• by Yoav Tzruya , December 13, 2006

Since the advent of cable television, the story of the advertising market has been one of fragmentation. Advertisers must choose between traditional and nontraditional media to reach every demographic.

Advertisers recognize that they are losing their core viewing demographic--young men, aged 18-34--to video games. Advertisers that once invested in television are warming to in-game advertising as a viable opportunity.

Limited Audience Reach

But a major issue facing in-game advertising is the relatively limited consumer reach that can be achieved at any given time. A successful television advertisement reaches tens of millions of viewers. However, advertisements placed in games have a more limited exposure; even newly released, highly anticipated titles typically have an audience of approximately 1 million users. That's not enough reach to convince advertisers to put down their money. Even if you take an ad-network approach and try to maintain reach across multiple titles, it is unlikely that any network will be able to sustain a consistent reach of more than 3 million to 5 million users at any given point.

The real problem lies in the fact that the above reach is global. In-game advertising faces limitations from a geographical distribution perspective. A certain title may have 1 million users globally, but if 800,000 are in Europe, you are in big trouble if you are a U.S. advertiser. To a certain extent, dynamic in-game advertising solves this issue, given that you can track usage and place geographically localized ads.

But the overall reach problem is still not resolved. Even if we take an optimistic approach, assuming an in-game ad networking agency has five new AAA titles at any given point in time, that's still only an average audience reach of 5 million--not enough to elevate in-game advertising into a valid medium and generate significant advertising revenues.

Moreover, when an ad network relies on new AAA titles as its inventory of ad avails and counts on the reach achieved by those titles, it limits even further the uniqueness of the target audience. It is likely that hardcore gamers, the ones who purchase the AAA titles, will account for a significant number of duplicates across the different game titles, limiting the effective reach even further. In many cases, even if you advertise in a different game title, you wind up advertising to repeat buyers.

Until now, in-game advertising was only perceived to be relevant for newly released game titles, requiring a technical integration stage to be performed during the game development. However, in the U.S. alone, the overall gaming audience is estimated to be around 80 million, a number highly attractive to advertisers. So, how can we bridge this gap in the potential vs. effective reach? What are all those gamers playing, and how do we reach them? A significant portion of gamers is busy playing casual games and older titles. To solve the issue of reach, you have to tap into the back-catalog and casual-game inventory.

Standardization

As with all budding advertising mediums, the in-game advertising space faces the issue of ad unit standardization. It's great that we can embed ads into games, but without having the appropriate unit of advertising and the relevant measurement tools, we lack the reference points for advertisers to consider in-game advertising a significant medium in which to invest. Before the industry can move forward, the CPM definition in games needs to be standardized. This means the size of the ad, exposure time, and definitions for other relevant parameters such as valid angle views, lighting, shading and such must be accounted for. This must also take into consideration the fact that games come in a variety of genres--and as such, the standards have to accommodate multiple gameplay models.

Once we have these standards in place, advertisers will have the information to properly make buying decisions. With the right standardized measuring tools we can actually prove that an ad was viewed, how it was viewed and for how long. In comparison, with television, you know your ad was delivered and potentially how many viewers were exposed, but at the end of the day you have no solid proof. With prime-time television viewership on the decline and online game play on the rise, advertisers should feel comfortable turning to in-game advertising.

ATL vs. BTL--Getting it Right

In-game advertising is above-the-line advertising--all about brand awareness as in television, radio and newspapers, trying to create an emotional connection with the brand in hopes that the consumer will choose it when next making a purchase decision.

Below-the-line advertising, on the other hand, is what you see with direct mail and some forms of online advertising, where the consumer is asked to answer a call for action and interact with the advertisement.

A major misconception that we see right now is that, because in-game advertising placement occurs in an online environment, these ads follow the BTL Internet-type advertising model. However, there is little you can do in a game to create a call for action without interfering with game play. The success of any in-game advertising campaign hinges on enhancing game play, not interfering with it. Furthermore, like real-life advertising forms such as outdoor and television, the nature of in-game advertising is brand awareness, resulting in ATL effects. CPMs for in-game advertising, the sales process and media buying should follow the ATL path instead of the BTL path.

To sum up, for in-game advertising to succeed, the industry should focus on leveraging untapped reach opportunities, standardizing advertising and measurement, and correctly positioning in-game advertising in the marketing mix.