[MUD-Dev] [BIZ] Advertising sprawl (yahoo)

J C Lawrence claw at kanga.nu
Sun Apr 8 17:12:01 New Zealand Standard Time 2001


MTV, Def Jam, Coke: They're All Playing With
Video-Game Product Placement

By Jordan Raphael

Last year, Charlene Boudreaux paid a sales call to a billion-dollar
food conglomerate to pitch a novel marketing opportunity: product
placement within Midnight Club: Street Racing, a car-racing game for
Sony's PlayStation 2 (news - web sites). The response was immediate
and firm: Not interested.  "They just didn't get it," she says.

In February, Boudreaux went back to the same company, this time
armed with a video reel from Midnight Club featuring virtual city
streets brimming with billboards from advertisers like MTV, Def Jam
Records and Coca-Cola. "Seeing the Coke brand in there really opened
their eyes," she says. "Suddenly, they had a lot of questions: How
effective is the advertising? How much does it cost?"

As director of client services for L.A.-based Global Product
Placement, Boudreaux mainly works on movie and television
properties; her credits include booking brands like Christian Dior
and Louis Vuitton into Charlie's Angels, The 6th Day and the WB's
teen hit Popular. She doesn't play Nintendo (news - web sites) 64 or
PlayStation. Nevertheless, her forecast for the future of product
placement in video games -- or in-game advertising -- is worthy of
an overjuiced Internet analyst. "It's going to explode," she says,
adding, "When companies see their competitors' logos flashing on the
screen, they're going to be forced to head in the same direction."

Fueled by the popularity of consoles like PlayStation, video games
are increasingly drawing an older and broader demographic that
appeals to a wider range of advertisers. According to the
Interactive Digital Software Association, 58 percent of console
gamers are 18 or older. Super-charged consoles like PlayStation 2 --
and the upcoming Microsoft Xbox (news - web sites) and Nintendo
GameCube -- now have the processing power to render logos with
near-realistic clarity in any area within a game, from skate-park
ramps to baseball-stadium scoreboards.  Imminent broadband
connectivity for console games also raises the tantalizing prospect
of dynamically dishing up ads in the game space of, say, Everquest
or Quake III Arena.

In an August 2000 report, Forrester Research identified product
placement as an important new income stream for game publishers, and
predicted, perhaps a tad optimistically, that placement revenues
will grow to $705 million by 2005. "Bottom line," notes Sean Wargo,
a senior analyst with NPD Intelect, "gamers are a focused and
dedicated consumer segment that is ripe for the picking."

Of course, the placement of real-world brands within video games'
virtual environments isn't new. Simple online games found at such
sites as Shockwave.com and Zone.com have been featuring in-game ads
for some time. For several years now, game-makers like Sega and
Electronic Arts have incorporated logos into the simulated fields,
arenas and stadiums of their sports games. Racing titles, most
conspicuously EA's NASCAR (news - web sites) line, sport stock cars
adorned with stickers promoting everything from Goodwrench Quicklube
to Kodak Max to Corn Flakes.

The big difference is, in the past these placements weren't treated
as ads: game publishers typically included the logos for free,
seeking to boost the authenticity of their 3D worlds, and in some
cases even paid a licensing fee to the brand owner.

The flow of money may be changing direction, but so far ad revenues
aren't making publishers rich. Reps who sell ad space in games say
they're bringing in anywhere from $10,000 to $100,000 per
title. Only one company, Electronic Arts, has reported breaking the
seven-figure barrier.

"We started in-game advertising for the first time in December, and
we generated a couple million dollars of revenue with that," EA
president John Riccitiello told a crowd at a European multimedia
conference in February. "Our expectation is, we'll cover the cost of
the games where we do the in-game advertising, partly because of the
large audience we're able to realize." (EA declined to clarify the
comment or provide more details of its in-game advertising

Marketers are beginning to appreciate video games as a potentially
powerful interactive advertising medium. Consider: Sega's Crazy
Taxi, a modest hit that was filled with virtual billboards, sold
more than 750,000 copies in the U.S. alone, which means it reached
at least that many gamers. Add to that the game's addictive quality,
with players staring at the same ads over and over, and it's hard to
argue with the ability of such environments to draw both eyeballs
and repeated ad viewings.

What's more, fans seem to be taking the ads in stride, as another
reflection of pop-culture reality. "In games like Crazy Taxi,
product placement is so excessive that it almost feels like a joke,"
says Bryan Younce, a 24-year-old gamer in Los Angeles. "It just
seems like the natural course of things." Adds Heather Berry, editor
at Happypuppy.com, a gaming fan site, "If gamers like the game, they
don't care about the product placement."

"There is no other way to reach a large group of this demographic,"
says Erik Dochtermann, CEO of Global Product Placement. "With cable
TV and the Internet, everything is too fragmented. This is long-term

Despite the potential benefits to the bottom line, some of the top
game publishers have been wary of wading into product
placement. "Right now, we certainly don't look at advertising as a
revenue generator," says Stacey Kerr, the product manager for Sega
of America's NFL, NBA and NHL sports line. "We are not in the
advertising business."

Representatives of Sony and Nintendo expressed similar reservations
about hawking space in the games they publish.  "Occasionally, when
it makes sense, we may include billboards," says George Harrison,
vice president of marketing for Nintendo of America. But "the
purpose would be to add realism as opposed to generating revenues."

Sony, meanwhile, has preferred to go the barter route. For the last
three years, the company has included banners for the likes of
Billabong, Mountain Dew and Motorola in its extreme-snowboarding
series Cool Boarders, in exchange for which Sony received
cross-promotions and sweepstakes prizes, says product manager John
Koller. The company is happy with the arrangements. "Not all of our
games get huge budgets. These trades really help us out by extending
the life of our marketing," he says.

P.J. McNealy, a senior analyst with Gartner, believes some
publishers are simply waiting for the market to develop. Once big
brands are coupled with dynamic technologies that let marketers
target individual gamers, he says, even Sony and Sega won't hold
back. "When you have people logging on to play and they get the
local Domino's on a billboard, that's not going to be barter," he
says, adding, "These games have a captive and targeted
audience. That's a viable advertising base."

Several smaller developers, however, see the opportunity now. The
most sophisticated titles already offer richly textured dream worlds
whose immersive qualities rival those of the most compelling movies
and TV shows. "When you consider the volume of sales, the target
demographic, the amount of involvement players have, and the
multiple direct and subliminal qualities of branding in that
involvement, you have a huge value that has yet to be truly
appreciated by advertisers," says Terry Donovan, chief operating
officer of New York City-based Rockstar Games, which released the
ad-laden Midnight Club game, and will incorporate product placement
in the upcoming Grand Theft Auto 3 and Smuggler's Run 2.

Donovan says that ad revenues covered only a small fraction of
Midnight Club's multi-million dollar development cost, but the new
titles are bringing in significantly more advertising dollars,
though he declines to give specifics. In the future, says Donovan,
"it wouldn't be inconceivable to offset 50 percent of a game's
development with advertising, but we're nowhere near that

For now, however, in-game ads can be a tough sell, in part because
there's no established metric with which to reassure
marketers. Boudreaux of Global Product Placement, for example,
explains to clients that a Rockstar driving game typically sells
300,000 to 500,000 units to a predominantly male audience, ages 16
to 34. Each customer will play the game for an average of 100
hours. With several dozen billboards per sponsorship package, she
estimates that an advertiser's brand will be viewed more than 200
million times. The average sponsor in Midnight Club paid between
$2,000 and $5,000, she says. Even if her math uses some fuzzy
variables, by practically any measure those ad buys were a steal.

"It appeared to be an incredible opportunity for us," says Johnnie
Walker, senior vice president of R&B promotion at Island Def Jam. "I
now have a new way to reach this demographic, and I may be able to
save some dollars on (other types of marketing)."

If in-game advertising blasts into hyperdrive, ad rates will surely
zoom up as well. Boudreaux envisions a time when companies bid
against each other for choice placement in a game -- at the finish
line of a racetrack, for example, or on billboards in the easy
levels. "I see the marketing dollars building around video games
like they do with film," she says.

One place where those marketing dollars are beginning to pile up is
in the world of online games. Firms like Yaya, a Los Angeles-based
marketer, develop custom-branded interactive games for companies
hoping to capitalize on the format's inherent stickiness. "Games are
one of the most dominant ways that people use the Internet today,"
says Yaya CEO Keith Ferrazzi.

Yaya is also venturing into in-game advertising with a
browser-based, multiplayer soccer game that will be hosted on this
year's World Cup Web site. The game will have the capability to
stream ads all along the soccer field, as well as on players'
jerseys and in the stands. Lacking a proven CPM (cost per thousand)
track record for in-game advertising, Ferrazzi describes the rate
negotiations as "fairly flexible."

Shockwave.com scored some respectable results last fall on an
in-game ad deal in its top-rated 3D game, Real Pool. Jack Daniel's
bought logo placements on and around the billiards table for a
period of six weeks. Shockwave projected that the branding campaign
would pull in 4.4 million impressions; it ended up drawing more than
5.5 million. With an average player spending 12 minutes on the game,
the whiskey maker enjoyed nearly 66 million minutes of brand
exposure. Total cost of the campaign: $60,000. That's about
equivalent to the cost of a Web banner campaign, but unlike
traditional online advertising, on Real Pool it's impossible to
avoid the brand.

"We're transforming video games into a mass entertainment medium,
which means it will be supported largely by advertising," says
Joseph Varet, vice president of business development and strategy
with The Groove Alliance, the developer of Real Pool.

For The Groove Alliance's new racing game, SkyRacer Impulse,
Shockwave will use a DoubleClick DART server to dynamically stream
ads into billboards placed around the track.  "The advertiser's
brand is part of the interactive environment," says Varet. "It's not
something you can zone out of. If someone's playing our game,
they're staring right at your brand."

That, ultimately, is the key selling point marketers will have to
buy if video-game ads hope to rival the numbers of conventional --
or even online -- advertising. As Rockstar's Donovan remarks,
"In-game advertising is in its infancy, and it could only be
described as looking toward a rather healthy childhood."

J C Lawrence                                       claw at kanga.nu
---------(*)                          http://www.kanga.nu/~claw/
--=| A man is as sane as he is dangerous to his environment |=--
MUD-Dev mailing list
MUD-Dev at kanga.nu

More information about the MUD-Dev mailing list