Video Games: The Next Ad Medium?

Video games aren't just for kids anymore. Faced with decreasing returns from traditional media, marketers increasingly look at video game ad and product placements.

The Yankee Group, in a report titled "Marketers Look to Video Games to Drive Their Messages Home," forecast the nascent market for in-video game ads and advergaming will be worth $260 million by 2008, up from a scant $79 million in 2003. In-video game ads are essentially product placement inside a video game, while advergames are branded entertainment -- the game is the ad.

Video Game Advertising Growth Forecasts

Year In-Game Advertising Revenue Growth
2003 69.0%
2004 83.6%
2005 113.7%
2006 153.3%
2007 203.5%
2008 259.9%
Source: Yankee Group

Year Advergaming Revenue Growth
2003 10.0%
2004 11.5%
2005 17.2%
2006 30.1%
2007 52.8%
2008 92.4%
Source: Yankee Group

Market dynamics for the video game industry as a whole are also very strong, and offer marketers an attractive demographic. The video game industry is expected to grow from $7.4 billion in 2003 to over $8.3 billion by 2008. The ranks of 108 million US gamers 13 years and older will swell to over 126 million by 2008. (See Chart at bottom of column)

According to Michael Goodman, Yankee media and entertainment analyst, "The two main challenges for video game marketing are measurability and timeliness." Goodman explained initiatives are underway by a number of companies to provide real-time ad insertion in games, which will help the market take off.

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