Is China the promised land for in-game advertising?

Lisa Cosmas Hanson, managing partner, Niko Partners, says NO

"Niko Partners has provided market intelligence on China's online game industry for eight years. In that time we have seen little penetration of in-game advertising, but we think the market has promise. It is not a question of converting online gamers to online consumers, it is more the appropriate placement of both dynamic and static ads in the games that exist today.

Chinese online gamers are not opposed to unobtrusive in-game advertising. The big issue is that it doesn't really fit the genre for the Chinese games that are worth advertising in, such as the MMORPGs. Most of those games are based on mythical, cultural history themes and sticking in an ad for a modern day consumer product is inconsistent. The sports games are logical fits, yet they have not succeeded to the extent that the others have.

If the purpose of an in-game ad is to raise awareness of a certain product or service, then its use can be effective in China because online gamers are consumers in stores and online. If the purpose is to drive an immediate online purchase, that would be less effective."

Steven Hu, CEO, InGameAd Interactive, says YES

"We see more global brands such as GM, Alibaba and Logitech adopting in-game or gaming-related advertising in China.

Converting online gamers into consumers is not difficult because online gamers are some of the most active online spenders. They have been happily paying for entertainment online. In 2009 the online game market was worth about US$4 billion, more than four times as much as the film industry in China.

There is a trend towards female online gamers, but the content and variety of the social networking games they favour are diverse, which creates more pressure for advertisers.

Automobile advertisers have used online games well, perhaps because the virtual game world and the actual test-drive experience are somewhat similar.

As more advertisers see their competition's gaming-related campaigns, the market will develop more quickly which, in turn, will push the in-game advertising market to further evolve and better serve advertisers in China."

Patrick Xiao, digital director, UM Shanghai, says NO

"Not for the short term, but maybe in the medium and long term. Currently China is the largest online game market in the world, but the problem is that the majority of the gamers are young. 60 per cent of them are under 20 years old, so they have limited income and consumer power.

They do buy virtual goods, but not so many real world goods and, even if they buy non-virtual goods, they are often limited to FMCG and food and beverage purchases. They rarely buy expensive products.

China does have great potential as 20 to 40 per cent of people shop online. Brand campaigns in the virtual game world have not yet matured, partly because it is difficult to measure the efficiency and success of the campaign.

Currently, Chinese online gamers don't like ads that take the hard-sell approach such as direct branding banners. If the campaigns are softly imbedded, then they will accept them more willingly.

But softly imbedded campaigns are more creatively- driven and much harder to devise so they require more creativity from the agency."

Meg Wu, MD, Interaction, Group M China, says YES

"More and more of our clients are interested in in-game marketing and, in the past two years, the application of social networking services on mobile platforms has become very popular.

Previously much of our in- game marketing efforts focused on large-scale games, which have a much longer production time. This also meant there were many limitations in the game interface and content. As a result, only very few clients have produced really successful marketing campaigns.

However, in the past two years, more leisure games have been developed. These dancing and music games, centred around fame and celebrity, are very popular with young people.

Increasingly clients are more open to in-game advertising, since social network platforms have become a very hot talking point and their in-game application have also become a focus point.

Still, it's the case that most of our clients undertake in-game marketing campaigns as a way to strategically support their branding and consumer engagement objectives."

This article was originally published in the 17 June 2010 issue of Media.