In-game advertising - sizing the market opportunity

As in-game advertising market is poised for explosive growth, estimations of the growth of the in-game ad market have been varied:

In-Game Advertising Market Size Estimates ($ Millions)

  2004 2005 2006 2007 2009 2010 Notes
Microsoft           1,000  
Yankee Group 34 56       732  
Park Associates   80     400   PC in-game
Massive, Inc CEO           1,600 $1.6-$1.8B
Analysts     200 400 500 1,000  

Metrics 2.0 

  • Microsoft's internal estimates put in-game advertising at about $1 billion per year by 2010. 
  • The Yankee group recently pegged in-game ad revenues at $732 million by 2010. In 2005, advertisers spent approximately $56 million placing ads in video games, up from $34 million in 2004. 
  • According to Parks Associates,  PC in-game advertising will increase from $80 million in 2005 to more than $400 million in 2009.
  • Microsoft estimates that 2005 brought in $56 million in in-game ad revenue. 
  • Mitch Davis, the CEO of Massive Inc., predicted that by 2010 between $1.6 billion and $1.8 billion will be spent putting real-world ads into the virtual world of games in the U.S. 
  • While game advertising is only a $200 million business in 2006, most experts estimate that number will rise dramatically over the next few years. By 2007, in-game ads are expected to be worth nearly $400 million, more than $500 million by 2009 and close to $1 billion by 2010. 

According to a report from DFC Intelligence, the worldwide online game market is forecasted to grow from $3.4 billion in 2005 to over $13 billion in 2011.  Another report from DFC Intelligence estimates the worldwide video game and interactive entertainment industry to grow from about $29 billion in 2005 to as much as $44 billion in 2011. 

By comparison, U.S. advertising spending is expected to increase 4.9% in 2006 to $150.3 billion, according to the full-year forecast released TNS Media Intelligence.  The global entertainment and media (E&M) industry will increase at a 6.6% compound annual growth rate (CAGR) to $1.8 trillion in 2010, according to PricewaterhouseCoopers' "Global Entertainment and Media Outlook: 2006–2010" report. 

In 2005, U.S. Internet gamer households received about $0.10 worth of advertisement-supported gaming content on a monthly basis, compared to $50 worth of TV content, according to Parks Associates,

Parks Associate's survey also revealed very interesting demographic perceptions of in-game advertising:

  • Males 18 – 34 are more open to seeing advertising than other age groups-29% say they would not mind seeing ads in games as long as it helps enhance game play, compared to only 19% among female gamers 35-54
  • However, the percentage of gamers willing to put up with ads in games if there is a chance to win prizes is similar among these two groups (38% among 18-34 male and 35% among 35-54 female)

Men and women also differ about what is the least intrusive approach to in-game advertising: 

  • Men 18-34 prefer: product placement (49%);  pre-game ads (22%); in-game bulletin boards (18%). 
  • Women 35-54 prefer:  pre-game ads (42%) ; product placement (36%); between-level ad placement (13%).

In addition, gamers revealed through the survey that they expect a discount on game prices in exchange for seeing ads and the expected discount ranged from 31% for gamers ages 13-17 to 58% for women 55 and older.

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