Random Noise

Numbers Game

Predicting the growth of the in-game market seems to be a popular activity these days. Over the past three months four large reports have been released. Let’s take a look at what they’ve got.

In April, eMarketer released a 14 page report that examined video-game related advertising from a number of angles. Disclosure: I’ve read the report, but I’m going to avoid quoting from it directly (since it is a paid download). Overall they paint a rosy market picture. They cite positive comments last year from Joanne Bradford (Microsoft) and from Google on their acquisition of Adscape Media. They also claim the continued strength of the gaming market as a whole (and recently the increasing appeal to casual gamers) will also fuel advertising growth.

So let’s get to the numbers – their press release predicts that worldwide spending will rise from $692M today to $1,938M in 2011. They believe the US market contributes 50% of that figure.

Wowza! That’s a 22.9% CAGR (compound annual growth rate).

Parks Associates has more optimistic numbers. In June they released a 190 page report (I haven’t read all of this one =) that predicts market growth from $370M in US generated revenue in 2006 to $2,051M in US generated revenue in 2012.

Double wowza! That’s a 33% CAGR.

What I find most interesting here is that one of the authors of the report dismisses the idea of advertising in casual games. Speaking about the report to GamesIndustry.biz, Yuanzhe Cai says “I think the casual game genre is not very appopriate for in-game advertising.” Personally I disagree with him, so by his assessment $2B may be an underestimate.

Up next, PricewaterhouseCoopers. In their June “Global Entertainment and Media Outlook” report (which I haven’t seen), they expect a 9.1% CAGR for the games market overall, but much faster growth in in-game advertising. They expect US revenue growth from $80M in 2006 to $950M by 2011, which works out to a 51% CAGR. Triple wowza!

Finally, the Yankee Group. This month they released a report (which I haven’t seen) that predicts growth from $77M worldwide in 2006 to $971.3M in 2011. These are the most conservative numbers of the bunch, but I can only assume that’s due to the scope of the report. It’s titled “Advertising and Games: 2007 In-Game Advertising Forecast.” So I presume it doesn’t include estimates for advergaming (which others typically break out separately).

Even though these numbers seem much lower than the other reports, the growth rate is through the roof. $77M to $971.3M in 6 years represents a 52.6% CAGR. Wowzatacular!

By all accounts we have a bright future ahead of us.

Sources:

• “Video Game Advertising: Getting to the Next Level” – report by eMarketer (Apr 6 2007)
• “Electronic Gaming in the Digital Home: Game Advertising” – report by Parks Associates (Jun 29 2007)
• “Global Entertainment and Media Outlook: 2007-2001” – report by PricewaterhouseCoopers (Jun 23 2007)
• “Advertising and Games: 2007 In-Game Advertising Forecast” – report by Yankee Group (Jul 6 2007) (paid membership required)

Related:

• On the strength of the game industry: “This year, people will spend more money on games than they will on music.” – Peter Moore @ E3 2007 (skip to 14:38)
• Jun 7 – Got game – Economist.com
• Jun 18 – Beyond in-Game Ads: Nissan Takes Growing Market to Different Level – AdAge.com
• Jun 21 – Video Game Industry Growth Still Strong – HollywoodReporter.com on the report by PricewaterhouseCoopers.
• Jun 22 – Analyst: Games Industry To Reach $49 Billion by 2001 – Gamasutra.com
• Jun 28 – Parks Associates: Game Advertising to Pass $2 Billion by 2012 – GameDaily.biz
• Jun 28 – Game advertising to exceed $2 billion by 2012 – report – GamesIndustry.biz
• Jun 29 – In-game ads can be “double-edged sword”, says analyst – GamesIndustry.biz
• Jun 29 – In-Game Advertising To Top $800 Million by 2012 – Slashdot
• Jul 7 – Analyst: In-Game Ads Grow To $971 Million By 2011 – Gamasutra.com