How Ads Are Changing the Casual Model

Two industry insiders weigh in on the evolving business of casual gaming

It has been a banner year for the $1 billion dollar casual games industry, and 2007 is looking even better. A record number of people are playing games such as Cake Mania, Bejeweled, and Super Collapse 3. Tens of millions of casual games are either downloaded or played in a Web browser every day. All this growth is tremendous; however a very small percentage (less than 2 percent) of people downloading casual games actually purchase them. This frames the enormous opportunity for in-game advertising.

Throughout 2005 and 2006 in-game advertising in console and online PC games has been a very hot item.  The evolution of in-game advertising capabilities has allowed advertisers to see it as a viable alternative to traditional ad channels such as television and outdoor display ads.  As the reach of television advertising decreases, forecasts for in-game advertising are increasing, with research firms such as the Yankee Group estimating in-game ad revenues to reach $732 million by 2010.  These numbers demonstrate agencies’ strong interest in this budding channel, with many releasing trial campaigns featuring a dedicated in-game advertising line in their budgets.

Dynamic ads within core console games seemed to be the most discussed segment of in-game advertising for 2006.  While this segment offers an exciting opportunity for branding, there are some kinks that must be smoothed out as the segment matures.  Basic ad metrics such as how to measure an impression still haven’t been standardized. Reach and frequency for these ads are still insignificant. Additionally, the advertiser is required to have an intimate knowledge of a game to blend within its environment without violating elements of the scene. For example, if a game is happening in the year 2040, it doesn't make sense to place an ad announcing a new release of a 2006 car. To top it off, leveraging powerful video ads in core games is almost impossible.

Casual Downloadable Games

When our team at Eyeblaster evaluated the opportunity of in-game advertising, the initial thought was to target a solution for core games.  However, the more we studied the market, the more we realized that downloadable casual games are a perfect match for in-game advertising.

The growing casual game industry provides quality content to end users, has the right reach and engages users with content for long periods of time. In addition, the demographic audience that characterizes the category, predominantly women-over-30, holds 80 percent of decision-making buying power in the US. Essentially, the casual downloadable game industry has all the required elements to present a sustainable ad supported model.

We developed to provide this missing revenue model by integrating video advertising units along with reporting tools. To limit intrusiveness and interruption to the gamer, video ads should be placed at natural game breaks, such as between levels or before the start of the game. Game developers also have the option to customize the frame and position of the ad so it will blend with the game environment. The intervals between which ads are shown vary, but in general 10 to 30 minutes pass between presentations. Clicking on the ad pauses the game and opens a browser on the advertiser’s page.

Another option is to place logos within the context of the game so that users are exposed to brands continuously during game play. Such logos can be placed on different games elements in a polite and effective manner, e.g. on the back of playing cards within a Solitaire game. The logo placements can be done dynamically, even after a game is downloaded to the end user’s computer.

We found that, in general, in-game advertising for casual downloadable games produces a 200 to 500 percent revenue increase as compared with ad-free “try and buy” games. The lift in revenues is dependent on the duration users are spending with the games, the number of ads displayed during a session and the average CPM for advertisement sold. When games are offered without a time limit, revenue per game download increases as time progresses.

Natural Breaks

In June 2006, Eyeblaster announced a partnership with RealNetworks. Now game developers can integrate Eyeblaster’s in-game SDK and participate in the advertising revenues generated through games distributed on RealNetworks properties.

Instead of the limited 60 minute trial, users get some extra game play.  In exchange, video ads are presented every 10 minutes of play during natural breaks of the game. In the event the end user decides to buy the game, the ads are immediately disabled. Ad impressions are captured in standard manner by the game distributor and can also attribute revenues per game or game developers. The revenue generated from the inventory is shared based on revenue share arrangements between game developer and distributor.

The benefit for gamers is that they get extra playtime against exposure to ads.  Game distributors generate advertising revenues from premium advertisers Game developers and publishers are sharing advertising revenues with the distributors; and advertisers get access to high-quality video inventory with significant reach, frequency and accountability.

We strongly believe that the introduction of polite, high quality in-game streaming video ads that provide a supplemental revenue stream is changing the industry for better. Not only will advertising revenues gradually become a very dominant component for game distributors and developers, but an introduction of new kind of segment will arise.

This change also benefits the core gamer market. The traditionally sought-after demographic for advertisers (males between ages 18-34) figures less prominently in the field of casual downloadable games. One of the reasons for this was the lower conversion rates from trial games to games purchased in this demographic. The lower rate of purchasing activity from the male demographic resulted in game developers shifting their focus to creating games appealing to the more profitable female audience. However, in-game streaming video solutions provide an alternative monetization option that can be leveraged in a new industry segment, casual games for core players, targeting the male demographic.

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