By Clayton Collins

The Christian Science Monitor, 1/26/06

Even a virtual soldier gets hungry sometimes. That's why one new firm is helping Subway, the sandwich chain, embed advertisements for its $2.49 daily specials in the video game Counter Strike. The real ads - still in test mode - appear on signs an alert gamer encounters while patrolling a virtual city.

And they appear to deliver. The company, Engage In-Game Advertising, surveyed online players recently after they had encountered the ads and recorded 94 percent recall. That's a "phenomenal" result compared with other media, says David Smith, vice president of business development for Engage in San Francisco. Subway's sales numbers also spiked in the test market.

Product placement meant to foster brand affinity has been commonplace in video games for several years. The practice is widely embraced by gamers, who prize realism - a FedEx delivery truck as opposed to a generic one, for example, in a street-racing game.

But "this is more," says Mr. Smith. "This is actually immersing traditional advertising, like billboards, into the games." The ads are local-market specific, and can be updated by means of an Internet "patch."

The move is the latest step in marketers' ongoing bid to capitalize on the rising number of PC- and console-based games that include, if not require, an online component. It has some watchdogs worried that more ads will pitch to younger-than-intended gamers.

Though many games are targeted to older teens, members of the age 12-to-17 set are most likely to play, according to one 2004 study.

"In-game advertising is here to stay, and will increase as more games and platforms hook up to the Internet," says Jeff Greenfield, executive vice president of 1st Approach, a marketing firm in Dover, N.H. "Gamers love the reality, and brands are excited about reaching their core demographic." It's a willing audience.

"This new generation of consumers does not consider its experiences 'authentic' unless advertising is involved," says Mario Almonte, a vice president at Herman Associates, a public relations firm in New York.

Soon, new gamers might not recognize ad-free games.

In fall 2004, two companies, inGamePartners and Massive, began experimenting with enhanced versions of product placement, including multiplayer online games that could be played free if a gamer agreed to view ads.

Then, early last year, Sony Online Entertainment formed an alliance with Pizza Hut centered on the fantasy role-playing game Everquest. A player can type "pizza" to open a browser window and order home delivery.

Today, one in-game advertising insider speaks excitedly about games in which a 3-D city might resemble New York's Times Square, ablaze with ads. Already in the works: in-game ads that replicate broadcast advertising formats. For example, a car in a video game can have a radio that streams live-audio ad messages, says Justin Townsend, chief executive officer of IGA Partners Europe, a leading global player in in-game advertising.

As for in-game television ads: "That's very close on the horizon," says Mr. Townsend. "Our next software release will actually allow us to place TV spots inside games."

Some observers, including Mr. Greenfield, do not yet see clear evidence that in-game ads will cause youths to buy more. Greenfield also maintains that too much ad clutter could actually annoy gamers and even trigger retaliatory hacking. "This is a rebellious group," he says.

Already the Pizza Hut order option has been derided on some websites, says Steve Mounsey, a 20-something gamer who manages a GameStop store in Beverly, Mass. "A lot of people make fun of that."

Still, few marketers are likely to resist the potential gold mine. Big recent studies - including one in November by Mediaedge:cia and another, just last month, by Nielsen Entertainment and gamemaker Activision - show relevant, well-integrated in-game ads to be remarkably persuasive among 18- to 34-year-old males, a group marketers have found to be elusive of late.

"The consumer is no longer sitting in front of the TV set, and brands have to be more innovative in terms of engaging that consumer," says Claire Rosenzweig, executive director of the Promotion Marketing Association (PMA), a nonprofit research and educational organization. "What you see is an incredible rise in experiential marketing, and 'advergaming' can be included in that branded experience." (Advergames typically promote a single product or brand.)

The PMA's stand on this avenue for ads: The industry should educate, rather than regulate. "Give people information about what it is they'd be engaging with," says Ms. Rosenzweig, "and let them make informed decisions."

But all of that access to eyeballs, in the hands of a still largely self-policed marketing channel, has more independent watchdogs concerned. In some cases, in-game ads might thrill marketers by providing useful feedback on gamers' personal preferences - vehicle colors, for instance - raising privacy concerns. And parents rattled by the likes of Grand Theft Auto may now wonder what kinds of ads might eventually flow through such games, many of which are played by younger teens, despite a ratings system.

"It's virtually impossible to know what kids are doing," especially as gaming goes mobile on hand-held devices, many with wireless Internet connections, says Susan Linn, cofounder of the coalition Campaign for a Commercial-Free Childhood.

She suggests that parents lobby Congress to get the Federal Trade Commission involved.

"We need to have some laws about marketing to children," says Ms. Linn, as what she calls "interactive advertising" broadens its reach.

IGA's Townsend counters that it is in advertisers' interests to protect their brands from image problems. Clients already can schedule ad campaigns that preclude games that feature alcohol or violence. He adds that opt-out rules apply to in-game ads, and he says firms like his are not seeking to mine for private consumer data.

"If you were to remove any regulations regarding privacy, it would be an advertiser's dream," he allows. "[But] there are regulations in place already that prevent people from working with that data."