Video games have emerged as a very powerful medium at the same time that many other forms of traditional media are losing ground. Video games garner a tremendous amount of time and concentration from individual gamers and the audience of gamers continues to broaden into new demographics that cross gender, age, and income lines, so it is only natural that advertisers have taken notice. Whether considering advergaming or in-game product placements, the market for video game advertising is inarguably poised to skyrocket.

One only has to look at the November 9th release of Halo 2 to see why video games are such a hot growth area in advertising. Halo 2 shattered entertainment retail records in its first 24 hours on store shelves, selling 2.4 million units in the U.S. and Canada the first day alone. This translated into a one-day sales total $125 million. Not only did Halo 2 exceeded video game sales records, but general entertainment records as well. Halo 2 generated more money on day one than any of the biggest movies in box office history including Spider-Man 2, Harry Potter and the Prisoner of Azkaban, and The Matrix Reloaded.

In general, there are two forms of video game advertisements. The first form, known as advergaming, involves a customized game that has been developed specifically to promote a brand. These can range from simple puzzle games used to promote a potato chip or soda brand, to a lengthy and complex adventure game tied into a new movie release. The key is that the brand is the primary focus of the game and is an integral component of how it functions. Successful advergames manage to avoid simply applying branded window dressing to the game and instead utilize the brand within the action itself.

The second form, known as in-game product placements, is analogous to movie and television product placements. The product appears within the normal context of the game. For instance, the players in a basketball game may be wearing a specific brand of shoes, another brand of jersey, and taking a sip of a certain brand of sports drink while sitting on the bench. The products are noticeable but do not blatantly appear to be advertisements. They appear in the same context as they would in the real world and seem completely natural to the gamer.

In-game video advertisements have proven remarkably effective. In fact, according to research released by Activision and Nielsen Entertainment, 87 percent of their study participants had a high level of recall of a well-integrated brand inside a video game. They also found that 40 percent of male gamers said in-game ads influenced purchasing decisions and made them more likely to buy the advertised product. Interestingly, 67 percent of respondents cited in-game advertising as a factor that makes a game more realistic.

Clearly, the market for video game advertising is set to experience rapid growth over the next few years. In a recent report from the Yankee Group entitled “Marketers Look to Video Games to Drive Their Messages Home,” the market for in-video game ads and advergaming was forecast to be worth $260 million by 2008, up from only $79 million in 2003.

The video game advertising market will be interesting to observe as it grows and matures. It is likely that new ad forms will appear and advertisers will become evermore diverse. It may not be too long before we see national personal injury law firms advertising on billboards in games such as Grand Theft Auto or catch a Homeland Security PSA in a game such as Splinter Cell. Stranger things have happened in the world of advertising.