As that ever-diminishing television audience migrates to newer forms of networked entertainment, advertisers will follow. Witness, the transformation of the video game business to an ad supported medium. With Massive’s massive $400-million purchase price by Microsoft, all bets are on (or is it off?) for the in-game advertising marketplace. But as Massive continues to focus on the hard-core console games, using its newly-found riches to secure exclusive deals with major publishers, there is still a huge untapped market for serving up in-game ads – enter the casual game marketplace.
While the typical testosterone-laden console gamer is male, ages 12 – 25, the demographic is of a completely different nature for online gamers, where the highly coveted female, ages 35 and up, strutt their stuff. It’s no wonder that in the last month, I’ve spoken with three companies – from Sandhill Road to Paris to Israel who literally have their sites set on this emerging revenue model.
And, it’s no wonder developers and aggregators alike are turning to an ad-supported medium. First, where there is an audience, there is an ad. And, few entertainment outlets are growing like the online gaming sector. From new hits like Diner Dash to established gems like Bejeweled, these sometimes entertaining, often addictive games differ from the massive (no relation to Massive) Worlds of Warcraft and D&D crowd we hear so much about lately. They presently represent a half-a-billion-dollar marketplace and that number is expected to increase dramatically over the next five to ten years.
Secondly, there is an inherent flaw in the way companies are monetizing these games, where an hour of try-before-you-buy often leads to plenty of triers with few actual purchasers. I’ve spent a fair amount of time studying the analytics associated with downloadable games. It isn’t pretty. In fact, we had a term for it when I oversaw marketing for one of the leading digital distributors of casual games – The Funnel of Hell. The Funnel of Hell works like this: Attract a large audience from which about 3-percent will take the time to download a file. From that point, only about 2% will actually install the downloaded file, out of which less than 1% will actually make a purchase and call the game their own. This micro-economic sell-thru rate is enough to make publishers green with envy at the amount of money they could be collecting via advertising.
Finally, when given a choice of plunking down $19.95 (average price for casual game download), or playing the game for free with the occasional ad interruptus, 9 out of 10 consumers will go for the ad-supported game. In-game advertising is the gift that keeps on giving. Publishers are able to generate continuous revenue streams – the more you play, the more they get paid. Publishers are also able to monetize older titles that lost their mojo years ago. The once standard laws of diminishing return no longer have to apply, regardless of whether its a first-day-of-release title, or classic game brought back to life.
So, as this model proves itself to all of the parties involved, look for ads to star in your next downloadable game. Its only a matter of time before Dinner Dash’s beloved Flo serves you up a Starbucks ad rather than the coffee your character ordered.