Video game players face a plethora of ads in games, from billboards on virtual streets to soft drink machines, and now the industry has a new target in mind — video game spectators.
As the video game industry gathers in Los Angeles for the annual Electronics Entertainment Expo, or E3, console makers are preparing machines that can allow complex, Web-based play, which many expect will draw a crowd of people wanting to watch the virtual matches.
Microsoft Corp. unveiled its latest gaming console, the Xbox 360, at E3 with technology that will allow advertisers and video game developers to design games around virtual tournaments.
Peter Moore, the Microsoft vice president in charge of advertising for the Xbox business, described a scenario where a a virtual race hosted by a corporate sponsor, with thousands of gamers competing for a grand prize while their buddies and competitors watch online.
"If you are the sponsor, you've captured the attention of hundreds of thousands of people who've spent the last six months living and breathing your tournament and your brand," Moore said at a Xbox 360 launch event.
Advertisers and gaming companies are betting that in-game advertising is on the verge of becoming a medium that soon will rival television, newspaper and Internet spending. Gamers already spend as much time playing as surfing the Web.
"People spend as much time in videogames as they do on the Internet," said Guy Bendov, vice president of DoubleFusion, which offers technology that allows advertisers to place ads dynamically into online games.
Users spent an hour per day on average playing games in the latest year, the same that they spent on the Internet, according to a study by research firm The Yankee Group. Yet, advertisers only spent $30 million on game-based advertising, compared with $8.5 billion in spending for Internet-based advertising.
Yankee Group analyst Michael Goodman predicted that the game advertising market will reach hundreds of millions of dollars in annual revenue by 2010 as advertisers increasingly tap into the changing demographics of the gaming market.
Advertisers are keen to bring their marketing message into the gaming world, where development budgets of $2 million to tens of millions are driving the need to find sources of income that can offset the high costs of developing intricate and complex online worlds.
While the market is currently dominated by 18- to 34-year old males — the same segment targeted by television advertisers — game developers are hoping to expand their revenue base by making games that appeal to women as well as older and younger players.
Similar game advertising is already seen in 'advergames,' or games that are created for advertisers that immerse users in the world of an advertisers product. A good example of this is DaimlerChrysler's "Jeep Mountain Madness" game, where users drive a Jeep through mountain terrain.
Even the U.S. Defense Department has adopted the model, creating a combat games called "America's Army" to be used as a recruiting tool.
"The promise of in-game advertising is it's going to be very, very big," said Ankarino Lara, a director at online gaming site GameSpot.