February 9, 2007 1:03 PM PST

Can Google score with in-game ads?

As Google expands its lucrative ad network to new markets, industry watchers increasingly believe the search giant will buy its way into the nascent market for advertising inside video games.

Google has reportedly looked at acquiring AdScape Media, a small company, founded in Ontario and now based in San Francisco, that specializes in so-called in-game ads. Google did not return calls seeking comment, and an AdScape spokeswoman declined to comment on the talks.

Though an industry insider who asked to remain anonymous said negotiations had stalled, such an acquisition would allow Google to take on old foe Microsoft, which last year acquired a similar but larger company called Massive. In-game ads, however, are one place where Microsoft would have a rare advertising advantage over Google thanks to thriving sales of its Xbox 360 gaming console and a long list of gaming titles.

"Google would be playing catch-up against some significant entrenched providers," said Michael Goodman, a program manager at research firm Yankee Group Research. "The biggest challenge for them is they might see themselves closed out of the Xbox as a platform to serve ads to."

In-game ads may sound like a niche, but it's a growing one that reaches a choice demographic for advertisers. A recent Nielsen Entertainment study found that men aged 18 to 34 are spending more time playing video games (12.5 hours on average per week) and less time watching television (9.8 hours per week).

About 6 million U.S. households have at least one "power gamer," someone who spends as much as 20 hours per week and $50 per month on games, and there are more than 15 million active players of casual games, which are free ad-supported games such as Tetris or cards, said Michael Cai, director of broadband and gaming for Parks Associates.

"It's not a pimply faced teenage kid playing video games in the basement anymore. It's people with a lot of disposable income," said Jeff Berg, content editor at the Interpublic Emerging Media Lab think tank. "It's a natural space for Google to move into if they can do it effectively."

The dollar value of this market isn't nearly as small as many people would think. Parks Associates predicts that game advertising revenue will grow from $120 million in 2006 to $200 million this year and $300 million in 2008. Yankee Group forecasts in-game ad revenue to reach $732 million by 2010.

Buying AdScape wouldn't get Google a lot of new customers, but it would get the company technology, Goodman said. "Google already has significant relationships with advertisers, but they would have to build up relationships with game publishers," he said.

"Google is the king of search ads, but they aren't that dominant in brand advertising."
--Michael Cai, director, Parks Associates

Over the last 18 months, the search giant has been rapidly moving into new ad markets such as print and radio, using its automated online ad-delivery system to provide a way for advertisers to reach new customers via offline mediums. Google purchased radio advertising provider dMarc Broadcasting for just over $100 million a year ago and has been conducting radio ad delivery tests.

While it's hard to imagine virtual world games like World of Warcraft being a great advertising vehicle for Coke or Pepsi, plenty of games could be ideal, such as sporting titles.

"For example, we take Nike's (ads) they've used for print or television and implement that straight into the games across our sports titles," said Justin Townsend, chief executive of in-game advertising firm IGA Worldwide. The ad is delivered over the Internet and can be changed depending on which advertiser has purchased the ad rights, he said. The ads are targeted geographically, so players in Germany, for example, will see a German version of the ad.

Because Google's greatest success has been in contextually targeted ads rather than display ads, it might be better suited serving ads that appear alongside casual games, which are sold over the Web, Cai said.

"The question is whether Google is interested in getting into a new media form--gaming, and whether they are looking beyond search and trying to address a new ad business--display advertising," he said. "Google is the king of search ads, but they aren't that dominant in brand advertising."

But is the gaming industry ready for Google's automated kind of advertising?

CONTINUED: Are gamers ready?…
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18 comments

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not exactly organizing the worlds information
How exactly does in-game advertising fit in with their stated mission to "organize the world's information and make it universally accessible and useful"? Stick to search, Google.
Posted by ronpadz (62 comments )
Reply Link Flag
Neil Kelty
Well, they ARE organizing relevant ads to your experience and introducing you to content that enables you to SEARCH for free.

I don't see why people are getting pissed about this , they need to make money you know. It's not evil.
Posted by NeilKelty (9 comments )
Link Flag
Have they forgot "Don't be evil"?
What about the mantra "Don't be evil."? Being the company providing annoying, unexpected advertisements to likely already stressed & annoyed gamers does not seem like a good move. This seems like the opposite of the intention to not get on people's nerves. They're sitting on the edge of the evil side of the fence. Don't jump, Google. Don't jump!
Posted by esterud (9 comments )
Reply Link Flag
re: dont be evil
I agree. Everyone loves Google, they better not **** that up.
Posted by extinctone (214 comments )
Link Flag
There's a fine line there
In some cases, in-game ads can add to the realism of the game. For a racing game, a billboard in a racing game which displays a real ad adds to the realism. Also, the ability to have various companies sponsor your virtual vehicle so you can buy upgrades to it---sponsorship would be based on your racing skill and reputation.

But there is a fine line between adding realism and annoying players. Putting real ads in a virtual GTA is a good thing if they are exactly where their real life counterparts are. If they interfere with gameplay, it will really turn people off.

Other genres don't really have non-intrusive ways to add ads, so that concerns me more. I just can't see a contemporary ad in World of Warcraft, for example.
Posted by bluemist9999 (1020 comments )
Link Flag
Are we talking about on-line gaming?
where these ads are delivered over the 'net while the game is sending and receiving info to/from the game server?

If so, is Google prepared to take the blame for every perceived bit of lag or other in-game glitch? They had better be because, responsible for it or not, they will get blamed. When we do things like spend over $1000 for video cards and pay for top-tier broadband service in order to squeeze the last bit of performance out of a $50 game, any kind of real-time intrusion into the server-client data stream will not be view favorably.

One of the great paradoxes of modern video gaming is that we gamers demand, and pay through the nose to get, maximum eyecandy from our games. Then, when actually playing, we don't even see it while concentrating on the objectives of the game. I see no benefit to anyone in putting advertising into video games...like I'm really going to click on an ad, or make note of a place to redeem an offer while in the middle of a firefight in Unreal Tournament 2004 or, when it comes out, UT3. Somebody needs to get a grip on reality here.
Posted by dvthex (18 comments )
Reply Link Flag
DON'T MESS WITH MY HALO, Microsoft
I am still debating if microsoft buying out Bungie was a mistake, but if I see a Google ad in Halo 3 I Will .....................

I don't know what I'll do, probably cry...
Posted by SiXiam (69 comments )
Link Flag
MMORPGs and stuff like that
I agree that a fast paced action game is not very suitable for this kind of things, but I think it could work in games that are more open in terms of gameplay, I'm counting MMOs but other games like GTA could use something like that.
Posted by latin_nerdy (5 comments )
Link Flag
Please no
Please no more ads, I hate them... and now in games :(
--
Pixel image editor - <a class="jive-link-external" href="http://www.kanzelsberger.com" target="_newWindow">http://www.kanzelsberger.com</a>
Posted by firstlast (35 comments )
Reply Link Flag
No. No. HELL No.
I refuse to play or buy any game that has adverts in it so
blatantly. I don't mind the graphics in a given level or map if
they blend in (for realism purposes), but otherwise no fscking
way.

/P
Posted by Penguinisto (5042 comments )
Reply Link Flag
way not?
In fact, in game add can contribute to its realism and also it can be a usefull addition to the gameplay. It is a matter of design.
Posted by zzarkov (2 comments )
Link Flag
The real question...
is who wants to advertise to an audience of no-life geeks. My guess is you'll be seeing a lot of ads for pimple cream, dating services and work-from-home schemes.
Posted by Hardrada (359 comments )
Reply Link Flag
 

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