AdAge just ran an report on advergames, from their coverage of AdWatch: Outlook 2004 conference in New York.

They report that the increasing costs of TV ads are driving brands to consider games, and the increasingly broad demographics of gamers are helping.

Despite the trends, the gaming industry continues to flub their approach to advergames. Here's why.

From what I can tell from the article, the industry representatives at the conference were all from the traditional gaming industry, which probably means that they don't know the first thing about advertisng. Julie Shumaker, director of sales for online and in-game advertising at Electronic Arts and Dave Madden, executive vice president of sales, business development and marketing at WildTangent were among the participants.

Shumaker cited a stat that the average Sony PlayStation 2 gamer plays nine games a year at $50 each. That's great, but how do advertising messages or product placement change the price structures or buying habits of games? There is a fundamental difference between product placement and advergames, and Shumaker may have been mixing metaphors.

Then Madden argued that the devices people play games on don't matter for advertisers.

The question of what relative benefits or detriments do each of these platforms offer advertisers is simply cast aside. I think it matters a great deal when, why, and how players are online compared to in front of their consoles. Not to mention the massive cost differentials for development, distribution, or placement.

But the most shocking challenge comes from Tim Hanlon, senior vice president and director of TV 2.0 at media agency Starcom MediaVest Group -- this time an advertiser, not a game executive. His observation inspires the sub-headline for the AdAge piece, Panel Questions if Advergame Medium Works for Package Goods.

Perhaps the problem is the black hole of creativity at so-called "creative agencies," but I offer that this observation is utter rubbish. Creating meaningful gameplay experiences around any human activity is a challenge, but there are so many unexplored opportunities to create games that go beyond product placement and branding, I can't imagine how any self-respecting "creative advertiser" would make such a statement in public. Maybe he had his assistant do it for him.

At any rate, Mr. Hanlon clearly has never changed a diaper, or he would see the gameplay inherent in the process. Chasing down the kid, keeping his legs down while you try desperately to wipe the muck off before he flips himself over and crawls away, catching his hands from groping himself and spreading shit everywhere. Or how about convincing an 18-month old to just pick a diaper design so she can get on with her diapering. Or how about trying to change a diaper in a series of unsuitable places like an airplane lavatory.

Are you listening, Proctor & Gamble?

Now, I've made my share of advergames, many for consumer packaged goods companies. But I've proposed a lot more that never got the green light. The real challenge to the medium is advertisers' unwillingness to try new things, and their insistence to work with their inoperative, bloated advertising agencies instead of smaller groups who can provide interest, ideas, and results instead of short skirts, $10 martinis, and Prada Christmas gifts.