WSJ (subscription required) says Electronic Arts is joining Microsoft in an ad serving service for video games:

Advertising in games remains a relatively small business, but many game publishers believe there's a large untapped revenue opportunity in displaying ads to their audiences. Many games are played by 18- to 34-year-old men, a prized demographic for marketers that is spending more time playing games at the expense of traditional ad-supported media like television....In the past, companies like EA have integrated mostly "static" advertisements into their videogames that don't change throughout the life of the game ... EA is currently estimated to earn revenue in the single-digit millions from such ads....Such ads must be integrated into a game six to eight months before the title is released...[vs.] "dynamically" insert advertisements into games on a regular basis...

With hundreds of hours playing a title, ad revenues could hit tens of dollars per player which could be billions of dollars vs. millions. In a competitive industry, this should drive the sticker price of the games down.

There is a chicken and egg problem though. Ad rates for games are too low right now for game producers to make the ads too intrusive. That makes the ads less valuable per viewing.

Look for more freeware titles and 100%-mail-in-rebate deals around late 2008 for Christmas 2007 titles that have ads.

With hundreds of hours playing a title, ad revenues could hit tens of dollars per player which could be billions of dollars vs. millions. In a competitive industry, this should drive the sticker price of the games down.

The X Prize Cup should sponsor a video game (computer, X Box, PlayStation, etc. . .) based on all of the various events that will occur at Las Cruces together with the original X Prize competition and the rocket racing league.

Re-create Rutan's win in a simulation style game, for example.

Bill, I think X-Prize is more of an ad vehicle for sponsors to reach customers than a game producer or an advertiser.

EA has a pop-up advertisement whenever you login to BF2. Worked for me, I purchased a new item, and it was cheaper.

I find the idea of ads in games offensive, myself. I suppose if there were discounts to products I'd actually be interested in buying it MIGHT be different.

Free stuff and cheap stuff continues to have broad appeal much as I'd like to pay for ad-free versions of most things I see and hear.

The Ad Concept in Games is not new (Obviously). The most likely scenario, bsides BF2's pop-up, would be the MMORPGs where in many of them (at least the non fantasy games) you could actually but up billboards and signage to advertise your product, and depending on how clever you are you could make it so that it is unobtrusive.
It's coming though....sigh

I see a more populist version: free versions of games that have ad server code that makes the game look like a website. That is, ads taking up the right hand side and top of the screen. It's a fairly simple tradeoff: screen real estate vs. sticker price. Convergence of TV and computer means banner ads on soccer and TV ads on video games.

I see a more populist version: free versions of games that have ad server code that makes the game look like a website. That is, ads taking up the right hand side and top of the screen.

You mean like Pogo, Miniclip, and Candystand (put a www in front and a com in back). My kids play these sites all the time, and the games are the better quality than most $.25 arcade games of my generation. The games are free, and the advertisement is everywhere.

The themed sites manage to provide the games just for affinity with no direct advertising. My daughter has just joined the 'net. That's the other vector--'net games may just get better and better until no one buys non-net titles.

In movie theatres and DVDs they get us for 15 minutes and I can't imagine they're making more than $0.25/person for all those ads. A video game on the other hand is often a 100+ hour experience so that could be $10-30 instead or $10,000/thousand instead of $250/thousand. The base rate is still about $20/thousand per minute of advertising.

That's the other vector--'net games may just get better and better until no one buys non-net titles.

My daughters won't play packaged game with the exception of the SIMs (A great game for placing ads). Otherwise, they are more than happy with simplistic net gamess. I actually like it from the aspect of learning basic strategies. Of course, the fact that they are cheap is great too.

I don't think the advertisements have much effect on them. However, I think you are giving a fair assessment of the numbers. DVD's ads are short and easily skipped. Internet adds can flash right next to you and be ignored if the other part of the screen contains something interesting.

All kinds of ads can be skipped, stripped or ignored. A video game just has hundreds of hours of them as opposed to a DVD or broadcast show which has fewer.