• by Josh Lovison , August 31, 2007

When it comes to video games, digital downloads still lag far behind brick-and-mortar sales. Some 85 percent of purchasers bought more than three-quarters of their games in physical format, while only 5 percent acquired three-quarters of their games in digital format bought three-quarters of their games in digital format, according to the NDP Group.

But there are signs digital distribution is picking up. Steam, a game download platform created by Valve, maker of Half-Life 2, has logged more than 13 million users. On the Nintendo Wii's Virtual Console, over 100 titles are now available for download, with more than 4.7 million games already sold. Akamai, whose technology enables downloads on the Wii and PS3, says the growth rate for game downloads is now twice that of traditional media downloads.

Marketers and advertisers stand to benefit from the shift. Besides the potential for displaying ads during the download process, marketers could create branded games for download similar to those developed by Burger King for the Xbox and sold through its restaurants. The technology would also allow publishers to sell in-game ad slots on an ongoing basis, rather than selling it all upfront.

In-game advertising got a boost in July when Nielsen announced it would develop a measurement system for Web-linked console game advertising with Sony Computer Entertainment America. The ad data will be combined with game usage info from Nielsen's GamePlay Metrics panels, with the first joint report expected this fall.