Despite its rocky history, nearly everyone agrees that the potential for online advertising is enormousThe argument goes that advertising budgets should be spent roughly in accordance with how consumers spend their timeThus, if 20% of consumer time is spent online, 20% of advertising budgets should be spent online
Of course, that thinking lost a lot of people a lot of money in the late 1990s. Online advertising spending peaked in 2000 at $8 billion and declined for several years, even as people were spending more time online. However, the last two years have seen record spending for online advertising. According to the Internet Advertising Bureau, online advertising could reach $12 billion in 2005 (up from slightly under $10 billion in 2004)Of course, the biggest growth area for online advertising is from the search and keyword advertising best exemplified by Google and Yahoo. Online games are attracting an increasing amount of consumer time, but they attract a comparatively low rate of advertising spending. The question this article will address is whether game companies will be able to cash in on the online advertising bonanza or whether games will continue to be a paid-content media form
The relationship between games and advertising has always been rockyGames have not followed the advertising rule of spend-money-where-consumers-spend-timeDespite garnering enormous amounts of consumer time, especially in the valuable young male demographic, video games have never generated serious revenue from advertisementsThis is despite the fact that advertisers and game companies alike have tried for years to bring advertising into the gamesAdvertisements have appeared in games since at least the early 1980s. Furthermore, ads have not been limited to billboards and logos in sports and racing gamesFrom the infamous ?pizza?command in Everquest, which allowed users to order real-world pizza in the EQ virtual world, to Axe body spray signs in Splinter Cell, advertising has spread across all game genres,. However, this advertising has been at most a minor revenue source and is probably best compared to product placement in movies and television
Product placement in video games has been hyped for years, but the biggest growth in advertising has been with online games, and most specifically casual online games. Massively multiplayer online games (MMOG) and retail hybrids like Half-Life 2, have not really attracted advertisingOn the other hand, online-only casual games present a fundamentally different opportunity than buy-at-retail, play-online gamesUsers play the games through a traditional website, often within the web browserIn this way, they become just another content type on the Internet, as likely and able to host advertising as a blog, newspaper, email account, or Salon.comAds can be displayed around the actual gameplay spaceThey do not require special creative advertising work or incorporation into the actual gameOne ad buy can span all of Yahoo抯 properties, including gamesAs has been said, content is king, and game content seems particularly attractiveCasual game sites record tens of millions of unique users a monthOnline game providers are some of the tickiest?sites in the world, which means each user spends a lot of time on the siteThese two factors combined mean that game sites should be attractive to advertisersAt this point, there is no question: the usage is thereGoogle is now generating over a billion dollars in advertising revenue per quarter. Game content already has heavy usage and even if it could only attract a fraction of the advertising of Google it could be a significant source of revenue.
Unfortunately for online game companies, the story is a lot more complicated. There are crosswinds blowing around nearly every key point in advertising抯 potential for game sites, making it difficult to determine how integral advertising will become to online game business modelsIn order to understand why, we have to look at how online advertising revenue is generated.
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