Video games:

The next big ad medium

by Chris Wagner

Leave no stone unturned. That has long been the mantra of advertising agencies. They spend billions of dollars marketing on billboards, television, magazines, newspapers and the Internet. So where do they look next? What is the next big ad medium? Where will marketers turn to gain the attention of consumers? More specifically, where will they turn to gain the attention of teenagers and their money?

Let me introduce you to a changing face in the American cultural landscape. A face that was once only a small niche of male adolescents. A face with eyes glued on small TV screens with crude CX40 joysticks in hand. A face that now consists of a growing number of females, includes 100 percent of college students, and has an average age of 29. A face that spent $10.7 billion last year, in this market alone.

Welcome to the world of video games. Sit down and make yourself comfortable, take the time to get acquainted with this rapidly changing medium. Most likely, you already have. After all, according to the Entertainment Software Association, half of all Americans six years of age and older have played video games. So why take an even closer look? Because marketers have begun eyeing video games as the next "big money" ad medium.

Marketing within video games is not new. Game developers in the ‘80s put advertisement banners in the background of games. Sega's arcade auto racing games featured Marlboro logos on billboards along the racetrack. Over the past couple of decades a growing number of sponsors have been taking similar, but more sophisticated approaches to using video games to market products. Marketers generally use any kind of space they can find and afford to lure customers to their products. For a number of reasons, however, they have been comparatively slow to jump on the "video games as an ad medium" bandwagon. But why? To begin with, only recently have video games become the huge phenomenon they are today. Another reason is that video games are either hit or miss. Michael Goodman, author of the report "Marketers Look to Video Games to Drive Their Message Home," points out that only 10 to 20 percent of video games actually break even. Previously, predicting which video games were going to be huge hits was nearly impossible. Spending large amounts of their advertising budget on video games that may not sell well is a risk that ad agencies have not been willing to take. Finally, even if a game sells well, agencies have no way of knowing how consumers are interacting with ads in games. They also don't know what their perception of those ads is. In other words, there has been no way of linking "adver-gaming" to the bottom line, no way of knowing whether or not an investment in video games is profitable.

However, the changing face of the video game industry is altering all that. Video game retail sales worldwide are expected to grow from $23.2 billion in 2003 to $31.6 billion in 2009 (around $17 billion in the U.S) according to DFC Intelligence Group. These projections show substantial growth in the next several years, and don't even include the growing sector of online gaming! The Yankee Group reports that "the video game industry is already a mass market comprising more than 108 million gamers 13 years and older"—in the U.S. alone!

As you can see, the growing video game segment is appearing more and more lucrative to marketers. But there are a number of other reasons they're starting to pay attention as well.

Though it is still difficult to predict how well a game is going to sell, by sticking with time-tested methods, marketers reduce their risks. Sequels of well-selling games have proven themselves to provide success for game developers. For the first six months of 2004, eight of the top 10 best-selling video games were sequels or spin-offs of already successful video game dynasties. Hollywood films also provide material for profitable video games. "Resident Evil: Apocalypse," "Tomb Raider" and "Spider Man" are all recent examples of this. Not only are they based on Hollywood scripts or vise-versa, but the above examples have also spawned their own multi-game franchises. As the sales of video game titles becomes easier to predict, marketers will be more willing to lay down big bucks to be key players in the video game realm.

Research companies such as Nielsen Entertainment and Massive Inc. have begun developing and implementing programs that track the ways gamers interact with ads they find in games. The recently released "Tony Hawk's Underground 2" skating game is one of the first of its kind to introduce a new technology that "determines how long and how often players interact with brands." Reports indicate that Chrysler is the first advertiser to test the waters. Players of "Tony Hawk" have to interact with a Jeep brand vehicle throughout different stages of the game. This watermarking technology allows Nielsen to collect statistics regarding user interaction with the Jeep via the Internet. The tools being introduced by Nielsen allow marketers, for the first time, to obtain tangible results regarding their efforts. Robert Kotick, CEO of Activision—maker of "Tony Hawk"— says, "companies are beginning to recognize the tremendous potential of in-game advertising. Our partnership with Nielsen Entertainment is aimed at taking video games to a new level as a mainstream advertising medium."

Massive Inc. recently launched a new ad-serving network for online game marketers. Like the Nielsen tracking system, it allows for user behavior to be tracked and monitored. Given the nature of the Internet, it also allows marketers to know when and where users are playing games, as well as monitor ad exposure and interaction. This allows marketers to tailor specific ads to specific audiences and even permits the ads to be changed in real time. As new slogans or products become available, a game will automatically update the ads it displays via the Internet.

The key to successful "adver-gaming" is to keep the ads from being intrusive to normal game play. The last thing game developers want to do is make their customers upset. Kotick says, "we understand that video gamers expect to see brands that lend credibility to the content and settings portrayed in our games." Efforts to follow these rules have led some developers to incorporate products into actual game play, rather than just idle billboards in the background. An example of this is "Worms 3D." If a character drinks a Red Bull power drink, he is then able to jump higher. Early surveys show that "70 percent of gamers actually liked the game product placements, saying it made games more realistic."

For many years marketers have been scratching their heads trying to find ways to advertise their products to the elusive 18-34 year-old male demographic. In 2003, U.S. marketers spent $12 billion on television ads intended for this group while only spending $10 million on video game advertisements. According to Nielsen Media Research, this group spent 20 percent more time playing games in 2003 than 2002, while watching less and less TV. Marketers have been unsure how to respond, but it's now evident the advertising dollars listed above are about to make a drastic shift. Mitch Davis, CEO of Massive says, "statistics show that young guys are not watching (TV), they're playing video games. We think this could be a billion-dollar ad-spending market in the next several years."

So what does this mean for teenagers?

Though the average age of gamers has been rising, teens will always be key to the continued growth of video games. Researchers from a Michigan State University study found that eighth grade boys play video games an average of 23 hours a week! Even girls in eighth grade play as much as 12 hours a week. This is vital information to today's marketers who know that today's teenagers have more disposable income than any other targeted marketing segment. Teens will be bombarded with messages to buy the latest trendy clothing as sported by their favorite game characters. Regular "household" products will be given brand names enticing young gamers to buy their products. Background billboards will continue to display ads, and don't be surprised when you begin seeing the likes of a McDonald's commercial while waiting for a new level to load.

Everyone knows that teens love music, and the struggling music industry is using the blossoming video game industry to help its sales as well. An October press release was titled, "Video Games Becoming an Essential Revenue Stream for Recording Companies in 2005." Today's video games spawn their own soundtracks from today's top artists. One hit group, The Black Eyed Peas, signed a deal with video game producer EA that will make exclusive tracks available only in the upcoming "Sims" game. Relatively unknown artists have even been known to make it big because of a hit single found on the soundtrack of one of today's popular games. The lines distinguishing video games, music, music videos and movies are beginning to blur.

Games are already being infiltrated with ads and product placements from Samsung, Palm, Old Spice, Best Buy, Cingular Wireless, Burger King and more. As marketers become serious about using video games as an ad medium, this list will continue to grow. Expect to see advertisements for products that are not "teen-friendly," specifically in terms of cigarettes and alcohol. Alcohol companies will use the average age (29) of video game players to justify that they are not marketing to potential underage drinkers. This will be a blatant lie. Millions of teenagers are going to be playing such games, even if (perhaps especially if) the rating on the box deems it inappropriate for their age group.

So what do we do as parents, youth workers and educators?

It is no longer enough to simply be familiar with the game play of a game. The "content" of video games has become so much more. Those who care for youth now need to be aware of what kind of action occurs in the game as well as what is being marketed to our teens. With the ability to include full-length songs on the soundtracks, it's also important to know the musical messages video game players are hearing.

It may take some time, but check out the video games that the teens you know are playing and seek to discover what advertising messages are being transferred to them. Are they age appropriate? Sit down with your teen and discuss the idea of lies within marketing and help them filter through the ads that they see. With your help they will be able to begin making these discernments themselves. Games intended for young children will not be immune to the infiltration of marketing, so start these discussions early.

Pay attention to what games you purchase for your teens. The ratings listed on the packages are not enough to make an informed decision as a parent, and they certainly do not tell you what products are being advertised within specific games. Know what you're buying.

Just as in television, advertisements in video games will eventually be impossible to ignore. The lure of big dollar signs in the eyes of both game developers and marketers is much too enticing. Game advertising revenues will enter the billions in just a few short years. Make sure you do your best to impart wisdom onto teens so that they know how to recognize the effects of marketing, within video games and beyond.

For more info on the content and ratings of video games visit: www.esrb.com. For more information on marketing to teens visit: www.pbs.org/wgbh/pages/frontline/shows/cool.