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Last Updated: Friday, 14 July 2006, 15:28 GMT 16:28 UK
Marketers leap into gaming
Ian Hardy
By Ian Hardy
Click's North America technology correspondent

With early game consoles, the concept of adverts around and within gameplay was almost an afterthought. But the latest generation have clearly been built with the marketers in mind.
Xbox 360
In-game advertising helps meet the cost of producing new games

Marketers are excited by the next generation of games consoles; not by high definition graphics or wireless controllers, but by the two-way data pipeline that is built in.

It will mean a giant leap forward for in-game advertising.

"The first generation of Xbox we experimented a little bit with online advertising," said Xbox group product manager David Hufford.

"But the second generation of Xbox, the 360, is much more targeted at something like online advertising. Why? Because we've gone from a world where 10% of our systems are connected, to a world where 60% of our systems are connected to the internet."

Massive profits

In May this year Microsoft bought Massive Incorporated, a young but highly successful company that drops ads into online PC games.

The business of pushing out dynamic advertising, as it is called, is expected to leap from $56m (30m) last year to $732m (398m) by 2010.

There has been this blow out in the cost of developing games for next generation systems, and that's causing a lot of problems in the industry as far as being profitable when they do develop games
David Yarnton, Nintendo

In addition to the posters and billboards, Massive is introducing clickable multi-level video commercials that enable products to be ordered from within the game.

No wonder Microsoft wants to deliver the ads on the Xbox 360 itself.

"I think the Microsoft acquisition really does a lot to build the industry," said Mitch Davis of Massive Incorporated.

"MSN is a huge technological innovator in terms of ad-serving technology, they've got a very large and substantive ad sales organisation. So bringing that technology into this industry will really enhance it."


The Microsoft move puts direct pressure on Sony to do the same thing, as it gets ready to launch the PlayStation 3.

Motorola 3G phone
Mobile operators already use advertising for extra revenue

It was also designed with advertisers in mind, but some in the ad serving business say there needs to be compatibility between all the various parts of the gaming industry.

"What we're seeing is publishers and hardware manufacturers becoming more and more collaborative, and that can only be good for the IGA space, as we call it, which is In Game Advertising space," said Justin Townsend of IGA Worldwide.

"There needs to be new standards established for measurement, there needs to be what are called CPM rates established, which is the currency in which you buy IGA space."

Advertising revenue has become increasingly important because Xbox 360 and PS3 games are so expensive to make.

By contrast, games for Nintendo's Wii will not have to rely on income from advertisements.

David Yarnton of Nintendo said: "There has been this blow out in cost of developing games for next generation systems, and that's causing a lot of problems in the industry as far as being profitable when they do develop games.

"So we've made it a lot easier for development so they can make lots of games simpler and fun."

Impact on gamers

But the arrival of the Xbox 360 has raised many questions about the future of advertising in and around games. New opportunities come with new challenges.

There is a big question about how much gamers can take. Would players welcome additional levels or characters for a reduced cost, if there are brand names involved?

How about totally free versions? Well, that is unlikely on a console because of the enormous expense of producing the games.

But on mobile phones it is already happening.

"We've gone out of our way to make sure it's not that disruptive," explained Jim Durrell of Greystripe.

"It doesn't go into the game, it doesn't disrupt the gameplay, it really is before and after game advertising - 'this game brought to you by...' kind of message.

"A real positive association between the advertiser and the game that's sponsored."

And that is true of any gaming platform - the Xbox 360 is doing well, with five million sold around the world, but Microsoft cannot afford to put off potential gamers with over the top selling techniques, especially as the PS3 launch is mere months away.

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