JJ Richards, general manager of Massive, the in-game ad network Microsoft purchased in 2006 for an amount estimated to be between $200m and $400m, has a message for anyone who believes that in-game advertising must have been overhyped due to steep layoffs in his unit and rumors that Microsoft has been shopping it to potential buyers. That message is: in-game advertising is doing great thank you very much.

In a post on the Microsoft Advertising Blog, Richards statesI want to set the record straight by divulging five basic facts about in-game

The ‘facts‘ Richards presents are:

  • In-game advertising is thriving. Richards reveals that “For our 2009 fiscal year, Massive achieved an impressive double-digit
    year-on-year revenue growth in the face of one of the worst economic crises of
    the last century
    “. He says first quarter sales targets have been exceeded by “more than 100%” just one month in.
  • Gaming connects brands to valuable audiences. Richards calls in-game advertising the “holy grail” because it enables advertisers to reach the young male demographic that is increasingly elusive.
  • In-game advertising works. From brand lift to recall, Richards touts impressive stats from research studies that make the argument in-game advertising is an effective medium for advertisers.
  • In-game advertising is measurable, inexpensive and easy to do. Producing the creative for in-game ad campaigns is easy, effective metrics for tracking results are readily available and CPM pricing is “in line with cable TV rates for young demographics“, according to Richards.
  • Gamers like it. Massive’s research indicates that “most gamers like advertising in the game because it adds to the realism“.

It’s hard to argue with success and Massive’s revenue growth and sales performance sound impressive. Richards does a good job of selling in-game advertising and I think many of the selling points he makes are valid. In-game advertising is something worth looking at, especially for brand advertisers.

But like any good sales pitch, Richards leaves out a few things:

  • Massive’s fiscal performance isn’t necessarily evidence of a “booming” market. Without dollar amounts it’s difficult to qualify just how impressive the unit’s performance is and I’m inclined to say that the unit’s ability to beat quarterly sales targets in a single month might be more indicative of significantly lowered expectations than anything else.
  • Richard notes research from Screen Digest projecting that in-game advertising will be a $1bn market by 2014. That’s nothing to sneeze at but in 2006, Microsoft projected internally that in-game ads would be worth $1bn by 2010. That’s quite a big difference and as we’ve seen in many tech markets (mobile anyone?) predictions often aren’t worth the paper they’re printed on.
  • CPMs in line with cable TV rates for young demographics” doesn’t necessarily equate with “inexpensive“. A medium is only inexpensive when the cost of desired results is comparatively cheaper than other mediums.
  • The 18-34 year-old male demographic is not the “holy grail of advertising“. For some advertisers, it may be an important demographic but I cringe whenever someone calls a single demographic a “holy grail“.

Bottom line: Richards is trying too hard to sell in-game advertising. At the same time, skeptics and naysayers are trying too hard to dismiss it. The reality is that, like any advertising medium, there’s good and bad. In-game advertising may not yet be (and it may never become) what some predicted. Maybe it has been overhyped. At the same time, it’s clear it’s a ‘big enough‘ market that has the potential to offer real value to certain kinds of advertisers looking to reach certain kinds of consumers. There’s nothing wrong with leaving it at that.

Photo credit: mawel via Flickr.