Massive CEO: Video Ad Market To Reach $2.5 Billion By 2010

Calling broadcast television advertising a "bloated" and "overweight" medium, Massive CEO Mitch Davis predicted Thursday that in-game video advertising, which his company specializes in, will increase more than 165-fold in the next five years, from $15 million last year to $2.5 billion by 2010.

"There is a disproportionate amount of money spent on broadcast television compared to the reach and frequency it delivers," Davis said. Video games, he said, are "a far more interesting, exciting, and interactive medium."

Speaking to a crowd of about 250 game developers, advertisers, and press at the Advertising in Games Forum in New York City, Davis predicted that video game spending--which, in 2004, totaled an anemic $15 million--would reach $1.4 billion in the United States alone in five years.

Not everyone is as bullish as Davis about advertising in games. Jay Horowitz, an analyst with Jupiter Research, pegs in-game advertising sales for the United States at closer to $1 billion by 2010. "There's a long way to go to making this a viable ongoing medium for advertisers," Horowitz said, adding that Massive has made strides toward establishing ad networks with performance measures and measurable results.

The biggest barrier to companies like Massive, Horowitz said, is that the vast majority of console gamers are not connected to the Internet when they do their gaming, and console gamers comprise the larger part of the audience Massive is targeting.

"Not everyone is on a connected console, and that pipeline is the critical link for these companies to insert dynamic advertising," he said. "It'll be quite some time before you have a large connected console audience. By our estimates, one in five console users will be connected regularly by 2010. So the console side of things is inherently limited in the five-year period that we're talking about."

Massive's network works by dynamically inserting ads into video games through Internet connections. The ads appear where gamers might expect to see them. In one of the company's launch titles, "Splinter Cell: Chaos Theory," when the main character, a covert operative named Sam Fischer, stalks down a hallway and passes a soda vending machine, it's plastered with a Sprite Zero ad. Without the ads, the soda machine advertises a generic, no-name soft drink. The ads are updated dynamically, so timed campaigns are possible--Paramount Pictures is advertising its film "The Longest Yard," which is set to be released on May 29, and presumably will drop the ads after the movie is released. The ads are updated via the Web connection on gaming PCs and connected consoles systems. The Internet hookup also allows Massive to track when gamers are playing, what level of the game they're on, and which ads they're currently seeing. It also lets companies run ads in different geographic areas, and at different times of the day--Dunkin' Donuts runs ads for bagels in the morning and donuts in the afternoon, Davis said.

Davis said he hopes the advertising Massive brings in will increase developers' revenues to the tune of between $1 and $2 a unit. Currently, Massive runs an advertising network comprised of 12 game publishers and a number of blue-chip advertisers, including Paramount Pictures, New Line Cinema, and Coca-Cola. "Advertising changes, in a very fundamental way, the economics of the game industry," Davis said. "There's no doubt that advertising is going to be a significant part of this industry."

Still, added Jupiter Research's Horowitz, video games have a long way to go before they'll replace television in marketers' minds, even for the hard-to-reach 18- to-34-year-old male demographic. "There's always discussion about this elusive audience that he's talking about, and games certainly are a good way to reach those folks. What Massive's doing is a great approach for aggregating these disparate audiences that exist on individual properties," he said. "But for national reach, it's hard to beat broadcast."

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