Video Games Get Ads, Makers Get Richer

Knight Ridder - Wednesday, April 27, 2005

Knight Ridder Newspapers
By Dean Takahashi

Video games have provided one of the last refuges from the ubiquitous advertising that hits consumers from every direction. But that's beginning to change, thanks to an innovative start-up that puts ads into games.
Massive, based in New York, has figured out how to insert advertisements into the background scenery of video games that run on both PC and game consoles. With its custom technology, the company can insert advertisements into billboards, storefronts and other parts of the scenery in a video game. It can even change the ads on a periodic basis.
More than a dozen big advertisers and 10 video game publishers have agreed to participate in Massive's advertising network, which has a business model resembling product placement in movies, said Nicholas Longano, chief marketing officer at Massive.
The added revenues from the ads could be a bounty for game developers and publishers. Massive estimates that it can add $1 or $2 net profit to the publisher's pocket for a $50 game. Depending on the type of game, a publisher's profit is usually only $6 to $8 per game, so the new source of ad revenue could be a big deal for game companies.
Longano says that this secondary revenue stream will help put video games on a more even footing with other kinds of entertainment. Movies, for instance, generate 24 percent of their revenue from the box office receipts. But they generate far more income through DVD sales, rentals, pay-per-view, network TV syndication and cable TV syndication.
"Video games are the only media without a secondary revenue stream," he said.
The company's founder and CEO, Mitchell Davis, hit upon the idea a few years ago when he was playing a video game that was supposedly set in a big city. But as his character moved past storefronts and billboards, the illusion of the game was destroyed by fake ads. He wondered how he could put real ads into the game to make it look more real.
Others had tried to do such product placement before. Intel and McDonalds inserted ads into Electronic Arts' Sims Online game a couple of years ago. But the ads were static, and they required close work with the game development team many months in advance of the game release.
Massive says it has had great success lining up advertisers and publishers. The advertisers include: Intel, Paramount Pictures, Universal, Coke, Comcast's G4 gamer TV network, Nestle, Honda, T-Mobile, UPN, NewLine Cinema, Verizon DSL and Dunkin' Donuts. Game publishers include Atari, Ubisoft, Vivendi Universal Games, Funcom, Take-Two Interactive Software, Legacy Interactive, Codemasters, Eidos and Majesco.
Davis' team invented a technology that could use the Internet to download ads into a part of the game's scenery on a regular basis. Massive's own engineers work with game developers for just a couple of weeks to make sure the ad fits in the space of a virtual billboard or imaginary storefront.
"We make it look realistic, so the ad just looks like part of the game," said Longano. "It really brings to life the environment."
Jay Cohen, vice president of publishing for Ubisoft North America, says Massive allows Ubisoft to incorporate ads that enhance the realism of its games and at the same time don't spoil the experience of the game for the player.
Every time the gamer plays the game, they can see a different ad in the same spot. And since the ads change and can be a natural part of the game's environment, the advertiser doesn't run as much risk of annoying the game player through over-exposure. Massive also measures how often gamers can see the ads so that it can report back to the advertisers how effectively they are reaching the audience.
"This ability to track the ad viewing is especially attractive," said Brandon Berger, an ad executive at OgilvyOne Worldwide.
In addition to that, the Massive network allows advertisers to jump on the bandwagon of a popular game by waiting to see if it is popular before committing to placing an ad in the game, said Chad Stoller, director of communication solutions at brand consultancy Arnell Group in New York.
"Advertisers who rely on making `change on the fly' decisions and require immediate placements will benefit from massive's network because they can advertise when they are ready," said Stoller. "The film business will benefit tremendously from this network as they prepare for Friday movie openings."
The gamer audience hasn't been easy for advertisers to target. About 70 percent of males age 18 to 34 play video games and spend less time consuming other media. According to Nielsen Interactive Entertainment, people who see ads in games recall them better. In 2003, Nielsen said that males in this age group played 30 billion hours of games, as much time as they spent watching TV. And much of the playing occurred during prime time TV hours.
By the fall, Longano said that 40 game titles would use the in-game advertisements. Already, Ubisoft's s Splinter Cell: Chaos Theory and Funcom's Anarchy Online use the technology to create dynamic ads. Notably, only games with live Internet connections will be able to download new ads. Consoles or PC games that are not connected would only be able to display the same ad over and over in a particular spot in the game.

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