In-game advertising: A necessary evil?

Do pirated games translate to lost revenue? If so, can in-game advertising fight it?

In a world where software piracy runs rampant, one indie developer is choosing the lesser of those two evils. Greener Grass Games, based in Vancouver, hopes to create a free-to-play, browser-based game supported entirely by in-game advertisements.

The practice hasn’t quite caught on with larger companies (video games are still viewed as experimental ground by many advertisers), but increased advertising in video games is part of the industry’s future, and this project could herald the beginning of a new era.

It began with Raycatcher, an indie game offered through Steam (a platform for distributing PC games over the internet). Only a day after the game was released, 35,000 copies were pirated, compared to a measly 1,000 purchased at its $5 price tag.

The Greener Grass Games logo, taken from the official Web site.

After that, John Warner, one of the game’s designers, formed Greener Grass Games with partner Mitch Lagran in order to sidestep the piracy business. By offering their new game (still in development and as-of-yet untitled) for free, they plan to use advertising dollars rather than purchase price as a business model. Within the game’s 3D environments, they’ll use billboards, posters, television screens, etc. to display various kinds of ads.

Using in-game advertising is nothing new — media analysis firm Screen Digest predicts it will be a $1 billion industry by 2014 — and in Asia, the free-to-play model has already become a popular method for combating piracy. Even so, this free game would be among the first to generate revenue entirely through advertising, and if the idea catches on, it could change the face of indie development in North America.

The folks behind these games don't think piracy detracts much from overall sales.

However, going back to the beginning of this equation, piracy in fact hardly affects total sales. After all, Demigod, which opened to an 85 percent piracy rate, still managed to reach #3 in retail PC sales. World of Goo’s PC version saw a 90 percent piracy rate. And despite these high numbers, the games’ developers argue that most pirates never buy games anyway, so high piracy rates don’t always mean lots of lost sales. Russell Carroll, director of marketing at Reflexive Entertainment, also estimates that for every 1,000 piracy attempts you prevent, you only gain 1 additional customer.

So it’s not necessarily right to say indie developers will turn to in-game advertising out of a need to combat piracy.They’ll turn to it because it makes them more money (not a selfish thing at all — game designers need to eat too, you know). Just because they employ in-game advertising, that doesn’t mean developers need to model themselves after Greener Grass Games either; advertising could be used to supplement sale profits rather than replace them, or like newspapers and magazines, developers could still sell every product (albeit at a loss) and plan to generate their real revenue through the in-game ads.

That said, liberty from corporate trappings is one of the main reasons indie developers are successful, and some will abstain from in-game advertising out of principle. But with games expanding to broader audiences, it’s only a matter of time before businesses start aiming to capitalize on the success of not only smaller indie games, but blockbuster titles as well. Greener Grass games is just the beginning. It might not happen right away, but over the next several years, we can expect in-game advertising to become much more prevalent. We’ll probably see more billboards and posters, some logos in random areas, maybe even commercial breaks between levels (the latter one’s a stretch, but who knows for sure?).

Snake could advertise his very own brand of cologne in-game.

Not that in-game advertising is always a bad thing, though. Product placement has been part of the movie industry for years, and even if it detracts from a product’s aesthetic qualities, corporate sponsorship allows for bigger budgets, which could mean bigger and better games. Also, according to a study sponsored by IGA Worldwide, the world’s “leading in-game advertising network,” (therefore the results are most likely biased, but still worth pondering), 82 percent of gamers don’t mind games with advertisements. Looking at it this way, in-game advertising only means developers earn some more rightfully earned cash, and gamers will simply have to endure those Pepsi symbols in the lush 3D backgrounds of their favorite titles, which only bother 18 percent of gamers anyway.

Games such as 1 vs 100 for the Xbox hint at the potential markets for in-game advertising, but with the economy in flux, it could be a while before businesses really begin experimenting with it. Still, the industry is headed in this direction, whether gamers like it or not, and everyone — gamers, developers, the world — should brace themselves for the corporate storm.

And ironically enough, it all begins with an indie developer.