All these happened like a synchronicity. A couple months ago I was introduced to a Korean in-game advertising company. Few days ago I met a new friend over the Internet, Mr. Darren Herman, the man who created the world’s first dynamic in-game ad engine. I was reading Darren’s blog while he was reading mine. Subsequently we were talking to each other over emails for opinion sharing. By the way, Darren Herman’s blog is a worthwhile read for marketers.

I am a casual gamer but find myself quite disconnected from the latest game trends. In the last couple of months, I was connected to the people and the market. The digital game industry has once again got my attention as an advertising medium. So I decided to take a closer look for the market in China.

I begin my research from an Internet advertising report recently published by JPMorgan (China Web 2.0 Review has the China chapter summary), which gives China online game market an estimated 37% year-on-year growth in the MMORPG (Massively Multiplayer Online Role-Playing Games) segment and 43% growth in casual games. Total number of gamers is 44.7 million and 50.9 million for MMORPG and casual game respectively. Market size worth US$1.8 billion for 2008.

Adding to the above numbers, I also think China’s new economic policy to cultivate creative industry will be a boost for digital game business in a long run. Previously I had visited a few China’s hi-tech and incubation parks such as the really impressive one in Chengdu. Computer animation and digital gaming are two major emphases. And they have a pool of talented companies working on the R&D in this area.

Besides, the growth of ChinaJoy, China’s largest digital game exhibition and the world no.3 show after Tokyo Game Show, has kept doubling up its exhibiting area and the quality of exhibitors are improving each year. This is also a factor that indicates the market growth.

So, this is the digital game market in China, but this is only the game market. In-game advertising in China has yet to get started, or I should say it is about to get started.

No doubt that every China online game provider is eyeing on in-game advertising business. Following the news of Shanda, China’s leading digital entertainment company that officially confirmed its in-game advertising business last October, I believe other game publishers will follow suit.

Here I can create a portfolio of the Chinese companies which everyone has relevant strength, financial capacity, and potential to expand into the in-game ad business.

Shanda Interactive [[SNDA]]
The9 [[NCTY]]
Giant Interactive [[GA]]
Netease.com [[NTES]]
Perfect World [[PWRD]]
Sina.com [[SINA]]
Sohu.com [[SOHU]]
Tencent (0700.HK)

Besides the game publishers, we also have quite a few companies working on in-game ad solutions. Local players like Captiv8, InGameAd Interactive, NGI are signing up game publishers. International companies like the Korean-based Aruon Communications and Asian-based GameGlance already have their China operation setup in Shanghai. And Darren Herman was telling me that a couple of US companies such as IGA Worldwide, MSN’s Massive, Turner’s GameTap, Double Fusion, MochiMedia, and I will also add Google’s Adscape in my watch list, all have plans to enter the Asia/China in-game ad market.

Ok. Don’t forget up to this moment, China in-game advertising is still an unexploited market. So no one has the precise number to realize the potential.

But, according to Parks Associates’s report, US in-game advertising spending is expected to grow from US$370 million in 2006 to more than US$2 billion in 2012. So we can take reference and assume the China in-game ad market, once it kicks off, will follow suit. This is the general assumption.

It is the sizable users base that makes the digital game platform an encouraging medium for advertising. In China, the Internet game users penetration rate is 22.3% for MMORPG segment and 25.4% for causal games according to the JPMorgan’s forecast. This represents a potential reach of approximately 50 million target audiences (assume an overlapping users base for different type of games) spending hours watching and interacting with the advertising medium.

So yes, the reach is there. We can further drill into all the relevant demographics and to justify a great business potential with all the numbers. But I think it is equally important for us, as a marketer, to look into the practice side, which is how we want to ensure the reach will impact the bottom line and equates with a measurable metrics. I will talk more in my next post.

Here I’ve found you a clip on YouTube about US in-game advertising market. Worth a watch.

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