• by April 9, 2007

Video games are fertile ground for marketers looking to promote their brands, but the medium remains underused.

Leveraging video games as an advertising medium is projected to grow substantially in the next five years, with global spending on in-game advertising and advergaming increasing by a compound annual growth rate of 22.9% from 2006 to 2011, according to a new report by eMarketer, which projects that 50% of that spending--some $969 million--will come from the U.S.

"We see it as a pretty big opportunity," said Paul Verna, senior analyst, eMarketer. "One of the barriers is just simply awareness. It's been a niche play up until now, but we see it as taking on more of a mainstream appeal."

Verna cited Burger King's successful ad integration with three Microsoft Xbox and Xbox 360 games last holiday season. While most advergames are free, the fast-feeder sold 2 million of the games for $3.99 a pop in just four weeks.

The category currently pulls in $692 million worldwide, and eMarketer projects it will grow to $1.94 billion by 2011. Spending on advergaming is projected to reach $344 million by 2011 in the U.S., up from $207 million in 2007. However, spending on in-game advertising will rise faster, reaching $625 million in 2011. Also included in the category are product placement and integration, but not mobile.

Currently, global video game revenues stand at $34 billion, and are projected to hit $54 billion in 2011 with growth spurred in part by interest in casual and mobile gaming.

"When you look at advertising overall, obviously TV dominates--but that's changing," Verna noted, adding: "It's clear that if people are spending four or six hours a week playing video games, that's time robbed from TV viewing or something else."

Broadband and the growth of digital distribution in gaming is helping fuel growth, which creates opportunity for marketers to reach consumers where they are--online. Many games are downloadable.

There are also massive multiplayer online games that are played in teams with chat rooms and other social networking features. Online consoles such as the PlayStation 3, Nintendo Wii, and Microsoft Xbox 360 are broadband-enabled, allowing for dynamic in-game ad placement.

"This is a very large channel through which people can advertise," Verna said. "The flip side is that not all games are created equal. Some games, like the massive multiplayer online games, have audiences that may be more resistant to ads. It's a different kind of experience.

"Marketers should look at all these data trends," Verna added. "This is a channel that's been underutilized until now. One of the obstacles has been measurability; how do you know how many people are actually seeing an actual display ad and responding to it?"

In part, online ad networks like Microsoft-owned Massive and AdScape, now owned by Google, are addressing these types of marketer concerns as they take place, and track ads dynamically within online video games. Click-stream data, engagement with ads, views, and other data can be closely examined.