Quick-Change Ads for the Joystick Generation
By Geoff Keighley

(Business 2.0) – From a distance, this year's Electronic Entertainment Expo seemed to attract the usual scruffy crowd of gamers, retailers, and reporters. But if you looked a little closer, you might have noticed a new, more polished breed jostling among the veterans: advertising executives representing fast-food, automotive, athletic shoe, and other consumer product companies, all desperately trying to land meetings with major game publishers. Ubisoft, one of the most sought-after firms, didn't have the manpower to handle all the requests--more than 60, up from just two in 2003. "Three years ago, when we started to reach out to advertisers, they all said, 'Thanks, but we don't want to reach 12-year-old boys,'" says Julie Shumaker, director of sales for leading game publisher Electronic Arts. "But now we're seeing the market pick up at a record-setting pace."

Why all the interest? Two reasons: The 30-second TV spot is on a glide path to history, and young men are increasingly abandoning television for videogames. Sixty percent of 18- to 34-year-old males play videogames regularly, and Nielsen recently reported that the same demographic is spending 5 percent less time watching TV. Advertisers have already caught on, spending $16 million last year on videogame advertising--mostly product placements.

What still makes media buyers skittish, however, is that there's no way to precisely measure ad exposure in videogames. But that's going to change. Nielsen Interactive Entertainment announced in April that it's working on a "people meter" for games. By the end of the year, it will gauge how many people are playing a game, how long they play, which ads they see, and how long they see them. "Measured media is going to lend credibility to the videogame space and will lead to greater cost effectiveness when buying game ads compared with other forms of media," says Sam Bloom of media marketing firm Camelot Communications, whose clients include Blockbuster, 7-Eleven, and Southwest Airlines.

Measurability will become even more vital as ad technology becomes more sophisticated. Next month Massive Inc. will roll out a system that can embed, display, dynamically change, and measure in-game advertising. In a game like Splinter Cell: Chaos Theory, for instance, the billboards on taxicabs will change on the fly. Play the game this fall and a promotion for the new season of The Apprentice might appear. But in December, an ad for the theatrical release of Ocean's Twelve could be displayed in the same place. "We can target specific demographics or even specific regions of the country," says Richard Skeen, Massive's VP for advertising sales. Major advertisers like Blockbuster, Chrysler, and General Motors have already expressed interest. But Massive's technology is limited to games that can connect to the Internet. That won't be a problem for PC games, but they account for just 18 percent of the market, and only 15 percent of stand-alone game consoles are online-enabled.

Another hurdle for Massive will be persuading game publishers to integrate the technology into products. Atari and Ubisoft are onboard, but Electronic Arts won't support Massive's launch. Shumaker says EA is forgoing dynamic in-game ads in favor of brand-integration deals, in which advertisers sponsor specific game features. NCAA Football 2005, for example, showcases the Old Spice Red Zone Report. SSX 3 lets players snowboard through the open doors of a Honda Element SUV. Product-integration deals aren't new, but they're becoming white-hot--one reason EA isn't looking to improve on them: This year the publisher will book $7 million in product-integration revenue from 15 brands, up 60 percent over 2003. EA currently charges advertisers based on a game's projected unit sales, not specific ad exposure.

One great unknown in all this is how gamers will react. Game publishers will have to tread carefully with players, who, after all, are shelling out $50 per game and won't react well to anything that feels like a hard sell. As EA's Shumaker puts it, "No matter what we do, we have to always remember that the gamer is god." And--as Madison Avenue has discovered--a fast-moving target as well. -- GEOFF KEIGHLEY