In-game advertising

Advertisers earn extra lives for their clients inside video games, but keeping score remains elusive.

Skateboarders and car enthusiasts might seem to have nothing in common except four wheels, but the connection soon might become more apparent. Activision has set a fall launch for its skateboarding console game "Tony Hawk's Project 8," featuring significant action inside a Jeep Wrangler factory, and by year's end -- surprise, surprise -- Jeep Wrangler is slated to unveil its first four-door edition.

"Synergistically, the deal just lined up," says Dave Anderson, senior director of business development and licensing at Activision. DaimlerChrysler, maker of the Wrangler, has been associated with four previous installments in the Tony Hawk video game franchise.

Such marriages are hardly unusual anymore. As one of the key audiences for traditional ad-delivery mechanisms on radio and network television -- those multitasking 18- to 34-year-old males -- increasingly turns to video games and the Internet, advertisers are modernizing their reach methods. Researchers at PricewaterhouseCoopers estimate that the global market for video games -- including console games, massively multiplayer online games, and even casual and "advergames" -- should reach $46 billion by 2010.

In a separate study, the Yankee Group estimates that in-game advertising will reach $732 million by 2010, more than 13 times the $56 million tally in 2005.

A bevy of game-related branding methods already exists, including static product placement in the form of objects or branded settings; static ads that resemble traditional outdoor ads; and refreshable, dynamic ads that appear as TV screens, logo-emblazoned scoreboards or even product placements.

Advertisers like British men's fashion brand Ben Sherman have even set up virtual shops within network-connected games. Players of the Atari racer "Test Drive Unlimited" for Microsoft's Xbox 360 can purchase virtual menswear for their drivers based on the actual Ben Sherman collection.

According to Nielsen Entertainment president and CEO Andy Wing, advertisers "have finally found a pipeline into the 18-34 male (demographic), and the video game publishers are in a position to monetize that audience."

Whether in-game advertising works, much less translates into sales, has yet to be measured successfully.

According to Shelby Cox, director of video game ad sales at Take-Two Interactive's 2K Games division, ads placed in sports-related titles have become as accepted as they are in live-action sports. "When you walk into an ad agency today or talk to brand managers, you no longer have to evangelize about what in-game advertising is," she says.

Developing better measurements of success, Cox emphasizes, is a crucial next step for the industry. "We had been using unit sales as a base from which to understand certain campaigns, but that all changes as online play grows," she says.

Double Fusion is one of several companies -- also including Engage, IGA Worldwide and recent Microsoft acquisition Massive -- seeking to sharpen the technology that automates ad and product placement and measures the effectiveness of brand messages in console and PC games. The easier it is to sell and place ads, Double Fusion CEO Jonathan Epstein observes, the more profit margins will increase for game makers. "The 5%-10% that ads may bring to a publisher can impact a 20%-30% profit increase per title," he says.

Such increases might be on the way, thanks to dynamic-content ads, which recently have become the golden child for game developers. Xbox 360/Xbox Live and Sony's upcoming PlayStation 3 will allow gamers to log on to the Internet, providing companies that place dynamic ads with a direct link to the success of their sales pitches.

Dynamic ads are easy and fast to develop, a major benefit for game makers like Electronic Arts. According to EA vp online commerce Chip Lange, creative work on in-game ads typically must be finalized at least six months before a title is launched -- while dynamic-ad creative can be uploaded the week a campaign kicks off.

At Sony Online Entertainment, chief financial officer and senior vp John Needham notes that it can take a year to create a 3-D object that will meet brand specifications and be relevant to a game. As dynamic-ad technology becomes easier to use, though, SOE could run trailers for upcoming Sony feature releases as interstitial material before gameplay or within a game's "fiction."

What might be coming next is product placement inside a dynamic-content world, alterable at whim by a game's players -- or anyone else, for that matter. Second Life, an online digital community started by Linden Lab, features more than 350,000 "residents," and each player can create his or her own dynamic content. American Apparel has set up an in-game store where residents can use virtual dollars to buy virtual clothing -- or link out of the game and purchase real-world gear. In July, pop band Duran Duran announced that it was expanding its "brand" within Second Life, where avatars representing band members soon will play concerts and fans can congregate and even purchase CDs.

Second Life remains a small fish in a big pond, but its template might be the hook for game-branding's future: Get players in on an idea; don't just let them skate through it.

"The association of branding with the pop business is largely down to cynical commercial marketing exercises," sniffs Peter Wells-Thorpe, president of 3003 Group, the strategic-marketing firm that brought Duran Duran to virtual reality. "Artists like Duran Duran have so much to offer creatively that all that is needed is for organizations like us to connect them to new opportunities and new ways to take their message in music and art and culture to more people."