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LOS ANGELES -- A looming boom in in-game advertising got industry pooh-bahs drooling at E3, with marketers and game execs salivating over the prospect of colonizing one of pop-culture's last virgin territories.
In-game ads seem to be a terrific investment. Mitchell Davis, CEO of Massive, a company that connects game companies with advertisers, told an audience Thursday that his studies show in-game ads boost brand recognition by 23 percent to 35 percent. By comparison, he explained, a good television campaign might net a 6 percent to 8 percent brand lift.
Plus, people spend nearly the same amount of time playing video games every day as using the internet, according to Yankee Group senior analyst Michael Goodman, who spoke Tuesday.
Yet in-game ads remain a relatively untapped opportunity. But not for long: Panels with leading experts on the subject drew standing-room-only crowds throughout the expo as industry types eyed their prospects.
In-game ads in 2003 were worth a mere $30 million, compared to roughly $8.5 billion spent on internet advertising, Goodman said. But this year, that number will rise to $71.9 million, and by 2009 it will skyrocket to $562.5 million, he said.
"There's a tremendous opportunity here for ads in video games," said Goodman.
New technologies make it easier for ads to be integrated with games and for publishers to build in ad-related content, which can be sold on the fly and for which payments can be collected.
Microsoft said it plans to make advertising a central part of its Xbox Live service, something that was discussed several times.
Advertisers might sponsor tournaments, Microsoft suggested. Xbox Live offers a spectator mode, and the software giant is hoping game tourneys could draw hundreds of thousands of viewers, just like professional sports.
One recent innovation panelists lauded was Sony Online Entertainment's "slash-pizza" command in the multiplayer online game EverQuest II. When players enter the command, they can order a Pizza Hut pie for delivery.
Another example is a partnership between Sony Ericsson Mobile Communications and Ubisoft Entertainment in which players of Splinter Cell use a branded cell phone to get out of dangerous situations in the game.
"You use it and the phone becomes the hero," Brandon Berger, a senior strategist for OgilvyInteractive, told the Tuesday audience.
An idea floated several times is for publishers to seek sponsorships early in a game's development cycle to help defray rising costs. Some suggested it wouldn't be surprising to see 100 percent sponsorship of games down the line, though most likely not from giant publishers like Electronic Arts, Activision or Ubisoft, which may be loath to ruin games by servicing advertisers.
"At the end of the day, we have to make games," said Monika Madrid, senior manager for strategic sales and partnerships for Ubisoft. "We're an entertainment medium, not an advertising medium."
Several panelists said customer feedback for in-game ads is positive. But others cautioned game companies must strike the right balance.
"I'm not sure I'm waiting for the day when I'm playing Tony Hawk's next game and I can cruise by a Motorola billboard and can opt in to find out about the newest handset," said David Anderson, a senior director of business development and licensing for Activision. "But I know Motorola is."
