In-Game Ad Execs: The Billion-Dollar Forecasts Are Real
- by Tameka Kee , December 4, 2007
Boston-based Yankee Group recently pegged the global in-game ad market to develop at an "exponential rate," soaring from last year's $78 million to reach over $970 million by 2011. Riccitiello countered that forecast (and others) in a recent Dow Jones interview, saying: "You can't be as bullish as analysts are on in-game advertising and be sane." He noted that in-game ad sales only accounted for about 1% of EA's robust $3.1 billion business.
As head of one of the largest global game publishers, Riccitiello is arguably one of the most influential executives in the gaming industry--but that didn't stop the UBS panelists from wholeheartedly disagreeing with his statements.
"The traditional retail sector may not be the sweet spot for in-game advertising," said Jonathan Epstein, president and CEO of DoubleFusion. "But if you look at the activity in the casual and advanced casual space, there are billion-dollar new companies emerging, all based on making games free through ads."
It's true that ad dollars don't scale the same way retail dollars do with games, said Justin Townsend, CEO of IGA Worldwide. "But two years ago, the average advertiser investment for a dynamic campaign was between $20-40K from an experimental budget," he said. "Now we get $600,000 and $800,000 budgets--and even some seven-figure investments from major brand advertisers."
Meanwhile, WildTangent has seen a 300% growth year-over-year in ad spending, according to Dave Madden, the company's executive vice president of sales, marketing and business development. Madden noted that in November alone, WildTangent ran 75 campaigns for more than 50 advertisers, including automotive, CPG and telecom brands.
In terms of some of the numbers behind those deals, Madden talked of $150/CPM packages that allowed advertisers to sponsor users' entire game sessions and reach a demo- and psychographically targeted audience--with an average CTR of 13%. Meanwhile, Townsend noted that IGA's dynamic in-game billboard ads typically ran for about $30/CPM and Epstein said that DoubleFusion was focused primarily on product placement and in-game branding buys.
But all three executives acknowledged that the industry had to get rid of a considerable amount of "friction" for the ad models to scale successfully--particularly with funds allocation, purchasing and performance measurement processes for console-based dynamic ad buys.
"Right now if a media buyer wants to place an ad in (EA's) Madden, they have to go through one company to get it in the PC game, another for Xbox and another for Sony," Townsend said. "It's a fragmented buy, and it inhibits market growth because buyers just want to write one insertion order. But it's only a matter of time before Sony and Microsoft's closed networks open up to allow cross-platform buys."
"Agencies are paid based on their efficiency of spend and the results that they yield--so if they can't compare their in-game ad spend to TV or radio, then they can't place ads in console games," said Madden of WildTangent. "Give them a system that lets them do that, and you can get in the big pools of dollars. Casual and other pc-based games make that possible, and someday the consoles will be open enough to allow that to happen."
Madden added that developing open networks, and figuring out how to place in-game ads more effectively, is partly why WPP acquired a 3.4% stake in WildTangent in 2006.
