Brands still wary of Chinese gamers

Sometimes, when targeting a particular consumer group, stealth is key. When buying a condom, for example, a little privacy is in order. In a campaign for Jissbon condoms launched in Shanghai during this year’s Golden Week, the product was bundled with a specially designed gaming disc and shelved side by side with its unbundled, gameless counterpart in selected Watsons and Carrefour stores across the city.

“Buyers could say to themselves, ‘Hey, I’m buying this gaming disc,’” says Steven Hu, CEO at InGameAd Interactive, the agency that created the game and marketing strategy for client, Jissbon. “This helped the brand achieve a huge differentiation in consumers’ eyes, and sales nearly doubled during the campaign.”

In hindsight, the Jissbon digital initiative seems an obvious marketing ploy, but brand owners have been slow in adding games to their China media mix, despite the heavy migration of young consumers to virtual realms of play.

Digital games arrived late to China. But after a few short years, the country can now lay claim to the world’s largest gamer population - and that will only grow larger as PC penetration expands beyond tier one cities. Unlike the West, where console games are dominant, Chinese gamers use the PC as their platform. In fact, PS3s, Wiis and Xboxes are technically still illegal, though available in China.

Few foreign games have traction in China, the exceptions being blockbusters like Blizzard’s World of Warcraft and NCSoft’s Lineage, both of which are online subscription-based games. In contrast, most of the top 10 game list consists of free-to-play games offered by Chinese developers and publishers Tencent Holdings, Shanda Games, NetEase.com among others.

Chinese gamers are willing to spend on virtual items, and revenue is growing fast - up 39.5 percent to 6.2 billion yuan (US$908 million) in this year’s second quarter. Six Chinese game companies have already listed on the NASDAQ, and all are committed to launching global gaming blockbusters.

With this backdrop, China would seem fertile ground for game-based marketing, but not much is happening. Asked what milestones the in-game advertising industry has so far witnessed, Hu says, “We are still waiting.”

Industry analyst, Lisa Cosmas Hanson, managing partner at Niko Partners, says in-game advertising is still small in China so far, with less than three percent of revenue for online games coming from advertising. Hanson says the culprit is game content. “In surveys, Chinese gamers say they don’t mind in-game ads provided they aren’t disruptive. But the problem is that the mythical and historical themes of most Chinese games don’t lend themselves to advertising.”

The same view is held at Taiwan’s largest game developer and publisher, Softworld International. “Most in-game advertising would be for modern products like drinks or clothing,” says vice-president and CFO, Hsing-Po Chung. “How could a developer incorporate that into an ancient Chinese game theme.

In Taiwan, ZenithOptimedia estimates that the country’s in-game advertising spend totals less than NT$1 million (US$31,000) annually. In China, that figure would be much larger, though still relatively small given the country’s gaming population.

According to Hu, one reason for the low level of in-game advertising in China is the traditional digital media bugbear - the lack of third party metrics.

That is not to say that the measurement technology is not available. InGameAd Interactive, for instance, has backend systems that can track the position of each gamer’s avatar at three-second intervals and record what is visible on their PC screen. “Traditional market research companies don’t have the technology to do this,” says Hu. “When asked to analyse results for a game, they turn to traditional sampling and pick, say, 20 cities and interview 500 gamers and try to determine if they have seen the product placement.”

In spite of yhese measurement concerns, however, some brands have taken the plunge, especially on social networking platforms such as kaixin001.com, where branded web-based games are highly popular. Brands are incorporated into game play through a variety of methods - from straightforward branded gaming environments or game sponsorship to more sophisticated offerings such as in the popular Sale of Slaves game where users are able to reward their ‘slaves’ by purchasing them a Pizza Hut lunch.

Still, the in-game ad culture in Greater China is far behind that found in neighbouring Japan and South Korea. Similar to China and Taiwan, gaming in Korea is predominantly online-based - the country led the gaming industry shift from consoles to online games a decade ago when NCSoft launched its online hit Lineage. Korea also played an equally important role in developing the free-to-play model with Nexon’s Maple Story and other games exported across the region.

Unlike Taiwan and China, however, South Korea has a thriving in-game advertising industry. Korean games tend to veer towards modern themes such as car racing or dance, and as a result are much better suited for advertising.
In Japan, in-game advertising is also growing, and will continue to do so despite the current recession, says Richard May, director at the Japan Consumer Marketing Research Institute (JCMRI). For years, Sony has deployed in-game ads via several generations of its PlayStations, and more recently it has worked with IGA Worldwide, one of a dozen global in-game placement firms, to place other company’s messages as well.

Last month, Sony began work with another multiplatform in-game advertising company, Double Fusion, to place advertising in games played on PlayStation3, and the service debuted Konami’s soccer games.

Research conducted by JCMRI shows that in-game ads appearing as billboards within a scene or even in its background or wallpaper are clearly seen by gamers. But May notes that one of the more interesting trends in Japan, and one that the rest of Asia will surely follow up with, is the already advanced use of advertising in mobile phone games.

“On a subway or train, commuters will find stickers on the windows them to a URL where they can play the game. These games are embedded with advertising, and are designed for a short duration for play, usually under three minutes, which is slightly less than the average travel time between stations.


This article was originally published in 3 December 2009 Winter issue of Digital Media.