June 4th, 2008

Sony's PS3 to Get In-Game Ads

By Nick Wingfield
The Wall Street Journal

Sony Corp. reached an agreement that will allow advertisements distributed over the Internet to be inserted into PlayStation 3 videogames, a boost for what could become a significant new revenue source for games companies.

Sony’s games division is expected to announce Wednesday that it has joined with IGA Worldwide Inc., a New York company that handles the placement of ads inside videogames, which can range from a bottle of soda consumed by a virtual character to billboards inside a sports stadium. The in-game ads will change over time through a user’s Internet connection. The partnership, which isn’t exclusive, will bring in-game advertising to Sony’s PlayStation 3 console for the first time.

IGA also plans to announce that Electronic Arts Inc. will be the first publisher to feature ads inside its PlayStation 3 games, allowing them to be placed inside upcoming versions of popular titles like Madden NFL football, NBA Live and Need for Speed. Financial terms of the deals weren’t disclosed.

The deal could significantly widen the audience of users that brands target with videogame advertising, which remains a relatively small market, with spending by a major brand running into the low seven-figures on a typical campaign. Still, analysts like Yankee Group’s Mike Goodman project that in-game advertising revenue could near $1 billion by 2011. Advertisers are aiming to reach the young, mostly male audience that is spending increasing time with games, often at the expense of traditional media.

“At the end of the day, advertisers have to go where consumers are,” says IGA Chief Executive Justin Townsend.

Videogame publishers like EA, of Redwood City, Calif., are eager to see growth in the in-game ad market because it could improve profits at a time when budgets for game development are soaring.

But some obstacles could prevent videogames from ever seeing the magnitude of advertising seen on the Web and other media. One problem is that the different gaming devices, such as PlayStation 3 and Microsoft Corp.’s Xbox 360, have fragmented the gaming audience, making campaigns difficult, since some of the ad programs delivered by providers like IGA don’t work across the various consoles.

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