Online Video Game Growth to Benefit Ads

• Posted: Wednesday, June 06, 2007
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• Author: pradhana
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• Filed under: Advertising, Internet Advertising, Online Services

Spending on online video games will hit $13 billion worldwide by 2012, up from $4.5 billion in 2006, according to DFC Intelligence's "Online Game Market Forecasts" report. That matters for marketers who want to reach gamers, and it is good news for the in-game ad market overall.

Advergames like the 3.2 million units sold at Burger King over the holidays have been a success, and in-game placements have music labels competing for exposure in the latest sports games. But it is online gaming that holds the best promise for targeting during specific time slots, as is possible through XBox Live and other game ad networks.

DFC's forecast also bodes well for digital distribution, which (along with virtual item sales) will reach 40% of online gaming spending by 2012, accounting for $1 billion in annual console gaming revenues worldwide.

Thanks to a long history of software piracy, the video game industry has been even more reluctant to distribute its wares digitally than the music and movie industries. Now that consoles have an online component with digital rights management, advertisers can look forward to interstitials and other placements in gamers' living rooms.

eMarketer estimates that worldwide spending on in-game advertising and advergaming will rise by a compound annual growth rate (CAGR) of 22.9% from 2006 to 2011. Around 50% of this spending will come from the US, where the CAGR over the same period will also be 22.9%.

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