Google gets in-game with Adscape
EmptyGoogle made it official Monday, acquiring in-game advertising company Adscape Media for $23 million in a deal analysts say solidifies the $30 billion global video game landscape as a major player in the advertising business now and in the future.
"I'm not sure that Google is doing much more than expanding its advertising reach," said Michael Pachter, video game analyst at Wedbush Morgan Securities. "I think that they're smart enough to see that people will be spending a lot of time playing games online and want to be sure that they don't overlook any online opportunity to connect consumers and advertisers."
The majority of 18- to 34-year-old males play video games and a growing number of them play during primetime, making games the best way to reach a coveted demographic that always seems to have disposable income. With the advent of such always-on consoles as Xbox 360, PlayStation 3 and even the new Wii, in-game advertising, once relegated to the smaller PC space, is finding a home with the mass-market console audience.
Adscape, a startup that launched in February 2006 with $3.2 million in funding from Atlanta's HIG Ventures, is behind the other players in the burgeoning in-game advertising market, which include Microsoft-owned Massive, IGA Worldwide and Double Fusion.
Founded by former Nortel engineer Dan Willis, Adscape hired former Sega executive Bernie Stolar as the company's dean of games. It has not announced any game publishers as customers.
"Games can be played anywhere and at any time," Stolar posted on his blog. "In this mobile world, games have evolved to become a part of our lives. Unlike television, gamers can make games their own -- customizing their experience in new ways -- and we are helping them do that big time."
IDC video game analyst Billy Pidgeon said the purchase of Adscape makes sense because the company's approach focuses on context that is Google's strong suit. He also said there will be attention on the in-game advertising sector as a result of the deal, which will have a double-edged effect: The business looks more promising, but players will need to demonstrate sustainable growth more quickly.
"I would not be surprised to see other large firms experimenting with in-game advertising schemes," Pidgeon said. "IGA Worldwide, Double Fusion, Massive and other existing vendors must each demonstrate how their approach benefits the brand, the process and the market."
Microsoft reportedly paid $200 million-$400 million when it purchased Massive in May 2006. The company now blends in-game advertising for both PC games and Xbox 360 games via Xbox Live, which has more than 6 million global subscribers. In the second half of last year, Massive signed publisher deals with Electronic Arts and Activision and ran global campaigns from advertisers including Castrol, Wendy's and Under Armour.
"We've got quite a head start here," Massive CEO Cory Van Arsdale said. "The Massive team has been working side by side with the Xbox team while utilizing the huge investment Microsoft is making in advertising-platform technology and worldwide sales execution, creating a powerful combination for the in-game advertising industry that's simply unmatched."
Massive has more than 50 live game titles in the network, more than 60 blue-chip advertisers and more than 115 million game sessions served to date.
Pachter doesn't think the Adscape deal is bad for competitors like Massive.
"Rather, it validates that in-game advertising is real and will grow dramatically," he said.