With today's launch of Microsoft's next-generation console, we asked the GameSpot SVP to give us a rundown on the present and future of in-game advertising.
On November 22, 2005 (that's today) you can walk into a Best Buy and see a new gaming console called the Xbox 360. But if you want to walk out with one, then pre-ordering would have been wise. This next generation console is designed to be connected -- and the bet (from anyone betting on a big market for dynamic in-game advertising) is that tens of millions of gamers will be playing Xbox Live and that console gamers will come alive online.
So file that away for a minute as we circle back to this topic of in-game advertising.
Fact #1: Xbox 360 launches on November 22, 2005; analysts predict it will sell somewhere around a million units by year end.
Fact #2: The current generation Xbox console (launched in 2001) has sold about 13.5 million units in the United States as of October '05. Currently only about 10 percent of the gamers playing on Xbox play online.
Fact #3: Cumulative production shipment of the PlayStation 2 (launched in 2000) console system in the United States reached 36.48 million units by mid 2005. No specific online PS2 numbers are available, but many gamers are playing SOCOM and other online games on the PS2.
Ads within games are a little like commercials in movie theatres or TV (think plain old network television from the likes of ABC, NBC, CBS et cetera). Watching network TV is free. When we're about six years old we learn that the company advertising is hoping you'll go cuckoo for Cocoa Puffs.
At an early age we are introduced to advertising-supported television programming, and it looks like this model could move to other entertainment categories, like games.
A console game for a PS2 or an Xbox runs about $50; for the next generation systems Xbox 360 and PS3 it'll be more like $60 per game. A movie ticket runs around $12. The question is -- after paying that much, will consumers also accept ad-supported video game experiences?
Friday night at the movies in San Francisco: the lights dim and the commercials begin to roll. You experience pure San Francisco cynicism. Movie goers hiss. The ads end. The previews begin, and the purists settle down. Commercials in theatres where ticket prices are now in the $12 range? Why is it that box office is in its 28th consecutive month of decline? Could in-theatre advertising be on the list of reasons why people aren't going out to the movies as much as they used to?
Where are we headed as PC games and console video games have commercial brands deeply integrated into the game play experience, and as companies like Adscape, Massive Inc, IGA Partners and Double Fusion get busy integrating their ad serving technology (think DoubleClick and ad serving for PC and console games) into online games?
And for media folks and marketers, how do you get your head around what the opportunities are today, how they differ from what the opportunities will be down the road, and how to value this new media vehicle?
Note that there have been brands and product placement in games as long as there have been Cheerios on Jerry Seinfeld's kitchen shelf. It is not the notion of brands in games that is new: it's the notion of being able to serve ads dynamically into connected games the same way ads are served onto websites -- that's new.
But again, keep in mind that you can't have ads cycling through video games unless those video games are being played online by connected gamers (see the three facts, above).
Pre-conditions for successful in-game advertising
So what has to happen for this novel and kind-of-cool new medium to have a big impact?
- Video gamers -- the ones using the new consoles like Xbox 360 and PS3 -- must go online in big numbers (today, it is mostly PC gamers that are online).
- Advertisers must strike deals with the publishers to integrate the ad serving technology into their games -- the developers need software development kits.
- Game developers need to determine the appropriate brand integrations -- creative and design considerations will play a major role.
- Game publishers must convince their development studios that in-game advertising revenue is real enough to be worth the risk and the hassle.
- Publishers, developers and advertisers need to work hard to make sure that gamers don't feel the way I feel when I pay $12 to see a movie and sit through 10 minutes of commercials -- before I even get to the previews.
- The media community needs to determine and accept standards and measurement metrics -- as iMedia Connection readers well know, it has take a decade to develop standards on the web.
Next: What are the opportunities for marketers?