A new report from analyst group DFC Intelligence has questioned the future of advertising in video games, suggesting that serious expansion will only become possible when the majority of users are online.
The report states that the last two years have seen record spending for online advertising, with the Internet Advertising Bureau suggesting that spending could reach $12 billion in 2005, up from $10 billion in 2004. At the same time, it notes that online games attract a comparatively low rate of advertising spend compared to the amount of consumer time spent on them.
Nevertheless, online games continue to be the largest growth area for advertising in the video games industry; in particular Web-based games played within a browser window. These simpler, casual gamer friendly titles are also generally the only type of game to be used in conjunction with search advertising - currently the most profitable area of online advertising, where specific advertising is displayed according to a search engine entry by the user.
Display advertising, such as traditional banner ads, are seen as the most compatible with online games, even though they are generally favoured only by larger companies with more generic campaigns. The report points out that display advertising has grown more than 20% on MSN in the last year, and that the increasing use of video footage online has attracted more large companies to the concept.
DFC Intelligence's analyst report ends by predicting that, although the game advertising market is not yet saturated, the next generation of online consoles may represent the next milestone for advertising in games, with speculation that Xbox Live Arcade and any similar services from Sony or Nintendo could include third party advertising in the future.