games reporter

It's all part of the game with NBC Uni ad sellers

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

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

"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."

Only about $54 million was spent on ads (both static and dynamic) within PC, console and mobile games in 2006, but 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 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 unit signed a pact allowing the NBC sales team to sell ads into IGA's inventory of retail PC and console games, now 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," says Justin Townsend, CEO of New York-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 already has served more than 150 ad campaigns for such leading brands as Coca-Cola, Burger King, McDonald's, Wendy's and several 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, Townsend says, is 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," says Nick Johnson, vp digital media advertising sales at NBC Uni. "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."

A big buzz term these days is "360-degree ad campaigns," which refer to advertisers who want to reach a certain demo but find it difficult to do so through 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," Cai says.

Townsend already has 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 money on in-game ads will contain to fade.

"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," he says.