DFC second-guesses game-ad growth
Analyst firm is skeptical of bullish expectations for in-game advertising growth, forecasts better results from digital distribution and subscriptions.
There's no shortage of people predicting explosive growth for game advertising. In a report on the gaming market released earlier this year, Parks Associates analysts projected that the in-game ad sector would jump from $370 million in 2006 to more than $2 billion by 2012.
However, not everyone is expecting such explosive growth. One firm thinks the industry's expectations of in-game ads are skewing high. DFC Intelligence today released an investors note explaining why it is sticking to its own comparatively conservative forecast of 250 percent increase by 2012 (compared to the more than 500 percent growth expected by Parks Associates).
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"Advertising is all about collecting a whole bunch of eyeballs in a certain demographic and being able to target them with the appropriate message," DFC explained. "Much of the focus on future advertising in video games is clearly looking at the mass market video game consumer. However, the reality of who will be online to receive advertising in the near term is much different. The opportunity in the next few years for console systems is more likely to be the hardcore or enthusiast gamer that has a very different profile than the market as a whole."
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As for that more mainstream market, the report points to Electronic Arts' Pogo.com and sites like it as being especially successful, attracting tens of millions of users. However, DFC also notes that EA has been fairly quiet on the subject of ad revenue expectations of late, folding the category in with licensing and other miscellaneous income on its financial reports. For the company's fiscal 2007, it actually reported that revenue from that combined category was down 6 percent to $57 million.
"Products like PlayStation Home provide a potentially attractive environment for advertising," the report concedes. "It is just that many of these products are simply what the PC business has been doing for years. Advertising is in large part a numbers game and there seems to be no way that console systems will have the aggregate numbers of the PC in the next five years."
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