Nielsen turns to TV viewers to report on video games


They say the third time is the charm and Nielsen Games is hoping that's true. On July 25, the research company plans to start providing a metric to measure the effectiveness of in-game advertising. But this isn't its first attempt.

Two-and-a-half years ago, in January 2005, the division of The Nielsen Co. [which is also the parent company of "The Hollywood Reporter"] said it was poised to unveil a TV-industry-type metric for games. The plan called for the use of "tags" that developers could build into their video games that could be used by Nielsen to measure all sorts of in-game activity, especially response to advertising. It included how people navigated through the games, what levels they reached, and how long they spent on each level.

It never happened. Nielsen reported that the tags had turned out to be incompatible with the complex technology within the industry's next-generation game consoles.

A year later, in January 2006, Nielsen gave it another shot, but because the project was so dependent on the forthcoming launch of Sony's PlayStation 3, the company admitted its measuring system wouldn't be up and running before the third quarter of 2007.

Meanwhile, the industry struggled to sell what is known as dynamic in-game ads -- meaning that the ads within the video game can be altered remotely so they can be used for time-critical campaigns, like movie launches. Last year, despite all the hype, less than $15 million was spent on so-called DIGA commercials, which is just about 4% of the $370-million total generated by the U.S. video game advertising industry.

But, in five more years, DIGA spending is expected to skyrocket to $676 million, which will be about 33% of a market projected to hit $2 billion by Dallas-based research firm Parks Associates. If that happens, dynamic ads will be the darling of the video games industry -- and its biggest ad revenue producer.

However, all of this is predicated on advertisers feeling comfortable with their DIGA return on investment. And, so far, that isn't the case.

"Most of the CMOs of brand name companies don't understand gaming and its marketing potential," explains Michael Cai, Parks' director of broadband and gaming. "They don't understand how they should justify the ROI for game advertising, as the medium doesn't have established tracking metrics like TV. For advertisements based on image delivery -- such as TV ads and Web display ads -- advertisers need a standard way to count impressions in order to compare their spending on different media and justify the ROI. One advantage of TV advertising is that the 30-second spot is a widely accepted and easily-understood standard. For dynamic in-game advertising, such a standard does not exist."

Nielsen Games hopes to change all that. Next week, Nielsen will start releasing data gathered by using a different technology altogether than it originally planned. This time, it will use the same familiar technique it uses to measure television audiences.

"We're using the same exact metering equipment and the exact same TV PeopleMeter panel that is a national representation of the United States," says Jeff Herrmann, vp of Nielsen Games and Nielsen Wireless.

The equipment detects each game's unique "audio signature," compares it to the reference library of audio signatures compiled by Nielsen, and determines what games are being played when and where.

"What's so compelling is that because the same people's TV viewing and game playing activities are being monitored, we can do an apples-to-apples comparison that supports integrated media campaigns," adds Herrmann. "In other words, if the gamer demographic is an attractive target for you, you can now reach them through dynamic in-game ads as well as through TV commercials. And, now that we just acquired Telephia, we can also layer in data on mobile advertising." San Francisco-based Telephia is a provider of syndicated consumer research to the telecom and mobile media markets.

But Nielsen subscribers will need to wait a bit before all that information is available to them. The July 25th release of title-based data is for PC games only; title-based data for console games won't be available until October and title-based data for mobile games will be released in early 2008.

"The advantage of signature matching," says Herrmann, "is that there's no need to involve the active cooperation of the game developers and no need to add anything to the game. That doesn't mean that we don't intend to pursue the encoding approach which we believe is still a good strategy and is still on the table. But given the complexity of the next-gen consoles and the current state-of-the-market, we have decided to use the passive approach now and then turn to the collaborative approach later on."

Meanwhile, Sony has agreed to feed Nielsen its own gameplay metrics -- which Sony games are being played, by whom, and for how long -- "to enhance the data we are collecting and to give us the opportunity to take a hybrid-based approach to measurement," notes Herrmann. "Sony's census-based data combined with our panel-based data will make the numbers we report that much more robust."

"We're letting Nielsen as a third party run our data through their mill to help us validate the value of advertising on our platform," notes Phil Rosenberg, Sony's senior VP. "I believe Nielsen is going to provide very real metrics to the advertisers which will help them understand the value proposition of the PlayStation network compared to their other options."

Sony's plan is to begin releasing its network statistics -- for PlayStation and PSP games -- "later this year" but wasn't more specific.

Currently, Sony's titles contain only "static" ads, meaning that they are hard-coded into the game and cannot be altered the way dynamic ads can. Plans for dynamic advertising will be considered "at some point," according to Rosenberg.

"In-game advertising is a priority for our company; it's a real important strategic initiative moving forward," he explains. "We recognize that it can help us offset some of our development costs but, first and foremost, we need to make sure that nothing we do inside a game via advertising detracts from the game-playing experience. Right now we're looking at our options."

While some advertisers have invested in DIGA advertising, relying primarily on the ad-serving companies for ROI information, others have been waiting for the sort of third-party audience measurement Nielsen and Arbitron provide for the TV and radio media. Nielsen says the data it will begin providing this month is just what the doctor ordered; Parks Associates' Cai isn't so sure.

"Nielsen has been under pressure from TV advertisers to come up with a more accurate way of measuring viewers than the panel they've been using for so long," he says, "so it's actually kind of surprising to see Nielsen's retreat to that same panel methodology. Maybe the tagging technology is too complex, it's taking time for them to perfect it, and this is just a stop-gap measure before they adopt tagging. Maybe they just don't want to wait to come out with a measurement system."

Measurement of game usage is further complicated by the inability of the three ad-serving companies -- Massive, IGA Worldwide, and Double Fusion -- to come to a consensus on a standard way to count impressions in order to compare spending on different media and justify ROI.

"That's probably another reason why Nielsen is going with the panel approach," says Cai. "If they can't be 100% accurate, at least polling can provide some metrics showing how consumers are using gaming. Then, when there is agreement among the solution providers, then Nielsen can switch to a digital methodology. I believe that's what's holding the industry back at this point."

Indeed, the same panel approach is being employed by a new competitor to Nielsen -- Santa Monica, Calif.-based Interpret LLC -- a company co-founded in April, 2006 by Michael Dowling. Dowling had been general manager of Nielsen Interactive Entertainment until March 2006 and was a key player in the effort to measure video game usage there.

Interpret has created its own survey-based solution, called GameMeasure, which polls a panel of more than 10,000 consumers ages 12-65 each quarter about their recall of such various behaviors as gameplay, usage, and purchases. GameMeasure is already in its third reporting period.

"But we also delve deeper into what's the frequency and incidence of buying products in many key categories of consumption," he said. "So you can determine, for instance, what nonalcoholic beverages a person who bought 'Guitar Hero' is drinking. And so, if you're Coke, you can understand the likelihood of a 'Guitar Hero' gamer buying your product."

Dowling reveals that his company is also developing a metering solution that will compete with Nielsen's later this year and that will co-exist with GameMeasure.

He is reluctant to predict when the industry will agree on a standard methodology for measuring DIGA advertising.

"At some point, there will be a winning methodology declared," he said, "but it's not going to happen right out of the gate. Some advertisers who are the thought leaders are already buying ads, but there are others who are sitting on the sidelines. I believe they won't be able to do that for long given the import of this marketplace and the opportunity to reach and influence consumers. So each GameMeasure study that we do, each data point that Nielsen releases, each Parks Associates report that comes out, they are all taking us one step closer to people feeling more and more comfortable with dynamic advertising."

While advertisers mull over their options, Parks Associates' Cai reports that an increasing number of game publishers are viewing dynamic ads as an important revenue source.

"The CEOs at some of the largest publishers -- like Electronic Arts and Activision -- have come out and said that, in the next two years, in-game ads are going to become a more significant percentage of their total revenue," said Cai. "I mean, the ads in EA's 'Need for Speed: Carbon' alone reportedly brought in $4 million. So there's definitely growth in this area.

"The bigger advertisers have been testing the waters," he noted. "But in order to have exponential growth -- especially in dynamic ads where the selling point is really the scale -- there needs to be thousands of advertisers, particularly the smaller ones who are accustomed to the measurements they get from Internet advertising. That's where you need to have an accurate digital methodology, not just a panel or a survey system. That's when the sale of DIGA ads will really take off."

Paul Hyman was the editor-in-chief of CMP Media's GamePower. He's covered the games industry for over a dozen years. His columns for The Reporter run exclusively on this Web site
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