“Year of the Online Game” – O Rly?

Google 2007Google is looking to get into games, according to CNN Money, and before this week is out, should be announcing a deal to buy Adscape Media Inc., and through them, work with publishers to feed ads through the Internet into their online games. (Presumably, the elevator pitch would be, “AdSense meets Xbox Live.”) This news, along with other ads-in-games news, comes just as a related question is gaining some currency through the blogosphere. “2005 was the year of the social network,” Jason Lee Miller of WebProNews recently argued, “In 2006, online video was the chief cause of acquisition hysteria. Will 2007 be the year of the online gaming site?”

Miller points to the popularity of gaming sites with the Pacific Rim, accounting for nearly 25% of total traffic to entertainment websites. In this he’s citing Sandra Hanchard of Hitwise, who argues, noting the amazing popularity of the free, ad-driven MMORPG Runescape, “[I]t would seem that the online games industry is deserving of more attention by marketers and advertisers given its prominence in website visits.” [See update below.] Prism VentureWorks’ Nabeel Hyatt takes the meme football from there, comparing usage patterns between YouTube and game site Pogo.com, and comes up with some startling figures: while YouTube has far more page views and unique visitors, Pogo.com has a far higher Average Length of Stay. (About 40 minutes, compared with YouTube’s 10 minutes.) Finally, surveying all this buzz, Raph Koster of Areae pronounces it, “both terrifying and exciting.”
But is onling gaming this year’s big thing, making it time for investors to buy into the bigger game sites? Maybe. Hyatt himself is skeptical, because in terms of unique visitors-plus-time spent (a metric he calls “rating”), YouTube still dominates (though Pogo performs respectably.) Moreover, “[W]e aren’t measuring the web that way yet. Second, the social networking and online video memes were pronounced as the thing only after the massive exit of MySpace and YouTube, respectively.” But World of Warcraft is already owned by Vivendi, he goes on, while arguing Second Life is “experiencing hype-fatigue.” (Of course, I have a different take on the latter opinion.)
There’s several notes of caution I’d add to this, myself. Most obviously, there isn’t much compelling evidence that advertising in games is effective, and some research which suggests the contrary. More key, gaming is a large medium with vastly different demographics, and an ad-based MMORPG with rudimentary graphics like Runescape is bound to attract a far different audience than a subscription-driven, separate client MMORPG like Warcraft, or other resource and graphics-intensive games which appeal to “hardcore” gamers. What’s more, the intrusiveness of advertising in games which are designed to be an immersive, attention-rich experience is likely to provoke a backlash among players. (Imagine the rage a Counterstrike player would feel, after accidentally clicking on a pizza delivery poster which launches his web browser, and getting killed in the process.) Alternately, I think the smart money is on casual, web-based game sites like Pogo, BrainKing.com, and IamGame.com, which feature titles which can be played during idle times at work, or by non-gamers which skew to women and older players.
Year of the Online Game? Probably not. Year of the Casual Online Web-Only Game? Almost definitely.
Update, 1/24: While Runescape does take advertising revenue through its homepage, Daniel James of Three Rings (a successful indy online company in its own right) offers a more complete description of the company’s revenue model— and his— in Comments below.