This article is more than 1 year old
Massive game advertising startup to aid desperate brands
Product placement in computer and console games
How it works
Massive has written a data link library which can be called by the game playing program. This library is furnished with new adverts for a given game level, the level that is about to be played, and these are downloaded from a Massive server over the internet while the game is loading into memory. This might create a delay of a few seconds, but it should be largely unnoticed by most gamers.
These files, mostly 10 to 20 kilobyte files of text, audio and graphics, are now callable from the library as the game plays. Over a two week period just before the game is released Massive works with the game authors to decided where these files will play. In a grand prix racing game they may be the advertising around a circuit, in a Mall based game, such as the first Massive enabled Mall Tycoon, they may be billboards and shop window advertising, and around a stadium they have all the locations that are used in real stadiums.
Both the game authors and Massive follow rules of thumb to limit the invasiveness of the advertising to make sure that it doesn't break the reality of the game. The early games that have been Massive enabled have around 50 advert locations identified within the game, and it looks to serve between 8 and 20 adverts per hour during the game play.
The important difference between TV advertising and in-game advertising is that the game variety is non-interruptive. You don't have to stop playing the game to notice a billboard, and since there are billboards in real life, the game appears more like real life, rather than less like it.
There will be an eerie sensation when a game player walks down a street and sees that same advertising campaign, say for a major motion picture that is starting its run next week, using the same artwork and delivery format as one he saw that evening in a game that he bought 3 months ago. Research says that it enriches the gaming experience and we can't see anything wrong with that observation.
The likely future
Despite huge promise, this Massive adventure is still really in its early days. There are few rules about just what advertising works, and Massive will have to prove over and over again that this form of advertising has the same effect as, for instance, national billboard advertising or internet advertising, but Massive is effectively modelling this on internet techniques and is using agencies to measure the 'brand lift' created by this form of advertising.
But advertisers will have to ask themselves is there any real point in convincing boys of 15 that don't yet drive, that Castrol is a really fine motor oil? It might well affect sales in three years time, but that's not what this year's advertising budget is for. So the market will have to emerge, emulating new advertising markets like the Internet, but creating its own rules of thumb as it goes, over the next three years.
Contractual Monopoly
One thing that the company has been at pains to attempt is a kind of monopoly by contract. Some big players like Activision and EA Games may not yet be part of this network and may end up never joining it, but if they capitulate and Sony joins the party, then Massive will have far too tight a contractual grip on a new form of advertising.
Certainly if that point is reached Massive may not be too worried about changing the contract to make it a little less restrictive to participating publishers. A start up is allowed to behave monopolistically, but if it starts winning the war, we expect to see other companies raise legal challenges to its contracts.
Hays is not giving out financial projections right now, but she would be delighted if 2005 yielded Massive something close to $15m in revenues, but probably is internally projecting far less.
Given that games publishers have mostly negotiated more than 50 per cent of the total advertising revenue for their games, roughly 66 per cent, that would mean that Massive alone would be responsible for $45m of in game advertising in the US alone.
Massive plans to launch its network in Europe during March 2005, and in Asia (with an unnamed partner) in November 2005. It is likely that this revenue could double due to the geographical reach during 2006, and double again, due to the number of games platforms that are going online, that could easily create a $180m revenue operation, with some $60m for a highly profitable Massive and a valuation that is likely to be ten times revenues ($600m) as it seeks to go public in 2006.
Our own view is that if Massive manages the key hurdles ahead of it, like a relationship with Sony and a successful shift to the Far East, it could be far bigger than this and it would all be in the price for a 2006 IPO. And all of this from Massive's $5.5m of funding and a two year development effort.
Back in the early days of Internet banner advertising, prices went as high as $100 for 1,000 page views, valuing each advertising viewer at $0.10. It's much lower today, but in game advertising is likely to go through a similar honey moon period where the advertising is at a premium.
Do that calculation for the top 100 games launched each year, across multiple platforms.
There are 68.5m US homes with a games platform, and more than double that around the world, with perhaps 50 per cent of them online by 2007. Allow for just two hours of gaming per household per day (across multiple individuals), with 10 ads per hour and even at 1 cent per advertising impression, around one tenth of the same price of early internet advertising, you end up with a $2.5bn industry in no time at all, perhaps as soon as three years.
Coming back to a recent research analysis of the industry, most companies are doubtful that it will ever go to these types of numbers and the Yankee Group only expects it to creep towards $100m during in this time, with advergaming becoming more important.
By this Yankee means that new game formats will arrive, like free web sites and free to air television, where the game is GIVEN away, and paid for entirely by advertising. This is almost certainly coming, and it will then leave the gaming market open to a few new Massive style networks, because they wouldn't have to sign up existing games suppliers.
But it is hard to see this dwarfing the paid gaming market overnight, and if it ever does, it is certainly a long way off, leaving Massive with a long run out in front on its current business model.
Copyright © 2004, Faultline
Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.
Related stories
IDG: e-magazines 'not good value'
Gates: PC will replace TV, TV will become a giant Google
Online ad spend on the up