The Perils of Advergaming

Ads in your games, ads on top of your games, and games that are ads themselves. Is this what the future has to hold? Sort of.

Gamers are increasingly likely to encounter marketing and advertising, in a variety of subtle and not-so-subtle forms, in both online and retail games, according to developers and marketers speaking at the Games and Mobile Forum held in New York Monday.

With the growing popularity of electronic games, and online gaming in particular, it was only a matter of time before advertisers seized on gaming as a venue for marketing products, according to panelists here at the conference. Any new media phenomenon needs a buzzword, and the concept of advertising through games has one: advergaming.

There was some debate at the show here about what advergaming is, but the basic idea is that it involves any kind of advertising or commercial that uses a game, according to Keith Ferrazzi, chief executive officer of marketing technology company YaYa LLC in Los Angeles.

In its simplest form, it can involve product placement of the type that has been used in movies for decades. For example, a Nike shoe can be put on an athlete in a sports game. Advergaming can also involve free online games created to attract and keep gamers on a Web site. In its broadest sense, advergaming can involve sponsored, custom titles that are used to promote non-game products.

For example, 21 percent of people surveyed after the opening of "A Knight's Tale" said they found out about the movie from the online game, according to Alex St. John, CEO of WildTangent Inc., in Redmond, Washongton, which developed the game for Sony Pictures Entertainment.

The intertwining of games and marketing can create opportunities for product marketers and spark some creative thinking among developers that can lead to interesting new gaming experiences for consumers, but the concept has some potential pitfalls.

Since gamers are used to sophisticated game scenarios, expert game development is often called for.

"3D games attract a much larger audience than 2D; gamers think of 2D as more of a toy," said Joseph Varet, vice president of The Groove Alliance Inc. of Hollywood, California, which produces a gaming platform and develops advergames.

But marketing requirements and budgets put some tight constrictions on developers.

"People in ad agencies don't have an idea of the time it takes to create a 3D game," said Eric Zimmerman, CEO of New York-based game developer gameLab LLC. "They'll have an idea of something and want it in two weeks, when to get what they're thinking of in their heads, we'd have to spend six to eight months developing it," he said.

The needs of a marketer don't always conform to the rules of game development, which require that, to create some form of challenge, gamers occasionally need to lose.

"Lego wants to be sure that boys between the ages of 8 and 12 see lego.com as one of the places they want to go, but they can't have a player that loses a game because then they associate something negative with the brand," Zimmerman said.

Advergaming also raises legal issues, especially regarding marketers who aim to use game registration to elicit demographic information from very young gamers.

"The degree to which the advertiser has control over a game may dictate whether it becomes an ad, and subjects it to those rules ... for example to truth in advertising," said Jerry Spiegel, a partner at law firm Frankfurt Kurnit Klein & Selz PC in New York. "When it applies to children, it raises issues related to COPA (Child Online Protection Act), which raises significant obligations on how you collect information from children."

Though COPA, which was signed into law by President Bill Clinton, was struck down by an appeals court in March, some federal legislators and the Bush Administration are expected to continue to fight for it.

Even though design and legal challenges may tax developer ingenuity, all signs point to the continuation of some form of advergaming. The traditional media advertising model is crumbling, in part because online entertainment is siphoning off part of television's audience, according to speakers here.

The average age of serious gamers is 28 years old, said Doug Lowenstein, president of industry group Interactive Digital Software Association in Dulles, Virginia. "This suggests that gaming is not some passing fancy that people leave behind. Games will take their place with music and film in the triad of American entertainment."

In addition, technology like TiVo Inc.'s electronic program guide, which allows consumers to skip over ads on TV, raises serious questions about the value of TV marketing, said YaYa's Ferrazzi. Ad agencies are in a state of denial about the phenomenon of TiVo, but eventually they will have to face the facts, Ferrazzi said.

"There's a hideous complicity among ad agencies ... to keep pretending it's not there," Ferrazzi said.

But trends show that more ad money will flow toward gaming. YaYa has formed a division chartered to place brand names and products in games. "Currency direction is changing. Nike used to get paid when a Nike shoe was put on a player in a game, but not any more. The revenue model is following that of the movie model," where product advertisers pay to have their products placed in films, Ferrazzi said.

The Coca-Cola Co. has said that in five years a third of its ad revenue will be spent in nontraditional forms of advertising, he noted.

"Ads will go where the eyeballs are and online video games are the fastest growing form of entertainment," said Groove Alliance's Varet.

The form that most advergaming will take is anyone's guess at the moment, and will depend at least in part on the way that games are distributed.

"As games are distributed over TV or broadband there may be places for ads in a more traditional model ... in the interstices between content download rather than inside content," said gameLab's Zimmerman.

In the end, advergaming is bound to get more sophisticated.

"Product placement advergaming is interesting but primitive," said WildTangent's St. John. Sponsored games, or custom-produced titles, where a product maker pays a developer to create a game, will become increasingly popular, he said.

Right now, product makers typically want the games they sponsor to reside on their own sites, but this will most likely change, St. John said.

"Why should a Nike game need to be on the Nike site? If you're playing the game, you're 'in' Nike, whether or not the game is on their site or on AOL or Yahoo. Custom title publishing, where the advertisers pay to have their games carried on major sites, is going to happen."

Despite debate over what form advergaming will take, and legal issues raised, the interaction of gaming and marketing is bound to increase.

"You can't bring up these problems and kill off advergaming now, it's just in its infancy," Ferrazzi said.

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