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It's impossible to think that video game sales will continue to climb at their meteoric rate, but that is exactly what continues to happen as the industry reported a 23 percent growth, according to this Reuters report.

I bring that up so that I can talk about the next piece of news, which at first blush, will appear to be unrelated. Newspaper companies announced that overall advertising was down in their national books, but local and regional groups have seen a marked increase.

So, how are the two related? Simply in this way: As video games continue to see a staunch growth in revenues -- and as they begin to experiment with in-game advertising, it's likely that we'll be overseeing a rapid shift in the marketplace, away from traditional media outlets and more towards very targeted segments of the population.

For the game industry, this means that -- particularly with a game like John Madden Football and it's 10 million units sold -- big time ad buys will be coming its way. That, in and of itself, is enough to potentially push the industry's revenues into the stratosphere. And, it fundamentally separates itself from the music and movie industries, which must spend millions marketing their products.

Ads, the Internet, and Media

Television advertising continues to take a pounding (as does traditional print media advertising), as the Web continues its growth cycle, according to this Reuters report.

 

That's all fine and dandy -- until you begin to look at the numbers. Traditional outlets still continue to receive the lion's share of funding (Television's share is expected to peak in 2006 at 37.9 percent of global ad spending…. Newspapers are expected to end 2005 with a 29.8 percent global ad spend share), and at some point, one would have to imagine that there will be a leveling off -- although that may come at the expense of old media being distributed across a plethora of new delivery platforms.

 

In other words, television programming with advertising that is delivered to mobile phones and laptops will be increasingly difficult to pigeon-hole. Is that traditional advertising? Internet advertising? Mobile advertising? The same goes for magazine and newspapers that will surely be shipped across a variety of platforms.

 

Maybe the least dynamic ad buys will come from Internet-only content.

Game Maker, Advertiser Strike Virtual Deal

The end is apparently upon us, as a massively multiplayer game has gone completely free -- with the help of a plethora of in-game advertising billboards meant to defer direct costs to gamers, according to this GamesIndustry.biz report.

Massively multiplayer game specialist Funcom has announced that the free version of its online RPG Anarchy Online is set to feature dynamic in-game advertising billboards, thanks to a new deal with Massive Incorporated.

This is an inevitable conclusion (or beginning) of online games seeking to expand their audiences. Removing the barrier to entry -- the upfront cost -- is no different than news sites using banner ads, and not subscriptions, to draw in readers.

My writing partner John and I are working on a story about Alternate Reality Gaming, which essentially moves games from the PC and blends them with the communication devices that we all use in the real world (phone, pagers, ect). The result is a stunningly complex group-think game, which requires strangers from around the country to work together to solve problems.

The big problem, though, is that these games cost a lot of money to make -- so they have been used, at least in their most popular forms, to promote a movie (A.I.: Artificial Intelligence) and a video game (Halo 2). In other words, the games were giant marketing tools (that doubled a wicked cool games).

So there is little surprise that games which started as commercial ventures, have fallen back, in some small part, to marketing vehicles.

Interactive Games Become Marketing Tool

Not to toot my new horn, but the Technology Review has a piece on the popularity of Alternative Reality Games written by noted MIT professor (and video game defender) Henry Jenkins.

Jenkins does a nice job explaining why players are attracted to these improvisational games, which often require the help of hundreds of people who haven't met outside of virtual space:

One puzzle required them to decrypt GPS location data, send participants at various times to hundreds of phone booths scattered across the continental United States, and respond within a matter of seconds to unanticipated questions delivered by a live actor. To give proper answers, each person had to trust an ad hoc group of strangers to instantly provide the information they needed.

It's surprising, though, that the two biggest games were designed as marketing tools: The Beast (for the movie Artificial Intelligence: A.I.) and ilovebees (for the Microsoft Xbox game Halo2). In other words, games became something more than just games. They became a way to draw people into fictional worlds, and create a sense of "community" around a product (without ever actually pushing the product).

Mario Goes Quilting

Boing Boing has a great post (along with a picture) about a quilt patterned after Nintendo's über-mascot Mario. The cover was made, according to the blog, by overlaying a game screenshot on a Paint Shop grid.

There is a great quote from Marc A. Smith – which is a seven word description of the history of mankind – in Howard Rheingold's book Smart Mobs (p. 31) that encapsulates the emerging thinking that needs to be engendered by corporations that want to include customers on a very personal level: "More people pooling resources in new ways."

Game companies do a great job releasing all the collateral for their products months before the actual box hits the shelves. The reason: encourage people to create communities and products themselves. It's wonderful market research, and it encourages creativity.

ILoveBees -- A Marketing Story

The wildly popular – and slightly neurotic -- ILoveBees game is winding down, but not because of lagging player participation.

Instead, the game's storyline – which skews the line between a virtual and the real world – will wrap up in the days leading up to Microsoft's much-anticipated release of Halo 2, the sequel to its shooter game that pits Master Sergeant against the Covenant in a science-fiction thriller.

The reason: the alternate-reality ILoveBees was conceived as a marketing campaign to promote Halo 2, according to this Wired News story.

Confused? That's okay. Wired News writer Daniel Terdiman tries to explain.

ILoveBees is the latest and perhaps most ambitious of the growing genre known as alternate-reality games. In it, widely dispersed players coordinate to find and answer thousands of ringing pay phones all across the United States and provide correct answers to recorded questions.

When all the answers have been supplied, the latest episode in an internet-based War of the Worlds-esque radio serial is unlocked and made available to its rabid fans.

The ILoveBee's storyline, though, is a lead-in to Halo 2, allowing players who are eagerly awaiting the game's release to continue existing within the Halo universe. The IloveBees plot is simple: the futuristic war is going badly for Earthlings, and futuristic warriors have come back to the past for help. Players must coordinate online to find clues and solve puzzels, and then track down pay phones throughout the country (supplied with GPS photos) where they will receive more information that is incorporated into the game.

It's a brilliant game. And yet, ILoveBees – while a fascinating stand-alone game – was conceived as a marketing ploy. (Of course, considering its popularity, don't be surprised to see the game continue in some manner or form.)

Halo 2, as it turns out, has needed very little marketing. There have been 1.5 million pre-orders of the game, slated to be released on November 9, according to this story on GameIndustry.biz. This would put the game on track to become the fast selling game of all time.

The original Halo -- which has become the cornerstone game for Microsoft's Xbox – also spawned a series of books, and the game engine is used for the popular Red vs. Blue machinima.

CPL Asks $2 Million Question

The Cyberathlete Professional League is taking a decided risk. After seven years of tournaments where winners have walked away with over $2 million donated from corporate sponsors, the CPL put this question to its members:

Do companies that sponsor CPL have a better chance of getting the gaming community's purchasing dollars and recommendations?

The question has sparked an interesting debate on the CPL message boards, and frankly, it's likely the group might not receive an answer they like (although when you self-select like this, I would imagine that people are more likely to take a high ground and claim that no corporate advertising and marketing affects their decision).

For an industry trying to grow up – in this case, professional game tournaments – it's a fascinating discussion to follow.

Online World Cup Partners With FIFA

Electronic Arts, Microsoft, and the Fédération Internationale de Football Association (FIFA) are teaming up to bring soccer players around the world together with online tournaments and real-world camps.

Online gamers will be invited to participate in an international online tournament played on EA's FIFA Football 2005 using the Microsoft Xbox Live service. The tournament will travel to six continents from October until December 2004, with the finals being played at the FIFA World Player of the Year Gala in Zurich in December 2004.

Along the tournament route, FIFA will coordinate several mini-camps complete with special guests that will take place between tournament matches.

This is the beginning of the marketing blitz for the World Cup 2006, and both Microsoft and EA will be offering special products over the next two years as teams continue to move towards the kickoff of the international sports spectacular.

Madden, Dodge Roll Out Corporate Sponsorship

Electronic Arts' Madden NFL 2005, with a little help from corporate sponsor Dodge, is giving its players a suite of free online services when the game hits shelves August 12. With the EA Sports Premium Pass presented by Dodge, players still need a credit card to sign up for online play (for authentication purposes), but the card won't be charged for these services:

• EA Reputation Boost: A publicly visible indicator that rewards and penalizes players for following EA SPORTS Fair Play rules.

• Name in Lights: Subscribers will have their name highlighted from non-members in the game.

• Personalized Career Pages: One central Career page will host online stats and records, along with Fantasy Football and the latest EA SPORTS News.

• Expanded Leaderboards: Members-only leaderboards are enhanced with dozens of statistics and a powerful new search tool.

• Customizable Streaming Sports Ticker on Web: Pulling in multiple real world sports feeds as well as EA SPORTS online system messages.

• EA Calendar: Subscribers can set their “time online” preferences and organize Madden NFL 2005 challenges and tournament games. Other members can challenge them and be assured that they will find a suitable time on their calendar.

• Members Only Medals: members will receive special medals that they can display next to their game trophies in their Trophy Room on their Personal Career web pages.

• Exclusive EA SPORTS Premium Pass Message Boards

• Early Registration for the Madden Challenge: Subscribers get a full 48 hours to register before non-subscribers for Madden Challenge registration, a 32-city competition which determines the best Madden NFL Football player.

• Madden University: More Madden online tips and hints than players knew existed can be found here.

• Members Only Customer Support: Priority web, email, and in-game support from EA Customer Support.

There's been much grumbling within the gamer community over in-game advertising and corporate sponsors. The hardcore and traditionalists worry product tie-ins threaten creativity and game play. The realities of big game development, though, is that production houses want to offset as much of its budget as possible before titles ever make it to the store.

However, partnerships like this have a natural tie-in since corporations have long supported the major sports leagues. Players will likely recognize familiar branding and products. And with television viewing slipping amongst the 18-34 male demographic (replaced by playing video games), it's likely this won't be the last major sponsorship deal.

Microsoft Announced America's Favorite Zoo Contest

Microsoft Game Studios has taken the promotion of its latest title, Zoo Tycoon 2, into the wild. The company invited 50 zoos from across the United States to submit materials to a panel of judges in hopes of garnering the top prize of "America's Favorite Zoo" and the $25,000 cash prize that comes along with it.

The judging panel consists of the 2002 Ultimate Zookeeper Challenge winner Jonathan Gilmour from Zoo New England, a member of the National Wildlife Federation, a Microsoft Game Studio employee, and a Blue Fang Games employee.

That panel will narrow the field to 15 on Sept. 20, and then voting gets turned over to the animal-loving public, who will narrow the field to five at the official Zoo Tycoon site until voting closes on Oct. 15. Those five will then compete in a straight-up, online run-off, with the winner being crowned on Nov. 2.

Game League, Vibe Team Up

The Global Gaming League – the latest start-up computer gaming league – is cooler than you, and it's inked a partnership with Vibe Magazine to solidify that fact. The two companies announced the "Who's Got Game?" tournament, where players compete to win tickets to the Vibe Awards in November and a contract with the Global Gaming Management team.

Until recently, the combination of the hacking and hip-hop cultures appeared to go together about as well as square dancing and rap; however, the continued rise of gaming in the popular culture pantheon has made the relationship between these two companies, on the surface, a natural fit.

The promotion will bring together the marketing from the GGL, as well as the print magazine and its online gaming component, Gameclub.Vibe.com.

Online Gaming Nears $1 Billion Mark

Online gaming – still in its infancy – is barreling towards the $1 billion revenue mark, according to figures released by Boston's Yankee Group research firm earlier this week.

These lucrative games already pull in "…$353 million in direct sales and subscriptions revenue and $450 to $550 million in advertising," says Michael Goodman, Media & Entertainment Strategies senior analyst in a written statement.

Those numbers are expected to grow as new revenue models emerge:

· New devices are creating revenue opportunities for Web-based games.
· Advergaming represents a significant opportunity for advertisers,
publishers, and developers.
· Online games will stabilize and supplement revenue from PC and console games.
· Online console gaming represents an opportunity to enhance the relationship
between broadband service providers and console manufacturers.

Game Ads Go Beyond the Banner

Internet advertising is here – particularly online where companies expect to spend just under $10 billion this year, according to the Interactive Advertising Bureau, so it was only a matter of time before companies starting looking at the most obvious place to spend money: video games.

There is a great article in Business Week that touches upon the growing trend of in-game advertisements. Today, company's only drop $200 million games, but analysts predict that number will grow closer to $1 billion by 2008.

While that's exciting for those in the advertising and game development business, there are far more compelling ideas that come along with simply putting together interactive ads. The folks over at Terra Nova have an interesting post about a fashion competition which seeks to find new design talent within in-game worlds.

The Future Fashion 04 wants to take talented designers, and move them from the screens to the runways of New York. Talk about your cool game promotion, that not only raises awareness of a brand, but also gives something tangible back to games, game worlds, and game players.

The Unknown Developers

The music and movie industries are built around cults of personality, but that hasn't happened for video game developers despite the financial successes over the last few years. All but a few of the most popular developers are unknown, laments Naughty Dog President Jason Rubin at the D.I.C.E. conference in Las Vegas.

The GameSpy article, which chronicled Rubin's speech, does a good job at capturing the feeling that permeates many game design firms. Publishers have almost always marketed the games – not the design teams that build them. There's good business sense behind it. After all, if the best game designers are known, it's going to cost much more money to keep them around.

Oddly enough, Electronic Arts formed in the '80s with the mission of promoting game developers. It was a noble experiment, but one that didn't last very long. Instead, we have Sony's EverQuest, EA Sports, and XLive. When a company is pouring hundreds of millions of dollars into one market, it's not unreasonable to believe that its executives will want the public to think of the business, not the workers.

And really, a look at the shares of Martha Stewart's company today shows why. Company-based branding in the game industry isn't likely to change anytime soon.

Simulating Reality: The Centers Don't Hold

NASCAR fan Steve Katz created the ultimate driving experience for racing fans. He bought two used cars, including one driven by last year's Winston Cup champion Matt Kenseth, and turned them into real-life video simulators, according to this Daily Sentinel article.

It's part of the ever-evolving attempt to bring simulations closer to real-life. For instance, Sony's San Francisco Metreon, a high-tech shopping center and entertainment destination, houses an arcade which includes pod-based simulations and wall-sized video bowling. There's a full bar and DJs spinning music.

However, these entertainment havens have rarely been hits, particularly when bringing together the game and movie industries. The now-defunct ESports Arena set up giant LAN centers in local movie theaters. The idea: create an interactive space where gamers could hang out, turning theaters into the virtual arcades of the new millennium. It would have also offered media conglomerates the chance to debut, say, Electronic Arts' Return of the King at the same locations as the movie was playing: You've seen the movie. Now play the game. Immediately.

While ESports Arena failed, smaller endeavors like Katz' race car simulation will continue to pop up, and sometime soon, we'll see successful business model of these new convergent worlds.

EverQuest Auction System Launches

Sony's EverQuest is the most popular massively multiplayer online role-playing game on the market these days. On Wednesday, its EQEcon auction system was officially taken out of beta, according to this Terra Nova blog post.

Game players can now create, buy, and sell in-game items in the same way real items are auctioned at eBay.

I mentioned this phenomenon to my college students last week, and one of them asked how this could be used to form abridge between the real world and the gaming world. He, like others, said this appeared to him to be just a weird gamer phenomenon.

However, it's not too difficult to imagine companies creating digital products for these worlds (the magic Gillette sword – for that smooth, clean cut), and then selling them. It's a way to cheaply extend your brand in a world that's of yet not cluttered with marketing, to reach the very demographic that appears to be fleeing traditional television and print outlets.

Play the Game, Buy Stuff

The costs associated with game development can reach upwards of $10 million, particularly when big-budget licensing deals are involved. Defraying that skyrocketing price tag has sent marketing departments to sell any space they can in their virtual worlds, insuring that even if a game tanks, the company will not.

Marrying marketing and content, though, can be a bit hairy. It's easy to see how you can end up with the State and Main Bazoomer.com dilemma, where you are trying to stick Coke marketing in the middle of a Star Wars game. That, of course, would likely anger ad-wary gamers. Still, business is business and the games gotta be funded.

EA, in particular, has built its company around big hits. Where other developers hope for a series of modest successes, EA's profits come from games like the John Madden Football, Lord of the Rings, and the James Bond franchises.

It's not unexpected, then, that Electronic Arts has partnered with 10 big-name consumer companies, promising them prominent product placements throughout its sports franchises, according to the San Francisco Business Times.

There may be a bright side for game developers, though. In the continued drive towards hyperrealism, the addition of actual corporate stores and placement does make sense within the game world. Real sporting events, for instance, are hardly devoid of advertising. And the developers for Sony's car chase game The Getaway would have been hard pressed to replicate 40 square miles of London streets without including some actual corporations.