In-Game Advertising on Console Systems to Spike

In-game advertising on next-generation gaming systems is expected to grow to $852 million by 2011, fueled largely by connectivity enhancements in the consoles. The projection is part of a forecast released by ABI Research.

“The growth and interest in this generation [of game consoles] is in part because the number of connected consoles are much, much greater,” said Michael Wolf, research director, digital home, at ABI Research. “Attach rates for consoles are around 50 percent for this generation. When you have that many consoles connected to the Internet, it delivers a much wider base to deliver advertising to.”

The $852 million spending forecast for 2011 represents a more than ten-fold increase over the $80 million ABI expects this year. Earlier reports placed the category at $56 million in 2005.

Escalating development budgets for console game titles will contribute to the growth, Wolf said. “You have the publishers who are much more interested in diversifying the revenue base than selling games at retail. Advertising is a relevant revenue stream.”

Connected consoles create more opportunities for dynamic in-game advertising, where ad placements can be updated with new campaigns and advertisers. It also allows advertisers to commit to a particular title closer to release date, or even after a game is in stores.

While revenues have continued to grow each year, Wolf said ad placements are now served into only about 20 to 30 percent of games on the market. “Percentage-wise, you’re seeing it rise gradually; in a couple years you’ll see it over 50 percent of games,” he said.

Console manufacturers are also finding additional revenue streams by selling advertising real estate on the console’s dashboards and scoreboards.

Microsoft’s year-long lead in the current console cycle has given its online console portal Xbox Live a lead for both branding opportunities and the creation of mini-versions of classic and casual games. Sony and Nintendo, however, have a larger catalog of games from legacy systems release.