ADVERTISING IN COMPUTER GAMES
`
`by
`Ilya Vedrashko
`B.A. Business Administration, American University in Bulgaria, 2000
`
`Submitted to the Department of Comparative Media Studies in partial fulfillment of the
`requirements for the degree of Master of Science in Comparative Media Studies at the
`Massachusetts Institute of Technology
`
`September 2006
`
`v.. / .............. ...........................................
`Signature of author .... ..... ........
`Dept. o omparative Media Studies, August 11, 2006
`r\
`'f
`
`K,.;
`
`Certified by .............. .
`
`
`
`.- ....-
`
`
`
`.,., "-
`
`"'........................'.."W i .i." .."'r'c h .
`Prof. William Uricchio
`
`Accepted by................... . . ..... .:....
`
`................
`.....
`..................
`Prof. William Uricchio
`
`© 2006 Ilya Vedrashko. All rights reserved.
`
`The author hereby grants to MIT permission to reproduce and distribute publicly paper and electronic
`copies of this thesis document in whole or in part in any medium now known or hereafter created.
`
`MASSACHUSETTS INS
`OF TECHNOLOG
`
`.
`
`E
`
`SEP 2 800E6
`
`TLIBRARIES
`
`ARCHIVES
`
`Playrix Ex. 1016, Page 1 of 74
`
`

`

`ADVERTISING IN COMPUTER GAMES
`
`by
`Ilya Vedrashko
`
`Submitted to the Department of Comparative Media Studies in partial fulfillment of the
`requirements for the degree of Master of Science in Comparative Media Studies at the
`Massachusetts Institute of Technology
`
`Abstract
`This paper suggests advertisers should experiment with in-game advertising to gain skills
`that could become vital in the near future. It compiles, arranges and analyzes the existing
`body of academic and industry knowledge on advertising and product placement in
`computer game environments. The medium's characteristics are compared to other
`channels' in terms of their attractiveness to marketers, and the business environment is
`analyzed to offer recommendations on the relative advantages of in-game advertising.
`The paper also contains a brief historical review of in-game advertising, and descriptions of
`currently available and emerging advertising formats.
`
`Keywords
`Advertising, marketing, branding, product placement, branded entertainment, networks,
`computer games, video games, virtual worlds.
`
`Thesis supervisors
`* Prof. Henry Jenkins
`* Prof. William Uricchio
`
`Playrix Ex. 1016, Page 2 of 74
`
`

`

`Acknowledgments
`
`This work would not have been possible without:
`
`* MIT C3 Convergence Culture Consortium and its corporate partners GSD&M,
`MTV Networks, and Turner Broadcasting System that supported the initial probe of
`the subject.
`* Darren Herman at IGA Worldwide, Jonathan Epstein at Double Fusion, and the
`entire team at Massive Incorporated who were very forthcoming with information
`about their businesses. I owe special thanks to David Sturman at Massive for a very
`thorough and informative walk-through of the company's operations.
`* Readers of the thesis blog and my friends in the virtual worlds who volunteered
`priceless bits of knowledge and whose insightful comments would often reveal
`unexpected dimensions.
`* Sarah Wolozin and Generoso Fierro at the Comparative Media Studies department
`at MIT who made sure this thesis would one day happen.
`* The Comparative Media Studies department that invited me to MIT and made it
`feel like home.
`* Prof. Henry Jenkins and Prof. William Uricchio who encouraged and steered this
`work from its early days all the way to the defense.
`* Mom and dad who have been rooting for me from day one even though they are
`still not quite sure what it is that I do. See? Computer games are good for
`something.
`
`Thank you.
`
`Playrix Ex. 1016, Page 3 of 74
`
`

`

`Summary
`
`Today, as advertisers grow increasingly unhappy with the value delivered by traditional
`media, they turn to alternative communication channels. Marketers, many of whom for a
`long time have been discounting computer games as an activity reserved for teenage boys
`with unattractively little purchasing power, are now gathering for conferences trying to
`figure out how to get into the game, so to speak.
`
`While still relegated to the fringes of marketing budgets (games' share in the overall
`advertising spending remained at meager 0.1%1), in-game advertising and advergaming is
`slated to grow to a $1B business by 2009. Over the past few years, at least a dozen
`companies have sprung to claim their slice of this advertising pie, their services ranging
`from dynamic insertion of standard ad units to customized product placement tailored to
`advertisers' needs.
`
`As the interest in the medium's potential grows, gamners become wary. On forums, they
`protest against advertising intrusion into what they see as their last haven safe from the
`marketing onslaught. Current advertising practices do little to placate their fears and to
`suggest that games won't become the next victim of advertising excesses, even though
`industry professionals are careful to note how important it is for the game-based ads to be
`unobtrusive. One reason for these misfiring efforts is the systemic deficiency of the
`advertising process; the market is better equipped to process mass-produced and recycled
`communications than custom-tailored messages. The other reason is a lack of experience in
`planning for an idiosyncratic medium that has only recently emerged from its relative
`obscurity and reluctantly opened its doors to brands.
`
`This paper is designed to address the latter problem by compiling, arranging and analyzing
`the existing body of academic and industry knowledge to distill a set of recommendations
`and ideas for advertising in computer games -- a series of cheats and walkthroughs, in the
`gamers' parlance. The main question this work seeks to answer is how to design and place
`in-game advertising in a way that would recognize and respect the limitations of the
`medium while taking advantage of the unique opportunities it offers.
`
`Playrix Ex. 1016, Page 4 of 74
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`

`

`INTRODUCTION
`
`"Alice opened the door and found that it led into a small passage, not much larger than a
`rat-hole: she knelt down and looked along the passage into the loveliest garden you ever
`saw.
`
`Lewis Carroll, Alice's Adventures in Wonderland
`
`5
`
`Playrix Ex. 1016, Page 5 of 74
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`

`

`The War
`
`Hey, fellow advertiser. Yes, you, red-eyed, with horn-rimmed glasses and a black
`turtleneck. Can you pitch a product to a god when even mortals go out of their way to
`avoid us.
`
`The remote control, that sword of consumer Damocles, has been hanging over our
`collective head for over half a century now. When the Lazy Bones first appeared in the
`1950s, the technology was advertised (what an irony) as an ad silencer. What did we do?
`We set up road blocks by scooping up chunks of air time across all channels to keep the
`suffers bumping into our commercials they were so diligently trying to dodge.
`
`The ultimate ad-skipping technologies - the refrigerator, the microwave and the bathroom
`- have invited a similarly ungraceful backlash. We are single-handedly responsible for one
`of the largest and potentially most dangerous urban phenomena, the Super Flush, the
`massive splash of advertising dollars going down the drain when all Super Bowl fans head
`to the bathroom during commercial breaks. Our response? Turning the volume up and
`slinging the ads within earshot of our flushing and corn-popping audience.
`
`As the remote control mutates and proliferates, our countermeasures follow a predictable
`path of making the ads louder, more intrusive and more omnipresent. The success of these
`measures has been predictably low and has resulted in more anger than brand loyalty on the
`part of the same audience we are clumsily trying to court.
`
`Advertisers are frustrated because their forecasts show that the situation is not about to
`improve; the first random study that popped up on Google predicts that DVR adoption will
`grow at 47 percent a year through 20082. Most of the current research points out that
`anywhere between 70 and 80 percent of DVR owners skip commercials. What are we
`going to do about it? Slap banners right in the middle of the screen when TiVo goes into its
`fast-forward mode, that's what.
`
`When AT&T in 1994 launched its first banner on HotWired, it was exotic, exciting and
`effective. The interest quickly faded, and we rushed to gussy it up with pretty colors and
`animations. That was fun for a while, but then people turned away and got back to their
`business. We upped the ante once again, and came up with even, we thought, more exciting
`technologies -- exit windows, interstitials, roll-ons, roll-ups, pop-ups, pop-unders, pop-all-
`over-the-place. The very TV spots people were trying to zap on TV, we began to stream
`online. We turned the volume up, too, embarrassing office surfers who scrambled for the
`"mute" button and deafening everyone wearing headphones.
`
`We were the only ones excited. People responded in kind. First, they would politely click
`on the "x" button to get rid of the mini windows jumping in their faces. Then they created a
`pop-up blocker. Then the pop-up blocker became a standard feature in all browsers. Then
`they learned how to block animations. When that didn't help, they began to block off entire
`ad servers. Now they've come up with Grease Monkey, a technology that automatically
`scraps every single ad from a web page before it is even loaded.
`
`The war is on and we are losing it. And this is one war we don't even need to be fighting.
`
`Playrix Ex. 1016, Page 6 of 74
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`

`

`We love our audience, but it is only our fault if no one can tell. Instead of being a gentle
`and loyal lover, a prince charming always ready to help, never a nuisance, we collectively
`act like a paranoid stalker, obsessively collecting and fetishizing every little thing our
`audience leaves behind. We call our audience at nights, breathe heavily into the phone and
`read a sloppily written script. We deluge their mail boxes with letters. We jealously guard
`our audience's every move; god forbid that the audience should ever turn away from us.
`We demand undivided attention. Like an insecure teenager, we shout obscenities,
`mistaking disdain for interest. In an act of desperation, we parade naked bodies. We burp,
`fart, and insult our audience's intelligence. We doubt their sexual endurance and we are
`never satisfied with their breast size. We criticize the cars they drive, the clothes they were,
`their cooking, parental and gardening skills. We scoff at their education, habits and tastes.
`Even our pick-up lines are so clich6 out that a simple "may I buy you a drink" would sound
`excitingly fresh.
`
`What do you call people who pay for someone's entertainment and then demand certain
`favors in return? Advertisers.
`
`We generally mean well, though, and sometimes people even love us back. On those
`bright days, they laugh at our jokes, answer our calls, forward our emails, and buy our
`stuff. They say they never watch ads on TV, but cheer the reruns of the old ones. They say
`they hate ads in newspapers but diligently cut out coupons. They say they can't stand ads
`on the DVDs they buy, but rewind movie trailers. They pay for glamor magazines that are
`90 percent ads. They keep their Yellow Pages tomes nearby. They collect fridge magnets.
`They wear our logos. They tattoo our names on their skin. They are saying how they
`despise advertisers, yet Boston's section of Craig's List hosts some 150,000 ads they
`themselves post in any given month. Then Google launched its AdSense and suddenly
`they are reading self-help books on how to boost click-throughs.
`
`We love them. They, it turns out, are not ruling us out of their lives either. Why can't we
`do the right thing and fix this relationship from dysfunctional into thriving? Sometimes we
`don't know what the right thing would be. Sometimes we do, but the system won't let us
`do what's right.
`
`The first part is easy. All we really need to know we already learned in the kindergarten.
`Play fair. Don't hit people. Look. Listen. Follow the path of the least resistance. Be on
`time. We would be better off even if we followed our own slogans. Think different. Be
`inspired. Be yourself for a while. Try harder. Just do it. Some advertising gurus say the
`business of advertising should not be confused with the business of entertainment. They
`were proven wrong by the millions who downloaded BMW films and then headed to
`dealerships to test-drive the car. Others say dry info doesn't sell. They were proven wrong
`by the spectacular rise of Google, a company whose entire business is to mediate the sales
`of dry ads, 95 characters at a time. The whole stack of books of advertising wisdom can be
`summed up in one sentence: "Whatever you have to say, say it to the people who are
`interested and say it when it suits them best in a way that will keep them listening."
`
`Playrix Ex. 1016, Page 7 of 74
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`

`

`We are also prisoners of the media system we ourselves helped to set up. It all started quite
`innocently:
`
`Consider broadcasting. In its infancy, it was a reflexive instrument, a tool
`for selling radio sets. But broadcasting's real birth might more accurately be
`dated to the Postum Co.'s 1926 order that its Philadelphia advertising
`agency, Young & Rubicam, relocate to New York, the developing center of
`the broadcast-network business, to handle the account of its Jell-O division.
`Within eight years, that move bequeathed to the listening public "The Jack
`Benny Program," "Colgate House Party," "General Foods Cooking School"
`and a smattering of other audience-delighting radio programs.3
`
`The very medium that we hoped would bring us closer to the people has grown into a risk-
`averse behemoth that is cute to look at but is harder to teach new tricks than the proverbial
`old dog. The 30-second spot everyone is so willing to see dead that it just might as well die
`is not around because it does the job well - it is considered bad manners now to claim so in
`public. It is around because there is nothing to replace it, that is, nothing convenient and
`comfortably familiar.
`
`People at Worldwide Wrestling Entertainment are among the few who are trying something
`unfamiliar and uncomfortable. In October 2005, WWE began extending its live coverage
`to the web instead of cutting it off for commercial breaks. At least one analyst, a director of
`national broadcast for Initiative, immediately voiced a concern: "Now you're talking about
`telling the most rabid of fans to switch to another platform when advertisers are wanting to
`talk to them. It sets a dangerous precedent." 4
`
`Dangerous precedent? WWE may have just dealt a Hulk Hogan blow to ad skipping,
`single-handedly incapacitating the Super Flush, the DVR and the remote. Chris Chambers,
`WWE's VP for interactive media, quoted a house study that showed 60 percent of the
`simultaneous TV and computer viewers not channel-surfing away during the commercial
`breaks. "If they weren't online, they'd probably go get a snack or go the bathroom. This
`way they're probably still in the same room and can hear the ads."5
`
`Instead of exploring the opportunities the DVR offers, we are trying to circumvent or break
`the fast-forwarding function. The DVR threatens the familiar and the comfortable. The
`DVR is bad. If we can't kill the DVR, then we must at least cripple it.
`
`Prohibitive transaction costs, technological limitations, red tape, shortage of research
`knowledge, insufficient infrastructure, broken communications, conflicting interests, or
`plain inertia both on our and media's side have perpetuated the tyranny of the existing
`delivery formats, even if these formats have been stretched to the breaking point.
`
`Pop-up ads annoy consumers and freeze their computers and yet more money is poured
`into pop-ups. Spam renders entire email accounts useless and yet a computer maker keeps
`sending me offers to buy a PC even though I have already bought one from them and have
`not expressed any interest in buying more. Nearly identical credit card offers from
`competing banks fill up mailboxes. It is a vicious circle: the more cluttered the format, the
`more advertising is crammed in it. If there is a law of diminishing returns, it doesn't seem
`
`Playrix Ex. 1016, Page 8 of 74
`
`

`

`anyone in advertising is aware.
`
`The New World
`
`We, the advertisers, have permeated every imaginable space, collectively showering our
`fellow citizens with 3,000 daily offers, promises, offers of promises and promises of offers,
`enticements, seductions, solicitations, invitations, demands, recommendations and thinly
`disguised threats. That's 187.5 every waking hour, 3.1 a minute.
`
`We have taken over every part of our fellow citizens' lives. Our ads greet them at home
`and they accompany them to work; our ads are on TV, magazines, newspapers, radio,
`clothes, street signs, cars, buses, computer monitors, toys, cloth hangers, subways, stores,
`food items, bathroom stalls, telephones, trash receptacles, parking meters, bills, ATMs,
`money, desks, flip-flops, soda cans, pizza boxes, coffee mugs, mirrors, tables, and
`homeless people. We have painted the sky and branded the beach sand.
`
`We have almost run out of space.
`
`Have you ever dreamt about working back at the time when life was simple, Bernbach,
`Bernays and Ogilvy were yet to be born, television was still a matter of science fiction and
`the information space was more like a stately ball room than a chaotic floor of a stock
`exchange? Would you, who complain about today's media clutter by night and create more
`of it by day, would you jump into conversations, interrupt family dinners, sneak into
`bedrooms, knock on doors, spray-paint walls, feign romance and send unwanted letters like
`there's no tomorrow?
`
`What would have you done differently? Because you are standing at the door that is about
`to swing open to reveal sprawling cities, endless highways, virgin forests and other
`undeveloped property so utterly devoid of anything branded that it is hard on the eyes, and
`the choice of what to make of it is now yours.
`
`It is a strange world. It is a world where people kill without hate, die without pain, re-
`spawn and die again, hijack cars, operate spaceships, beat up perfect strangers, command
`lemmings, lunch on orcs, befriend elves, and nonchalantly save the universe one planet at a
`time. Armed to their teeth, they wield flaming swords and laser blasters. They carry gold
`coins and gems, and always pay cash.
`
`It's the world of computer games, the promised land of virtual reality where the wildest
`dreams come true that for the 30 years of its existence has remained largely impregnable to
`us. And if we are finally about to be ushered in, we'd better know the rules of the place
`where natives' revenge can be swift and spectacular. If you are already afraid of a remote
`control, think of what an unleashed swarm of fire-spewing dragons can do to your precious
`billboard.
`
`Remember how I asked you whether you could pitch a product to a god? That's what this
`world is all about. We will be pitching to gods.
`
`Playrix Ex. 1016, Page 9 of 74
`
`

`

`DEFINITIONS AND SCOPE
`
`10
`
`Playrix Ex. 1016, Page 10 of 74
`
`

`

`I had hoped that "advertising in games" would be an elegant and self-explanatory title.
`Soon it became clear that I needed to set certain boundaries around meanings of each word
`or risk losing focus. So below I will explain what exactly I mean by "advertising", "in",
`"computer" and "games", an exercise that defines the key terms and outline the scope of
`work.
`
`Advertising
`Turning to the industry that itself relies on metaphors for a precise definition of what it
`does has not yielded any useful results. Use a search engine near you to look up the range
`of opinions about what the word means and you will find everything from a rather
`restrictive "messages printed in space paid for by the advertiser" 6 to a more generous "any
`paid, non-personal communication transmitted through out-of-store mass media by an
`identified sponsor." 7 None of these definitions are complete. As the most recent
`developments in the industry show, advertising communications don't have to be non-
`personal, or out-of-store, or rely on mass media, or even identify its sponsor. The word that
`describes advertising in the context of this work is "propaganda" in the sense of
`propagation of information intended to cause or reinforce specific alterations of behavior,
`but the strong negative connotations of the term have rendered it nearly useless for a
`neutral discussion.
`
`In most cases, the ultimate behavior intended by advertising is some sort of transaction,
`usually a sale (or a vote, in case of political advertising), but the immediate goal of any
`given campaign could be different; advertisers may plan to create awareness about a new
`product, or to encourage trial, or to provide incentives for the audience to share personal
`information. In some instances, propaganda may encourage the audience to refrain from
`doing something, or it may attempt to shape beliefs about an issue.
`
`The way to treat advertising in the context of this paper is to think of it as "promotion,"
`although not in its "buy-one-get-one-free" sense but as one of the P's of the marketing mix
`(the other three being product, price and placement). Yet, precisely because "promotion"
`has this other meaning of "buy-one-get-one-free", I will be using "advertising" as an
`umbrella term that refers both to the process and its perceptible output in the form of
`billboards, branded products, banners, coupons, TV spots, emails and countless other
`artifacts, events and phenomena. Context permitting, I will be using the terms
`"advertising", "ad" or "ad unit" interchangeably to refer to such instantiations.
`
`In
`Defining the "in" may seem superfluous, yet doing so will help to narrow the scope of this
`work. This "in" is pretty unequivocal; generally, it refers to "inside." It doesn't mean "at",
`"over" or "nearby", although maybe "within". The paper doesn't discuss in detail all of the
`available ways to reach game playing demographics. The marketplace provides plenty of
`alternatives to advertising in a computer game and many of those are cheaper, easier to
`plan and execute, and have a proven record of success. Marketers could buy space on a
`popular game review site, put an ad in a magazine targeted at gamers, or sponsor gamer
`conferences and competitions and reach the same audience as they would with an in-game
`ad unit. Each of these approaches is equally interesting from an academic or professional
`point of view but falls outside the scope of this particular work, even if for the only reason
`that the line needs to be drawn somewhere.
`
`Playrix Ex. 1016, Page 11 of 74
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`

`

`Advertising that shares the visual space with games but that is not technically "in" --
`sponsors' logos on splash and download screens, or banners that sit near a web game --
`have been given the benefit of the doubt. Deciding on what formats to include was not
`unlike working as night club face control: "Yes, I understand that your name is almost like
`the one on the guest list... no, it doesn't count... oh, really... ok, get in." Yet generally, an
`ad is considered to be "in" a computer game when it is also inside the game's magic circle.
`
`Computer
`Academic and professional literature on gaming often makes distinctions between
`computer games, video games, and electronic games, but the boundaries are blurred and the
`situation is further complicated by the availability of console games, PC games, mobile
`games, handheld games, interactive entertainment, virtual worlds. Some of these
`distinctions are made to describe the hardware on which the games are played; others refer
`to a particular characteristic of the medium or the social aspects of playing.
`
`This variety is not helpful, especially considering that at least one game, Doom, can now be
`played on cell phones, portable music players, calculators and digital cameras in addition to
`PCs and tricked out consoles. Creating and using a separate name for each instance of a
`new hardware group would quickly become cumbersome. The term "electronic games"
`may be too broad as it can also include games that are technically electronic -- for example,
`pinball machines -- but are rarely discussed in the context of "video" or "computer" games.
`
`"Computer games," on the other hand, seem like a good fit. The term refers to games that
`are controlled or mediated by a computer -- a machine that digitally processes data
`according to a set of instructions -- and includes a large range of devices that contain an
`embedded computer. The term "video games" means computer games that use a video
`display as the primary feedback device. Since most of the games discussed in this paper
`rely on television screen or a computer monitor for visual playback, "computer games" and
`"video games" will often be used interchangeably, but clarifications will be provided where
`necessary.
`
`Games
`Video game theorist Jesper Juul analyzes seven well-known definitions of games provided
`by academics and practitioners. 8 Based on the distilled list of features necessary for
`something to be a game, he then defines it as "a rule-based system with a variable and
`quantifiable outcome, where different outcomes are assigned different values, the player
`exerts effort in order to influence the outcome, the player feels emotionally attached to the
`outcome, and the consequences of the activity are optional and negotiable." 9 This
`description will become useful when we look at the characteristics of the computer games
`as a distinct medium.
`
`Some of the "rule-based systems" referenced in this paper don't bill themselves as
`computer games. Linden Lab, for example, insists that its Second Life should be called a
`virtual world instead, or a platform, and in all fairness, Second Life does not fit Juul's
`definition as it lacks any system-wide "variable and quantifiable outcomes." Yet these
`software products share enough important characteristics with bonafide games to be
`included here.
`
`Playrix Ex. 1016, Page 12 of 74
`
`

`

`In many cases, players use the game software either in a non-gaming fashion or for
`purposes different from those intended by the developers and thus they fail to "exert effort
`in order to influence the outcome." Using three-dimensional multiplayer games purely as
`an instant messaging or a chat client is an example of the former; machinima, or the
`practice of creating short movies using games as rendering engines, illustrates the latter.
`Since these secondary interactions take place within the game space and users are exposed
`to the game content, I felt they also would be relevant to this discussion.
`
`Several readers of the web companion to this thesis have asked how I choose what types of
`games to include in this work. In part, these decisions were guided by what research had
`already been conducted in the past. Juergen Kleeberger had discussed the marketing
`potential of web-based advergames in his own master's thesis at the University of St.
`Gallen, and so I felt that a discussion on advertising in full length third-party games would
`add more value. 10 Besides, in-game advertising and advergaming involve different
`processes, the latter being more about designing a game from scratch and the former being
`more about fitting your brand's story into an already existing narrative. While the
`conceptual overlap is significant enough to warrant a discussion about both approaches, so
`are the differences that justify focusing on one over the other.
`
`Likewise, Betsy Book had written about the emergence of user-created brands in Second
`Life, and this prompted me to focus instead on opportunities to add "outside" or "real-life"
`brands to the environment. 11
`
`In other cases, the choice was limited by the availability of relevant information. Some of
`the games that are featured here had not been released at the time of this writing and the
`information was drawn from the press releases issued by their publishers. Naturally, the
`games with more forthcoming publishers (or better PR people) were the lowest hanging
`fruit. Finally, in some cases, the choice of games was guided by personal preferences.
`Among the games I have considered, I spent more time examining those I enjoyed playing
`(or, officially, exploring) the most.
`
`Caveat Emptor
`It would have been easier to write this paper two years ago when the in-game advertising
`industry was reliably quaint if not inexistent. Today, the news of breakthrough
`developments come before the ink has dried on yet another draft. The in-game ad revenue
`estimates have been revised several times since last spring when I prepared my first
`presentation on the topic. Just before the first deadline for submitting this work, an
`announcement that Microsoft had bought an in-game advertising agency came in and
`prompted revision of a chapter. By the time you finish reading this paper, the landscape
`will likely have changed again.
`
`Considering these limitations, the resulting work should not be taken as a comprehensive
`guide to advertising in all "rule-based systems with a variable and quantifiable outcome"
`played on "machines that digitally processes data according to a set of instructions".
`Instead, it compiles some of the most important bits of knowledge in a package relevant to
`advertisers eager to venture into this new space and provides pointers to those who are
`curious to learn more. It looks at how in-game advertising has been done in the past and
`
`Playrix Ex. 1016, Page 13 of 74
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`

`

`offers ideas on what can be done better. This work asks more questions than it answers,
`trying to attract attention to the issues that often remain overlooked. If anything, it is a
`walkthough for the first level of the real-life game "World of Advercraft" with a handful of
`cheat codes and directions to power-ups and monster lairs.
`
`Playrix Ex. 1016, Page 14 of 74
`
`

`

`Part I
`BUSINESS SENSE
`This chapter looks at the business side of in-game advertising and considers the size and
`composition of the playing audience as well as its growth potential, available platforms
`and titles, and the existing providers of advertising services.
`
`15
`
`Playrix Ex. 1016, Page 15 of 74
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`

`

`The playing public
`
`For marketers, it is yet another existential dilemma: to advertise or not advertise in games,
`and for those looking for a quick answer, it is a yes. The reasons, however, differ from the
`ones offered by the conventional wisdom and media hype.
`
`Here's a quote from a typical article on the subject that appeared recently in San Francisco
`Chronicle:
`
`Advertising executives also recognize television ads may not be the most effective
`form of advertising for the highly coveted segment of males between ages 18 and
`34, who tend to spend a lot on retail items. They are seeing this audience moving
`increasingly toward Web and video games. According to Nielsen Entertainment,
`young men spend 12.5 hours a week playing video games, compared with 9.8 hours
`a week watching television. 12
`
`There are several problems with the suggestion that switching ad dollars from TV to games
`will allow marketers to reconnect easily with their flitting demographics. First, the
`evidence to prove that games are stealing TV's eyeballs is inconclusive. A study similar to
`Nielsen's and conducted by Jupiter Research among online users within the 18-24 age
`bracket found that "the impact of video games on other media is largely overplayed.
`Although a large fraction of users (42 percent) report some diversion from TV attributable
`to video games, the proportion of time spent with TV has grown relative to other media --
`including games -- over the last three years."l 3 The percentage of weekly time spent with
`TV and games out of total media time remained at 29 percent for TV and around 17
`percent for games. 14
`
`The general gaming audience is indeed huge; the Entertainment Software Association that
`includes all major game makers states on its website that half of Americans play games. 15
`(The ESA numbers are criticized as unscientific because the organization refuses to make
`its methodology public. A veteran game designer Chris Crawford argues that the ESA's
`definition of game player might include everybody who has ever played a session of
`solitaire on a PC, diluting the data's value for decision makingl6). Nielsen claims that
`there are 113 million American gamers age 13 and older and that the number will grow to
`148 million by the end of 2008.17 Jupiter Research estimates 51.4 million American
`households, or roughly a half, own a game console. 18
`
`Yet, the composition of the gaming audience is not as uniform as it was once considered;
`instead, it is fragmented along just about any imaginable line. Games are not a realm of
`teenage boys any longer; in fact, the under-18s (boys and girls) account for only a third of
`the audience. The Entertainment Software Association reports that the age of the average
`player is n