Random Noise » market analysis http://www.jeffcarnahan.com/blog Mon, 25 Feb 2008 05:02:54 +0000 http://wordpress.org/?v=2.3.3 en Numbers Game http://www.jeffcarnahan.com/blog/2007/07/12/numbers-game/ http://www.jeffcarnahan.com/blog/2007/07/12/numbers-game/#comments Fri, 13 Jul 2007 04:14:06 +0000 Jeff http://www.jeffcarnahan.com/blog/2007/07/12/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.

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