Ever since Microsoft bought in-game ad placement firm Massive Incorporated last year for a reported $200 million, projections for in-game ads have grown rosier and rosier.
It's understandable. Marketers have been bombarded with the idea that video gamers, usually thought of as 18-to-34-year-old males, are shunning TV en masse in favor of games and the Internet.
Microsoft/Massive also has a good thing going, since it basically gets an exclusive on showing ads to gamers on the XBox Live and XBox Live Arcade networks. To an extent, it's a captive audience.
And that's just one platform for in-game ads, which doesn't count future PS3 or Wii ad placements, much less PC ad placement.
So it's not especially surprising that rival firm IGA Worldwide has now projected that in-game advertising will be worth $1.2 billion in three years.
Just this January, in-game ad revenues were only projected to reach $589 million, according to Oppenheimer & Co., IDC, Parks Associates and Yankee Group.
Who's right?
Depending on market definitions, they all may be, but it's more likely that IGA is getting ahead of itself.
Advertisers may still be hesitant to jump in while in-game ad models are still evolving, for instance. According to a November 2006 study of American Advertising Federation members, merely 3.6% of US ad execs' 2007 budgets were slotted for video games.
To its credit, IGA suggests that in-game ads are set to correct for a historically underrepresented portion of ad spending. Two or three years ago, IGA says, in-game ad spend was dramatically underrepresented in relation to its share of media usage: Gaming had a 13.5% share of media use but only a tiny 0.06% share of the total ad spend.
"However, the situation is changing rapidly, and the in-game advertising industry is experiencing rapid growth," said Ed Bartlett of IGA. "We can confidently state that the in-game advertising industry should be worth at least $1.2 billion by 2010. The growth rate is just phenomenal!"
That may be, but a bit of circumspection is in order, too. After all, players can always shift to ad-free games if in-game ad models become intrusive or grating.