In-Game Advertising in China

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In-Game Advertising in China

• Edward Lehman
• Managing Director

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Chinas Gamers

• Chinas Internet-using population slated to
  surpass that of the United States by early 2008
• Largest market in the world for Massively
  Multiplayer On-Line Role-Playing Games (MMORPGs)
• Over 45 million people in China play games online
• Roughly half of these players pay for them.
• Estimated 85 million online gamers in China by
  2012

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Business Models

• Pay to Play Models
• Sale, Subscription, or Pay as you Go
• Sometimes advertising-supported
• Tiered Model
• Players pay to improve their character
• Free to Play Models
• Selling virtual land, items, et cetera
• In-game advertising

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Types of In-Game Advertising (1)

• Static Ads
• Ads hard-coded into the game, and do not change
• No Internet connection required
• No way to easily gauge effectiveness of ads
• Dynamic Ads
• Game contains ad engine to retrieve ads on
  demand
• Requires Internet connection
• Can change ad campaigns for a particular game
• Can enable click-through and other user
  interactivity, monitor ratings, et cetera

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Types of In-Game Advertising (2)
Advertisements on Menus and Loading Screens
Advertisements in the Game World
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Immersive versus Intrusive

• Well-placed ads make games more realistic
• Poorly-judged ads can turn off players (potential
  customers)

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Market Growth

• Netguide 2008 survey Gaming market increased
  57 year on year to RMB 14.7billion (US2billion)
• Public gaming companies market capitalization
• Giant Interactive (NYSE GA) - US2.6billion
• Shanda (NASDAQ SNDA) - US2.13billion
• Perfect World (NASDAQ PWRD) US1.31billion
• Growth of local companies specializing in in-game
  advertising Captiv8 NGI In-Game Interactive
• Foreign in-game advertising companies starting to
  establish presence in China Aruon Communications
  (Korea) GameGlance (Thailand)

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Regulation

• Restrictions on Advertising
• Real world restrictions also apply to the
  virtual world (and to on-line ads in general)
• No obscene, false, or disrespectful advertising,
  or advertising that runs contrary to official
  ideology
• Restrictions on Online Gaming
• Computer game software is a restricted area
  foreign game producers may not operate directly
  in China
• ID registration and restrictions on gamers under
  18
• Software must contain time restrictions

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Thank You!