Is That a Video Game -- or an Ad?

Marketers and game makers alike are latching onto in-game product placements and advertising. Is it an intrusion or another creative element?

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The Sims 2 Open for Business, the expansion pack in the popular Sims franchise that hits stores in March, allows players to launch virtual restaurants, stores, and other entrepreneurial ventures. But, oddly enough, they won't be able to interact with true-to-life financial services companies, or see any on-screen versions of objects, food, or clothing representing recognizable brands. Although the game's publisher, Electronic Arts (ERTS), considered product placements and even wrote some into early storylines, the game's ad and design staffs decided against it.

"We realized breaking the Sims fantasy in this case would detract from the player's experience, so we declined," says Julie Shumaker, EA's director of video-game ad sales. It's a surprising statement from the Redwood City (Calif.) company that, in 2002, garnered the video-game industry's first seven-figure product-placement deals from megabrands McDonald's (MCD) and Intel (INTC), which appeared, no less, in The Sims Online.

EA's decision to avoid real-world brands in The Sims 2 Open for Business is just one example of how leading developers are balancing the sometimes conflicting interests of in-game ads and product placement vs. game design.


  It's a quickly growing advertising market, projected to garner revenues of $562.5 million by 2009, up from $34 million in 2004, according to Boston-based research firm Yankee Group. But as new, controversial models for inserting paid ads into games are surfacing, not everyone in the gaming world is happy. In early January, Engage, a new San Francisco-based in-game ad agency, in collaboration with New York's IGA Partners, placed virtual billboards for the Subway fast-food chain within the popular first person shooter game Counter-Strike -- without clearing it with the game's publisher, Valve, based in Bellevue, Wash.

"At no time did [we] grant permission nor discuss these advertisements with Engage. As such, this is now a legal matter," wrote Doug Lombardi, Valve's director of marketing, in an e-mail interview.

In online forums, gamers are making it clear that they're worried about the intrusion of ad-driven elements into their on-screen environments. As one posting to, a fan Web site with more than 50,000 active users, recently stated: "Ads while you're gaming are just like telemarketing ringing up while you're having dinner." Another stated bluntly that the recent Subway in-game ads in Counter-Strike, specifically, are "uncool."


  Although EA decided to draw the line between ads and games in the forthcoming The Sims 2 Open for Business, it has seen a 50% increase in the number of in-game product placements since Shumaker first started the ball rolling in 2002. "When producers start to sketch a title and storyline, my team is in there working with them," says Shumaker.

Getting the ad folks and the designers at the same table early has helped EA determine when ads or product placements are appropriate and where they aren't. About 14 to 18 months before a title launches, she adds, the ad team reassesses the storyline to see what products and brands, real or not, might be logical and effective.

While some resist the intrusion of ads into the gaming world, other game designers see the presence of billboards, posters, branded mobile phones, and digital doppelgangers as a creative catalyst. Tom Clancy's Splinter Cell Chaos Theory PC game, released last year by Ubisoft, includes a bright neon sign for men's deodorant Axe that was permanently included (or "hard-coded") in the game. The protagonist, secret agent Sam Fisher, scales the sign at night.

While the blatant appearance of an ad in the game might seem obtrusive to some players, the game's designers saw the presence of the flashy ad as an opportunity to experiment with dramatic lighting effects -- a signature element of the game's overall design. And the designers saw the inclusion of the billboard as way to not only to draw attention to the ad but also to add a physical challenge for the protagonist.


  Ubisoft is also working with New York-based Massive to place dynamic ads (not hard-coded) within PC games that have an online game-play component. This allows product placement and ads to be updated and reflect timely ad campaigns, such as those for a movie release, thanks to Massive's proprietary software, which also tracks players' encounters with brands within the game.

Publishers approve all ad and product-placement design, and receive between $1 and $2 per connected game unit. So far, 39 publishers are using Massive's services, and such high-profile brands as Coca-Cola (KO), Nokia (NOK), and Panasonic have made their way into games. According to Massive CEO Mitchell Davis, ads have appeared in 30 million game sessions to date.

In December, Massive signed THQ in Calabasas Hills, Calif., to its stable. Dave Miller, senior global brand manager at THQ, says although in-game ads promise to be a source of revenue, he and his colleagues are careful to avoid overloading games with ads.


  To their surprise, they found Massive's ad-tracking system to be a useful design tool. "Because ad units can be tracked immediately, we can determine how many times a character walks past or interacts with an ad," explains Miller. "So if the character is stuck in front of a brick wall with an ad poster on it, we know that the level might be too hard. We now see the ad-tracking system as a way to find ways to improve on a game's design." While THQ can't disclose which forthcoming title will be the first to feature Massive's dynamic ads, Miller says it will debut this year.

Traditional ad agencies have been eyeing the in-game forum, too. Chicago's Play, a division of media buyer and planner Starcom MediaVest Group, helps match in-game advertisers with developers such as 2K Sports, a publishing label of New York's Take-Two Interactive Software. And New York's Ogilvy Interactive, a division of international agency Ogilvy Worldwide, is currently working with in-game ad companies to research how to best target the coveted 18- to 34-year-old male market.

Interest will likely increase as the video-game market grows. Total 2005 retail sales of video games were 6% higher than in 2004, according to research firm NPD Group. The challenge for both game designers and advertisers is to maintain the balance between game play and brand visibility, and avoid alienating the growing gamer audience.

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