Advertisements in video games are becoming as common as billboards on California highways.
Only a few years ago, a video game company had to pay goods makers if it wanted to include their products in the virtual world for a dose of realism.
But today, advertisers are handing over millions of dollars to get their brands in front of the 140 million people who play video games in the U.S.
"Everquest II" players can order from Pizza Hut. Skaters in "Tony Hawk" send text messages on Nokia cellphones. "Tiger Woods" golfers swing Nike clubs, and billboards promoting a variety of brands adorn the stadium walls in "Madden Football."
Advertisers are expected to spend $183 million this year to pitch their real-world products in video games, according to Yankee Group. The research firm, which also measured the playing population, predicts in-game ad spending will reach nearly $1 billion by 2011.
Internet giants are investing in technologies that let them broker those ads. In the past year Microsoft Corp. snapped up Massive Inc. and Google Inc. acquired Adscape Media to try to cash in on the trend.
"There's a tremendous audience and tremendous growth in games," said Bernie Stolar, who in the 1990s headed Sony Corp.'s U.S. PlayStation business before becoming chairman of Adscape.
Gamers don't know what to make of it.
Some say ads heighten a game's realism.
"For sports games, I think it's a necessity to see billboards for Coke or Pepsi," said Sam Woolley, a 29-year-old artist in Koreatown. "That's what I'd see if I went to a real game."
For others, the ads are an unwelcome intrusion.
"Games should be about game play, not selling products," said Ben Spradlin, a 29-year-old systems analyst from Knoxville, Tenn. "It ends up being a big distraction."
Unfortunately for Spradlin, in-game ads are expected to become big business over the next few years.
"Right now, roughly a quarter of games have ads in them," said Michael Goodman, a digital entertainment analyst at Yankee Group in Boston. "Ultimately, you'll probably see 60% to 75% of all games having ads."
Spending on ads in games is expected to grow 33% a year for the next five years, compared with just 3% for television advertising, according to Parks Associates. Part of that growth has to do with supply and demand.
"Overall, gaming is virgin territory for advertising compared to other media," said Michael Cai, an analyst with the Dallas-based media research firm. "TV is saturated. It's very hard to insert another 30-second commercial. But for games, there are a lot of unused properties."
Game publishers love the extra revenue because it helps them fund growing development budgets, which have exploded to more than $20 million for a typical console game from $5 million three years ago. Ads help publishers reap an extra dollar or more for each copy of a game they sell, according to analysts.
That has persuaded some major publishers to offer advertising in their games, including UbiSoft Entertainment, Activision Inc. and Electronic Arts Inc.
Redwood City, Calif.-based EA recently expanded a deal with Microsoft to place ads in some of its bestselling titles. The game publisher also struck a deal with clothing retailer H&M to produce "The Sims 2 H&M Fashion Stuff," a game that lets players outfit their Sims avatars with the firm's couture.
For advertisers such as H&M, games are a good way to get people to engage with their brands in ways they can't with print or television ads.
"It gives our existing customers an opportunity to take the fashion that they love in the real world and interact with it in a whole new way," said Steve Lubomski, H&M's U.S. advertising manager.
The player's ability to don, kick, toss or use products is part of the appeal. In "Super Monkey Ball," players try to get their monkey characters to collect Dole-branded bananas. And in "Tony Hawk's Project 8," players use Nokia phones.
Until recently, ads had to be incorporated into a game by software coders 18 months before its release. But as more game consoles connect to the Internet, companies such as Adscape, Double Fusion Inc., IGA Worldwide and Massive are coming up with ways to pipe ads into games in real time.
For example, a billboard in a racing game can advertise a movie release, then switch to a new product the next time you play.
"Being connected means you can start to sync your ads with upcoming events," said Cory Van Arsdale, chief executive of Massive, which Microsoft bought for $200 million.
Another bonus for advertisers is the ability to closely measure how often an ad is seen.
"The game understands where a player is, what they see, which way they're facing, what the lighting conditions are and how fast they're moving," Van Arsdale said.
Not all games lend themselves to ads. Incorporating products into "Halo," "World of Warcraft" and "Pokemon" could disrupt the fantasy, he said.
To get around that, companies sometimes sponsor multiplayer tournaments and tout their products before and after the matches, while players are gathered.
Those types of ads tend to be the most effective, according to a study released last week by Double Fusion, which also noted that 80% of players notice ads in the games they play.
In-game advertising still faces challenges in trying to compete with traditional media advertising, analysts and ad buyers said.
Art Sindlinger, a vice president at media planner Starcom USA, said game ads were part of advertisers' "innovation" budgets, which are generally small and earmarked for risky projects.
But some industries, especially cars and telecommunications, are dedicating more of their budgets to games "because they've got some natural entry points to become part of the experience."
Many ad agencies still think of video games as a young male adolescent pursuit. But Stolar, now Google's game industry evangelist, believes that will soon change.
"This is going to be an ongoing education for publishers, developers and advertisers," he said. "It's a vision that's just starting to evolve."
Alex Pham and Alana Semuels, Los Angeles Times. July 30, 2007
Copyright © 2007 Los Angeles Times. All rights reserved.