Digital advertising in mobile games: A ...

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Digital advertising in mobile games: A conceptualization and description of typical features of mobile in-game advertising JARI SALO*, HELSINKI SCHOOL OF ECONOMICS, FINLAND

ABSTRACT Changes in advertising media and the increasing sophistication of mobile technology are propelling the advertising field forward and have positively influenced the success potential of different types of game advertising forms. The purpose of this paper is to evaluate the current state of mobile in-game advertising and then place it into the context of the wider discussion evolving in the advertising field. Mobile-games- based advertising can be seen as one form of branded entertainment. This study employs as its methodology a literature review and synthesizes a framework for positioning mobile in-game advertising in the wider field of advertising. For academics, this paper identifies a number of fruitful research opportunities. For managers it provides insights on how to conduct mobile in-game advertising.

KEYWORDS digital advertising, mobile games, mobile game advertising, categorization, game industry

*Corresponding Author: Jari Salo, Helsinki School of Economics, Department of Marketing and Management, P.O. Box 1210 FI-00101 Helsinki, Finland, e-mail: [email protected]

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1. Introduction

The field of advertising has developed considerably since the days of simple, static newspaper-based advertising. Today’s mobile and ubiquitous technologies facilitate transactions and advertising that, at their best, are simple but dynamic. The proliferation of handset technologies and telecommunication network technologies creates novel ways to contact customers. A whole spectrum of new advertising channels enabled by internet technologies has appeared over the last 15 years. Websites have evolved from simple HTML based static websites into AJAX and mashups created websites providing dynamic content creation (Yee, 2008). Changes in advertising and technology have created prominent advertising options for companies including targeted website advertising, search engine marketing and advertising in the form of optimization and direct paid ads, virtual worlds and online social communities advertising (Armstrong and Hagel, 1995; Ducoffe, 1996; Dahlen et al., 2003; Gangadharbatla, 2008). These have been to a great extent discussed both in academia and in popular press. However, less attention has been paid to mobile phones as an advertising channel. Of course mobile marketing has been studied intensively over the last 5-10 years (Tähtinen and Salo, 2004), but a specific area of mobile marketing, namely mobile game advertising, has scarcely been studied (see Salo and Karjaluoto, 2007; Salo 2009). In addition to the academic research gap, one managerial and practical issue is the increasing value of the mobile entertainment market. Gibson (2006) states that mobile entertainment is expected to grow from $17.3 billion in 2006 to $76.9 billion in 2011. There are several similar sets of market research results posted each year. According to Holden (2008), the mobile games market in particular, is expected to grow from $5.4 billion in 2008 to $10.0 billion in 2013.

To clarify, mobile marketing can be defined as: “Any form of marketing, advertising or sales promotion activity aimed at consumers and conducted over a mobile channel” (Mobile Marketing Association, 2005).Thus, mobile game advertising can then be defined as “a game application used by a company for advertising purposes in a mobile handset of a customer — and an application can be downloaded computer software, like a preinstalled game, or it can be an SMS based game played in a certain context (e.g. in connection with a TV program)” (Salo and Karjaluoto, 2007). Apart from SMS, other technologies like Bluetooth can also be used for location specific games. Furthermore, internet portals or mobile portals can be used to download or play games online (browser based games) without downloading games to a mobile phone. A game application can be played with various game platforms, the two most common being Java and BREW, which are compatible with almost all well-known phone models. The purpose of this paper is to evaluate the current state of mobile in-game advertising and then incorporate it into a wider discussion that is developing in the advertising field. The structure of the paper is as follows: The first section introduces and then defines mobile in-game advertising by differentiating it from other games and advertising. After that, we review the earlier works relating to in-game advertising. Then, mobile in-game advertising is place in relation to the current marketing literature as a form of branded entertainment. The final section presents suggestions for future research and implications to managerial practice.


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2. Mobile game advertising logic

Changes in advertising media, the sophistication of mobile technology and the acceptance of advertising are propelling the advertising field forward and have positively influenced the success potential of different types of game advertising. It has been predicted by eMarketer (2008), that the mobile game markets will grow faster than the PC and game console markets and their value will double by 2011. By any measure, the overall game industry market has already surpassed the movie industry. Still, it is clear that even though the overall markets increase, this does not necessarily turn into advertising revenues for mobile game developers and other players in the mobile ecosystem. Based on the degree of reach (how many customers see the advertisement) of mobile game advertising and the degree of personalization and customization of advertising in the games, the literature has identified mobile game advertising to be different from other more traditional advertising formats (Salo and Karjaluoto, 2007). The degree of customization and personalization is relatively high in mobile media (i.e. the sender and receiver can influence messages when dealing with dynamic in-game advertising) but reach is low compared to TV or newspaper advertising.

The business logic behind mobile game advertising varies depending on the type of advertising (Salo, 2009). Thus, a number of companies and specific competencies and resources are needed to plan and conduct successful mobile advertising (see. e.g. Salo et al., 2008). For example, digital media agencies, advertising agencies, game developers and telecommunications companies need to contribute expertise. Before they can start to assemble these competencies required for successful mobile game advertising, advertisers should consider the type of mobile game advertising they want. The value chain or network of the mobile game industry is complex (Macinnes et al., 2002). It can be viewed as starting with the mobile phone manufacturer or the game developer, and goes on to involve a number of players in the chain depending on the game developed. When a new game is developed, the value chain is considerably longer than if an existing game is modified for advertising purposes. The length of the value chain also affects the revenue and costs apportioned between the players in the value chain. At best, mobile game developers can get 70 % of the revenue (e.g. Apples App store). Usually, game developers providing games for advertising purposes harvest less of the revenue. Apart from the value chain the other influence on revenue is the game format. Salo et al. (2009) identified four different forms of mobile game advertising where the degree of brand visibility or involvement in the game varies.

FIGURE 1: DEGREE OF BRAND INVOLVEMENT IN DIFFERENT TYPES OF MOBILE GAMES

HIGH Mobile advertising games

DEGREE OF BRAND INVOLVEMENT

Mobile games sponsorship

Mobile in-game advertising

Mobile games

LOW Source: Salo, 2009

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Figure 1 presents four forms in a continuum where on the left hand side is a pure mobile game with no advertising (e.g. Nokia’s famous Snake) or something with some unintentional advertising, and on the right are mobile advertising games that are deliberately created as advertisements (King Kong Jump by Pringles). Between them, but placed towards the left hand side, is the mobile in-game advertising focused on here, and placed further towards the right hand side, is mobile game sponsorship (e.g. Jeep Off-road Jam). In-game advertising according to Yang et al. (2006) refers to placement of advertising and brands inside games. In more detail, mobile in-game advertising represents games in which advertising is present in various forms including billboards and different products that are visible in the game, as for example with branded sportswear, when the player plays the game (e.g. WRC 3-D). Thus, mobile in-game advertising is deliberately-placed advertising inside a mobile game (Salo, 2009). The game application can be downloaded computer software like a preinstalled game, and browser-based games like those based on WAP, XHTML and HTML (Shchigliket al., 2004) can be thought of as mobile in-game advertising forms. In addition, mobile in-game advertising can be dynamic


as opposed to static advertising occurring in other previously introduced formats. Dynamic advertising refers to the fact that when a game connects to a service provider’s server it can change ads. For example in an imaginary case, if the prize for the winner of WRC 3D rally championship is a Toyota, it could just as well be changed to a Subaru if Toyota does not pay enough (as in the Google service for advertisers). Within all four mobile game types are dozens of business models dictating who pays and who gets paid (see MacInnes et al., 2002), assuming that we are not dealing with games developed and shared without fees. To illustrate, companies like Mas and Greystripe have developed mobile services that are free to user. The customer downloads mobile games for free, but allows the service provider to download advertisements to the game or show adverts while downloading the game or during the gaming session itself, depending on the game and context. This is similar to the Blyk, model but Blyk offers customer free mobile phone calling time and text messages for watching ads. Figure 2 provides examples of each mobile game advertising type.

FIGURE 2: EXAMPLES OF DEGREE OF BRAND INVOLVEMENT IN DIFFERENT TYPES OF MOBILE GAMES

Mobile in-game advertising games are funded to some extent by the advertiser. Telecommunication operators, telecommunication service providers, content providers and other third parties will receive their share of the gaming industry revenue as downloading and other fees. Figure 3 draws together the pertinent elements of the mobile game industry ecosystem.

It is derived from the findings of Salo and Karjaluoto (2007), adding the pertinent actors, named mobile network operators and providers acting as a gateway to the customers. Furthermore, the internet and mobile portals such as Apples App Store and Nokia’s OVI are influencing the development and distribution of mobile games.



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FIGURE 3: THE MOBILE GAME ADVERTISING ECOSYSTEM

TECHNOLOGY AND HANDSET DEVELOPEMENT -Handset developement (Chehimi et al., 2005) -Game software developement (Texas Instruments, 2006; Chehimi et al., 2005) - Telecommunications network development

GAME EXPERT’S ACTIONS (Efffort by the Electronic Arts - EA - and the Gameloft) - Game technology developement - Game design and graphics - Game experience and flow research

MOBILE NETWORK OPERATORS AND PROVIDERS - c ess to infrastructure and costumers

MOBILE GAME ADVERTISING INDUSTRY

COMPANY USAGE OF GAMES AS ADVERTISING FORÚM -Effectiveness -Consumer adoption of the new medium -Advances in technology

MARKETING ACTIVITIES -Bigger brands to attract more gamers (e.g. EA) -Increase entertainement and experience and total value of gaming -Simpliflying buying and dsitribution of games

INTERNET AND MOBILE PORTALS -Acces! to game developers (e.g. Apple App Store and Nokia)

CONSUMER ADOPTION OF MOBILE GAMES WHITH ADVERTISING -Gaming experience -Cost/value ratio -Number and quality of games -Advances in technology

Source: Extended and modified from Salo and Karjaluoto, 2007

The major forces shaping the industry are technology and the handset developers, whose actions influence what type of games it is possible to play with various mobile phones. Other key influences are the game developers who are trying to create new and ever more attractive games. The marketing activities of both game developers and handset providers clearly affect customers’ decisions to adopt new games and accept advertising. Some markets have started to use social media and different types of word of mouth strategies (e.g. asking a player to recommend a game to friends).

Traditionally mobile network operators and providers such as O2 and Sonera have had a central role as gatekeepers of the customer base. This has changed since many independent companies are now providing mobile games through their internet and mobile stores. One of the key issues in the mobile game advertising ecosystem is the customers and advertisers. If customers are willing to play advertisementfunded games then advertisers will pour money into the game developers’ pockets — however, if customers perceive games as too costly or low quality, a vicious cycle starts and all parties to the ecosystem loose revenue.

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3. Connecting mobile in-game advertising to the marketing literature The advertising field has witnessed an increase in the amount of research on what advertising is and what it is not (see Richards and Curran, 2002). Product placement –where one party pays to reach or influence selected consumers (Newell et al., 2006) – is clearly one form of advertising. Recently, it has been suggested that product placement can be traced to the emergence of motion pictures and is attributed specifically to Lever Brothers, who as early as the 1890s placed their branded soaps into films (Hudson and Hudson, 2006). There has been a lot of research on product placement and how consumers connect the world seen on film to their social words and consumption (DeLorme et al., 1994; 1999). This area of research is increasingly important, as consumers are no longer seen as passive users of media waiting for advertisements, but as active users of media (see Lazarsfeld and Stanton, 1944; Katz, 1959; Louro and Cunha, 2001). Consumers are passive or active users of media depending on their current and new needs (McCarty and Shrum, 1993), values (McCarty and Shrum, 1993), and the usefulness of the media (Canary and Spitzberg, 1993) among other things. The advertising media or channel has influenced the conceptual definitions provided by scholars, for example, in the 1920s advertising was viewed by Starch (1923 p. 5) as “selling in print”, print referring to the most popular media of that time. Currently, researchers include forms of the Internet and mobile internet based advertising under the umbrella of advertising (see e.g. Journal of Advertising). These already well-established advertising media are web based advertising (e.g. websites, search engines), e-mails (subscribed or spam), banner ads, advertorials, chat room advertising, pop ups and pop-under ads (see e.g. Ducoffe, 1996; Parsons et al., 2000; Dahlén et al., 2003). It is suggested that we need concepts other than product placement to demystify and introduce mobile in-game advertising into the marketing discipline. However, it is noted that ideas and concepts presented in product placement help to understand and describe in-game advertising and should be used to enhance brand management (see Panigyrakis and Veloutsou, 2000; Louro and Cunha, 2001).

There has been an emerging discussion of entertainment marketing (Hackley and Tiwsakul, 2006) and mobile entertainment (Shchiglik et al., 2004). The emerging discussion of entertainment marketing (Hackley and Tiwsakul, 2006) focuses on “brand references within mainstream marketing”, which could include almost any conceivable advertising method. Entertainment marketing seems to encompass everything from movies sponsored by a wine company, to NFL games occurring in a particular branded stadium. Therefore, defining mobile in-game advertising games as forms of entertainment marketing would not clarify the concept but rather blur it even more; as entertainment marketing is too broad and misleading. Entertainment marketing could be assumed to involve marketing of any entertainment (e.g. promoting a movie). On the other hand, mobile entertainment includes mobile television (see Södergård, 2003), mobile (music) videos, sound, animation, mobile games, adult content and of course more traditional ringtones, wallpapers and mobile jewels. Mobile games are clearly a form of mobile entertainment, and as the analysis narrows down our focus moves from mobile games to mobile in-game advertising games, and then the difference becomes apparent. Meaning that, mobile in-game advertising games are created as advertisements while mobile games are created for entertainment purposes. Entertainment marketing, and especially, mobile entertainment, are favoured buzz words of contemporary managers and consultants. Thus, there is need to adjust the current branded entertainment concept to find a proper home for mobile in-game advertising games; one that places them in their rightful spot in the realm of marketing as a tool that enables “the connected customer” era promoted by the Marketing Science Institute (MSI, 2006). Following Hudson and Hudson’s (2006) product placement – branded entertainment continuum, it is suggested that mobile advertising games are neither pure advertisements, nor pure entertainment services. As such, mobile advertising games could be seen as a form of branded entertainment (Figure 4). Nevertheless, to deepen and extend our understanding requires a multiple-theory approach.



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FIGURE 4: CONTEXT FOR UNDERSTANDING MOBILE IN-GAME ADVERTISING

branded (mobile) entertainement

advertising

traditional product placement

mobile intertainement

entertainement

mobile (in-) game advertising

Source: Salo and Alajoutsijärvi (2008)

Hudson and Hudson (2006) provide the following definition of branded entertainment, “the integration of advertising into entertainment content, whereby brands are embedded into storylines of a film, television program, or other entertainment medium.” Within this definition, mobile in-game advertising games are conceptualised as “other entertainment medium”. Furthermore, all mobile entertainment services, including the abovementioned television, video clips, ringtones and wallpapers, could be included under the classification of branded mobile entertainment, if they are branded. Otherwise, they are pure entertainment goods and belong to mobile entertain-

ment. In addition, from the branded entertainment perspective, mobile in-game advertising can be seen to belong to a relational or adaptive brand management paradigm presented in Louro and Cunha (2001), as brand identity is augmented by games and consumers may be seen as an active community of game developers. Management of brand placements in mobile games can thus use traditional advertising theories and specific applications of both product placement theories and brand management ideas (Panigyrakis and Veloutsou, 2000; Louro and Cunha, 2001; Hudson and Hudson, 2006) to further improve the effectiveness of brands placed in mobile games.

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4. Conclusions, theoretical and managerial implications

This paper has used a literature review to illustrate the absence of research on mobile in-game advertising games, but also noted that there is some research on both mobile games (Salo and Karjaluoto, 2007) and on the advertising field, that has focused on in-game advertising in computer and video games (Yang et al., 2006). The study established a connection between mobile in-game advertising and advertising in the branded entertainment sub-section. Based on the analysis and synthesis conducted so far, the following topics are recommended as future research avenues for the academic community. First, what are consumer attitudes toward mobile in-game advertising and more precisely, how do consumers perceive, accept, and react to them? (Kavassalis et al., 2003). What kind of cultural differences are there in relation to the previous question? Second, as with product placement in movies, are there types of brands that are better suited to mobile in-game advertising and how can this novel forum most effectively increase brand equity? (see Hudson and Hudson, 2006) Third, what types of mobile in-game advertising games are perceived as fun and useful by the customers, and in which situations? Are they single-player or multi-player games? Are they sponsored or full advertising games? Fourth, what other supporting promotional activities are needed in combination with mobile in-game advertising? Fifth, how are regulations (e.g.) legal changes influencing mobile in-game advertising games? More specifically, what is ethically acceptable as advertising and in which form? Finally, research is needed to show what type of brand placements are welcome in mobile games; would it be advertisements before or after download or advertisements integrated in games or full mobile advertising games? Researchers and managers from various research traditions could approach these questions with qualitative methods to broaden and deepen our understanding. They could also use surveys to generalize the observations to a larger group of customers.

Armed with findings from these future research areas we can together attempt to understand how mobile in-game advertising should be organized to be more effective. For managers, an elementary framework that can be used to facilitate decision-making on investing in mobile game advertising campaigns is provided. First, it seems that a brand can and should be integrated into the plot of the game (see Nelson, 2002). For example, if the advertiser employs mobile advertising games, the brand can be woven tightly into the storyline of the game, or more precisely, the storyline can be created for the brand. Second, initial reviews suggest that mobile in-game advertising games can augment other advertising channels (Rauhanummi, 2009) and they should be used in conjunction with other advertising channels in the form of hybrid or integrated marketing communications. In addition, the study identifies major benefits of mobile in-game advertising. These are the opportunity to create a specific storyline that fits the advertiser’s brand; the fact that brand exposure can be controlled better than in traditional media, and that the mobile can be easily integrated with other marketing campaigns; and further, that currently, legal regulations are less strict in the field of mobile advertising. Until further research is conducted, these suggested benefits of mobile in-game advertising and the classifications presented above, provide only hints on how to cope with the emerging channels. A limitation of the paper is without doubt its conceptual nature, and empirically based research is needed. Hopefully, the research conducted, although conceptual in nature, provides some insights into this emerging field, and opens doors for future research.



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Jari Salo is currently Assistant Professor of Marketing and Adjunct Professor of Digital Marketing at the Helsinki School of Economics (HSE). Before joining HSE he was a Professor of Information and Communication Business at the University of Oulu, Finland. He received his D.Sc. (Econ. & Bus. Adm.) degree from the University of Oulu and practical experience from the clothing and retailing industry. Salo has published in Industrial Marketing Management, Journal, Journal of Business and Industrial Marketing, Business Process Management Online Information Review and other journals. Besides journal articles Salo has also published several book chapters and have participated leading conferences in marketing and information technology area. He has almost 100 publications. Salo is the editor-in-chief of Journal of Digital Marketing.