What the Google Deal Really Means

With the purchase of Adscape, Google signals its arrival in a whole new market. IGA's Ed Bartlett gives some context to what this means for the industry

by Colin Campbell

Rumors of Google’s interest have been circulating in the in-game advertising community for some weeks so it came as no great surprise on Monday when the Wall Street Journal broke its story about the possible marriage. Google had made no secret of its desire to bring its online advertising model to new markets, and online gaming is an obvious temptation. This is a sector currently worth about $100 million but with a forecast to grow to $500 million by the end of the decade.

Back in 2005 Microsoft validated the market with its $200 million purchase of Massive, while the price of Adscape is estimated at around $25 million – not bad for what is essentially a piece of technology and the experience and contacts of management including chairman and former Sega boss Bernie Stolar; Darlene Kindler, formerly of Nintendo and Randy Gordon, once of SCEA.

Contextual Advertising

Google’s amazing success has been built on Adwords, pay-per-click advertising via its search engine; contextual advertising that attempts to only target consumers with a proven interest in the product. The company has been seeking to expand its interests from text-advertising to new areas like video. The big question is how Google is seeking to fit this model with gaming.

IGA is a big rival to Adscape. Ed Bartlett, VP publishing Europe says, “This is the interesting point. In-game advertising is very different compared with online advertising. Although we’re both using the Internet as the technology, we use the medium very differently.”

He says in-game advertising is has traditionally been more like above-the-line work, seeking to build brands. “It’s image based campaigns. It’s more like T.V., print or outdoor.” Google’s work is about impressions and clicks. “It’s about driving a transaction,” he says.

Geographic Servers

In-game ads work like this. A player goes online to race against human competitors in a Formula One title. As he turns a corner, he sees an ad imbedded in the game, perhaps as a virtual billboard, for a new car. His German opponent turns the same bend, and sees the same billboard, except it’s advertising a new government anti-drugs campaign. The ads are served according to geography; and are placed demographically with the confidence that most racers will be males in the 18-35 age-group.

Google will likely be happy to take a piece of this pie, but it will also be looking at the casual games market, where the numbers are higher, and the demographics are broader.  IGA recently announced a deal with Acclaim to bring its technology to that company’s free-to-play social games.

Bartlett adds, “When you’re playing poker online it’s very easy for you to finish a hand then maybe click a banner on the same screen that is relevant to poker players. But that is not going to happen in Battlefield 2142.” EA doesn’t want players pausing between a major battle to visit a virtual Gap store.

He warns that the in-game ads market relies on people who understand the format, and the needs of publishers and developers, doubtless one of the reasons why Google is keen on an acquisition.

Another factor is contextualizing advertising; something that Google and the likes of IGA have been very keen to stress. Obviously, Google’s engine is built around the idea of context – if you search for ‘sports cars’ the commercial links are for sports car dealers; not for hamburger retail chains or Doritos.

Likewise, driving games tend to be heavy on automotive advertising; Battlefield features a campaign from Discovery featuring a new series on futuristic weapons. It’s the kind of advertising we can all live with.

To a certain extend, there is a land-grab mentality going on. As the market matures, publishers or core and casual games will congregate around the leading technology suppliers and agencies. Most in-game deals are built around revenue share, so the outfits that deliver the most clients (assuming their tech works, and they understand the boundaries of appropriate advertising) will win through.

Market Growth

Bartlett says, “Some of the publishers have done business with several [in-game advertising] companies but in the longer term eventually publishers will look to deal with just one company.”

The likes of Google need to be in that game in order to hope to take share; the alternative being a highly expensive and problematic acquisition of a market-leader further down the road.  “ Google and MSN and Yahoo are always looking for different mediums,” says Bartlett. “There’s been such a marked and rampant decline in effectiveness and eyeballs with traditional media that they’ve had to accelerate, and this is part of that process.”

He adds, “In-game advertising has suddenly taken off. Our reach this year is going to be in line with a mid-sized T.V. network. We’ve got all these eyeballs that were watching T.V. that are now playing games and they’re in a completely engaging environment. They’re not off making a cup of tea or doing other things, so it’s certainly a very, very interesting space for people who want to be major players in advertising.”

Provided by Next Generation—
Interactive Entertainment Today