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Jeepers creepers, it's game on in the battle for ads, by Simon Canning - 3rd August 2006
(Credit: The Australian)

When News Corporation announced it was plunging more than $850 million in to online gaming operator IGN Entertainment last year, media observers across the globe were stunned.
But the move signalled the shift of old media operators, used to broadcasting, print and even telephony, into the booming online gaming world where users are forming global communities, often at the expense of the time they spend with old media. For News, IGN represented not just the web destination where gamers got their news but more than 70 community and gaming sites used to chat, download games and compete in live online battles.

Ninemsn has also begun investing heavily in online games through its website, while Telstra's BigPond has a dedicated gaming area called The Arena that its subscribers can use to play live online.

Now game manufacturers and advertisers are bracing themselves for an explosion in online gaming as the medium emerges from the darkened bedrooms of teenage computer geeks to take pride of place in the lounge room.

The launch, in November, of Sony's next generation PlayStation 3 is expected to be the catalyst for online gaming to begin serious inroads as a channel in its own right, coming in the wake of Microsoft's Xbox 360 earlier this year and after years of entrenched online gaming through computers. Both Sony and Microsoft have offered primitive online gaming with the original Xbox and PS2. But gamers are now being greeted with dedicated broadband connections, exclusive games, movie trailers and, of course, advertising with the new generation of consoles.

Xbox spokesman Mark Lenyszyn says since the launch of the 360 in the US last year, more than 50 per cent of all owners have signed their consoles up to Xbox Live within days of purchase. Locally, Xbox Live is believed to have about 50,000 subscribers -- the majority of them considered hard-core gamers.

Three weeks ago Xbox Live launched what it has dubbed as "Arcade Wednesdays" when gamers can download classic arcade games such as Frogger, Galaga and Pac Man. Globally, Xbox 360 owners have downloaded more than five million games, suggesting live online play and downloading is quickly gaining traction.

In May Microsoft spent $500million to buy in-game advertising pioneer Massive and this week in the US, Massive announced its first interactive deal that will see ads for the 2007 Toyota Yaris appear in the online game Anarchy Online.

But it is the launch of the PS3 that, along with the 360, is expected to lead to an explosion of console owners connecting their televisions to Sony and Microsoft's live sites in Australia. Michael Ephraim, head of Sony Computer Entertainment in Australia, believes the online component will be pivotal to the success of the PS3.

While the take-up of the ability to play against other competitors on the PS2 online has been limited, Ephraim says nearly 40,000 PS2 owners have bought the network adapter that allows them to go online.

"That is off a base of about 1.8million PlayStations," he says. Xbox's numbers come off a base of about 800,000 first-generation consoles in the market.

"That online offering for both of us was pretty limited. It was just online gaming and there was very little community aspect. PlayStation 2 online was, if anything, a dress rehearsal."

Ephraim is coy about many of the offerings for the PS3, but admits the broadband capabilities of the new unit will be an important part of the decision by consumers to buy. "Definitely the vision is to create an online community for online gaming and I'm very excited about the potential for what we can do with it."

While interest in the online component of gaming for both Microsoft and Sony seems a given, what remains to be seen is the impact advertising might have in the online environment.

Lenyszyn admits that Microsoft's PC background gives the company a sense of what may be possible through the 360, but he expects third parties such as game developers to be the first to try turning online gaming into a marketing channel.

"I think compared to, say, the music or movie industry, there has been a finite revenue stream that could be gained from a game release. Taking it online could change that."

Already many developers have struck deals with advertisers to insert ads in game environments. Racing games such as Sony's Gran Tourismo series and Microsoft's Forza Motorsport are examples where real world advertisers have made the transition to the cyber world.

The shift to real-time online gaming through consoles plugged into TVs heralds the first opportunity for advertisers to gain television-style impact with gaming ads.

In December, software developer, Activision, teamed with research company, Nielsen, to gauge how acceptable online gamers would find in-game advertising. The results suggested rather than being angered by such marketing, ads that were deemed relevant and appropriate would be welcomed by gamers.

"Advertisers have finally found a pipeline into the 18-34 male sweet spot," says Nielsen Entertainment chief executive and president Andy Wing.

According to the findings of the study, advertisers could take hints about real-world choices from in-game decisions. "The colour of a Jeep a gamer chooses says a lot about how they might act in the real world," Nielsen's Michael Dowling says. "This is invaluable information to advertisers."

Kevin Walsh, of online specialist agency NetX says the Massive deal may prove an important moment in the history of online game advertising, with the global market already valued by some at more than $1 billion.

"You have to remember that the generation under 25 is spending as much time playing games online as they are using the internet," Walsh says.

Sony's Ephraim says the online experience is the most important element for the next generation PlayStation in the short term, although he could not rule out software developers writing games that would be open to real-time advertising when players went online. But he described the potential of advertising as "the icing, not the cake".

"We need to make the cake first, then build the eyeballs and then start looking at the advertising revenue."

David Chang, head of News Corp's IGN, says gamers are cashed up and willing to spend. He says working with hardware companies such as Sony, Microsoft and Nintendo, as well as software developers such as Electronic Arts, Activision and THQ is paramount in future development.

Chang says the allure of IGN for a company such as News Corp was the ability to tap into consumers who were spending their free time playing games online rather than with old media. "Across our readership globally the average household income is $US67,000," Chang recently said.

He noted that vehicle manufacturers such as Honda, Volkswagen and General Motors were extending their online presence with games websites, and this could easily shift into online gaming.

Ephraim says the serious potential of online gaming advertising may not be reached until the PS3 had five to 10 million users and that getting people used to the new environment is the key.

"On the commercial side of the digital download we see this more of an evolution than a revolution. We see packaged goods and digital downloads complimenting each other."

Key to any early success will be making sure the early adopters embrace the system, as Microsoft found with the 360.

"We will be communicating with our core group of consumers (some 40,000 owners of PS2 and PlayStation Portable) who will probably be the pioneers of PS3 online," Ephraim says.

Regardless of their competition, both Ephraim and Lenyszyn agree that with the launch of the PS3, the console battleground will move from the living room to cyberspace, with companies such as News Corp, PBL, and Telstra following closely behind.

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