Last year was the best year ever for the casual games industry, and we are predicting this year to be even better yet. Across the board, revenue, reach, and usage went up in 2007. One of the emerging themes of the year, and a big driver of revenue growth for most companies, was in-game advertising in one form or another. The year taught us a lot about the opportunities and challenges we face as we work to integrate this model into casual games.
The concept of in-game advertising seems to attract an increasing amount of press, with the overwhelming majority of the attention focusing on console games. Microsoft said at CES in January that it has shipped 17.7 million Xbox consoles to date and signed up 10 million members of Xbox Live Arcade. That is great, but with millions of games played each day on the PC, the console market really represents only a fraction of the reach available to in-game advertisers.
Different forms of in-game advertising are now available and everyone seems to be participating in one way or another. WildTangent has a unique and seemingly scalable product with WildCoins. RealNetworks has a rapidly growing in-game streaming video ad product producing strong video-related ad metrics. (Full disclosure: I helped build it.) MSN, Pogo, and Shockwave have produced quite a few games that have advertisers’ products embedded directly in the game- play. Additionally, Sandlot Games is experimenting with branded avatars and alternate payment methods.
So why does in-game advertising work? At Real, we have found that users play ad-enabled games much longer than 60 minutes when given the option.What’s more, advertisers are seeing a competitive ROI and game developers are sharing in the incremental revenue. This alignment of incentives and results is powerful indeed. At scale, you start to see revenue in the range of $1.00 per download compared to $0.30 with pure transactional models. Give the users the choice and they will play more frequently and for longer periods of time.
In-game advertising has taught us that there are greener pastures outside of our conventional 60-minute downloadable world. As the web becomes more social and user-centric, the casual games industry must follow (and preferably lead!). We need to look beyond time limits and strive for maximum engagement of our users. If we do this successfully and do not turn users away with limits, new business models will definitely emerge. Figuring out ways to break down our conventional monetization walls will create bigger opportunities ahead for everyone.
Here is to a more open and user-centric 2008!
