As I said in my last post, it is important for a marketer to look into the practice side when it comes to a new type of advertising. In-game advertising in China has yet to kick off. But we already have a lot of numbers that justify how the market would go. So here let’s talk about how it should go.
Darren Herman has provided a insight about the ecosystem of video game industry. In the ecosystem, it basically contains 3 layers. The service layer at the top, the platform (device) layer in the middle, and the technical (developer) layer at the bottom “An Insiders Look at the Video Game Industry,” Darren Herman.
Based on this ecosystem view, we can imagine during the implementation of an in-game ad solution, it requires the solution developers to work with the game developers for optimizing the ad insertion point. And different platforms and game devices will certainly impact the complexity and feasibility of the integration. Then after embedding the ads in the game content, there will be additional logistic requirement and change of practice in the service layer. The in-game advertising industry operates like a satellite orbiting the digital game industry and communicating back and forth.
In view of practice, we are basically talking about 4 types of in-game adverts in the market:
- Static Adverts, like a product placement at the predefined spot in the game content. It cannot be changed once the game is compiled.
- Dynamic Adverts, enables on-the-fly ad insertion without recompiling the game content.
- Virtual Real Estate of an online community or 3D virtual simulation such as Second life and some of the MMORPGs.
- Incidental Adverts, a billboard-like advertisements that will help to create a more realistic gaming environment such as to include a real BMW model in a car racing game.
If you are interested to read more explanations, here is a good piece found on Wikipedia for in-game advertising.
Among the above in-game ad models, I think dynamic adverts will be adopted by the market in China because the integration fits the operating environment of online games, where China’s gamers are primarily concentrated in this segment.
So? Market adaptation doesn’t mean user adaptation. How in-game advertising practice should be carried out in good and effective manner? To answer the question, let’s first look at the commercial value chain :
Gamer, the reach of an advertising campaign. Despite the up and down of the response rate varies between different market studies and reports, in China, we generally believe that consumers can be taught through creative advertising. But in a gaming environment, gamers’ attention is very difficult to be distracted.
In Darren Herman’s blog, I find this formula for in-game advertising:
(Information + Authenticity) + (Entertainment + Engagement) â€“ Intrusiveness = Effectiveness.
It seems to me that “Intrusiveness” and “Authenticity” are two dependent variables. I don’t mean to complicate the whole notion but this is how I will further denote the equation:
Any positive integer of greater than 1 in the control variable “Relevancy” will result greater Effectiveness.
(I+A(R)) + (E+E) – I(R) = E
As the market development favors the dynamic ad solution, every inserted ad should be looked relevant to the game content. Remember, the higher the relevancy can be established between the ad and the game content, the lower intrusiveness and results better effectiveness.
Ad Media. In China, we basically have two camps of in-game ad media: The online game publishers and the online content portals. It looks like the online game publishers tend to have advantage over the content portals in terms of product recognition and more hardcore gamers’ loyalty. But online portals have better know-how, experience, and infrastructure for operating advertising business. This is important in the execution level.
Media Agency. You probably know in the advertising market the majority of ad inventory are sold to a dozen of key media agencies. Media agencies have a lot of things to do besides the ad buy, which equates to a lot of logistics to be carried out for campaigns and accounts management.
Months ago I met with my friend, Lawrence Wan, who is the Director of Digital Business of OMD Greater China. We chatted about in-game advertising and I asked what would be his concern. Lawrence’s concern was pretty much on the logistic side. His expectation towards an in-game ad solution which not only needs to provide complete analytics, but also be able to support 3rd-party tags for tracking and logging. That will make easy for a centralized campaign management.
Ad Solution Provider. I won’t be surprised to see M&A activities happen in this layer for China market. China online game market is now dominated by the home-grown game developers. According to IDC 2006 China Gaming Industry Survey, there was 25.2% of online gamers who played games free of charge, among the players who didn’t pay for the game itself, 22% did not generate any game related expenditures.
Hence, advertiser sponsored online game is a solution to save the loss in revenue without losing the users base. So it would be a natural path for an in-game ad solution provider to merge into the operation of either media agency or the game media for better business synergy.
Alright, before my post runs into an endless this-n-that, I guess that’s all for now for my observation of China’s in-game ad market. I am sure 2008 will be an exciting year for China in-game advertising. It is certainly on my watch list and I will talk more in my future posts.