Metue.com

In 1983 Anheuser Busch paid Midway Games to make all the beers served in their popular game, Tapper, be labeled Budweiser’s.  Fast forward a few decades and now that curious sponsorship has become the forefather to one of the hottest segments in marketing: In Game Advertising.

A lot has changed in the decades since Midway’s Tapper.  Today, gaming consoles have internet connections and ads placed in the games, thanks to powerful graphics chips, need not be static or two dimensional.  Today, instead of a fixed poster in the background, or a product label on a beer bottle, a billboard in the background of a game can come alive with video and sound.    Today, the labels on a virtual NASCAR racing car can be sold to marketers for sponsorship just as they might have been on a real life race car.  Today, a three dimensional soda can is able to provide a virtual facsimile in the game of what exists in reality.

In today world, networks like Massive (bought by Microsoft a year ago for $200m), or Adscape Media (bought by Google) or IGA, work with advertisers and game developers to serve two and three dimensional ads.   Taking advantage of the Internet connectivity on modern consoles, they can stream and vary advertising just as companies like display ad network DoubleClick do online.   That billboard in the background of the EA sports picture?  Today it can showcase a Toyota ad. Tomorrow, Coca Cola or Mercedes.

Yesterday, in a show of support for the developing industry, Electronic Arts announced it would join 41 other customers already signed up by working with Microsoft’s Massive advertising unit.  Five games from the EA Sports division will take advantage of the partnership: Madden NFL 2008, NASCAR 2008, Tiger Woods PGA Golf,  NHL 2008 and Skate.  Advertising in the games will be available for the PC and the Xbox 360.

Ads served through Massive’s Network will include static two dimensional ads, video/sound combo units (like billboards) or 3d objects (like soda cans which could be Coke one day and Mountain Dew the next).

Much of the advertising will be similar to what is already in place in EA Sports games. In fact, EA says they chose Massive as a partner because they “have proven [their ability] to deliver relevant ads in a seamless, nondisruptive way that enhances the realism of the game environment.” 

The big difference between Massive’s offering and prior sponsorship styled promotions is the ability for them to change the ads over time and the new economics of the transaction.   Whereas in the past, EA might have sold a one-time sponsorship for an in-game ad, using a delivery network like Massive’s will allow them  to use the gaming platform like a website or billboard which can be upgraded and recharged over time.  With Massive they gain a constant revenue stream; it is recurring capital where there was once only a one-time payment. That annuity like payment stream is an exciting prospect for a gaming company that has typically been married to seasonal retail cycles and one time sales.

So far the In Game ad market is relatively small.  It generated approximately $55m last year but that is expected to change rapidly.  Internet connected consoles (Xbox 360, Wii, and PS3) are selling at a combined rate of more than 500k units a month.  June hardware sales were excellent. Projections suggest there will be more than 8m units sold by the end of the year. That volume translates, in the terms of advertisers, to an awful lot of page views.  Enough views,  in fact, that the Nielsen Company  thinks its worth tracking (they’ve created two tracking lists to monitor In Game advertising).   The volume of page views is also enough that IGA was able to raise a $25m venture round earlier this month (with investments by Peacock Capital and Intel Capital).  

The question could be asked as to why EA chose Microsoft (Massive) as its ad network rather than looking at an independent, and platform agnostic, ad network like IGA.  That question makes for interesting speculation; especially when fueled with the fact that Microsoft’s recently hired a former EA executive to run its gaming initiatives and EA recently hired the outgoing head of Microsoft’s Xbox 360 project to be president of EA Sports.   The reality is, however, this deal didn’t happen overnight. Massive and EA worked together as far back as August 2006 on a pilot program using EA’s Need for Speed Carbon game. The success of that test was a precursor to this partnership.

That EA chose Massive isn’t the story. The story isn’t in who EA chose but that they chose anyone.  The industry is still early in its development.  Picking an ad network as a partner so early is a strong endorsement for the potential in In-Game Ads.  It’s validation for projections, sometimes which seem over optimistic, that have pegged the marketplace as big as $2b by 2012.  EA getting involved is legitimacy for a promising but still undeveloped market.