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Taking a look at ancillary revenue and new sources of funding, our latest Question of the Week asked our audience of game professionals: “Do you think that in-game advertising is going to be important to the video game industry in the future? What business models and placement tactics for in-game ads make the most sense to you?”

Quang Hong, Blogger

November 30, 2005

21 Min Read

Our latest Question of the Week asked our audience of game professionals: “Do you think that in-game advertising is going to be important to the video game industry in the future? What business models and placement tactics for in-game ads make the most sense to you?”

The general consensus from the responses received is that, while not necessarily always desirable, in-game advertising will be an inevitable fixture in the future. A particular focus in responses dealt with the extent and context of ad placement in a given game, with concerns over contemporary brands in sci-fi or fantasy settings, alongside a plethora of other interesting comments.

[We've added bold markings to some of the most interesting comments to this week's Question Of The Week, in order to improve readability and point out highlights.]

Branded entertainment of all forms is going to become a large part of society within the next several years. With the rise in popularity of DVRs, brands are losing their most consistent and effective advertising medium: the television. We are already seeing the initial reaction to this, which is placing the same or similar ads into video games. These in-game ads may be appropriate in some cases, and a few studies have even indicated that they may actually increase the level of involvement and believability players have in the world. However, it is only a stop-gap measure that will not have long lasting effectiveness. At the same time, we are seeing brands that are finally starting to realize that the best way to reach consumers is to create advertainment that people actually want to see and interact with. The best examples of this cause consumers to actively discuss, promote and spread the message to their friends. These come in all forms, from funny commercials and spoofs, to well-done branded websites, to high-quality advergames built around and fully integrated with a brand. The question is not, will this be important to the video game industry, the question is how long will it take for advertainment to become the accepted standard in advertising. To question the game industry's involvement is irrelevant because the brands, and their marketing dollars, will become an integral part of all entertainment mediums.
-Brian Robbins, Fuel Industries, Inc



In-game advertising is already important to the industry - as evinced by deals that have already been made by EA and others. The real question for the future is what role Madison Avenue will play: will traditional ad agencies wake up and get up to speed on the medium before new game-specific marketing ventures such as Massive Incorporated leave them with nothing but table scraps? There's still a lot of low fruit on the game advertising tree, but I wouldn't bet on the big ad agencies noticing it until it's gone.
-Clark Stacey, Smart Bomb Interactive

I believe that advergaming will continue to be a growing significant segment of video games. As with movie and TV product placement, games that do a good job of it won't be considered an affront, those that don't will be panned by gamers and critics. It will be interesting to see how the current clash between the Writers Guild of America (and SAG) and product placement interests works out, and whether similar issues will arise between game designers and financial stakeholders in the future.
-Kim Pallister, Microsoft Corp

Yes, I think in-game advertising will play an important role in the industry. Any time money can be extracted from a form of media, it will be. And why not? Movies, TV, magazines... even the web in its relative infancy are already saturated with advertising. I think that what most gamers are concerned about, though, is the potential for games to become so bogged down with advertising that they feel more like content delivery tools than games. Personally, I think it unlikely this will happen, because any game company that has its priorities so out of whack that it makes advertising more important than gameplay won't be around long enough to release more than one or two titles. Revenue models are varied. Clearly billboard type ads are a shoe-in. But there are many paths to take as well: Professional athletes might charge a additional endorsement fee to allow their digital likeness to be used wearing the advertiser's products; a game might feature subway ads, taxi ads, posters; game studios could charge an additional fee to feature a company's product during a cutscene or FMV, especially if the cutscene uses the voice/likeness of a famous actor or athlete. What I don't want to see are in-game commercials!
-Damon Tabb, ALFY Inc.

Some games will be fantastic for in-game ads, while others will be less suitable. It is surely an important component in the future of games, but not a necessary one. It's possible some games could be free based on advertising revenue. Online games could use a similar model to web pages with banner ads with recordable click-thrus.
-John Cataldo, Mad Doc Software

I absolutely think that in-game advertising is going to grow and become something very important to consider when developing a game. As more advertisers realize that games are here to stay and an excellent way to reach target demographics, they will want to be in our games. As more advertisers want in, developers will be able to make demands, and concessions, on the ads we put in. Currently we need to use third-party stuff like Massive or GameSpy in order to serve the ads effectively which is perfectly fine. I think that this way will be the best and most efficient for the majority of developers. That allows us to continue to develop content and not worry about developing a new tool set to serve ads that we then have to support administratively. The ability to target advertisers along with putting your own ads on things within the game is a good thing, and although it will never fully mitigate our costs of development, it will provide a nice bit of extra cash flow to those that implement it correctly.
-Mark Warner, Nexus Entertainment

As a realist, I believe in-game advertising is inevitable, at least for high-end titles. Much like the movie industry, the ever-increasing production costs of AAA titles are becoming too much for the developers and publishers to bear alone. Advertising revenues may be the difference between a game being rushed out the door half-finished, or arriving on shelves polished to a mirror sheen. As someone who holds a marketing degree, I think advertising in games should be as unobtrusive as possible. Certain games and genres lend themselves to advertising better than others. The Gran Turismo series for example, is an ad bonanza for auto manufacturers, and virtually any car-related advertising inserted into one of their games will be accepted by players without question. Advertising can also be integrated seamlessly into the gameplay, such as the Cingular and Motorola wireless services in Need For Speed Underground 2 and Def Jam Vendetta. Where it becomes more difficult is with games with more nebulous ties to reality. Nobody is going to accept the characters in Final Fantasy XII running around in Timberlands, although a fuel-cell powered airship is a possibility. But in the end, business models and placement tactics don't matter if the audience isn't receptive. As a gamer, the very concept of in-game advertising makes my skin crawl, and every molecule in my body revolt. I hate it when I see it in films and on television, and I'm not looking forward to its ubiquity in games. For years now, it seemed like games and books were the only media where it didn't seem like some nickel-slick marketer wasn't hiding around a corner trying to sell me this, that, or whatever. Looks like my library card will be getting more use.
-Eric Braxton

I think it will undoubtedly become more important to the advertisers - just like product placement in movies, in-game advertising will become an effective means of reaching audiences. For game developers, however, it may increase somewhat in importance, but it's not going to solve any revenue problems that a traditional independent developer might have. There will always be the struggle on the game developer's part of what advertising can be included in the context of the game, and won't alienate or frustrate players (especially if it soaks up in-game performance). The exception to that is there may be a growing space for smaller online game developers who can fund their game exclusively through online advertising, but that's a pretty small (or very largely distributed) game. Right now the most common placement tactic is in-game billboards but product placement will become more prevalent, as games move ever so slowly away from fantasy and sci-fi genres to more realistic settings.
-Borut Pfeifer, Sony Online Entertainment

Yes, I think that they will be necessary to offset the cost of development. They should be realistic and fit in with the environment of the game.
-Dean Swett, The Paramour Group LLC

Whether as a result of piracy in the retail space, low conversion rates in the try-and-buy sector, or reselling of used titles by the Wal-Marts of the world, a huge number of games are enjoyed by gamers without a dime going to the developers or publishers. In-game advertising is a fantastic way for developers to recoup some of the massive amount of resources that go into the creation of these games. Up-front sponsorship of games is the model that appeals most to me. This can manifest itself in the same fashion as in LEGO: Star Wars, where the sponsorship is implicit and integrated into the game experience, or as in games that feature a "Presented By" screen or short advertisement at the beginning of their game (usually online web games). Either of these models presents an unfettered interactive experience while still communicating the appropriate messaging of the corporate sponsor. It's a win-win. The model I find myself disagreeing with most is where publishers install spyware or adware under the guise of back-end game software. While it does allow the player to download additional assets during gameplay, any software that installs without my knowledge, that is unable to be uninstalled, or that sends information that I don't approve of is extremely offensive to me. I think that while this model can be very financially effective in the short-term, it is very dangerous to a company's long-term brand identity as well as the overall long-term health of the games industry as a whole.
-Coray Seifert, Large Animal Games

I think that in-game advertising makes a lot of sense for Massively Multiplayer Online Games. Pay-to-play MMOGs could be made free-to-play, and thereby attract a larger audience, simply by providing rentable space for in-game advertising. These adds would not have to be gaudy and out-of-character for the game either (i.e. pop-up adds - does anyone read them?). For example, an advertiser could pay to have virtual posters or billboards with their ad on it placed in frequently traveled areas within the game world. The pricing structure could then be based on the number of players that were near the ad and how long they were near it (much like the pricing model for NASCAR, where the amount of air-time each sponsor's logo receives is tallied). Or an advertiser could have a powerful item named after them or have their logo or other branding placed on an item. An alternative that makes sense for FPSes could be displaying an ad during the time between death and respawning. There are a lot of possibilities, limited only by the creativity of game designers and their potential advertisers.

Absolutely, in fact, Sony Online is already moving in that direction. Sony is adding in game adverts to The Matrix Online. It seems obvious to me that advertising can financially support the infrastructure to maintain an online game, could also supplement the cost to develop a single-player game as well. The business model that makes most sense to me is in game billboard ads along with product placement, and "brought to you by" splash screens at end of game or during loads (I actually would shy away from the during load ads) billing could even be done at the per impression level, but advertisers might want to stick to a predictable cost. Advertising in games is huge; my head is just spinning with ideas and ramifications. When I am watching baseball or football on TV, I look at those virtual ads all the time, however as an online gamer, I doubt if I would continue to play an online game if there was significant distraction caused by ads.
-Kent Simon, Novalogic

To answer the question, yes, in-game advertising will be important to the game industry in the future (as it is now, in my opinion), but that does not mean it will be important to gamers. It will be important to the industry as an alternate source of revenue, as companies clamor to expose the consumer to their products through video games and development costs rise with the next gen. It is yet another way that companies can expose (and therefore sell) their product as much as possible. But what about the desires of the consumer? Obviously, the bottom line is to make a profit. But how many times have you been listening to the radio and turned the channel to not have to listen to that annoying commercial with the guy yelling about some wacky waving inflatable arm tube man? Or, have you just given up and switched to “commercial free” satellite radio? Or how about TiVo, anyone? Commercial free TV is where it is at. I think the best way to avoid alienating with ads is with careful placement. For example, race games have a great way of doing this - allowing the gamer to have a selection of product logos, graphics, etc. at his/her disposal to put on the vehicle as a skin or graphic is a great, passive way for having advertisements in the game. If the player enjoys a certain soda, why not toss it on there? A particular brand of stereo speaker... sure why not? Then while playing the game, they see that logo throughout, not being able to complain about it because they put it there. But, when a player is forced to see "This load screen is brought to you by X" or numerous signs that line a race track, plaster a football helmet, etc., it can get annoying.
-Douglas Boze, Kemco

Yes, it provides additional funding - defraying marketing expenses, maximizing publisher profit, and creating additional incentive for development of new games. Every game is unique and needs to be treated uniquely, so marketers that create customized ads for individual games that enhance a game's alternate reality will actually make games better. Taking an ad formula and applying it across categories and brands is not a good idea.

Firmly, yes. I think that -- like every responsibility of the producer -- if done tastefully, the revenue will support the game and the player will not be offended. But if Master Chief defeats a level boss and is rewarded with a bag of Doritos so as to inflict insatiable fits of snack-o-rama upon unsuspecting hordes of Covenant, then players will tune out in droves. As the television advertising model decays further, non-interruptive in-game advertising is a sound idea that I support. I personally question any player who explicitly states they detest in-game advertising while simultaneously wearing branded clothing and drinking flavored sugar water beverages because Tiger Williams told him to. It is any marketer's chief responsibility to match a product to an audience and if the marketer is desperate or ignorant of the game design and game playing process, then the onus of responsibility will shift to the game designer.
-Ryan FitzGerald, Nihilonaut Productions

Advertising has always been an important thing for any industry or arena. Games are no exception. Basic ads such as billboards and subtle tactics, such as dialogue name-dropping will slowly make way into games in the future.
-Michael Rivers, Game Designers in Training

In-game advertising is set to explode, and it owes much of its growth to Valve. With Steam, Valve legitimized the radical idea of digital distribution, and along with games that are eternally connected to the Internet come advertisements that adapt to gamers' buying habits and game preferences. Just as Google's advertising software proved that targeted, relevant ads can be successfully accomplished without sneaking spyware onto a consumer's machine, digital distribution will afford advertising corporations greater insight into buying habits for individual consumers, and will allow for the rearranging of in-game ads on the fly. It's happening in the console world too—the Xbox 360 supports downloadable demos and content right out of the box. As developers grow more comfortable with an industry that is always connected, the advertisers will follow. And with the 360's emphasis on competitive online play, it only makes sense for corporate sponsors to hold publicized tournaments, with prominently-displayed products at stake.
-Ben Serviss, Creo Ludus Entertainment

I think it's going to be important for the same reason it's important to websites and movies today: money. As video games require more and more funding to ship, the people who provide that funding are going to want more bang for their buck. Also, it's probably going to be a bigger bill than a publisher wants to foot alone and charging companies for advertising space is a proven way to make up that money. I think it will be especially important for independent developers - just as it is for websites - where selling advertising space may well be their ONLY source of funding. Ideally, the best placement tactics would be where you would expect to see advertising in the real world: cola cans on the street, delivery trucks, billboards, t-shirts, bus stops... it's a long list. The biggest challenge will be all those games that don't take place in the real world. How does Sonic the Hedgehog plug Palmolive dishwashing soap? Is that photo-realistic wagon in Oblivion really a medieval BMW? But if I see a single in-game popup, that game is on a one-way trip to the trash compactor.
-Daniel Drew, Microsoft

I'm pretty sure that a lot of people would be really upset if they paid $50 for a game and were forced to watch ads in order to get to the gameplay experience. Tolerance for ads typically increases if prices are lower. In some cases, people will pay money to obtain ad-free versions of a service or product. With the growing popularity of online games, I'm pretty sure that viral marketing firms will start targeting them with a vengeance. For example, you could have a marketer start a guild in one game and after gathering a bunch of people that would like the game they're hired to market, tell their members they plan to rebuild on the other game.
-Christa Morse

Current business models used by film and radio will, I expect, be the initial push for in game advertising. However, most gamers, including myself, would find these blatant advertising attempts in a game offensive and pretty cheesy. The best models that I imagine will arise will be a good mixture of product to game ambience and environment. Examples are advertisements like... car company related ads on the walls of the tracks and on the cars in racing games, hip hop clothing and funky sunglasses for titles like Grand Theft Auto... games that are sci-fi-based might use advertising from companies that want to make a statement that they will be successful in the future that these sci-fi titles represent. I could see IBM or Microsoft for example advertising cybernetic implants within EVE-Online or X3: Reunion, or maybe even sponsoring free online radio in-game, etc. For shooter games, the actual gun manufacturers of the weapons that you're using in-game, clothing companies that supply the real armed forces gear and equipment, and maybe even the armed forces recruiting offices would be willing to pay advertising dollars to game companies directly in order to create an advertising market for their products or services that would reach the exact demographic that they would otherwise be trying to reach. If nothing else, a company that sponsored a game that had an environment relative to their product or services, could have a promo spot as the game loads as Microsoft and Nvidia, the game publisher, and game designers do now.
-Jonathan Hicks, Novalogic

In-game advertising has the potential to completely ruin the immersive aspect of games if done during gameplay. For instance, how can you advertise Pepsi in a medieval setting? However, advertising in other areas of the game, such as load screens and menus wouldn't be quite so bad. A much larger problem is that developers could become very susceptible to changes that are requested by advertisers, or that encourage advertising, as has happened with TV and newspapers. For example, it wouldn't be in the interests of advertisers to place their ads in a game where the player can go on a shooting rampage in a shopping mall because that is ideologically opposed to consumerism. Alternatively, suppose you have an in-game Pepsi machine. Perhaps Pepsi wouldn't like their machine to get blown up when you hit it with a crow bar. Suppose you're making a cops and robbers game. Would Bank of America want to advertise in a game where you can simulate shooting bank tellers? I don't think in-game advertising is going to lead to better games.
-Ryan Bailey, Entelepon

Obviously, it will. But I can only imagine ads in a realistic setting. Neither sci-fi, nor fantasy seems suitable for contemporary labels. And if ad revenue will be a significant part of a project's budget, developers will prefer games with realistic settings to others, right?
-Dimage Sapelkin, Creat Studio

In-game advertising in video games could be just as beneficial to the industry as it is with movies. The first thing that comes to mind is the financial aspect. Unless I am mistaken, the way it works now, publishers/developers must pay to have in-game advertising from companies like Nike, Coca-Cola, etc. If this practice could be reversed, it would mean big bucks for the game industry, helping finance development. It could also add some realism to games, increasing immersion. Say the player is pursuing the bad guy through an apartment building. Upon breaking into an elderly woman's apartment, she screams in fear, pausing her television viewing for a moment. On the television, the player can see and hear a fraction of that annoying Juicy Fruit commercial, or perhaps even an actual show, like CSI or Matlock. Why not? The downside is the continuation of this marketing invasion, and there is a definite risk of having our games overflowing with publicity. Too much of anything is always a bad thing. There is also a moral dilemma that applies with any marketing done anywhere. Publicity, whether we want to admit it or not, is brainwashing. Do we want that? Can we live with this fact? Aren't we already victims?
-Kim Jolicoeur

Yes, I can see that in-game advertising will become an important source of revenue for game makers. Using Google revenue streams as a model, it is clear to see that advertisers are keen to get to targeted audiences to maximize their investments. We have already seen examples of product placement within games. The creativity of those involved in designing the ads and the dollars spent by the gamers in response to those ads will determine the most beneficial relationships. However, one day not too soon in the future, it may not be odd to see a commercial delivered between levels of a game!
-Kathleen Harmeyer, University of Baltimore

Do I think that in-game advertising is going to be important to the video game industry in the future? No. Controversial? Yes. Keep advertising out of video games. What business models and placement tactics for in-game ads make the most sense to me? None. Advertising should be kept outside of the video game and off the game machines. Video games are expressly rooted in entertainment, and marketing is not part of what a video game ought to be. I do not want my hard earned cash wasted on a marketing campaign that I have absolutely no desire to be exposed to.
-Paul Garceau, New Dawn Productions


[Please note that the opinions of individual employees responding to the Question Of The Week may not represent those of their company.]

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About the Author(s)

Quang Hong


Quang Hong is the Features Editor of Gamasutra.com.

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