A new report from market research firm Parks Associates Electronic Gaming in the Digital Home: Game Advertising forecasts that spending on game advertising will grow from $370 million in 2006 to more than $2 billion in 2012. During this period, game advertising is expected to achieve a compound annual growth rate (CAGR) of 33 percent, which Parks points out is "much higher than that of other major advertising media, including TV, radio, print, and the Internet."

"Advertising in electronic games had an average monthly household expenditure of less than 50 cents in 2006, while broadcast TV was at $37, meaning advertisers are not using the gaming medium to its full potential," commented Yuanzhe (Michael) Cai, director of broadband and gaming, Parks Associates. "If executed correctly, game advertising can provide a win-win solution for advertisers, developers and publishers, console manufacturers, game portals, and gamers."

The report goes on to say that the burgeoning field of in-game advertising will experience the most growth among the different game advertising categories. Parks predicts the in-game ads market to grow from $55 million in 2006 to more than $800 million in 2012.

Furthermore, looking specifically at dynamic in-game advertising (DIGA) in PC, console, mobile, and casual games, this subset is expected to grow from 27 percent of the total in-game advertising market in 2006 to 84 percent in 2012. These are the types of ads we hear about so often from the likes of IGA Worldwide and Double Fusion.

"DIGA offers several unique advantages, such as timeliness, scalability, measurability, and flexibility," added Cai. "But the industry will also have to address several looming challenges, including lack of economy, lack of industry standards, and media fragmentation."

In response to the study, Yoav Tzruya, from Exent Technologies, outlined some of the challenges to DIGA as follows:

Pushing Dynamic Ads into the Game
-- One needs to be able to define new advertising inventory on the fly, without the need to recompile the game or issue a patch to the game

Having a Dynamic Inventory (defining new ad spots in the game)
-- Publishers are still reluctant to put spots for ads in new games. However, when the games become older they become more lenient with advertising, winding up with releasing the games to free ad-supported models (like we see happening with Turner's GameTap and other services).

Enabling games that were never designed for DIGA
-- Dynamic in-game advertising needs to support games that were never designed to be incorporating in-game advertising in the first place. Unless new advertising objects can be easily inserted, publishers will not be able to fully realize the revenue potential.