United Gamer Online (UGO)

by Chris Morris
While ads in video games may not be popular, they are effective.

A new study by Nielsen finds that targeted advertising can result in a substantial increase in sales – and that could spur companies who have been sitting on the fence to jump into the gaming world.

The study looked at in-game Gatorade ads in six EA Sports titles, including the last two installments of the company’s “NHL” franchise and the 2007, 2008 and 2009 versions of “NBA Live”. People who played those games increased their household dollars spent on the sports drink by 24 percent.

That’s a result most advertisers would kill for – but the implications aren’t great for gaming fans.

While players are more accustomed to seeing ads in games these days, they don’t necessarily like them. Recent Xbox 360 thriller “Alan Wake,” for example, was loaded with brand name products, including Verizon, Ford, Duracell and Energizer. And it earned the scorn of players, who felt the product tie-ins were a little too forced and obvious.

At retail, the game tanked, selling fewer than 200,000 units by the end of July. And while it’s impossible to determine how much of that was the fault of the blatant product placement, it’s impossible to rule it out as a factor.

Sports titles tend to get a little more leeway with gamers. Since ads are so fully integrated into both the real world and broadcast sporting experience, video games can double down on advertising opportunities -- as EA’s “Madden” does each year. But sometimes, even those can go too far.

Beyond being (let’s face it) an ad for the NFL itself, “Madden NFL 11” is filled with billboards in every stadium. That’s not nearly as distracting as the fact that virtually every major action on field carries a sponsorship with it, such as the “Swagger” statistic -- which determines the likelihood of the player to celebrate after a touchdown -- sponsored by Old Spice.

Nielsen’s study isn’t the first to underscore the effectiveness of in-game ads. After debuting its Bing search engine in June 2009, Microsoft promoted the Google-competitor in a series of games, including “NBA 2K10” and “DJ Hero”.

After their first exposure to the ads, the percentage of gamers visiting and searching Bing increased by 108 percent, according to Microsoft. In fact, two-thirds of the gamers who visited Bing after seeing the ad were visiting for the first time.

The recall rate of Microsoft’s ads was a surprisingly high 71 percent – and, according to the company, 60 percent of the gamers it spoke with said they had a more positive opinion of Bing after seeing the brand in a game.

Not every publisher has embraced in-game advertising yet, but if demand begins to outstrip supply, it’s likely a few will change their policies. 2009 and 2010 have been rough years for the video game industry, and publicly traded companies that turn down a lucrative income source will have investors calling for blood.

The trick to preventing a backlash among players comes down to two things: moderation and contextual placement. “Madden’s” willingness to grab ad dollars is documented above, but regardless of frequency, the ads have to make sense. A player exploring a mysterious world in another galaxy, for example, doesn’t want to see a Coke machine. In-game advertising almost died before it had a chance to take off since select publishers ignored those factors. Over time, the industry has become more disciplined, leading to the current revival.

Gamers may never fully embrace embedded ads, but no one thought it would work with television audiences, either. And look how big that ad market turned out to be.