in-game advertising in china edward lehman managing director

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In-Game Advertising in China Edward Lehman Managing Director

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In-Game Advertising in China

Edward LehmanManaging 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!