New York April 12—”The Game Initiative” is group that produced professional seminars and is responsible most of the video game oriented conferences across the country. To we east coast folk, these seminars often held in far off places like Texas (where the company and much of the video gaming business is based) and California. But Executive Director Chris Sherman brought something our way last year with the first ADVERTISING IN GAMES FORUM, held right here in midtown New York. Their 2006 edition was just held this week in Chelsea’s Metropolitan Pavilion on west 18th street.

Just what this particular event was about would depend upon who you are and what your company does. For the major game developers it was a chance to discuss significant funding opportunities available from the strategic placement of commercial products within their blockbuster games. And for the “casual games” and “advergames” developers it was a chance to discuss the development of online video gaming as a marketing vehicle for its advertising clients that underwrite and partner in a game’s development.

For companies like Massive, Double Fusion and Adscape, it was an opportunity to show off their new aggregating and market dissemination capabilities—both of which are the result equal parts technology and old school networking. These companies help sell and serve the ads to major games. And while these companies admit the power in their network channels currently rests with the game developer, each would love to become the next CAA in the video game world.

And then there were the investors—those coming to learn where to best place their clients money. And there were the startup businesses who came to the conference to show off a wide range of new ideas, or new twists on old ones. All in all it was a fascinating mix of folks coming together to see what could happen when we merge two very hot properties: Video games and advertising. This question was at least in part answered across the day with by the seven panel discussions:

• Trends and Numbers 2006 — A Year In Transition
• Keynote — Mitchell Davis, CEO, Massive Inc.
• The ROI of Advergaming
• Product Case Studies — a view from the trenches: Chrysler’s Dodge Challenger Game
• Technology Advancements In Game Advertising
• Every Medium is Yours — But What Works?
• Campaign Integration and the Gamer Audience

Options for Advertisers
Now would be a good time to clearly describe the two vastly different avenues currently being made available for merging advertising and games. They are best described as “Placement” and “Advergames”:

Placement: This model works off of the premise that the large blockbuster games are similar to movies or popular TV shows. It assumes that strategic placement of branded products within those gaming environments will enhance both brand awareness and in turn sales. Consider that a game may be viewed for 40 or more hours in its lifetime compared with a 90 minute movie which is likely to not be viewed more than 3—4 times (totaling 6 hours of viewing).

Advergames: This is the classic advertising scenario. Similar to placing a brand name on a pen, companies are underwriting the complete development of a game intended for (usually) free distribution and play online. While these are not the blockbuster games sold in stores, they are very entertaining game—fair that makes up a large part of the “casual games” market. This market actually accounts for the lions share of overall human video gaming hours.

While there was certainly some crossover, it appeared most players had staked ground in either the Placement or the Advergame camp.

Trends and Numbers The day’s first panel group began with analysts from Nielson Media and NPD Group spewing facts, figures and Powerpoint presentations. Some that caught my eye included:

• 76% of all gaming is done on the PC (online and disk based)
• Men spend more time gaming than watching network TV
• 200 million disk based games last year in the US
• 200 million disk—games sold in Europe last year
• Average US family buys 4—5 games a year
• Overall gamer average is 80% male
• Women dominate online gaming in the 30—50 market
• 57% of gamers play games online (non exclusively)

Of note was the one panelist Michael Patcher from Webush Morgan Research. A self—admitted gamer, he brought great personal insight to the discussion. He spoke on subjects and opinions that he freely admitted would be contested by others. For example “putting games in phones and other mobile units is vastly over—hyped and I can’t see it becoming as big as many think. We may play a few minutes here and there, but ultimately we use our phones for talking—and who wants to waste your battery on such tiny games?”

Patcher also thinks there is a great market for the “casual games” that run under 5 minutes. And while he personally loves playing games on his PC “the new Xbox is as fast or faster than my kicking Alienware desktop computer—the days of a PC being a better gaming platform are over.”

All this information and bushels of data can certainly be interpreted many ways. However for 3D and CG artists of all flavors it all means a few things:

This is a uniquely viable market for their talents. A market whose consumption is dramatically increasing on an annual basis. Unlike working in the film industry, the gaming world generally allows a much broader choice of places to live and work.

Due to the nature of gaming’s broad content there are job openings for an even wider range of positions than would typically be open in film. In addition to modeling, animation, rigging, lighting etc., are jobs like interface design, levels design, game designers, various types of programming, sprite and other art creation, etc.

The Keynote
“Just how fast is this market growing?” Mitchell Davis, the CEO of Massive Inc. noted in his keynote speech that games are now a $28 billion industry, and this number is expected to double if not triple in just a few years.

“Why are games so wonderful for advertisers?” Davis asks. “Games make for a great way to reach the target 18—34 year old male market. The average gamer plays for 93 minutes a session.” Davis cites a few reports:

• 94% of US consumers 12—21 own at least one gaming devise (Forrester)
• The average gamer spent 41.7 hrs with last game purchased (ESA 2005)

The forecast for in-game advertising is estimated at the $1billion mark by 2010 (US market) and close to $2.5 billion globally by 2013. This will all pick up as broadband becomes increasingly standard. Davis noted that gaming itself was a significant driver of broadband adoption.

“Ultimately,” says Davis “advertising in games is past the experimental dollars stage. We are now at a point where it is about budgeting for game advertising.”

The ROI of Advergaming
While the other panels spoke of placement advertising, this panel included a host of successful casual game developers who set their sites towards the Advergames markets. This included Gary Kitchens from Skyworks Technologies who produced online games for Miller Beer among others, Bill Clifford from the well known WildTangent group, Shawn McMichael from Microsoft Casual Games Division, and Dan Ferguson of Blockdot/Kewlbox.com

While there was certainly some uniformity of experience and agreement of some market trends, each developer had a very specific view that was clearly different from the others panelists. Agreement came in one area: The Advergaming market is a tough nut to crack. While doing placements in blockbuster games is clearly more established, the idea of an advertising client underwriting an entire game’s production for their promotion is still a bit riskier.

Part of this hesitation from the advertisers comes form the costs involved. While it was agreed by all that the larger seven figure advergame budgets are now a thing of the past, the current $30—90,000 range is still a lot to invest in a game when you don’t know how successful it will be once posted. And, in turn, how much branding/advertising you may get for the invested buck.

M&M Advergame

Starwars Advergame

This has lead one of the panelists, WildTangent, to move away from this end of the market entirely, whereas others have nurtured a good development business in this sector. Blockdot’s co—founder Bill Ferguson has created a comfortable niche for his company producing easy to play games that are brought in on affordable budgets for products like M&M and Star Wars. He does this, in part, by developing with common toolsets like Flash and Director/Shockwave.

Speaking with Ferguson during a break, he said that the ability to use 3D Shockwave was very important to him and his team, that they liked the flexibility Director offered. That said, he told me they hardly ever use real—time 3D rendering saying “you really can’t rely on the fact that the game player has a fast enough system to make it work effectively. So instead we do a lot of pre—rendered 3D effects which work well.”

When is a game deemed successful for the client? “Our M&Ms advergame has logged in over 25 million hours of total playtime—for a product that cost the client $40,000. That is an amazing value.”

Gary Kitchen summed it up: “Branded games need to be placed on sites as an ad buy. Put it on Microsoft, Yahoo, AOL.it needs to be on a busy site or promoted, or it will just be a waste. The game we did for Oreos cookies was promoted correctly and within the first 8 hours of posting it online it had over 100,000 plays. That was a success.”

“Advergames now account for more game time than all consol gaming combined,” continued Kitchen “It’s here to stay.”

Case Studies
The next discussion group was “Product Case Studies” and featured the Dodge Chrysler online game offerings and the creation strategies involved with their “Highway Hemi” game. (The scheduled case studies were unable to make it and this was a fine replacement).

This panel opened with the following words ablaze across the screen:

A Successful Online Game Needs:

• An Innovative Client
• A Creative Game Developer
• A Powerful Distribution Network

With that on the screen it is no surprise to see the panel consisted of all key players:

The Client Vanessa Kelley of Chrysler, Director of Product Promotions Chrysler currently has 18 games online.

The Developer Sean MacPhedran of Fuel Industries, Creative Marketing Strategist Fuel refers to itself not as a game developer, but a producer of online entertainment.

The Broadcaster/Distributor Kate Connally of Atom Entertainment, Vice President The Atom network includes AtomFilms.com, Shockwave.com, AddictingGames.com and GameBlast.com making it the largest entertainment and games distributor on the net. They reach 30 million game players per month.

When this team got together to produce “Hemi Highway” they had a few things in mind. “First was to create a game that would increase game time” Said Sean MacPhedran. “Typical game play online at sites like Shockwave.com last 2—3 minutes. Hemi Highway averages close to 5 minute plays which is huge.

“One of the things we did to achieve such high playtime was to include 15 race tracks to choose from” said Sean. The group commented a number of times how creating something interesting and fresh is really important to capture the game players’ attention.

In designing a game for advertising purposes though, it’s not just about game—play. The final product must also get the advertiser’s message across, but it must do it in a way that is appropriate to the client, the medium, the style of the game, and acceptable to the chosen distribution channels.

For Vanessa Kelley of Chrysler this means the game must be more than just a game. “We look to somehow integrate the product’s information—in our case cars—into how the overall game handles and interfaces with the player.”

Since product advertising and branding is the project’s driving force, such factors are of utmost concern. However if a game feels more like an ad than a game, then its possibility for success is nil. The other reason the ad message must be tempered is to more appropriately fit into a wider range of distribution channels. While a client can put almost any game they want on their own site, real exposure comes from getting a game on sites like Shockwave.com.

“We are very careful not to have overt advertising in the games we have on our sites,” said Kate Connally of Atom Entertainment. “We welcome branded games as long as they have high game value—they must stand on their own and be fun. Chrysler’s Hemi Highway did very well at Shockwave.com because it was first a great game. Then we were able to work with the client to bring added value, like deep editorial placement to its exposure on our sites. We think this helps communicate more about the game to our viewers. For example, we ran it in our featured games lists and other deep editorial treatments. It did very well.”

Vanessa built on that from the client’s view, saying “we prefer looking at all of our projects as a more integrated efforts—I hate the piecemeal “one—off” approach and avoid it whenever possible. We are doing much better in these areas than we were 18 months ago.

Bringing it all Together
The next three panel discussions spoke on the various subjects related to the technical and marketing aspects of ad placement in retail games.

The “Technology Advancement” panel sponsored the three companies looking to control the placement and dissemination of game advertising. While each of the three participating companies (Massive, Double Fusion and Adscape) claimed to be the market leader in technology and established networks of developers and ad agencies, each of the three also blinked and admitted it’s still very early in the game.

Unlike the Advergaming model, this group’s focus is on pure ad placement in retail games. This is much like placement in movies and TV shows, however the non—linear and multi—level nature of gaming brings additional variables to the table. For example, the lower game levels are more valuable than the higher ones since fewer players get to the advanced levels.

There are other unique concerns with game placement that came up in the following panel titled “Every Medium is Yours—But what Works?” Both Julie Thomas and Sarah McIlroy (In—Game Marketing Directors at Vivendi Universal Games and Midway Games respectively) commented how sensitive their companies need to be to the advertiser’s needs and that of the games.

“We had an advertiser that wanted placement in one of our action games,” said Julie “but they were very concerned about taking ad placement within any of the most violent scenes. The last thing they wanted was to have their product blown up or whatever. So we arranged to have their placement put in a quieter part of the game which better suited their needs.”

Julie offered similar concerns for the game itself. “While we would love to take the advertising, the game must come first. If the ad would compromise the game in any way, we will pass on it—it’s that simple. Before taking an ad placement we need to understand the brand. The brand and game need to be a good match for each other. Our focus is on selling games—sometimes it seems all the stars must be aligned just right for ads to work. It doesn’t always happen.”

Everyone agreed that the ads must be appropriate for the game, in both style and setting. You could certainly not have a modern product ad in a Dungeons & Dragons medieval setting. However it would be equally out of place to have a sporting event game that doesn’t have billboard advertising all around the stadium.

“There is an inherent conflict,” said moderator Jonathan Epstein “advertisers want to be noticed, but gamers want to be immersed and not interrupted by ads.” All agree seamless brand integration is the way to go. “A can of Coke would fit right in inside Second Life,” said David Fleck, VP Marketing of Linden Labs, makers of Second Life. “That would be something we would have no problem with. The characters could open a can up and there could be a fizzing sound and spray.that would be fine.”

By stark comparison to most of the speakers at the seminar was Greg Costikyan, a very well known and respected developer of games and CEO of the new Manifesto Games. Manifesto which launches later this spring aims to be the distribution channel for creative and independently produced games.

Something of an admitted throwback to a bygone era, Greg won’t put ads in any of his games and is dead set against it. He made a good case for his preferences and while it may not have gone over well with the marketeers at the table, after the panel concluded Greg was surrounded by fans from the audience who may also take issue with the way the industry is maturing.

During the “Campaign Integrations and the Gamer Audience” panel Alex Kakoyiannis, a Managing Partner at NaviGame said “We need to change the name `gamer’ to something else. They aren’t the guys wearing helmets and hanging out in basements who haven’t seen a girl in a year any longer. Today’s gamers are our mothers.” He went on to compare today’s gaming world to the 1990’s internet, saying it is just in its infancy.

If it is true that the world of video games is still in its infancy, then I may have met the woman who is about to give birth to its next generation. Seated next to me at the conference was Sangita Verma, a 16 year veteran of the video game industry and founder/CEO of “TV Head” the first video game cable TV channel. In final test marketing now, it is slated to launch nationwide later this year and be available as a premium station through all major cable service providers.