I'm at the Advertising in Games Forum in New York, and for the first time in a long time I'm live blogging. The event was (massively?) sponsored by Massive, Inc., subject of much press and some ire of late for their (massive) push into in-game ad placement. As with my previous coverage of The Education Arcade, Games for Health, and the Serious Games Summit, I should remind our readers that I am not transcribing the presenters' actual words, but summarizing my sense of them as they speak.

I feel sort of obliged to make an editorial comment about Massive, since they've generated so much discussion of late. Massive and Nielsen are trying to invent a stable ad network and metric methodology for in-game media buys (basically in-game billboard). This method intends to service the advertising industry's ongoing need for self-propagation: by inventing ad units and metrics that advertisers agree upon, Massive and Nielsen hope to stabilize the in-game ad buying market and make it predictable and patterned like TV. The problem is, games aren't like other media; value comes from player interaction with meaningfully procedural game elements. And those elements will likely resist the uniformity of this advertiser fantasy.

Ok, here we go.

Panel 1: Business Drivers - Market Numbers
Keynote: Mitchell Davis, CEO, Massive, Inc.
Panel 2: New Platforms and Technologies
Panel 3: Product Placement, Dynamic Campaigns and Online POS
Panel 4: Advergaming
Panel 5: Campaign Tracking and ROI
Panel 6: Managing the Agency/Developer Relationship

Panel 1: Business drivers - Market Numbers
Jonathan Epstein, Agent, Games and Interactive Group
Anita Frazier, Entertainment Industry Analyst, NPD Group
Mike Goodman, Senior Analyst, Yankee Group

Jonathan Epstein, Games and Interactive Group
Epstein compared in-game advertising to the early trends in internet advertising ten years earlier. In particular, a massive media focus, an in-rush of VC money, promises to change the nature of advertising and marketing. At the same time, there are important differences. Games, unlike the Internet, is a largely paid medium. Games are an application, not a platform, games enjoy the benefit of the Internet as a precedent, and games enjoy a consolidated field of media players, rather than the broad field of the Internet.

The growth of game advertising is driven by a decline in viewership in key demographics (male 18-34), but they also take advantage of a broader and growing interest in interactive media in general.

Epstein argued that casual and mobile games are key to the advertising in games business. Casual games are estimated to be 1.5x the MMOG market in 2007 according to ScreenDigest, and no demographic spends more time playing games than female game-players. He also argued that PC gaming drives the game advertising space -- even though console games make up the majority of industry revenues. He estimated that game advertising will total $1.26 billion worldwide by 2009.

Some genres work, some don't, but the top anticipated games represent a mix of games appropriate for advertising and those that aren't. Summary: "The best of the internet with an immersive experience you can't necessarily get on the internet."

Anita Frazier, NPD Group
Frazier discussed the videogame and PC software industry. Because most of our readers already have this basic background -- unlike many of the advertising industry people attending the conference -- I decided to skip coverage of this talk in order to save my laptop battery for later.

Addendum: I wish I had blogged it, because NPD group was unwilling to distribute slides to participants. one interesting note I did take down is this: Frazier noted that Southerners account for 34% of game sales, the largest of any geographic region by a margin of over 10%.

Mike Goodman, Senior Analyst, Yankee Group
Mike reminded us that TV ratings are going down among 18 - 24 year old males, who are playing videogames instead of watching TV. Goodman pointed out that advertising revenue in games lag behind other media; TV, which accounts for 3.3 hours of daily activity, drives $66 billion in advertising, while $.03 billion in games which comprise 1.09 hours of average daily activity. Goodman also noted that games are a non-multitasked medium, and the gamer is thus focused and not distracted, potentially making the medium a more desirable advertising target.

Goodman tracks three types of ads, (1) in-game advertising; (2) advergaming; (3) ads associated with game websites. But are games effective as an advertising medium to raise awareness and move product? He used the example of a RadioShack sponsored advergame on Shockwave.com for ZipZaps cars. In this example, the game logged 30 million plays, 700% of those who played "liked the integration of RadioShack's brand and the game, and 28% own or have purchased ZipZaps for someone, and of those who purchased, 26% who bought ZipZaps were "somewhat or strongly influenced by the game." Goodman described this as "indirect call to action," a "favorable impression" of the product in the game.

Keynote: Mitchell Davis, CEO, Massive, Inc.
Davis showed a short video ad for Massive that highlighted a number of billboard style ads in games. He then gave an extensive explanation of his background in software, publishing, and advertising. Davis noted the improvements in visual quality of games as a testament to their growth as a medium. He cited Splinter Cell: Chaos Theory in particular, with its 175 developers. Davis then articulated a "revolution in advertising": broadcast television is overworked, games make sense as an alternative, and Massive's network mode makes particular sense as an alternative.

Davis claimed that TV media buys are an act of faith, whereas videogames give you a certain sense of "who is watching." He suggested that gameplay cannot be interrupted, but publishers are increasing their receptivity. He urged advertisers o be smarter in their ads. He showed an analysis of media spending versus time spent interacting with each medium, suggesting that many more dollars are spent in areas of less time commitment. Cable is also dominating more of tv viewers' time, yet getting a disproportionately low percentage of ad dollars. The same is true of videogames. The issue of multitasking also came up, specifically the idea that people are doing other things while they watch TV (talking on the phone, using the internet). Advertisers are thus changing media strategies. For example, P&G and McDonalds are moving out of mass media. Videogames offer access to the 18- 34 year old male, the "lost demographic" of television. Videogames provide active engagement and thus provide better effectiveness, since players are paying attention. Gameplay is also a primetime activity, peaking between 6 - 11 PM.

Davis argued that to reach 18 - 34 year old men with high impact, videogames make sense. Massive provides a videogame ad network. They deliver ads into games dynamically and measure the results with Nielsen. They worked "in very close proximity" with the publishers to locate the advertising inside the game. Advertisers like Paramount, Nestle, Honda, and Coca-Cola are using this system for its "reach, control, and memorability."

Davis showed video of Spliter Cell with "fake" billboard ads (that is, billboards with fictional product advertisements, claiming that it detracts from the experience. He argued that real ads enhance the game experience, and showed the same footage with ads from Sprite and Paramount and the like. He showed data supporting "brand lift" after the use of Motley Crue in Splinter Cell. As another example, Massive ran time targeted ads for Dunkin Donuts, lattes in the morning, donuts in the afternoon. He also described geotargeting ads for Paramount's "The Longest Yard" in conjunction with their national release dates. From a media buying standpoint, this makes videogames the same as TV. Since Nielsen provides ratings, the results are just like TV too. Davis cited this structure as "key" because it integrates directly with existing advertising practices.

Among gamers, 30% say that they like in-game ads, 20% say they moderately like it, 42% are neutral, 5% moderately dislike it, and 3% dislike it. He cited a few positive responses to ad placement in games from blogs and online forums, all supporting this idea of ads "enhancing" the game experience. Apparently during a system update in Anarchy Online, gamers called customer service asking where the ads were. An audience member from Anarchy stood up and confirmed this player perspective. Of course, Anarchy Online used these revenues to stop charging for access, providing an incentive to "like" the ads.

For game publishers, Davis claimed that ads change the economic model of the game industry. Offering $1 to $2 back to the publisher (Note: I'm not sure what this is $1 to $2 of?) Funcom, for example, said that ad dollars can support further game development. Massive guesses that ads are a $1.4 billion market in the US by 2010.

Panel 2: New platforms and technologies
Tim Harris, VP/Partner, SMG Play
Guy Bendov, Co-Founder, EVP Business Development, DoubleFusion
Darren Hermann, Founder, CCO, IGA Partners
Kim Layne, VP, Business Affairs, TimePlay

Herman talked about the ability to integrate ads across platforms - PC, Console, Mobile. Layne remarked about the ability to add user interaction with dynamic ad content (what kind?) for "fresh experiences." All of the panelists talked about the lack of integrated marketing across media including games. New ways of getting content into games (?) was discussed...

The panel also discussed the problems of static ads, especially their poor integration with advertisers' immediate advertising goals ... a console game might take 9 - 12 months to appear. Dynamic ads help solve this problem and offer better metrics.

This session was fairly vague. I wasn't able to follow well enough to take meaningful notes. Worse, most of the audience was rather disrespectfully talking in the wings rather than seated listening to the panels. Advertising conference indeed. Sorry folks.

Panel 3: Product Placement, Dynamic Campaigns and Online POS
Curt Feldman, Senior Editor, GameSpot (moderator)
Sam Huxley, Chief Strategy Officer, Bounce Interactive
Tomas Melian, VP Integrated Marketing, VU Games
Brandon Berger, Senior Strategist, Digital Innovation, ObilvyInteractive
Dave Anderson, Senior Director, Business Development, Activision

Curt posed ten questions which the panel might consider.

(1) Brands understanding of benefits of in-game adverts? What kind of education is required?
(2) Pros and cons of the ad-serving network?
(3) In dynamic ads, is reach all you get? Is that enough?
(4) What happens when the first-parties (i.e. console manufacturers) enter the space
(5) How significant is online POS in games? Will it grow? How?
(6) Pricing standards for in-game ads?
(7) Correct paring of advertisers and games?
(8) Is more research required for advertisers?
(9) Will games ever be created with advertisers and marketers in mind?
(10) What about the PSP? Impact?

Brands are willing to consider games but they don't necessarily understand what that means. Some marketers don't even know what a game is. But they want to understand. It's easy to sell the fact that games are popular and a good target. But it's harder to show what the benefit is of participating. Lead time seems to be an issue among advertisers.

Product placement that is integral to the storyline is important. The publishers also offer a number of touchpoints with the customer, including the point of sale. The publisher. VU Games is looking to partner to get this done. They won't hire an ad sales group; instead, they want relationships with people who know how ad dollars will be spent. Activision takes a boutique approach to product placement and branding that allows for more customized programs. Activisioon clients are looking for a combination of services, including an overall solution involving in-game, out-of-game, promotions, on the ground, traditional media, and so forth. Licensors also make this harder, by creating another level of approval and limitations. The fact thatmost games sold are on console and don't do as well with dynamically served ads (because of limited connectivity). Billboards don't necessarily communicate meaningful brand information. Next gen consoles may improve the capacity promise of dynamic ads.

The agencies saw standardized ad units are needed but non-existent. The publishers asked... standardization of what? What is the object being standardized? The advertisers seem determined to create equivalences between game units and existing ad units, like the outdoor unit. Activision problematized this idea by suggesting a number of exceptions ... non-liear play, different play mode options, etc. The advertisers responded that standards need to be set that are based on how many people "saw something." Activision ran a promotion where they asked players to create custom parks in Tony Hawk with branded Jeep elements, which were judged by other players. This created a large amount of player contribution. Activision also uses advertising as a budget line item to move down the budget toward break-even, helping developers reach royalty faster.

Matching advertisers to games is a creative process according to VU Games. During the process of development, the developer might ask what brands make sense here, if any? Publisher-controlled IP is the lowest hanging fruit for ads. Associations on franchises and licenses is more difficult, for obvious reasons. There is no standard approach to licensed IP games. When bringing new IP in, VU is starting to ask questions up front about advertising.

Panel 4: Advergaming
Mary Margaret Walker - Mary-Margaret.com (moderator)
Gary Kitchen, CEO Skyworks Technologies
Rob Lawson, Senior VP and GM, Americas, Enpocket
Bill Clifford, Creative Director, WildTangent
Dan Ferguson, Co-Founder and Creative Director, Blockdot/Kewlbox.com

Why develop your own game? Where is the real value? Clifford argued that the 3D environment is far more useful and meaningful than a billboard, which is passive and has less value. He argued that billboards in WildTangent games are part of "brandcasting" where the game the brand as a part of the game experience. THe most sophisticated way to leverage the medium is through custom created content.

Kitchen argued that there's a lace for dynamic ads and custom ads. Taking all of the brand marketing into account creates a better advertising experience. Casual games may also support dynamic ads as well.

Lawson argued simply that mobile offers a simple experiences. Ferguson argued that smart, clever games offer opportunities to integrate messages into the game. Kitchen discussed Candystand, a game portal site for Lifesavers. With "hundreds of millions of hours" of participation with the branding, that's equity that you can't get buying a la carte media campaigns. Custom content in the long-term is a strong approach for a brand. Kitchen argued that brand impressions are not specific to any single brand events. His first game is still on the internet today and still being played, so it provides value on an ongoing basis.

Advergaming deals are becoming more and more active. However, advergame developers need business development to educate and sell their offerings to advertisers. The biggest hurdle used to be convincing advertisers to take the medium seriously, but that is changing rapidly over the past year. 70% of SkyWoks deals come straight from the brand. Deals come in largely by word of mouth. Enpocket works as an intermediary between brands and game producers, so they have biz dev on both ends. Blockdot said that they split their business between ad agencies and brands direct.

Advergames off the internet are simply harder to deliver. The Internet also offers a distinct call to action or information collection opportunities. Skyworks looks to leverage their game catalog across multiple segments, but they see opportunities in portable as well. Networked platforms in general seem to be key. Blockdot added that budgets and production lifecycles dictate online games over other platforms.

In-pack promotion offers an opportunity to drive sales of products based on other properties. For example, Blockdot created a Star Wars game distributed by Skittles, which offers game codes in packages. WildTangent also sells their games directly, offering an opportunity for sponsorship. For example, McDonalds gives away WildTangent games in their Monopoly store games. One of the challenges with in-pack, said Kitchen, is getting brand managers to think long-term about their plans. This allows more integrated marketing and call to action.

Advergame effectiveness is measured in different ways. In-pack allows direct ties to sales. Brand awareness measurements and pre/post surveys are other options. Kitchen claimed that the impression efficiency in advergames are more meaningful than other forms, mostly because it lasts longer. WildTangent also measures the use and frequency of use of the game, as well as other factors, through their platform technology.

Ferguson claimed that advergames are drawing the entire attention of the user, and thus have greater value. Additional tracking includes game sharing (send to friend). Lawson reminded us that mobile games also give advertisers the opportunity to collect a phone number. Calls to action for survey responses and other customer information can return higher response rates than traditional direct marketing. He offered the example of information return on a sample product distributed to game players that reached 50%. Ferguson suggested that advertisers could think of games as a carrot toward a call to action.

Advergame developers' influence on campaign execution can be a difficult issue. Collaborating with agencies and brands is required, and often difficult. Kitchen argued that brand managers often devise absurd game concepts. "I can't put a vacuum cleaner in a videogame." Making the brand the hero of the game is not necessarily possible, with the notable exception of automotive. Lawson argued that media buyers have more credibility than game developers because they need to be sellable.

Increasing budgets for advergames are coming partly from cross-branding, e.g. DaimlerChrysler games that leverage the same game across multiple automobiles. Kitchen gave the example of NabiscoWorld, a portal that integrates 19 brands at a lower cost.

Panel 5: Campaign Tracking and ROI
James Belcher, Research Analyst, FIND/SVP (moderator)
David Tokheim, VP Marketing, IGN Entertainment
Nicholas Longano, Chief Marketing Officer, Massive Inc.
Michael Dowling, General Manager, Nielsen Interactive Entertainment
Alexander M. Kakoyiannis, Managing Partner, Navigame

Creative drives the play value of branded games or in-game advertising. The publishers take a unique approach and need to be accounted for in metric methods. Videogame advertising provides "complete engagement" with no advertising breaks. Since the development team determines who the advertisers are and where they go, which indicates to the gamer that the advertiser makes sense.

Effectiveness can be different. So-called "high integration" games had more brand recall in Nielsen's experience. For Nielsen, recall and awareness are the most meaningful offerings.

Navigame works with consumer brands and focuses on defining what ROI makes sense for the brand, which will define the tracking methods required. Cross media integration is possible. Compared to other media, install base matters for in-game advertising. Getting network data like Massive/Nielsen's provides a perspective into where players are playing to adjust future campaigns.

Reach, duration of play, and depth of engagement are three ways of measuring ad value in games. Reach has been widely publicized, especially among teens and 18 - 34s. Gameplay can take hours, with play times over 100 hours over three months, a unique feature of the medium. And the game industry's strong brands create fanatics that seek out information about games and new experiences with the games. Targeting evangelists also increases the spread of the exposure -- many people buy games based on word of mouth, and that will affect the composition of the consumers of in-game advertising.

Customization and flexibility are critical for advertising success, and according to Massive those can only be provided through a network. All Massive ads are customized to the specific game environment. This provides more flexibility for the targeting strategies for ads, and change them on the fly. One of the panelists objected, noting that tracking everything yields more data but doesn't explain how you we use that data smartly. Nielsen and Massive argued that the data can be customized to avoid becoming overwhelming.

"Relevance" was sited as an important aspect for success in games. This might take place outside the game as well.

Panel 6: Managing the Agency/Developer Relationship
Adam Remson, Publisher, Other Advertising (moderator)
Sam Huxley, Chief Strategic Officer, Bounce Interactive Gaming
Ian Bogost, Assistant Professor, Georgia Institute of Technology & Parnter, Game Design, Persuasive Games
David Frederick, Chief Creative Officer, df|Media Group
Maryam Bazargan, Director, Symbiosis Media

This was the panel I was on and thus I couldn't blog it. Betsy Book was kind enough to take some notes, and I'll post those here tomorrow. Here are Betsy's notes!

Adam: This is the final session of the day. We’ve heard a lot about the opportunities today, now we’ll hear about the problems. I’m a publisher of magazine dedicated to nontraditional media, just launched its first issue last month. We’ve been dealing with “church/state” issues for a long time. Advertising in games is new, doesn’t have standards. We should at least learn from the magazine model about what not to do. One thing to learn from is that conflict is good and we have plenty of it, so I’ll try to do my best to find some conflict in the panel today.

(Intros of panelists)

Let’s leave it up to the panel to try to define what the problem is. Do developers want advertising in games at all?

Ian: I may not answer the question directly, but the problem is that advertisers don’t understand gameplay and developers don’t understand marketing. Videogames are software, inherently procedural - it’s about the interactions of rules and putting a billboard inside a videogame is like putting a billboard on TV or putting a TV spot on a web site. Can those have some effect? Maybe, but we’re missing out on products and services that can be communicated in a medium. We heard earlier the example of the vacuum. Katamari Damacy is a vacuum cleaner game – you roll a ball around and pick up stuff. If you’re serious about this, find game developers to work with. Game developers need marketers to help solve problems as well.

David: From my perspective, game developers approach advertising in games as a double edged sword. It will give them money to do various things but the developers see themselves as artists and anytime they apply real world business metrics to the “art” it’s a struggle. It’s a fine line.

Adam: Is there a difference in the developer mind between active and passive advertising?

David: The key differentiator is you’ll find some developers that are open to ads in their games. Other developers will have their own brand or niche and they’ll be totally closed.

Maryam: It also depends on the type of game. In action it may make sense to have brands in there. Developers will ultimately have no choice, being realistic about the development of the market.

Sam: My experience shows that some developers want to be choosy about the type of advertisers or advertising in their games. On the flip side, publishers will ask how much they’ll get for the naming rights. It depends on category and genre. Publishers are way more open than developers.

Adam: Is there nothing in it for the developer then? How can you incentivize them?

Sam: Money for more resources is the value for them.

Adam: Do you believe there is a trickle down effect?

Maryam: If the brand helps to sell more games then yes. Some developers are approaching us and asking if there are any monetizing/branding opportunities for their game.

David: In my experience I’ve found there is a shift in developers who are actually looking at developing products specificially as an advertising vehicle. Now we’re starting to see advergaming developers.

Sam: Advergaming is like an infomercial, a very specialized different business.

Ian: In the game development community, the relationship with the publishers presents an opportunity for developers to work on content they might not have an opportunity to do normally.

Adam: Every other media that has a model in place by which advertising is sold. We should seek to establish a model. Why let the advertisers dictate the terms?

Maryam: I can see how the Massive billboard advertising network can help determine standards but we’ll never get to a point where we’ll be able to accurately measure effectiveness.

Sam: Movies are the only other form of major entertainment that’s retail supported rather than advertising supported. There’s a big discrepancy between a Bond film and games with the 30 second logo spot. Even a billboard will be much more effective in a game than a movie but there is no standardized way to track it.

David: The key is from the advertiser perspective, what is it that you want to accomplish by leveraging this medium. Is it your strategy, or is it part of your strategy? With a movie as an example: Star Wars = billboards, merchandising, gaming etc etc. If it’s part of my strategy then a lot of the things around hits and ROI become almost negligible or at least will be judged differently.

Ian: You can’t have a standard unless you have a fundamental understanding of the medium. If you try to apply another medium’s metric it won’t work. The TV model isn’t directly applicable. In games the interaction is the meaning. If I interact with it for 1 minute it may be more valuable than interacting for 10 hours. The individual importance of projects, people, etc. is based on the interactive experience of the player.