Google's Next Move - Video Game Ads?

Since AdWords was launched in 2001, Google has expanded to image ads, video ads, and print ads, and has frequently been rumored to be entering radio and television. While many think that television ads (ala Spot Runner) could be Google's next major move, they may be neglecting a potentially larger opportunity: in-game video game advertising.

Earlier this year Massive Incorporated, a video game advertising network, announced a landmark deal with Major League Baseball and 2K Sports to provide dynamic advertising in the popular video game Major League Baseball 2K6. According to their press release, "Massive's Network and technology allow MLB Advanced Media and 2K Sports titles to leverage dynamic advertising for ever-fresh brand messaging in their games, mirroring the rapidly changing and expanding advertising opportunities in the live action sports industry."

Why Should Google Care?

The Entertainment Software Association put U.S. sales of video game hardware and software at $7.3 billion back in 2004, a figure that rivals Hollywood box office revenue. In-game video game advertising is nothing new for the booming game industry - large companies have been buying static advertisements in games for years. What is new is the expansion of online gaming into the mainstream. Once reserved for only PC Gamers, console gamers have now discovered a whole new world of competition over a broadband connection.

In a recent interview with TechNewsWorld, EA's John Schappert, who oversees the largest interactive game studio in the world, was asked about in-game advertising: "In-game ad integration is a growing business where we see both advertisers and consumers looking for more. It's an additional revenue stream that is still small, but growing. There's the potential for scalability in this area with dynamically-served ads. It's still in the early stages [in terms of] how in-game ads will grow in significance."

Starting with Microsoft's Xbox and Sony's PS2, and continuing into the next generation of online gaming with Microsoft's Xbox 360, Nintendo's Wii, and Sony's PS3, it has become a virtual certainty that nearly all gamers will be playing while connected to a broadband connection. With that broadband connection comes an advertising opportunity that's hard to ignore.

Is History Repeating Itself?

The potential flaw in what Massive Incorporated does is that their ad network still only includes the large advertisers. Massive's website gives no specific information regarding how to purchase advertising, only mentioning that "blue-chip" advertisers can work with their "veteran" sales team to start an account. I think it's safe to say that small businesses aren't their target market. So while they are implementing dynamic ads, those ads are still only affordable to larger businesses. Anyone familiar with internet advertising can see the potential for history to repeat itself.

Way back in 1996, long before Overture (now Yahoo! Search Marketing) and Google AdWords, a company called DoubleClick pioneered website advertising. Their downfall, however, was that they required a formal sales contract, limiting their potential client base to only large companies. Overture and AdWords made it easy for the small advertiser and small site owner to participate in their ad networks, essentially opening their service to anyone on the web. Several years later, one would think that Google is keeping a watchful eye on what's going on over at Massive Incorporated. Massive may be the first to enter the market, but it's hard to ignore the fact that the small business owner remains shut out. Could Google make Massive the next DoubleClick?

How Would Google Do It

There's no doubt that with the best programmers in the world Google is capable of developing and improving upon the technology that Massive has. It's also not hard to imagine advertisers paying per thousand impressions (PPM) for their text or image ads to be shown in specific games, much like they do now for specific sites. The tough part for Google, however, would be the distribution of those ads.

As opposed to signing up websites to display their ads by copying some code on to their site, Google would have to work with game programmers throughout the development process. This would be much more time consuming and would be a much larger risk for Google. In the same way that Massive signed the contract with 2K, Google would have to sign large contracts with game developers and work with them for several months to integrate their ads.

This enforces the fact that the main difference between what happened with DoubleClick and what could happen with video games is that it would probably be more work for Google to distribute their ads over multiple channels (i.e. more games). Since each game is programmed differently, there is no game equivalent to the JavaScript used in all AdSense ads. Every game would need to be tailored to Google's ad network individually. Difficult: yes. Impossible for Google: no way.

When Will They Do It?

In my opinion it's not a matter of if, it's a matter of when. The potential revenue from the gaming industry is too big for Google to ignore. Oh, and if you still aren't convinced, consider this: Microsoft, one of Google's main competitors, also produces the Xbox 360. If Microsoft decided to integrate their newly launched adCenter into Xbox games, would it really surprise anyone if Google countered by announcing a deal with Sony or Nintendo to integrate in-game dynamic advertising for the PS3 or the Wii?