Video games as an advertising channel? Well, why not? They're major media, and they offer more marketing opportunities than you might expect.

By Jack Gordon

In a video game called "CSI: Hard Evidence," based on the "CSI" television franchise and playable on Microsoft's Xbox 360 console or a personal computer, a Chrysler minivan serves as a mobile crime lab. Inside the van is a Hewlett-Packard computer that the game player uses to help solve a crime. Visa's fraud-protection software has a key role in cracking the case, as does evidence swept up and captured by a Dyson vacuum cleaner.

If everything works as the designers intend, the fact that the machines and software are recognized brands rather than generic devices adds realism to the game. If players aren't actually pleased, at least they will not be turned off--even if they know or suspect that those brands paid the game's producer, Ubisoft Inc. of San Francisco, to integrate their products into the action so that the player uses them to advance through the game.

That kind of "plot integration" is the most expensive form of what's known as in-game advertising, says Jeffrey Dickstein, digital advertising sales director for Ubisoft, which produces other video game titles including "Tom Clancy's Ghost Recon." An advertiser's cost for a promotional deal that includes plot integration in a major commercial game "usually runs into six digits," he says.

A Chrysler minivan serves as a mobile crime lab in the popular video game, "CSI: Hard Evidence."

For less money, a brand could buy in-game advertising in the simpler form of product-placement or "set decoration." In that case, for instance, Hewlett-Packard computers might appear on desktops in offices the player visits, but the player would not interact with them. Likewise, Visa or Chrysler might simply show up on billboards or in storefronts that appear as the player navigates through the cityscape of a game.

Gaming now rivals the music industry as a major segment of the entertainment market. Consumer spending on video games in 2007 will total $10.4 billion in the United States and $37.5 billion worldwide, according to PricewaterhouseCoopers. Research firm PQ Media reports that games are played in 66 million U.S. households. Advertisers naturally want to go where the eyeballs are. For them, video games are a potential marketing channel, like television, radio or the Internet.

In-game advertising, in its various forms, is one of three basic marketing strategies within that channel. Another is out-game advertising: products aren't seen or used within the game itself, but sponsors associate themselves with a popular game title by means such as hosting player tournaments or press events.

The third strategy is to develop one's own branded video game--a so-called "advergame." Last year, Burger King introduced an advergame called "Sneak King" that plays on Microsoft Xbox. Burger King sells the game at its restaurants--3.5 million copies in the first year, according to reports--for about $4 with a meal purchase.

This October, Toyota introduced the first advergame to be distributed via the Xbox Live service. Yaris, a game featuring Toyota's Yaris car model, can be downloaded free from the Live website by any Xbox 360 console owner in North America.

Full-scale console products like those, which can cost millions of dollars to produce, are rarities in advergaming, says Garry Kitchen, president and CEO of Skyworks Technology Inc. of Hackensack, N.J. Far more common are simpler, online advergames, like those Skyworks specializes in producing for clients including Procter & Gamble, Sony Pictures and Miller Brewing. These "casual" games may reside on the brand's own website, or the brand may sponsor them on other sites. Visitors usually are invited to play them for free, and players generally spend only a few minutes with them, as opposed to many hours.

Considering only advergames and in-game advertising (that is, setting aside out-game activities), research firm eMarketer estimates that U.S. advertisers will spend $502 million this year in the video game channel, up from $346 million in 2006. Worldwide, eMarketer's estimate for video game ad spending in 2007 is $1 billion.

ADVERGAMES
Skyworks claims to have pioneered advergaming by developing the first successful game "portal," LifeSavers Candystand. Launched in 1996, Candystand.com now offers more than 50 games and puzzles that feature Wrigley products such as LifeSavers candy and Juicy Fruit gum. The products are integrated into the action of some games and "placed" in others, as when they appear on stadium signage in baseball games.

Like the console games from Burger King and Toyota, however, Candystand, too, is an unusual example of advergaming, Kitchen says. Rather than building multi-game portals, most of his clients want a single game, often tying in with a product introduction, promotion or sweepstakes of some sort.

Sometimes, the site visitor has to register or enter the sweepstakes in order to play the game, helping the sponsor build a list of customers or prospects. In other cases, the game serves simply as a way to get visitors to remain on the site--and interact with the brand--for a longer period. "If they spend time with the game, they get a significant amount of brand exposure," Kitchen says. "Then maybe they tell their friends or come back to play again."

Advergaming offers marketers the means to highlight their brands via in-game and out-game advertising.

Some clients put games on their sites in order to sell sponsorships to other advertisers. Skyworks developed a casual golfing game for The Weather Channel's website, weather.com, in which players can choose weather conditions that match the forecast for the real course they'll be playing, say, next weekend. As of October, the sponsor was MasterCard, so MasterCard's logo appears on a screen that holds back spectators along the fairways.

In cases like that, the game becomes essentially a straight media buy, Kitchen explains: "A [potential advertiser] comes to a site like the Weather Channel's and says, 'Banner ads don't work anymore. What else have you got?' The Weather Channel says, 'Well, we've got this golf game. People play it for an average of eight minutes, or whatever, so that's the exposure you'll get.'"

Advergames do not necessarily have to be developed from scratch. Skyworks, for instance, has a catalog of more than 100 existing games designed to appeal to different audiences: teenage boys, adult women, sports fans of different types and so on. Kitchen says that the simpler, "entry-level" games can be customized for a specific client for $20,000 to $40,000 a year. Customization in that case may amount to little more than inserting the client's name into signage and other such "placement" techniques.

Granted, that sounds far less glamorous than making your product the star of its own full-length, multi-million-dollar 3D video game. But "product integration" can backfire in advergames, just as it can in commercial games, Kitchen says. "We don't always recommend integrating a product into game play, because if players feel that you're trying to ram your brand down their throats at the expense of the game, you won't just be ineffective. You'll actually harm your brand."

IN AND OUT
Preserving a game's integrity is a sensitive issue for commercial producers who sell in-game advertising. They like the revenue that comes from product integration or placement, but they must take care not to annoy players with blatant plugs.

"We can spend tens of millions of dollars to develop a game," says Sarah McIlroy, director of in-game advertising for Midway Inc. of Chicago, the producer of video games including "Mortal Kombat." "Brand contributions are small compared with development costs, so nobody wants to jeopardize a huge title with a brand that makes no sense."

In a new Midway action/adventure game called "Blacksite: Area 51," released in November, a Dodge Nitro SUV and Alienware computers are integrated into the action because it makes sense that the player would drive an SUV and use computers, McIlroy says. Even if players are aware that Dodge and Alienware paid for the privilege, they won't feel as if product plugs are coming at them out of left field.

That is the key to the balancing act of in-game advertising, agrees Ubisoft's Dickstein: "The player should think, 'Did I use a Sony Ericsson cell phone because it's the coolest thing on the market or because it was paid for?' That's the kind of ambiguity we want to achieve."

In-game advertisers often couple their efforts with out-game campaigns. For instance, Alienware will give away some computers in a sweepstakes tied to the "Blacksite" game, McIlroy says.

Sometimes only out-game activities are possible, because in-game placement doesn't work at all in some popular genres. When video games are set in fantasy worlds or in the distant past (ancient Persia, for instance), players can't very well interact with branded products or see them displayed as set decoration.

But out-game advertising can attach itself to any title that appeals to an audience a brand wants to reach. Ideas such as sponsoring launch parties, press events or player tournaments are obvious examples. McIlroy says that sponsors also may get involved in "pre-sell" programs, where consumers put down $5, say, to reserve a copy of an upcoming game. The sponsor might sweeten the deal with a product sample or a discount coupon for anyone who reserves the title.

Many brands attracted to in-game and out-game advertising have a more subtle agenda, as well, Dickstein says: "They want to gain cool points and cultural currency with the gaming demographic." When it comes to advertising in general, he says, "these people are hard to impress."

Jack Gordon has served as Electronic Retailer's editor at large since September 2004.