An article over at Game Daily reported on a prediction from eMarketer that advertising in games will grow from $295 million to $650 million by 2012. This report, while it appears bullish for in-game advertising, is still a much different growth scale than that predicted by the Yankee Group in July of 2007. The earlier report anticipated that the industry would reach $971 million by 2011. An even earlier report by eMarketer claimed that the industry would hit $969 million by 2011.
The preview of the most recent report, which costs $695, displays a chart highlighting the predicted size of the in-game advertising industry in each year through 2012. I suggest clicking through to the chart, if you haven’t already, to see what I’m talking about exactly. (I hesitate to grab a graphic from their report because it might cost twenty bucks for all I know.) I’ve taken their predicting revenue of in-game advertising and created a chart mapping the expected growth:
As you can see, the growth of the in-game advertising is expected to slow over the coming years. Even though the dominant news story for this report seems to anticipate a huge increase for the advertising market, the fact is that the company is predicting that the in-game advertising market will begin to reach a saturation point around 2012. At which point, any gains in the market will be small compared to the overall size of the industry. Rather than doubling in size over the course of a year, it will grow incrementally by at something close to a 3% crawl.
The response to the report in the gaming press tends toward the fearful. Hardcore gamers are often afraid that their games, which they are already paying money for, are going to become plastered in advertisements, but casual gamers prefer games that are ad-supported instead of the pay to download paradigm.
One of the problems, from an advertisers perspective, with in-game advertising for AAA titles is that there is rarely a way to track the conversion ratio. If a Madden player sees an advertisement for Reebok along one of the walls of a virtual stadium, there is no way to know if that player is more likely to purchase Reebok without conducting some rather expensive market research. And yet, a game like Madden is truly perfect for in-game advertising. It doesn’t strain the credibility budget of the audience in any way to see ads associated with a football game. (Such rules are not always adhered to.) As long as the advertisements do not interfere with gameplay, the player observes these sponsorships as passively as he would while watching a game on NBC. It is only the efficacy of the advertisement that is in question.
In the casual games market, since many of those games are Flash- or web-based, advertisers have the same feedback mechanism they have with other online ads. Already EA is working with game supported in a similar fashion (or through micro-transactions), so the market seems to have room to expand.
I don’t have an answer for this question, and since I haven’t dropped $700 on the report I can’t read into it, but why is it a market with such room to grow is going to see its growth hit a glass ceiling?
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