LOS ANGELES--This week's in-game advertising workshop, part of the E3 Conference Program, provided something for everyone. Experts with firsthand knowledge of the gaming industry's newest frontier shared their advice for ad firms, developers, and advertisers.

The discussion was led by Georgia Institute of Technology professor Ian Bogost, who teaches game critique and game design while running his own studio on the side. Bogost headed a knowledgeable panel that covered its topic from a variety of angles.

On the agency side, Brandon Berger represented Ogilvy Interactive, while Dave Madden of WildTangent and Guy Bendov of in-game ad-space aggregator DoubleFusion lent their expertise from the developer/publishing side of the equation. Jeff Bell, a marketing VP from DaimlerChrysler, talked about his company's experiences as an early--and successful--adopter of in-game advertising. Rounding out the panel, Michael Goodman from market research firm The Yankee Group gave the analyst's perspective.

Bogost kicked off with a brief explanation of the different types of ads in games, running the gamut from simple product placement through movie licensing to "advergames." Of all the kinds of in-game advertising, advergames involve the most complete integration of the product or message. Bogost pointed to Jeep Mountain Madness and America's Army as examples, describing them as "custom-built to disseminate a specific message."

Bogost closed his intro with some interesting comments on why he believes in-game advertising is poised to boom. Eyeball flight from mass media has sent traditional advertising into a tailspin. It's well accepted that games are cannibalizing TV viewership, and as a result, games have a lot to offer as an advertising medium.

But it's not a one-sided exchange. Bogost believes the advertising industry can also lend strengths in areas where the game industry needs help. He noted the game industry is now struggling with innovation...something he sees as a key strength of the advertising industry. Moreover, including advertising reduces content costs: a lifeline for game developers facing constantly climbing development budgets.

The panelists shared Bogost's optimism. Michael Goodman described in-game advertising as "a tremendous opportunity." From total spending of approximately $35 million in 2004, he projects the market will grow to $875 million in 2009.

But there will be challenges along the way. Goodman mentioned that tech-focused game firms and Madison Avenue ad agencies have very different perspectives: a frequent source of tension. Madden, of WildTangent, concurred, saying, "Many clients have brought their agencies kicking and screaming [to talk to us]."

Moreover, many firms resist in-game advertising because the formats and metrics are new to them. This is one reason, Madden noted, for the widespread use of in-game billboards: Ad agencies gravitate to this format because it mimics a medium they already know.

Still, all agreed that the potential results make pursuing in-game ads more than worthwhile. Panelists cited the high interactivity and high measurability of the medium as key selling points. Discussing a Honda Element product placement in the snowboarding game SSX Tricky, Ogilvy's Berger commented, "The metrics were through the roof."

Other panelists had their own success stories, but GM's Bell may have been the most dramatic. His team built a Dodge Durango game that was downloaded 50,000 times, resulting in 500 purchases. That's a 1 percent purchase rate, which is far ahead of what an advertiser would expect from traditional mass media, like TV advertising.

Bell closed the panel with a comment that goes a long way toward reassuring the people who fear how advertising dollars will impact the game industry. The only advertiser representative on the panel, Bell looked at the crowd and said, "We fear consolidation within your industry. We would very much like to work with the fresh, the small, the dynamic."

If Bells' views are shared by other members of the business community, ad dollars may free developers to innovate. By removing pressure from publishers and stockholders to focus only on safe projects, advertisers just might be doing gamers a favor.