In-game advertising is about to reach a tipping point this year, with broadband internet at the heart of the latest stage in its evolution.
In its earliest manifestations, advertising had to be "hard coded" into gaming software during development. Perimeter ads in the version of Fifa International Soccer released in 1994, for example, are enshrined in perpetuity. If you're still playing a version of that vintage, you're still seeing the same brands on the hoardings.
In the past decade, however, we've seen the rise of a more flexible and interactive variant - dynamic in-game advertising. A significant amount of game playing now takes place on personal computers, most of which are linked to the internet via broadband connections; while the latest consoles - Xbox 360, PlayStation3 and Nintendo's Wii - are internet enabled, too.
So the latest games have ad sites that can be posted via remote servers - and, these can be changed regularly, even minute by minute. Growth in the dynamic sector of the market has been slow and steady - there are, after all, huge numbers of older-generation consoles out there - but this year, the medium will cross a significant threshold, with dynamic advertising ratings outstripping static for the first time.
And, the specialists say, this could push the medium's already spectacular growth (revenues have been doubling year on year in recent times) into overdrive. Dynamic advertising doesn't just offer flexibility: it offers bigger and more measurable audiences.
Advertisers can now take advantage of network deals, when instead of buying into one property, they can buy into half-a-dozen or so games offering similar environments and audiences - a package of sports games, for instance. And internet technology allows them to monitor the behaviour of players. It's possible to know what they are seeing, for how long, and from what angle.
All of which adds up to a compelling proposition, Frank Sagnier, the European managing director of the in-game advertising company Double Fusion, argues. "With ad-serving technology, an advertiser only pays per impression," he explains. "It's accurately quantifiable; you are able to judge your return on investment, and you can follow it on an hourly basis. It's the sort of accountability any brand manager dreams of."
It sounds almost too good to be true. And it is, some media agency sources say. Jean-Paul Edwards, the head of media futures at OMD Group, says there are still major holes in the data that clients are being offered.
"We still don't have the figures on weekly audience reach that we have in other media such as print and TV," he points out. "The audiences for individual games are relatively small, and even with a network buy, it's still hard to reach a significant proportion of this audience. And we don't know how many unique users there are and how many are duplicated. We still need proof that this is a scalable medium."
But Edwards does admit that the medium is going in the right direction; indeed, Omnicom, his agency's parent company, is one of the backers of a new study which seeks to track brand recall and intention to buy as a result of computer game playing. Other backers include the world's top two games publishers, EA and Activision, and Nielsen Entertainment.
This is poised to be a landmark year for in-game research, because Nielsen's video games ratings service, GamePlay Metrics, is also due to start continuous reporting this summer. It will be seeking to establish a new audience currency for the buying and selling of advertising in video games, while tracking the activities of gamers across other media platforms, such as TV and the internet.
"The value of an entertainment medium is directly proportional to how well it is measured," Jeff Herrmann, the vice-president of Nielsen Wireless and Interactive Services, a new division set up to run this initiative, says.
Absolutely. Although, as in-game advertising specialists will point out, the lack of a hard trading currency has, to date, merely seemed like a minor inconvenience. Because, they add, there's never really been any argument about the fact that there's a huge gaming audience out there.
Globally, the sale of console and PC games is worth in excess of $30 billion a year, making it a bigger deal than either the music business or the film industry. Nielsen figures indicate that in the US during the fourth quarter of 2006, 45.7 million homes (41 per cent of all TV households) had a video games console. That represented a year-on-year increase of around three million homes. In the UK, the figures are less reliable; but it has been estimated that more than 90 per cent of those aged seven to 19 years of age own a games console.
So this is still a medium on the up. And even the most entrenched critics of its research efforts concede that the medium's core 15- to 24-year-old male audience spends more time playing video games than watching TV. That's why in-game revenue growth has been so spectacular - most forecasters (such as Forrester, IDC and CITI) believe global in-game ad revenues will leap from $300 million in 2007 to more than $1 billion before 2010.
Hence the arrival of the digital econ-omy's heavyweights. In May 2006, Microsoft paid $300 million to acquire one of the leading in-game ad specialists, Massive Incorporated; then, in January of this year, Google acquired Adscape, a relatively small San Francisco-based operator, for $23 million.
It won't remain a small player for long, now that Google is involved. For the time being, however, the top three in-game advertising specialists are IGA Worldwide (privately owned, it raised $12 million of institutional funding in February 2006, to aid growth), Massive Incorporated and Double Fusion, which is backed by a consortium of venture capital companies. Each of the big three companies has an international network of offices.
They have an increasingly sophisticated product to sell. While the workhorse formats for the medium remain two-dimensional opportunities such as poster sites and shop fronts in contemporary urban games, the recent creative buzz has been about three- dimensional placements.
At its simplest level, this can involve making products available to in-game avatars - your in-game alter ego's performance might be improved, say, by consuming a certain brand of soft drink. Or avatars might be asked to use a clearly branded mobile phone.
At the creative leading edge, advertisers have moved beyond this bolt-on sort of approach and have found ways to embed their products into the very structure and narrative of a game. For example, in the Power Challenge football game, an avatar can choose between two brands of Adidas boots: Predator and F50. Each gives the avatar different playing characteristics.
Or at a more elaborate level, in Test Drive Unlimited, as an avatar's status improves, he or she can acquire a better apartment and a better car. Or indeed, a change of clothing, which is achieved by popping into the game's Ben Sherman shop. The avatar tries on clothes in a realistic retail environment, and can parade in front of a mirror to see what they look like. This is a dynamic advertising environment, naturally, so the range of clothing on offer changes with the seasons.
Eventually, this type of advertiser involvement may evolve further to embrace retail and other e-commerce opportunities embedded in games.
We're not yet at this stage - but the rapid evolution of Second Life, the multiplayer internet game, offers a glimpse of what is possible. In this, players create a complete imaginary life for themselves, which naturally involves earning an imaginary living - but the line between this and the real world economy is rapidly becoming blurred. There's an exchange mechanism for converting the game's Linden currency into real money, at a rate of around L$250 to $1.
Back in the real world, however, in-game advertising specialists are preparing for boom times. They predict that hard audience ratings data, as it begins to come on stream, will confirm what everyone has long believed.
Justin Townsend, the chief executive of IGA, points out that when advertisers test the water, their own campaign-specific research tends to deliver a confirmation of the medium's effectiveness, especially among a young male audience that's hard to reach via mainstream network television.
He says: "If you go back 12 or 18 months, we were seeing advertisers committing experimental budgets to in-game advertising.
"When they assess the results from that activity, those same advertisers tend to come back with larger budgets. Fifty per cent of our revenue now comes from campaigns worth six figures or more. And in many cases, we're talking substantially more than $100,000." Hardly a game any longer.
GAMING: IS IT ABSOLUTELY WICKED? OR JUST PLAIN EVIL?
One of the best known quotes on the effects of video games comes from Kristian Wilson, "the former chief executive of Nintendo". You'll find it, for instance, at the head of the UK's definitive analysis of the in-game advertising market, The Buzz, which was produced by the Internet Advertising Bureau.
"Computer games don't affect kids," Wilson is quoted as saying. "I mean, if Pac-Man had affected us as kids, we'd all be running around in a darkened room munching pills and listening to repetitive music."
In fact, no Kristian Wilson has ever been the chief executive of Nintendo.
The quote was invented by the stand-up comedian Marcus Brigstocke - and featured in a section of his act on the surreal non sequiturs big business sometimes comes up with in the defence of the indefensible.
Not that computer games are indefensible. But the Wilson phenomenon is a perfect introduction to the sort of looking-glass world you have to enter every time you get anywhere near this debate.
The IAB is aware of the myth, and says that the sentiment is true. The trade body says that it does not advocate advertising to children in computer games, but the majority of gamers are 15- to 24-year-olds.
The fact remains, however, that if the video games industry wants to widen its appeal to advertisers, it will have to look at cleaning up its image.
And yes, there are one or two studies on the internet arguing that games are educationally beneficial, teaching children about focus and attention to detail, as well as numerical and spatial-awareness skills.
But by far the vast majority are negative. There are, for instance, studies seeking to prove that computer games are responsible for fostering a widespread inability to socialise adequately; and some even go as far as to argue that obsessive gaming has created the epidemic levels of autism currently found among children in developed economies.
Others argue compellingly that computer games are responsible for violent behaviour in general, and playground bullying in particular. Or, indeed, certain types of youth crime, from joy riding to handgun shootings. And, of course, sedentary game playing has been identified as an important factor (some say even more important than diet) in the whole childhood obesity debate.
In short, computer games have been instrumental in rearing a generation of malicious, maladjusted, fecklessly lazy fatties, who might turn uncontrollably violent at any given moment.
The biggest recent controversy in the UK surrounded the death of 14-year-old Stefan Pakeerah, who was killed in a hammer and knife attack in Leicester by a fellow teenager, Warren Leblanc, in 2004. When Stefan's mother claimed that Leblanc had been emulating scenes from the Manhunt computer game, her case was taken up by her local MP, Keith Vaz, who began pressuring the Government to bring forward new legislation.
Tony Blair's response to Parliament was that the existing classification system (which had always deemed Manhunt unsuitable for children) was already adequate. Vaz wasn't convinced - and he sought to introduce more stringent guidelines in a Private Members' Bill in 2006. Rather predictably, it failed to attract enough support to warrant debate.
The only other recent controversy surrounding computer games was rather more oblique. When Airfix went into administration and had to be rescued by Hornby in November 2006, it was held up as another sad reminder of how comprehensively computer games had defeated more wholesome pursuits in the battle for children's minds (although there was little mention of the substantial inhalation of glue involved in the construction of an Airfix Spitfire).
Perhaps only one thing is for sure: computer games have almost certainly fundamentally changed the sort of childhood culture experienced by many of those who are currently in government. But what do they know? They have probably never even played Pac-Man.