A Starbucks ad placed in a video game by DoubleFusion.Advertising in video games is reaching a new level of sophistication.

Utilizing new tools and services that are still emerging, advertisers are able to place so-called rich media – videos, music, animations and 3D elements – in video games connected to the Internet, on the fly during game play and tailored to the location of the player.

This is adding a level of customization to video games that did not exist before.

This rich media plays in the midst of the action and can be an interactive element within the game, and the different “frame rates” – the speed of playback – of the video game and of the video or animation within the game may be synchronized. In addition, the new technologies are creating an opportunity for even greater customization of advertising in video games in years ahead.

The top executives of several startups that are marketing these technologies to advertisers and game publishers were among the speakers at the Advertising in Games Forum (advertisingin games.com) held Thursday in New York. Those startups include DoubleFusion (doublefusion.com), IGA Partners (ingameadvertising.com) and Massive Inc. (massiveincorporated.com).

Utilizing the new technologies, ads in online games can be localized; for example, a gamer in Atlanta may see a different ad in the same spot in the game than a player in Hackensack, and a player in England will see a different ad than a player in the United States.

The ads also can be customized: At a place in the game where one player sees an ad in the form of a pile of tires, another player may see an ad in the form of a can.
But these new advertising abilities are not necessarily suitable for all types of games, the experts say.

DoubleFusion’s technology is expected to launch next month with the new PC-based video game London Taxi, from Data Design Interactive (datadesign.uk. com) based in England.

According to Guy Bendov, co-founder and executive vice president of business development at Israel-based DoubleFusion, when the game is played over the Internet, ads in the form of billboards and animations will be automatically downloaded to the game from a DoubleFusion server.

DoubleFusion sells the in-game advertising space on behalf of the game publisher and manages the placements, Bendov says. Advertisers will get reports about how much the in-game media was exposed and how much it was used – clicked on – by the players, he says.

The other companies’ technologies work similarly, and they have been active longer.

Massive was formed 3½ years ago and launched its ad delivery network last October, says Mitch Davis, CEO of the New York-based company.

The Massive network serves rich media ads to six online games from 12 publishers. The game list is expected to grow to 40 by the end of this year, Davis says. Those publishers include Eidos, Ubisoft, Vivendi Universal and Atari.

IGA Partners launched a North American division based in New York in March but started in the business with its technology under a different name – inGame Partners – in March 2004.

The company places video and music in the Internet-connected PC game CounterStrike, published by Valve Corp. of Kirkland, Wash. (valvesoftware.com), says Darren Herman, founder and chief commercial officer of IGA Partners North America.

“Video games have never been touched by other forms of media before,” Herman says. By adding this rich media to a video game, he says, “you’re taking it to a whole new level of experience, and that experience will be exponential tomorrow.” Herman envisions being able to wrap satellite radio broadcasts or so-called podcasts into a video game, in accordance with the user’s taste in music. “Video games are no longer just video games. They’re movie platforms, music platforms and content platforms.”

In the 1990s, he notes, a video game typically cost $2 million to produce. Now it can cost between $20 million and $30 million to produce, he says. “Bringing in all these different media platforms can help generate revenue for a game,” Herman says.

Davis says the new technologies for in-game advertising “fundamentally change the economics of the game industry, adding a significant new revenue source.”

Still, Bendov, Davis and Herman also see limits to what the new technologies can do. Both Davis and Herman point out that video and music are bandwidth hogs and inserting them during game play can degrade the quality of the video game if the user is not connected to the Internet via a broadband connection. IGA’s network senses what type of connection the player is using and won’t serve music or video if it is not broadband, Herman says.

Herman also says that not all genres of video games are compatible with all types of rich media ads. An ad for a plasma TV would not fit neatly into a game environment featuring an ancient castle, he notes.

“The reality is that advertisers are not going to present their clients in a bad light, and the game publishers are not going to do anything to upset the gamers,” Bendov says, adding that the process is managed on all sides to make the in-game advertisement credible.