Trends in in-game advertising

Social gaming is huge at the moment. Zynga are firmly owning this space and are consistently proving the business-case for social gaming, with the majority of their revenue coming from users purchasing virtual-goods that enhance their experience. As much as social gaming is a revenue-generator for many tech companies, it’s also providing a whole new advertising opportunity for brands. We saw the first high-profile example of this when Microsoft sponsored Farmville earlier this year. Since then, how is it progressing and is it really providing value to advertisers?
The answer to the second question, seems to be a big fat yes. Though it is still new and it is arguably only the more tech/social savvy companies that are really eyeing this up, the revenue potential is clear. According to a recent survey issued by Nielsen and Electronic Arts, when Gatorade invested in in-game advertising by placing branded goods in different online points, the real-life spend on Gatorade increased by 24%. Clearly this is an exciting, lucrative area and the ad dollars are following. The ad spend on game advertising in the U.S.  was at $370 million in 2006 and this is expected to expand to $2 billion by 2012. And it’s casual/PC/mobile  in-game advertising that will reap this revenue. In 2006 this accounted for 27% of the game advertising market, and by 2012 it will account for more than 80%. This is big money and big business and represents another stage in social advertising that can potentially transform advertising as we know it.

Case study – McDonalds

Earlier this month McDonalds experimented with one of the first advertising examples of its kind, by teaming up with Zynga to create a branded farm for just one day, that offered users the chance to grow mustard seed and tomato crops. They were then rewarded with branded products that would help them improve the growth of the their own farms. Though it only lasted 24 hours, it was available to every single Farmville user, being shown as a neighbour farm.That’s instant, deep ingrained (excuse the pun) exposure to nearly 70 million Farmville players worldwide.

As the screen shot above shows, the brand value for McDonalds is huge – the actual journey of users physically growing your brand logo is impressive. And though this certainly didn’t resonate well with some Farmville fans, who resented essentially providing ‘free’ advertising for McDonalds, I think this is a well-considered strategy. Crucially for me, McDonalds didn’t choose to reward players with something commercial such a a token for a free coffee, but kept the focus on the game itself, through branded virtual goods. This is echoed by Manny Anekal, global director of brand advertising at Zynga who said “Tens of millions of people play FarmVille daily and this unique campaign with McDonald’s, one of the most recognized brands in the world, further strengthens our commitment to delivering high quality in-game brand experiences.” This is encouraging for brands and advertisers and shows that Zynga are serious about providing their users with quality, relevant advertising instead of just sticking banners on the side of their games.

A new type of advertising – improving online content

Advertising is constantly having to adapt to keep up with social technologies and crucially to make sure their advertising strategies are relevant to users. There is an increasing call on advertisers to entertain their audience. When we’re getting so much good content in social media that comes from our own networks or communities, brands have to work that bit harder to keep our attention. Time is also crucial to this. While as an advertiser you may think you have the luxury of time when looking at in-game advertising, because users are engaged with it for so long, you may be surprised.

In a recent interview Mark Pincus, CEO of Zynga, explained how he was committed to reducing the game play sessions of their users, aiming for the ideal 5 minute session. When users are just giving  5 minutes to a game they’re invested in, this gives advertisers a short window to get their attention, which is evidently decreasing. Now more than ever, you need to understand the medium that you’re participating in to provide that extra special bit of content to your users. The McDonalds farm is a great early example of this, but there’s a lot more to come. Brands have to have a completely new focus for their advertising message. It’s not about how your brand can improve their lives, but how your branded content can improve their online lives. These are two very different things that present different challenges but show how exciting the advertising industry is right now.
This isn’t all good news for the advertising industry though. Microsoft recently announced that they were shutting down their in-game advertising unity Massive Inc. by the end of this month. While some may see this as signalling the decline in in-game advertising, the figures I presented above clearly show this isn’t the case. Many are instead speculating that this is due to gaming companies moving the advertising in-house, removing the need to go through a third party. It also signals again the need for more creative advertising options, as opposed to the more traditional model of placing an ad in specially-designated spaces, such as billboards on the side of racing tracks. While this was once innovative, the capabilities have moved on fast.
The huge shift in popularity of social gaming is where the real focus is now. The opportunity for advertisers is huge, as it’s no longer about getting in front of each gamer separately, but reaching the online communities of each user in new and powerful ways. In-game advertising is big business and with companies like Zynga dedicating time to providing users with a quality experience, I think we’re going to see some great case studies over the next few months.