The recession could be about to force the change of hands of IGA Worldwide, one of leading global in-game advertising networks. Right now it is seeking funding and nervous investors are asking the question, should it perhaps be sold off. We suspect that in a recession new advertising initiatives might be cut back, especially unproven ones, but that should not apply to in-game advertising, which have always had a reputation of reaching that unreachable demographic ‘ 18 to 34 year old US males.
The company chairman Justin Townsend told VentureBeat that the company was looking for buyers and made it clear that during the past two quarters sales had fallen away badly, but were now starting to come back.
IGA is really the other half of the in-game equation from Microsoft’s Massive, which it bought a few years back for several hundred million dollars. IGA by comparison has had investment of around $46 million and has adverts in around 22 video game titles so far.
Other players in the market are Double Fusion and an operation that Google acquired called Adscape which it is dusting off and bringing to market now. Back in June Sony opened in-game advertising on the games it controls saying IGA Worldwide was the ‘first’ network to gain its endorsement. In the early days of in-game advertising it was claimed impossible to put in-game ads on PlayStation games without Sony’s permission.
IGA then followed this up with a wide-ranging exclusive deal with market leaders EA Games and another with Activision to go with the Sony deal, and said it would bring all of the EA PlayStation titles to market with advertising in them. But that was June and this is now, and IGA would have had little time to bring any of that endorsement to market, and very little advertising revenue attached to it.
VentureBeat estimated that revenues were as low as $3 million in 2008, while the burn rate was closer to $11 or $12 million, perhaps more. The company appears to be targeting $3 million a quarter. This is tiny given the captive nature of this high spending audience, and either all the big bucks are going elsewhere, or the in-game market is currently parked until after this recession. IGA has already laid off workers and now only has 45 employees.
Bids to fund the company or buy it, need to be in by the end of March and soon after its fate will be known. For our money it is time for Google to up the ante here and acquire the rights to all those EA games and gives its nascent Adscape business (renamed Google AdSense for Games says one source) a chance to scale rapidly on the back of all those half finished EA games. After all, the gaming market has held up well in this current recession so there must be just as many gamers staring at the in-game adverts when they are served, as ever before.
In-game advertising is the process whereby potential advertising vehicles ‘ radio voice, sidewalk hoardings, shop fronts ‘ within games are identified by the producer as non-intrusive and then video and image objects, or even just text replacements, are produced for successive advertisers. These can then be inserted into the game at the time the game is loaded onto any given console, through its online connection. That way on one day a character in a game is drinking from a branded Pepsi bottle, and the next from a Snapple bottle, with a special promotion on the side.
This is analogous to internet ad serving networks and changes in-game advertising from a market where a handful of adverts were inserted into games when they were being written, and remained unchanged forever, into a dynamic promotion vehicle even for time sensitive launches such as motion pictures. In-game adverts can also be delivered in particular regions, for instance in reach of a specific retailer.
We think that in-game advertising will become standard over time and that each gaming session will involve the delivery of at least 5 adverts, and with almost 200 million consoles out there, and countless handsets and PC games, that suggests a future market upwards of 1 billion delivered impressions a day once all games adopt one or other technology. That means it has the potential to become a multi $ billion market in the next five years while most analysts are still seeing this market in the mere $100 millions.