Video games have, just as movies before them, gone the way of pursuing alternative revenues to drive incremental profitability, to stave off increasing development costs and to spur innovation. Consider the transformation in Hollywood: it's moved from the box office being the only connection to the consumer to a world where movie viewing is on consumers' terms—what they want, when they want it. This transformation delivers multiple paths to profit: on-demand available 24/7, DVDs, and ad or subscription supported broadcast. We can be equally enthusiastic about the coming shifts in the gaming business—many supported by advertising.
What does the landscape look like and how can developers and publishers embrace the requirements for this growing revenue stream?
First, let's move the focus from "in-game advertising" to video game advertising. This rubric more appropriately covers the full range of options games have for including advertising, and applies to all formats, genres and consumer channels for gaming.
Unquestionably the advertiser is interested in blockbuster retail games. Publishers should now with every game learn about the process and how video game ad technology can be integrated into their development and tools pipelines. Including video game ad development as a part of the design and development process, planned from the onset, will deliver the best creative and revenue results and must be considered as fundamental to the game as the building of online functionality. Advertising is already part of the retail gaming firmament—we're now at the stage as an industry where the question is not if, but how, and Double Fusion and others in the video game advertising industry have a tremendous amount of experience and knowledge to share here.
Looking forward, to extend the opportunity beyond core retail gaming, it's imperative that publishers look beyond the purely retail paradigm to some of the new key drivers of growth in video game audiences—the ever-increasing number of gamers consuming browser based gaming, back catalog re-releases, and MMOs. The consumer is in control of how, when and for what price they play their games, and these ways of consuming gaming offers greater flexibility for publishers in continuing their audience and revenue growth. Advertising is a critical part of the economy of these new types of gaming that consumers are embracing.
The halo effect associated with consumers receiving content of their choice for free in exchange for a relationship with the marketer is proven: 90% of all gamers are open to ads if it means additive game content or free play. Video game ad networks like Double Fusion have the technology and the sales network in place today to bring value to the game consumer, marketer and publisher alike by delivering a completely new revenue stream through the re-release of retail games on an ad-supported basis.
These alternative gaming formats do come with unique challenges, most specifically distribution. Developing expertise in digital distribution on both PC and consoles is a crucial skill for publishers to master. The first step into fully ad-supported gaming will come from shorter version and advanced casual games, and back catalog. All will involve establishing distribution, whether direct, in partnership with others, or both.
Moving your thinking from "in-game" to video game advertising expands the market opportunity from the 30-40% of games set in current settings to the possibility of sponsorship revenues in all of your titles. A great analogy is the Pepsi promotion, which drove one million downloads on iTunes... all game content of value to a consumer is ultimately valuable to an advertiser. Use your online leaderboards to drive sponsored tournaments. Activate the first 10,000 digital downloads of an object "brought to you by..." Create new and fully sponsored levels of gameplay. If well done (and we are there to help) you will increase your revenues while expanding the consumption of your game experience.
Learn about the advertising market and what makes a good ad. Double Fusion and others are conducting major research initiatives in this area. Understand what makes games "advertiser-friendly" and what does not. We are NOT here to tell you what games to make but we can help you understand where, at our point in market development, advertisers gravitate and where they do not. These standards include content, design, and creative formats. With regard to content, ultra violence and gore are generally challenging for ad buyers, except to a very small number of edgy brands. Creative standards are also critical—resist the temptation to "try too hard" to be creative; scalability requires creative standards that are replicable across games and within each game. Save the custom and out-of-the-box work for product placement deals.
Support of an open market is critical to building a healthy video game advertising ecosystem and will be of greatest benefit—and profit—for all players. As in any new business, creating additional complexities comes at the expense of growth and profit. As marketers in the video game space know, the value of the content you advertise in is paramount, not the platform through which the audience connects to the content. You love it when IGN, GameSpot or GameDaily announce your newest release, and don't care if someone is on a Dell or HP computer. The simplicity and scalability of TV continues to garner the lion's share of advertising dollars, and can again be the guide: advertisers buy into FOX's 24, not Comcast's 24 or Cox Cable's 24 or Direct TV's 24 and so on.
We are building a new medium, which requires ease of adoption for the buyers. Video game advertising growth will require impression standards across networks, the ability for advertisers to buy your valuable IP from a single source, and an auditing of the value of the advertising—all things we are pursuing with great support from publishers and advertisers alike.
It all starts from getting into the game—to ensure survival in the new gaming market of the future you need to be trying the ad-supported models—any or all of them, now. Start small if that's what it takes—as we move from the near term to the longer horizon, larger picture initiatives will emerge. You can immediately begin building the "long tail" for your titles: launch your back-catalog games on an ad-supported basis with us or others. Break through the creative limitations of retail. Learn the inherent challenges of a bifurcated ad market and support an open economy. Embrace all games playing a role in driving your advertising revenues. Prepare to capture revenues associated with the advertising fees paid to reach your engaged gamer.
The results will surely net you increased profits and category growth.