Summit News

Growth of ads in video games still far away

NEW YORK (Reuters) - For years, experts have been saying that advertising embedded in video games will someday become a big business. It appears that someday is still far off.

Microsoft Corporation Vice President of Strategy and Business Development for the Interactive Entertainment Business (IEB) Shane Kim speaks at the Reuters Media Summit in New York, December 3, 2008. REUTERS/Mike Segar

Executives at the Reuters Media Summit said this week that the tough economy will likely force companies and advertisers to look for new ways to reach consumers.

That could mean more branding of objects, prizes and billboards embedded within interactive video games -- a thriving industry that continues to grow even as consumers hunker down and cut spending on other luxuries. The concept is similar to advertisers paying for “product placement” in Hollywood movies.

Nonetheless, the video game ad medium is unlikely to make more than a blip on the $150 billion U.S. advertising industry in 2009.

Shane Kim, vice president of strategy and business development for Microsoft Corp’s gaming business -- which includes the popular Xbox 360 game console -- said that so far, advertising is not a big part of the business mix.

“In the next six to 12 months as we go through this economic period, it probably won’t have a big material impact on us or on the industry, frankly,” he said.

Advertisements have been seen in games for more than a decade, and the medium received a public-relations boost in October when a billboard featuring a message from then-presidential candidate Barack Obama turned up in the driving game “Burnout Paradise.”

Projected growth estimates for in-game advertising vary, with several experts suggesting that ad spending there will top $100 million this year, and grow to around $1 billion in 2011.

Strauss Zelnick, executive chairman of Take-Two Interactive Inc, maker of the hit “Grand Theft Auto” franchise, said that one problem lies in the chance that recognizing an ad in a game is distracting.

Advertising that truly captures the attention of the consumer is going to take that user “out of the entertainment experience,” Zelnick said.

“I have been saying ever since we took over Take Two that I thought in-game advertising was a very limited opportunity that applied mostly to the sports business, and I remain of that belief,” he said. “It’s a detail. It exists, it can be profitable, we’d be happy to have it. It’s just not going to move the dial.”

The exception? Sports, since branding and ads are already well-meshed with everything from soccer matches to the names of baseball stadiums themselves.

Nick Brien, chief executive of Mediabrands, a top executive of advertising giant Interpublic Group, said that because of growth prospects in the video game business -- which some analysts see expanding by 20 percent in 2009 -- that “someday” of significant growth will indeed come.

“For the young male audience and autos and leisure, it’s a huge space, because you are looking at gaming trends that are continuing to lift,” he said. “It’s not huge today but in-gaming technology is becoming much more sophisticated ... and is very measurable and increasingly linked to online activities.”

“Right now it’s still niche, but they are building,” he added. “Anything that’s building from scratch is always facing a tough time.”

Reporting by Franklin Paul, editing by Matthew Lewis