Video Game Companies Say Everyone Wins as Ads Spread

SANTA MONICA, Calif. — Gamers, get ready: Like it or not, advertising in video games is about to move to the next level.

Last year, advertisers spent $370 million placing their logos on billboards in virtual driving games, running ads on online gaming sites or reaching out to gamers in other ways.

Microsoft Corp. (enlarge photo) Yesterday's video game ads consist mainly of billboards in sports games or virtual worlds. In the future, ads will include video and other elements and will be more interactive and integrated into game play, developers say. Microsoft Corp. (enlarge photo) As part of a promotion last November, Burger King sold $3.99 games for Xbox featuring its big-headed icon. The games, including 'Pocketbike Racer,' sold more than 2 million copies.

Within five years, they'll likely spend a dizzying $2 billion, predicts Dallas-based technology research firm Parks Associates.

"It's definitely becoming a more established model for advertisers," said Yuanzhe Cai, the firm's director of broadband and gaming. "How many more 30-second spots can you put on a TV show?"

As the $12.5 billion gaming industry opens its E3 Media & Business Summit here Wednesday, advertising is likely to get as much attention as avatars and animation.

Along with becoming more commonplace, the ads are becoming more intriguing and integral to game play.

While yesterday's in-game ads consisted of simple billboards pitching Dell computers or Nike shoes at a virtual ballpark, tomorrow's are likely to include video trailers for upcoming movies, virtual vending machines that dispense extra energy along with every Coke, and computer-generated Cadillacs or Nissans that players can win and use in racing games.

And then there are specialty "adver-games." Last year, as part of a restaurant promotion, Burger King sold a series of goofy games for Xbox featuring its big-headed royal icon. The games, with names like "Sneak King" and "Pocketbike Racer," sold out and quickly became collector items.

Similarly, candy and gum maker Wrigley in February began offering free downloadable games exclusively for Nintendo's Wii console. Not surprisingly, the games come with names like "The Great Flying Mintini" (presented by Altoids), "Horse" (sponsored by Big Red) and "Out of Bounds" (brought to you by Juicy Fruit).

"Advertisers are all very excited ... and they all want the coolest and newest thing," said Cory Van Arsdale, CEO of Massive Inc., a Microsoft Corp. subsidiary that sells and develops ads exclusively for video games. "Business is very promising."

Depending on complexity and reach, a video game advertising campaign can cost anywhere from $10,000 to $1 million, according to Van Arsdale — a lot of money, but still cheap compared to major TV or print media campaigns.

A game developer's potential cut could be as much as $3 on every game it sells, he said.

Of course, just as too many commercials can turn viewers away from a TV show, too many in-game ads can turn away gamers.

Given the revenue potential, though, even game developers that previously shied away from selling ads in their games are starting to sell them.

Austin, Texas-based NCsoft North America, for instance, is planning — for the first time — to sell and insert ads into its popular online multi-player games such as "Lineage," "Guild Wars" and "City of Heroes," as well as into its forthcoming fantasy game "Tabula Rasa."

"We're really intrigued by it," said Dorothy Ferguson, NCsoft North America's vice president of sales and marketing. "It has the potential to increase (revenues), but it's really also about enhancing the game-playing experience."

Advertising in video games makes virtual worlds more realistic, Ferguson said. She said NCsoft's games will likely include various kinds of ads, from static billboards in virtual cities to interactive challenges that can let players win rewards.

Recent campaigns indicate where video game advertising may be headed.

Discovery Channel advertises its TV shows across all sorts of media. But one of its more successful ad campaigns recently was a tie-in with the "Gears of War" game on Xbox 360. Beginning in January, "Gears of War" players could download special maps to navigate virtual battlefields. When they did, they also got an ad for Discovery Channel's "Future Weapons" TV program.

Discovery Channel "got a really positive response," said Van Arsdale, whose company handled the campaign.

In one of the biggest commitments to video game advertising, carmaker Nissan last November inked a far-reaching agreement with Microsoft to put ads on Xbox and PC games, as well as on its mobile and handheld computer platforms. As part of the deal, Nissan became the official sponsor of Xbox's popular "Forza Motorsport 2" racing game and also sponsored a global online tournament tied to the game.

Especially with its $200 million-plus purchase of Massive last year, Microsoft has been among the most aggressive of game and console makers when it comes to advertising.

But rival Sony Corp. is taking steps to catch up.

This month, Sony announced it was working with media measurer Nielsen Co. to develop new ways to track and collect data about users of its PlayStation 3 game console.

The underlying reason: To figure out how to sell more ads in PlayStation 3 games and on its PlayStation online network.