• by Paul Gough , April 8, 2004

The race to reach young men took another turn Thursday when Nielsen Entertainment and a big video game publisher opened up what could eventually spell a major shift in ad dollars away from television and into product placement and sponsorship of video games.

It comes on the heels of an effort by Nielsen and Activision to create a measurement system for advertising in video games (MediaDailyNews March 8), boosting it to the ranks of measured media and making it possible to compare it against another medium that vies for the demographic--namely television. Activision and Nielsen have held preliminary discussions with advertisers, agencies, and other video game publishers to create standard measurements for video game advertising going forward.

Product placement and sponsorship of video games is worth about $10 million to the industry today--a pittance compared to the $60 billion U.S. television advertising industry. That's because most game publishers have given less thought to this area than developing products and moving them off shelves. But Robert Kotick, chairman and CEO of Activision, said that the focus on retail is changing as publishers and advertisers realize that they can reach the missing male demographic about which so much has been written.

"We're literally at the nexus of this next opportunity," said Andy Wing, CEO of Nielsen Entertainment. Last year was the first time males ages 18-34 spent just as much time playing video games--an estimated 30 billion hours--as watching television, according to a Nielsen Entertainment study. While Nielsen isn't willing to name video games as the reason why men 18-34 aren't watching as much TV as they used to, video game publishers would like to capture some of the billions of dollars that are spent on television advertising. This initiative is the first step toward that capturing those dollars.

And as Kotick pointed out Thursday, video games have a leg up on television--they're more interactive, and the video game user makes a conscious decision to buy the game instead of flipping a channel and watching passively. The measurement system hasn't been decided yet, but in an interview with MediaDailyNews, Kotick said it could include anything from passive audio signals that connect to a PocketPC or cell phone to Wi-Fi-based systems to infrared.

What it won't be is Internet-based, because most video game systems like PlayStation 2, GameCube, and Xbox aren't connected via broadband today, said Michael Dowling, general manager of Nielsen Interactive Entertainment. The data would be comparable to other streams available in other media.

"It'll be in the language that media planners and buyers understand," Kotick said.

The level of data could also surpass television's array.

"It's so easy and convenient to measure. We can measure when you picked up the can of Coke, when you skated by the McDonald's" in the video game, Kotick said. "It's so much more accurate as a measurement tool. I think we'll be supplying way more data than advertisers and agencies have ever had access to."

In Activision's case, advertising in video games is still in the early stages of its development. It has several companies that have been involved in product placements or sponsorships inside the games, like Puma, Nokia, McDonald's, and QuickSilver. Activision took in about $1 million in advertising/sponsorship revenues in 2003. None have been strict advertising--although in the future, that could happen.

It's even possible to have billboards inside the video games with advertising. Kotick envisions 6-12 advertisers per video game, with the advertisers vetted in focus groups and matched to the game to avoid bad fits. There's no rate card yet, but the data coming in will help determine that, executives said. Right now, rates are determined by a number of subjective factors, including how integrated the placement is in video games.

Activision's Kotick shied away from giving specific estimates on how much video game advertising spending could be in the future, saying any impact would be minimal for the next several years.