• by Gavin O'Malley  @mp_gavin, July 9, 2007

In-game advertising will be an almost-billion-dollar industry by 2011, according to a new report from the Yankee Group. Globally, the in-game ad market is expected to grow from the $77.7 million generated last year to $971.3 million by 2011.

(The study echoed the results of another report released a week earlier, where Parks Associates projected in-game advertising to reach over $800 million in 2012.)

Yankee noted that spending on traditional advertising media--television, newspapers, radio and magazines-- grew $3.6 billion last year while spending on Internet advertising grew $4.3 billion. As a result of the significant shift in advertising expenditures in new media, the budgets for in-game ads as well as for the networks serving these ads are also growing. In addition, connected game devices are becoming the foundation on which providers build dynamic in-game insertion. "As ubiquitous connectivity continues to reshape the media and entertainment landscape, media fragmentation and clutter are a result, making traditional advertising channels less effective," said Michael Goodman, director of digital entertainment in Yankee Group's Consumer Research group.

"Advertisers are increasingly finding in-game advertising to be a greater investment value because of the variety of opportunities that exist in and around games," added Goodman. "Video games represent an 'above the line' opportunity, which means that video games should be used to build brands and not as a call to action that distracts from the game play."

Also of note, according to the Yankee report, dynamically placed 2D ads will cannibalize static in-game ads, but fixed product placements will continue to grow through 2011.

Additionally, Yankee is predicting the number of games with in-game ads to double annually through 2008. In the near term, PC games will drive the market for dynamically served ads.