Transcript In-Game Advertising in China

In-Game Advertising in China
Edward Lehman
Managing Director
China’s Gamers
• China’s Internet-using population slated to
surpass that of the United States by early 2008
• Largest market in the world for Massively
Multiplayer On-Line Role-Playing Games
(MMORPGs)
• Over 45 million people in China play games online
– Roughly half of these players pay for them.
• Estimated 85 million online gamers in China by
2012
Business Models
• “Pay to Play” Models
– Sale, Subscription, or “Pay as you Go”
– Sometimes advertising-supported
• “Tiered” Model
– Players pay to improve their character
• “Free to Play” Models
– Selling virtual land, items, et cetera
– In-game advertising
Types of In-Game Advertising (1)
• Static Ads:
– Ads hard-coded into the game, and do not
change
– No Internet connection required
– No way to easily gauge effectiveness of ads
• Dynamic Ads:
– Game contains ‘ad engine’ to retrieve ads on
demand
– Requires Internet connection
– Can change ad campaigns for a particular game
– Can enable ‘click-through’ and other user
interactivity, monitor ratings, et cetera
Types of In-Game Advertising (2)
Advertisements on
Menus and Loading
Screens
Advertisements in
the “Game World”
Immersive versus Intrusive
• Well-placed ads make
games more realistic
• Poorly-judged ads can
turn off players
(potential customers)
Market Growth
• “Netguide 2008” survey: Gaming market increased 57%
year on year to RMB 14.7billion (US$2billion)
• Public gaming companies – market capitalization:
– Giant Interactive (NYSE: GA) - US$2.6billion
– Shanda (NASDAQ: SNDA) - US$2.13billion
– Perfect World (NASDAQ: PWRD) – US$1.31billion
• Growth of local companies specializing in in-game
advertising: Captiv8; NGI; In-Game Interactive
• Foreign in-game advertising companies starting to
establish presence in China: Aruon Communications
(Korea); GameGlance (Thailand)
Regulation
• Restrictions on Advertising
– “Real world” restrictions also apply to the
“virtual world” (and to on-line ads in general)
• No obscene, false, or disrespectful advertising,
or advertising that runs contrary to official
ideology
• Restrictions on Online Gaming
– Computer game software is a “restricted
area”; foreign game producers may not operate
directly in China
– ID registration and restrictions on gamers
under 18
• Software must contain time restrictions
Thank You!