NBC Uni's move into vid game ads augurs trend

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When Microsoft bought the in-game advertising network Massive last year, it was said that the purchase validated the business of selling ads inside video games. But Microsoft was already in the games business, of course, and knew full well the value of in-game ads.

What is far more stunning is that this summer the venerable NBC Universal invested in Massive's competitor, IGA Worldwide, and it has just agreed to start selling ads into IGA's inventory of video games. That makes NBC Uni the first non-gaming media giant to join the fledgling in-game ad business. But it certainly won't be the last, say industry observers.

"This is definitely important for the in-game ad industry," says Michael Cai, director of broadband and gaming at Dallas-based research firm Parks Associates. "At least the major guys are now paying attention and are taking some action instead of just going to conferences."

While only about $54 million was spent on ads (both static and dynamic) within PC, console, and mobile games in 2006, that will rise by 66% to $90 million this year and then to $150 million in 2008. Within five years, it is expected to top $804 million, according to Parks Associates data.

In July, General Electric/NBC Uni's investment fund, Peacock Equity, was the lead investor, enabling IGA to raise $25 million in Series B funding. Last month, NBC Uni's digital media division signed a pact allowing the NBC sales team to sell ads into IGA's inventory of retail PC and console games, currently numbering 50 but expected to reach 200 within the next two years.

"What we've done is carve out a portion of our ad inventory for NBC to sell directly," explains Justin Townsend, CEO of Manhattan-based IGA. "That relationship enables us to bring all the marketing power of the country's largest TV network to bear and, of course, all the current relationships that it has with existing brands and agencies as well."

IGA says it has already served over 150 ad campaigns, including such leading brands as Coca-Cola, Burger King, McDonalds, Wendy's, Cingular, Nokia, and several of the large movie studios. The agreement with NBC Uni is its first reseller deal aimed at augmenting its direct sales force of 30 in the U.S. and Europe.

What the agreement does for NBC Uni, says Townsend, is to give its advertisers access to the 100 million U.S. gamers who are mostly male and, at an average age of 29, an eagerly sought-after demographic.

"Our advertisers tell us they want to extend their sponsorship beyond our TV shows," explains Nick Johnson, vp at NBC Universal Digital Media advertising sales. "So, in addition to sponsoring, say, "Heroes" on-air, we have been taking them to our "Heroes" Web site and online video and to wireless. And now the IGA relationship puts us into a new distribution footprint -- the gaming environment -- which is one that is growing very, very rapidly. A sponsor of 'Heroes' might be very interested in games in the science-fiction genre, for example. As we continue to explore more and more creative ways to extend our advertising relationships, we think the gaming environment is really a strong one for us."

He describes his sales team is being in the early stages of setting up its games strategy and he isn't ready to discuss which brands he intends to target.

A big buzzword these days is "360-degree ad campaigns," which refer to advertisers who want to reach a certain demographic but find it difficult to do so through the traditional platforms.

"One thing that's important to a lot of advertisers is for the agencies to create innovative packages that include not only traditional media, but also some of the emerging media," says Cai. "That's because the advertisers don't necessarily understand all of the emerging media and how they position on the ad spectrum. So they're looking for agencies and strong ad sales teams at companies like NBC for some of those recommendations."

Indeed, he adds, "the words coming out of NBC's mouth can sometimes be more powerful than from IGA's mouth."

Townsend has already seen the budgets being spent by brands on in-game ads increasing from $30,000-$40,000 per campaign about two years ago to as much as $600,000 per campaign. And Cai believes that the hesitancy on the part of advertisers to spend their money on in-game ads will contain to fade.

"At the moment, it's still new and not totally proven yet," Cai explains, "even though the in-game ad solution providers have done some research to validate the media and to prove that gamers spend many, many hours on their favorite games. Still, the advertisers don't really know how to leverage the media yet. I think that when companies like NBC start telling them that in-game ads actually work, advertisers are going to feel a lot more comfortable spending their money."

Paul "The Game Master" Hyman is the former editor-in-chief of CMP Media's GamePower. He has covered the games industry for more than a dozen years. His columns for The Hollywood Reporter run exclusively on the Web site.
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