In-game ads to hit $400 million by 2009

Will advertisers follow families as they gather around the game console?

Yes, says a report from Dallas-based Parks Associates, which predicts in-game advertising will grow from $80 million in 2005 to more than $400 million by 2009.

The report says advertisers will be influenced by two things: First, more gamers are spending more time gaming and less time watching television. Second, gaming is becoming more of a family-oriented pastime.

And, advertising revenue has not yet caught up with gaming's growing popularity, said Yuanzhe "Michael" Cai, director of broadband and gaming at Parks Associates research group, in an interview with CNET News.com.

As with the Web, advertising is not keeping up with the changing, emerging market in video games. For every $50 a month spent on TV advertising per gaming household, only 10 cents is spent on advertisement-supported gaming content.

Moreover, Gaming is no longer a pastime restricted to 18- to 34-year-olds. Family members are playing video games together. According to the report, 42 percent of children age 13 to 17 have played video games with their mothers, and 40 percent have played them with their fathers. Almost half of 35- to 54-year-old female gamers play with their children, a percentage that's larger than any other adult-demographic segment, said Cai.

But could kids be getting their moms hooked? The report also found that females age 35 to 54 spend only 30 percent of their gaming-time playing with their children. Advertisers have yet to tap this growing demographic.

"Female casual gamers will spend 40 to 50 hours a month gaming. Advertisers will be realizing that with that kind of time you have the eyeballs, and they will seek them out," said Cai.

A recent report from DFC Intelligence, another market research firm, estimates that casual gaming will grow into a billion-dollar industry by 2011. Casual gamers are those who play mainly puzzle games, like Tetris or solitaire, as opposed to first-person shooter, racing and sports games.

"Gaming is becoming a major media. If, as anyone believes, the 18 to 34 (year old) demographic is spending more time on gaming and less time on TV, then advertisers need to figure out a way to get them back," Cai said.

In-game advertising currently offers three main types of advertisements: virtual billboard, pregame, and product placement. The interactive or dynamic in-game virtual billboard is still fairly new. A majority of in-game ads are still hard-coded into the game's design and cannot be changed, Cai said.

Companies like Massive, Double Fusion and IGA, which enable advertisers to stream audio and video into games, are trying to standardize pricing for dynamic virtual in-game billboards. Cai said he believes the cost of an ad for a virtual billboard is determined by angle of view (at what angle the billboard is approached and seen by the player), size and time of exposure. Additional considerations include 2D versus 3D graphics and lighting. The approach is quite different when compared with the time-of-day (prime time versus other time) model often used by network television.

Cai said that as the paradigm for dynamic ad revenue becomes more standardized, it will be easier for solution providers to attract advertisers. Dynamic ads, along with an eagerness to target the expanding demographics of women and families, will contribute to the market's growth, Cai said.