Spot On: Microsoft's in-game ad master plan

General manager of Xbox new media and franchise development explores the merger of industries in Game Advertising Summit keynote.

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SAN FRANCISCO--While the Game Developers Conference has proven a popular venue to examine various aspects of the gaming industry for years, there are emerging trends and topics that could support more robust discussion than is afforded by the one or two GDC sessions they are able to carve out. To give those topics their due, GDC organizers The CMP Game Group established the Focus On series--specialized summits designed to bring the key players in a number of emerging trends together to provide a deeper look at issues that will affect the industry in years to come.

The Focus On series begins today with the Game Advertising Summit. And to deliver the keynote address, the GDC turned to Kevin Browne, Microsoft's general manager of Xbox new media and franchise development. Browne is working to facilitate the flow of advertising to the Xbox platforms, but he also heads the effort to get Microsoft properties such as Halo and Viva Pinata licensed out to become movies, TV shows, and the like.

Brown opened his GDC Focus On keynote presentation with a disclaimer for the audience, journalists in particular: "I will make a bunch of statements that are rhetorical questions that I hope we can deal with seriously as an industry," Browne cautioned. "Please don't write that Kevin Browne said to drop your prices so we can get a bigger audience, because I'm not saying that. I'm asking a question--a valid question--about whether we can attract 10s of millions of gamers to an advertising business when we charge $60."

For most of the next 50 minutes, Browne talked about what "needs" to happen and what is "essential" for in-game advertising to reach its potential. But when Browne hit the part of his presentation he feared would be misreported, he was quick to note he didn't have all the answers to his questions. To start, he laid out some perspective, pointing out that the worldwide gaming industry right now is roughly $25 billion a year, while advertising, as an industry, spends some $378 billion a year to convey branding and marketing messages to consumers--with media-buying expenditures expected to grow six to eight percent every year, near-term.

"When you think about it, a fairly small shift in advertiser behavior could replace all the revenue that we generate today," Browne said. "We could be a totally ad-funded business if we could figure out how to do that. We could double the size of our industry by 2010 by finding the right mix."

Browne also saw some other possibilities for taking advantage of the advertising industry, in ways that could potentially revolutionize the game biz. He wondered if publishers should look at advertising as the extra $1-per-unit that could help a borderline title reach profitability, or something more.

"Could you as a publisher think about your business and say 'I'm going to price so that I can attract 10 times the customers I have today and be able to make it up on ads,'" Browne asked.

He also wondered if advertising could help create more flexible and fluid release windows for games. Right now, movies get a theatrical run, pay-cable TV, DVD release, and home broadcasting. Increased revenue from in-game advertising might be able keep publishers from feeling like they have to get all their revenues in the first six weeks of sale and make staggered releases in different windows more feasible for publishers.

That's what Browne thinks might happen. But he also discussed plenty of things he said needed to happen. To describe those, he broke the interested parties into three groups: gamers, advertisers/ad agencies, and developers/publishers.

"For us to make any progress at all, the things that you do have to provide benefits for all three," Browne said.

For gamers, the first rule is to "do no harm," Browne said. He emphasized that relevant advertising and providing bonuses like sponsored tournaments and original content were helpful in winning them over, and said that consumers these days are actually quite receptive to advertising; they just want to dictate how they get it and in what form.

"Think about this consumer as somebody not to vomit all over with messages," Browne said, "but rather to engage in a discussion."

Appealing to advertisers and ad agencies requires a different tack. Browne stressed the need for accountability and devising methodologies for tracking not just whether ads are being seen, but who they're being seen by. Advertisers need assurances that they are hitting their target market.

For the developers and publishers, Browne said they want advertising relevant to the game just like their consumers. Ads have to provide them with revenue to offset their development costs, but Browne brought up ease of implementation as a key issue facing the in-game ad sector.

In the rhetorical part of his presentation, Browne proposed a scenario where car manufacturer Volvo was debuting a new vehicle and wanted to run an ad campaign in all the big new games over a six-month period surrounding the car's release.

"If you were Volvo and you were trying to get into 30 or 40 games over a six-month period today, you'd very likely be doing at least 20 unique deals and doing 30 separate projects with 30 separate game teams," Browne said. "That's impossible. Nobody's going to do that."

Browne said it was necessary to set standards for signs, video, audio, 3D objects, and file formats to be used across multiple games and a variety of platforms. He advocated developing tools that would put the burden of the work on the ad agencies. Not only are they more used to handling the entire creative process end-to-end when working in other media, but it would also resolve other significant issues. For example, with ad agencies handling the grunt work, there wouldn't be different artists on each development team trying to create 3D models of the car while juggling their regular duties on already-tight schedules.

While Browne is convinced of what needs to happen for the in-game ad market to realize its potential, he was quick to mention some additional unresolved issues. For example, he wasn't sure how willing developers would be to set aside memory for things like interactive ads, or how amenable they'd be to letting advertisers drop content directly into their games.

Then, there was "the big question of how we work together as platform owners to make sure that we can aggregate an audience that's really big and interesting for advertisers." Browne said neither Sony nor Microsoft would be able to single-handedly take the in-game advertising industry to the $700 million mark it's projected to reach by 2010.

That sort of willingness of competitors to work with each other is the big unknown, according to Browne. He discussed Microsoft's recent acquisition of in-game ad serving firm Massive as an example, and, in closing his keynote, said the company was committed to remaining platform-agnostic going forward. Massive already serves ads for Sony Online Entertainment titles PlanetSide and The Matrix Online.

Check back soon for more coverage from the Game Advertising Summit. The next GDC Focus On event is the Game Outsourcing Summit, scheduled to be held August 14 in LA.

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