If you ask many pundits of the interactive entertainment industry, in-game ads are the way of the future. A recent study by Nielsen and Activision concluded that in-game ads helped increase a brand's "pervasiveness," defined as "the willingness of consumers to change their opinions of a brand and/or recommend it to others." The study also showed that the advertising enhances the experience, so long as the ad is relevant to the game it is in.

One of the main reasons that the study was conducted is that nowadays the crucial 18-34 male demographic is playing games more and watching TV less. With TV ratings down, advertisers are looking for a new space to increase awareness of their product. Game publishers aren't objecting either, as it is estimated that the revenue for certain titles can increase 20-30% above the amount generated by the title's retail sales.

One of the leaders at the forefront of this advertising revolution is IGA Worldwide. The technology they're pioneering incorporates "Dynamic In-Game Advertising." This allows advertisements to be switched out as they cease to be relevant, which enables games to continue to produce revenue long after the vast majority of retail sales have happened.

"With 70% of gamers saying that advertisements inside computer and video games help improve the realism of the gaming experience, an In-Game Advertising campaign is the ultimate opportunity to reach game playing consumers with an effective method that works," says a statement on IGA's website. "Gamers at play are operating at a much higher concentration level than someone who is passively watching television, glancing at a subway poster or flipping past a magazine ad."

"With Sapphire & Diamond, IGA Worldwide unique technology solutions, we simultaneously maximize In-Game Advertising and Marketing ROI," it continues. "IGA Worldwide dynamically serves a variety of advertising types across its versatile aggregated network of best-selling computer and video game titles. Our technology delivers measured results on consumer interaction with branded messaging."

GameDaily BIZ talked to Justin Townsend, IGA's CEO, about the business his company is named after. We discussed the company's expansion into different parts of the globe, what exactly in-game advertising tells the advertisers and how in-game ads will be even bigger than estimated.

IGA recently secured 12 million dollars in funding. Townsend revealed to GameDaily BIZ that the company plans to use the money to expand from its current offices in London, Berlin, and New York. The resources will be used to spread into Europe (specifically France and Nordic territories) along with both coasts of the United States. IGA also plans to expand into Asia, where companies in this business are even rarer than other major markets.

Townsend also explained just how the advertisements function. The advertisers don't have to pay for anything more than what people notice, and the technology does more than track whether or not the player has seen the advertisement. It keeps track of how long it has been looked at, what angle, and various other vital metrics. "The ad client is only paying for what is seen," he said.

He also mentioned how the oft cited statistic that in-game ads would be a billion dollar industry by 2009 was somewhat off. The estimates only account for more static product-placement in games. The sort of dynamic in-game advertising that IGA does should be millions more on to that number. "We expect the 1 billion dollar estimates to be far north of 1 billion," said Townsend.

While IGA has been on the leading edge of in-game advertising, its actions recently have produced a bit of controversy. IGA, working with Engage, placed ads in Counter-Strike for the Subway food chain. The problem, however, was that Valve had not given permission for either company to do so. Said Valve's Doug Lombardi at the time, "At no time did Valve grant permission nor discuss these advertisements with Engage. As such, this is now a legal matter. Advertising or any other commercial use of our games requires our written permission."

Valve and IGA managed to settle their legal differences last week. There was little indication as to how the ads found there way into Counter-Strike without Valve's permission in the first place, but the parties settled and absolved IGA from any liabilities. Townsend did not comment on the recent settlement between the two companies.

"IGA has always sought to honor the intellectual property rights of the owners of games in which its advertising is inserted. IGA takes its responsibility to obtain such permission very seriously," said Valve and IGA in a statement. "Valve and IGA have announced that they are pleased to have reached a swift and professional resolution of any issues that may have existed between them, IGA's advertisers and IGA's advertising agencies."