Game play

A recent splurge in VC investment toward in-game advertising signifies the ongoing development of the video-game ad market. Ken MacFadyen reports.

The business of advertising is not as straight forward as it used to be. Television advertisers complain about Tivo (and other digital-video recording devices), newspaper admen rue the internet, and radio marketers are scrambling to adjust to satellite radio. With the traditional media outlets exposed, advertisers have started to get creative.

Marketers have discovered virtual ads can drive real results.

Venture has done its part to explore new frontiers in advertising, and recently started targeting video games as a new medium to reach consumer eyeballs. If gamers are going to be driving virtual cars, why not have them test drive the new Nissan Skyline GT-R V-Spec II Nür? Or if they need to drive past objects, might as well make it a Best Buy billboard.

The latest VCs to make this sort of play are Accel Partners and Jerusalem Venture Partners (JVP). Earlier this month the firms invested $10 million into DoubleFusion, a move that coincided with the arrival of Yahoo! Games veteran Geoff Graber as the company’s new CEO. DoubleFusion is a manager of online and in-game-ad campaigns that works with the advertisers and game publishers to coordinate the process.

Graber sees the in-game advertising concept as an extension of the move away from conventional media by marketers. “The traditional advertising model no longer effectively captures the 18 to 34 year-old male demographic,” he says. “Marketers see this and are shifting portions of their ad budgets into ‘non-traditional’ platforms – including video gaming.”

The changing demographics of video-gaming are also relevant in this context. It used to be that gaming was considered strictly for children. But as Generation X has grown up alongside the video-game industry, there is a significant number of adults that still haven’t passed up the joystick.

“Video games have become ubiquitous in today’s culture, and finding the right ways to connect brands with them is the logical extension for the advertising market place,” Accel Partners principal Harry Nelis says.

Accel and JVP are not the only VC groups to target this growing market. Nordic Venture Partners has just put €5 million into Funcom, which uses ads to pay for the free version of certain online games. Also, last year, Draper Fisher Jurvetson Gotham joined existing investors RRE Ventures, Tobat Capital and New Light Associates in a second round of financing for Massive Inc., one of the leaders in the developing in-game advertising space. Reflecting the popularity of the medium, at least among VCs, Massive’s financing round was oversubscribed.

In October of this year, a month prior to the Accel and JVP investment, Nielsen Interactive Entertainment teamed up with DoubleFusion to publish a study demonstrating that in-game ad campaigns can result in a 60 percent increased awareness for certain products.

In time, who knows? TV advertising sold against the Super Bowl and the FIFA World Cup may some day play second fiddle to ads displayed on EA’s Madden NFL and Actua Soccer.