• by Laurie Sullivan  @lauriesullivan, June 16, 2009

It's no secret that video games have become more popular as consumers look for ways to entertain themselves through the recession.

While PC games revenue will decline this year, console, handheld and wireless games will pick up the slack. Analysis from PricewaterhouseCoopers released Tuesday suggests that in-game advertising will lead the category, with 13% growth annually during the next five years.

Video game advertising, which generated $30 million in North America in 2004, will reach $886 million this year and jump to $1.4 billion in 2013, according to PwC.

While Nintendo still does not permit in-game advertising in any of its games, according to PwC, Sony began to permit advertising in some games during mid 2008. Microsoft has been placing ads in its Xbox 360 games for several years.

Experts might argue the nascent in-game ad market has nowhere to go but up, but David Sturman, IAB Games Committee co-chair and principal architect for Microsoft's in-game ad company Massive, says that climb has been slow and steady.

Sturman says in-game ads have begun to move out of the "experimental buy" bucket and into the media plan because advertisers now realize that ads in games produce results. "We have had many repeat advertisers," he says. "For all advertisers, especially in current economic times, they want to know what they get for their money. Measurement is very important."

Companies have the analytics to monitor the success or the failure of advertising in games, but the industry lacks tools to keep measurements in line and reporting consistent. As demand increases, executives need standards to present numbers to clients that want to keep closer tabs on budgets and change.

Developing a common method to count impressions and provide key measurements and definitions will help marketers better understand the value of advertising in games, Sturman says.

Earlier this week, the Interactive Advertising Bureau (IAB) released new in-game advertising guidelines for public comment to establish a common methodology for counting impressions and to simplify the process of buying and selling in-game advertising.

With the aim of encouraging market growth, the IAB's proposed new guidelines cover dynamic, in-game advertisements that appear in PC or console-based games.

Microsoft's advertising arm also has been involved in a study that examines the emotional reactions consumers have toward advertising campaigns in and around video games. The first phase of the study -- conducted with EmSense, a neuroscience company -- compares the findings with similar results from television commercials. The companies discovered that the interactive elements in the video game ad campaigns evoke stronger emotional connections with consumers and more positive emotional associations with the brands.

EmSense analyzed several different advertising campaigns on Xbox 360 games, Xbox Live and MSN Games. Some brands involved in the study include Doritos, Kia, Sprint, Hyundai and Microsoft. The Kia Motor's Xbox Live spotlight interactive campaign, for example, drew in viewers with images of the Kia Soul, evoking 15% more positive emotions and 11% more cognition from respondents compared to the database average.