The fictional landscapes of video games are increasingly being dotted with product placements, pitching everything from athletic shoes to movies. And that's not all - advertisers will soon be able to update the ads over the Internet whenever they want, long after the games are sold.
The plugs reflect a growing business reality - video games are stealing eyeballs from movies and television, where product placement has long been a staple.
TV viewership among men aged 18 to 34 declined by about 12 percent last year while that group spent 20 percent more time on games, according to Nielsen Media Research.
Video games now attract not just hard-core gamers, but people of all ages and more women than ever. In the United States, overall sales reached $10.7 billion last year - more than movie box-office receipts - and is expected to reach nearly $16.9 billion in 2008, according to market research firm DFC Intelligence.
Revenues from game advertising worldwide are following the migration from remote control to joystick, expected to grow from $200 million a year today to $1 billion in 2008, predicted DFC's president David Cole.
"If the audience is there, the advertiser will be there," said Anthony Noto, a media entertainment and Internet analyst at Goldman Sachs.
Case in point: The marketing budget for ads in video games at DaimlerChrysler AG's Chrysler Group was zero four years ago. Now it represents more than 10 percent of the division's overall marketing budget, planting Chryslers, Jeeps and Dodge cars in more than a dozen video games while spending on television and print ads has dropped.
"When I was a kid, I used to run downstairs to watch Saturday morning cartoons, but my sons wake up and run downstairs to play video games," said Jeff Bell, a Chrysler Group vice president.
In its first experiment, the automaker invested six figures a few years ago so players of Tony Hawk's Pro Skater 2 game would have to do rail stunts over a Jeep to get points, or go through game levels decorated with Jeep billboards.
Judging the amount of eyeball time Jeep got from that investment was just a rough calculation. In the upcoming Tony Hawk's Underground 2 game, Jeep hopes to get a better measurement: players who want game upgrades will have to go to Jeep's Web site to download them.
On Monday, Massive Inc. will launch what is believed to be a first-of-its-kind video game advertising network, allowing marketers to deliver new ads into console and PC games via an online connection.
Billboards in a subway scene could feature a new movie trailer one day and the hottest new energy drink the next. Promotions could be tailored to geography, so that players in New York and California might see different versions of a car ad.
Massive's service can also track the viewing time each ad gets - a key metric that advertisers traditionally rely on in paying for television spots.
In the past, the value of product placements in video games were difficult to gauge, based on predictions of how many units would sell and how often the ads would be viewed by players. Deals were cut somewhat randomly between game publishers and advertisers, many ending in cross-promotional, no-cash transactions while others would cost advertisers anywhere from three-digit to seven-digit figures.
"It's been like the wild wild West up until this point," said Jay Cohen, a vice president at game publisher Ubisoft Entertainment Inc. "But now it's coming to a critical mass - advertisers keep coming to us saying, 'We want in. How much is it going to cost?' Without those (advertising) metrics, we can't go about it successfully or fairly."
That's why Ubisoft plans to use Massive's technology in the next sequel of the popular Tom Clancy Splinter Cell series, due out in March.
Capitalizing on the same advertising trend, Nielsen Entertainment is working with game publisher Activision Inc. to start a game-rating service similar to its existing TV-ratings system.
"It's a natural progression for the gaming industry to create standardized metrics to help everybody know the value of ads in games," said Matt Tatham, a Nielsen Entertainment spokesman.
In-game advertising has gained momentum in the past two years because traditional television and print ads are becoming less effective, said Wim Stocks, executive vice president of sales and marketing at Atari Inc., a game company that recently doubled to four its staff that handles product placements.
Advertising now shows up everywhere, most notably in blockbuster titles. There's a Samsung cell phone in "Enter the Matrix," a Palm PDA in "Splinter Cell," and Old Spice sponsors the half-time show in "NCAA Football 2005."
Electronics Arts Inc., the world's largest video game publisher, says its ad revenues are up 60 percent this year.
Mitchell Davis, chief executive at Massive, developed the concept for real-time advertising in games more than two years ago after playing Grand Theft Auto. "It was all fake advertising in the game, and I thought, 'It should be real."' If Massive's technology and service works as promised, Ubisoft and other game makers say in-game ads will inevitably mushroom and become a standard marketing method.
Next year, Vivendi Universal Games plans to introduce four games using Massive's advertising service.
"This will be woven into every major game company's plans moving forward, but it's really only going to work in games where it makes sense," said Ed Zobrist, vice president of global marketing at Vivendi.
His company has turned away advertisers in the past - alcohol companies that wanted to be in the new Leisure Suit Larry game, and shoe companies that wanted fantasy characters to wear their treads.
"Real world brands just do not have a place in a fantasy game," Zobrist said.
By May Wong