IMV17 : Online Gaming

The following is a transcript for IMV17 : Online Gaming. The original podcast is located here.

Announcer:

Welcome to the Internet Marketing Voodoo podcast brought to you by MindComet. And now, here's your host, Ted Murphy.

Ted Murphy:

Welcome to Internet Marketing Voodoo, Episode 17. I’m your host, Ted Murphy, and with me today is James Belcher, senior analyst for eMarketer. Welcome to the show today, James.

James Belcher:

Thanks, Ted.

Ted Murphy:

James, we’re here to talk today about advergames and the online gaming industry. For some of those people that are not familiar with advergaming, the gaming industry, and what’s going on there, can you tell us a little bit about what some of the most popular consoles are, who’s playing these video games, and just give us a snapshot of the industry.

James Belcher:

It’s kind of a huge and evolving question these days. Most of what gets attention are the console games. You hear a lot now about Xbox 360. There were somewhere in the neighborhood of I wanna say 100 million PS-2 sold. Certainly many, many and dominating the last round of the console wars. And even handheld games are considered consoles when tracking the industry. And Nintendo’s Game Boy has had well over a 110 million units sold since its inception.

Regardless, the other side of that typically is PC gaming, and then online gaming straddles both. You’ll have console games that are online via networks like Xbox Live hosted by Microsoft. Then you can have online games for PC games. With advergaming, most of what you see are PC-based games, especially Web-based games. Although these are spreading out to mobile games, as well.

There’s also the in-game advertising component to be aware of where ads are actually placed inside games that aren’t necessarily just a big ad for a game. It’s a big ad for a product, like an advergame is, where it’s built around one product in particular.

Ted Murphy:

Can you give our listeners an example of what an advergame may be?

James Belcher:

Yeah. I just played one a couple months back that was, I think, a really good example of how to run a campaign based around an advergame. It’s called Optus Tennis, and Optus sponsors a tennis tournament, and the game was very simple. It was something that was hosted online, so pretty much anybody with a browser could play it. You didn’t even need to download it, so there weren’t compatibility issues. And you just tried to keep the bouncing tennis ball in the air. That’s an advergame. It’s advertising something that they were already doing, so there was some type of synergy between the two marketing efforts. The sponsorship of the tennis event, and then the advergame worked, so was a multi-channel approach.

Ted Murphy:

And then you also mentioned in-game advertising. What may that look like?

James Belcher:

In-game advertising is placing ads directly into the game. And, really, it’s bee around for a long time. Pole Position, from Atari, over 20 years ago, had ads directly inside the game on the track. You’d have sponsor names. What was funny at the time, though, is that the sponsors actually wanted money from Atari to make the game more realistic.

Now, since it’s been established that a lot of people are playing videogames, advertisers and marketers wanna reach these folks. So they pay to place the ads in the games. Great example is pretty much any sports game. You’ll have, beyond just the actual images and names and statistics of sporting figures, you’ll have actual ads in the games that are true to life. You’ll have Nike. You’ll have Gatorade. You’ll have other sponsors, and all the brand names will be accurate. Maybe you can see down to the Wilson logo on the football.

Ted Murphy:

In terms of advertising, it seems like there’s different options in the industry. Where are you seeing the majority of advertising dollars go to?

James Belcher:

It’s about to change, and I think a lot of the interest is on the in-game ad side. But I think traditional sponsorships and advertising on game sites is still one of the bigger ways to go. So, for instance, Yahoo! Games will have just an ad like they would for their search engine, only it’ll be targeting folks who play those types of casual games, in particular. Then you have the in-game ads from companies like Massive, which was just bought up for a rumored $200 to $400 million by Microsoft. IGA Partners is another major firm in that field trying to put ads directly into games.

So you have sponsorship. You’ll have, as far as types of ads, you can have an ad before the game. You have a pre-roll ad. Ads at various points, say, between levels, like interstitial ads. As I mentioned, game sponsorships, which I really think is gonna take off and is kind of underused at this point. The actual sponsoring of either the development and/or distribution of the game. And then, of course, in-game ads.

Ted Murphy:

Let’s talk about a football game, like a Madden. What would I expect to pay to be part of one of these videogames?

James Belcher:

If it’s a live system where the ad is being updated, then what Massive has done, and what made them really saleable and attractive to Microsoft, I think, is that they run their ads in the same way that TV ads work, so that you have specific time slot that they’ll go in. So your rates are based on those types of negotiations, which are familiar to media buyers for television.

But, as far as game sponsorship, the development of a casual game can run anywhere from $25,000 to $100,000 would be very high on a casual game. These are, again, the types – where I mentioned Optus Tennis. That falls more into the casual games category. But if you’re talking about Madden, and you’re talking about a long run, that’s the most popular game year after year. So, obviously, that would be a higher fee.

Ted Murphy:

Are we talking millions of dollars here?

James Belcher:

I don’t know. I don’t see a lot of coverage on these types of deals, I think on purpose. Much like a lot of other deals aren’t advertised. I haven’t seen a lot of this in the press. One important thing to realize is that the model’s in its infancy, and you’re gonna see different packages and deals come up over time.

Ted Murphy:

Are there ways to actually measure the return on investment from these games? So if I’m looking at spending $100,000 on a casual game, how can I determine if that investment is actually benefiting the sale of my product or service?

James Belcher:

That kinda gets to the core of the old question – how do you measure or rely on any ad, in a sense. And the answer, I’ve heard from some marketing folks before, that strikes home anytime on this is stop advertising and see what happens. But I think the more pragmatic answer to that is use something that can be tracked as much as possible. Use a coupon or a promotion code. Maybe you have an 800 number that’s flashed in a game on a billboard, within a game environment, that’s specific to that promotion so that you know that this investment in this game went directly to that sale, if you’re sales driven. If it’s just a brand promotion thing, like Optus, there’s not a set amount of more interest that happened in the event. But it works like other types of brand building, as far as that’s concerned.

Ted Murphy:

There’s hundreds of different games on the market, from sports games to word games, logistical games. Are there certain types of games that tend to do better than others or that may appeal to different demographics?

James Belcher:

If you’re talking about advergames in particular, it seems like a lot of those are casual games. And casual games, in general, are played by an older demographic than the overall demographic profile of the average gamer, and they tend to be more dominantly women. Now these don’t get as much press as a lot of the things you’ll see at E3, for instance, where console games are looking to do over $100 million in revenue right off the bat from say Halo 2. But you’re talking about millions upon millions of viewers and players. Lots of eyeballs seeing the brand. So casual games go to that demographic I just described. First person shooters and more violent games do tend to be associated with younger male players. Then there are those games which are a bit more spread out, and these tend to be the Massive multi-player games like Second Life or games where you have a more broad demographic.

Ted Murphy:

In your report, Video Games: Where Are They Now?, you showcase a chart with results from an Ad:Tech attendee survey. And product placement in video games was actually last on the list for planned spending. Why do you think that may be?

James Belcher:

I think it’s the newness of the category. It’s an unproven model. Like I said, you’ve got people trying to figure out what they should spend, what that means for their brand. Until you get feedback, there are going to be tepid approaches to putting your toe in the water. Remember, a lot of people got burned when trying to figure out how to approach the Web, until a number of different ad possibilities came up. Similarly, even though you’ve got something which may be familiar right now, like buying time slots in games for ad placement, until you come back and say, “Oh, well, we definitely reached thus and such, and sales have been increasing or our brand is seen more favorably,” then I think that’s why it’s going to be off of peoples’ radar as much as just not being familiar with the possibilities.

Ted Murphy:

We’ve got a caller from our toll-free number, 866-206-4461, so I’m gonna play that for you right now, and we’ll see if we can help this gentleman out.

Dave:

Hi, this is Dave calling from Seattle. I’m a marketing exec for a large corporation, and I’m considering using advergame for one of our online promotions on our corporate site. Before spending thousands in game development, do you have any suggestions or cautions to watch for? Thanks for the input, and I love the show.

James Belcher:

I would say that, first of all, make sure you’re getting a type of game together and a type of venue for distributing that game. Be it hosted on your site or linked to from affiliates or game hosting sites. Make sure that it’s going to reach the audience you intend by checking the demographics, checking to see the look and feel of where it’s gonna be hosted, and the type of game itself. And don’t forget to make it fun. If the game is lame, that almost works against you, and it’s a squandering of money. Don’t make people hate your brand either the game play itself isn’t fun or you inundate them with messages, rather than just letting the association happen with a fun game. Also, make sure that you’re gonna have something that’s as compatible as possible. So Web-based games tend to work well there.

Ted Murphy:

Do you have any predictions for the growth of the online gaming industry and advergaming and what that’s gonna ultimately mean for marketers?

James Belcher:

I don’t have any numbers right at hand, but I think that online gaming is at a plateau at the moment. You’re seeing single instances of big success stories, like World of Warcraft. There’s over 4 million players of Lineage in South Korea, which is an online game, as well. Beyond that, and beyond possibly putting ads around an intro screen or between levels or those types of things, I think advergaming, especially, is going to be something that’s very common for a lot of consumer package good brands. It seems to be easiest to insert into existing game structure and format. So I think it’s going to be increasingly important. But, as far as a market size and return, that’s going to have to wait for some of the numbers to come back.

Ted Murphy:

That being said, what do you feel are the top three most important things that advertisers and marketers, specifically, our listeners, should know about advergaming and advertising in the video game industry?

James Belcher:

I think you should be aware of which games are going to reach which type of audience, and see if that matches up with your brand. You should make sure that you have suitable content for the brand association. I’m not saying necessarily be squeaky clean, but have the tone appropriate for your audience – be that ironic, straight-ahead, whatever. Make sure that those types of brand attributes that would be associated with the game would mesh up well with your brand.

And shop around. Ask for examples of existing work from the publisher or developer that you’re working with. Put out bids. There are lists of developers out there beyond just what might be associated with existing ad agencies that might have in-house development teams that work specifically on advergaming. There are many, many small independent firms which would love to have this type of business. Gamasutra, by the way, G A M A S U T R A, is the site of the International Game Developers Association. And they list many, many developers there and their areas of specialization. So that’s one place to look.

Ted Murphy:

If you’d like more information on video games and specifically advertising in video games, please check out the report that James coauthored with Ben Macklin. You can find that report on eMarketer.com.

James, it’s been an absolute pleasure having you on this show, and I hope we can have you back on the show again in the near future.

James Belcher:

Thanks for having me.

Announcer:

For more information on this week's topic, visit http://www.InternetMarketingVoodoo.com. This podcast has been brought to you by MindComet, the Relationship Agency.

View James' full report "Video Games: Where to Now?"
[End of Audio]

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