The Transport Accident Commission of Victoria, a state in Australia’s south-east, have signed a contract with Massive—the Microsoft-owned in-game advertising provider—courtesy of which they’ll beam their creepy anti-speeding commercials into the homes of the TAC’s target audience: young Australian males.

The ads will appear in Guitar Hero 5 but, more importantly, in Forza 3 as well.

The TAC are famous not just in Australia, but throughout the world, for their insistence on promoting road safety via graphic, violent TV commercials and billboards. So it’ll be interesting to see how the ads go down in Forza, a game about… driving really, really fast.

Below is one of the TAC’s more notable efforts, from a few years back. Be warned; it’s a little rough.

Video games to get local road safety ads [The Australian]

A team of U.S. and European researchers found that, even though players spent less time looking at them, ads associated with violence were more memorable than ones not. The test subjects played a racing game (named AdRacer, pictured above) in which the goal was to run over targets on a road course. Ads were displayed as billboards on the roadside. When the targets became pedestrians, running over them spattered blood all over the screen.

Now, the utility of this memory association has its own costs. Namely, what happens to a Dr. Scholl’s or a Betty Crocker when they’re the hit ad in Manhunt 5. Certainly an advertiser could expect some controversy if not only their brand was associated with a nasty-violent game, but was deliberately (warning: corporate word alert) leveraging the violence for extra (incoming buzzword alert) mindshare.

An Advert for In-Game Violence [MIT Technology Review via Game Politics]

“The ad has been removed from WipEout HD”, a Sony rep told Eurogamer, “and we are investigating the situation to ensure that any in-game advertising does not affect gameplay”.

Note this doesn’t mean all advertising in the game has been removed; only the ad that was causing the annoying, increased load times.

Sony removes naughty WipEout advert [Eurogamer]

Those video ads began appearing during WipEout HD’s loading screens, presenting players with a video spot that, in some cases, appears to be pitching State Farm Insurance. That advertising looks to be limited to U.S. based owners of WipEout HD for now, a new addition that may have been introduced during the game’s recent software update.

While the annoyance of in-game ads may be written off as nothing more than virtual visual blight, justifiably bothersome are accusations that the new ads increase loading times between races. Double Fusion boasts that the ads “contextually match the game’s sleek futuristic design” and “complement the WipEout HD world seamlessly,” but some players disagree. One YouTube video of WipEout HD’s ads shows this in action, a surprising difference that we’ve yet to verify for ourselves.

Advertising in the WipEout series isn’t exactly new, with entries as far back as WipEout 2097 sporting a noticeable presence for energy drink Red Bull, not to mention the design houses that were responsible for the games’ visual style.

We have contacted Sony Computer Entertainment America to see what’s up with WipEout HD’s new ads.

Thanks to Caleb and Gabriel for the heads up.

Kotaku AU Note: Anyone seen these ads in Australia yet?

Warner, 25, an environmental artist who had worked at Relic Games on Dawn of War II, expected to lose copies to piracy. He’d already begun pondering what might be a third option in the ongoing zero-sum struggle between keeping gamers happy and ensuring they give you money for your work. But if nothing else, the torrenting of Raycatcher provided a good argument that someone in the indie sector should try building a game supported by product placements and in-game advertising. And after this experience he figured, why not him?

“I think people are voting – they’re just not interested in paying for games any more,” Warner said. “The DRM is getting cumbersome, and everyone hates it. I think we’re at a point where indies have to consider a new revenue model. Because it takes a long time to make a game.”

Warner and another partner, Mitch Lagran, 22, formed Vancouver-based Greener Grass Games to explore just that – a free, browser-based and ad-supported game. The thought of in-game advertising may make the skin crawl for the gaming cognoscenti who form the most evangelical constituency of independent development. The practice may be, on the AAA retail level, a disappointment so far, with slender prospects until a terrible economy rebounds. And browser-based games may have yet to catch on in North America the way they have elsewhere. But games are not built for free, and these two developers- and others – think it can be done at this smaller scale.

“I don’t want to do anything The Man-ish,” Warner said, acknowledging the stereotypical disconnect between an indie developer, who’s supposed to be making better games because he’s freed from corporate trappings, and product placements, a nakedly capitalist practice.

“But in order to make games consistently, we need to make money,” said Lagran. “Otherwise, we can’t pay the rent. And if people pirate a lot, advertisements make sense.”

Warner (pictured) had no illusions that Raycatcher (built with another partner) was going to make him rich. Just getting it onto Steam was a learning experience and an accomplishment, he said, akin to a writer getting one’s first novel published. But the aftermath – from piracy to patching – poses disincentives to the independent developer, who began wanting to make the cool game he always dreamed of making, and finds that he’s inherited a lot of problems and obligations he hadn’t imagined.

“The money we’re making off Raycatcher, it doesn’t justify working on a project for a long period of time; I can’t support myself on it,” Warner said. Especially when you release a game, and it has bugs, and you have to fix them. In a certain sense, when you release something for money, it’s almost like you create a liability for yourself.”

The way Warner sees it, the game he and Lagran really wanted to make – a narrative, 3D first person adventure set in an alternate reality – can be done quicker, more cheaply, and with fewer of the headaches that come from a commercial downloadable release like Raycatcher.

In their development histories, Warner as an artist, and Lagran as a programmer, shared the same zeal for the immense back story that is created during a game’s design, and only partially revealed during its play. The game they are building, untitled as of now, opens that faucet of creativity. Through exploration and observation, players uncover how they got where they are, what they’re supposed to do, and advance the story to its conclusion in a game reminiscent of the Sierra and LucasArts adventures of those companies’ 1990s heyday, with elements of Myst.

Such a dependence on observation lends itself to advertising. What kind will players see? Their game, still untitled, will be a 3D, first person adventure, so everything you might see in the real world is on the table, Lagran says. Unity 3D, the engine they’re using, supports video texture mapping, so a television displaying a video ad is one example. Outdoors, billboards are a given. Product and brand placement could show up as a poster in a character’s bedroom.

“If there’s going to be a poster on the wall, and a brand on that poster, you might as well make it a real one,” said Lagran (pictured), a programmer whose experience includes work as an artist on PowerUp’s Night of a Million Billion Zombies. Other possibilities include getting a link to a magazine article, targeted to their player demographics. Or opening up a laptop in a university setting in the game, and getting directed to the web site of that university, in real life.

For all of these, however, Lagran and Warner have to make separate and sometimes competing sales pitches, to gamers as well as advertisers. For advertisers, they’re hawking a new and effective way to reach a targeted audience’s eyeballs. For gamers, they’re saying in effect, don’t worry, if the advertising is done well, you’ll barely notice.

“I’ve definitely played games with (in-game advertising) and it’s never bothered me,” Lagran said. “The only time it does is when it’s out of context, the random logo that doesn’t fit, like you’re in a sci-fi world and you see the Apple logo.”

So it’s clear that the sponsors are going to have to fit organically into this story, somehow, says Warner, who offhandedly confesses a “seething hatred” for pushy, repeated or conspicuous advertising, probably because he’s studied hypnosis. “I don’t hate products or people making me more aware of products – I buy my clothes the same places as everybody else. But people getting leverage on me emotionally – Axe (body spray) makes people insecure about their sexuality for example – it’s very manipulative and a form of bombardment. There are more tactful ways.”

And that’s where his and Lagran’s sensibilities as artists will help an indie developer do it better.

“I could be delusional, but I haven’t seen anybody else, really, doing it at this level,” Warner says – meaning advertising within fully-rendered 3D games played online.

That points to another condition of the gaming market they hope to exploit: Low expectations. Casual flash games with advertising, while showing an audience increase (67 million in 2007 to 86 million in 2008, with a 28 percent bump in ad views, isn’t looked to as any kind of a memorable gaming experience. “They’re almost so casual that they’re not considered real games,” Lagran said. “We want to capitalise on the idea that these browser games are nothing, and make one that feels like a full-fledged game that you’d download…. I think that’s where the industry is going to go.”

Of course, it already has, notably in Asia, with North America lagging behind. One portal under development, also based in Vancouver, is Dimerocker, and it too envisions enough potential for in-game indie advertising that it has secured venture capital and is building an API to serve ads to developers that list games there.

J. Joly (he goes by his first initial), Dimerocker’s founder and VP of content, considers his venture very much borne of the indie-scene aesthetic, envisioning a portal where users and developers communicate with no middlemen, in a give-and-take of release, adoption, feedback, revision and re-release. The portal is also geared toward distributing games built with the Unity 3D engine, which Greener Grass Games is using. Both studios consider it the fastest way to get a professional quality game into production.

“A great Unity game can be done with a 2 or 3 man team and $US100,000,” Joly said. That translates to considerable development agility and, by using the advantages of browser-based games, can target them to specific emerging markets such as, say, Brazil, skipping the overhead of traditional retail or downloadable releases, while making money back using Joly’s API. Lagran and Warner contend they don’t need eye-popping numbers to do well. “I think we’re looking at between 50,000 and 100,000 impressions in a month, and we should be pretty good.”

That’s the concept, anyway. It’s not something so ahead of the cutting edge that everyone’s shooting it down, but it’s not to say in-game indie advertising is unqualifiedly the next great thing.

“I’m a venture capitalist; I support the little guy,” said Jeremy Liew, managing director of Lightspeed Venture Partners, with an expertise in social media and casual gaming. “The short story here is in-game advertising has been a little bit of a disappointment. It’s not lived up to expectations as a major driver of revenue. That was true even when the ad market was strong, and obviously there’s an advertising recession going on right now.”

Even though recent (and not exactly disinterested) research projects a $US2 billion in-game ad market by 2012, the company releasing that sort of figure, IGA Worldwide, is itself in trouble, trying to secure additional funding but also exploring selling itself off, after losses of $US11 million in 2007 and $US26 million in 2008. Microsoft also just laid off a quarter of the workforce at Massive, its advertising service.

Sure, the scale of the ad sales operation undertaken by an indie game house might not be so large that it needs to hit the kind of numbers larger publishers want to see. But “I guess it depends on what you define as a success,” Liew said. “The challenge still is one of demand. And if you’re smaller and more targeted, you do have fewer things to offer.”

Liew understands Lagran and Warner’s instinct to shift to web-based games, but wonders if the in-game advertising is even necessary. “Piracy is what led people in Asia to shift to free-to-play games with digital distribution models,” Liew said. “This is a solved problem. Perhaps we can consider using the solutions that are out there.”

Dimerocker would be one of those solutions, with plans for a traditional model of free play leading to premium content, with some microtransaction capabilities. But that doesn’t particularly differentiate that portal from the others in that space, which is part of the reason why Joly’s pushed into it.

This of course is the business plan; what it may meet in reality bears watching.

“Most marketers characterize in-game advertising as experimental,” Liew said. “Given the major budget cuts people are seeing, they’re not feeling super experimental. And given the context that this has not lived up to expectations, in a recessionary environment, it’s going to be a tough challenge for them.”

Perhaps, but at least the price of failure, if it comes to that, will be comparatively low. The episodic nature of their project allows them to either continue a successful IP, or cut their losses without having wasted time and development on a full game nobody really preferred.

“Right now, we’re 10 grand in the hole, and it’s all borrowed money, friends and family,” Warner said. “Even if the first episode is a bomb, my mum isn’t gonna get the repo man after us.”

And they’re banking on the goodwill of gamers who will give a game a chance and understand the tradeoff – that free content has to be supported some way. It’s true that their exploration of advertising came about, in a sense, because gamers would not support a previous effort with their own money, and worse, pirates stole it. But gamers shouldn’t feel that in-game ads are some form of punishment.

“DRM,” said Lagran, “would be a punishment.”

With advertising down across the board thanks to the economic slowdown – and with the opportunities presented by in-game advertising perhaps not as great as was once believed – the cuts are hardly a surprise.

While this won’t be as gut-wrenching to you as the loss of, say, a development studio, it still sucks when people wake up to find themselves out of a job.

We’ve contacted Massive to confirm this, and will update when/if we hear back from them.

IGA Worldwide’s in the business of in-game advertising, of course, and the figures it cites are its own. But according to their research, gamers respond to ads a lot more favourably than some would believe.

Their claims, from a promo video IGA recently released

• 90 percent of gamers recalled the brands they had seen in games.
• 84 percent feel the ads they see “fit” within the games.
• 70 percent perceive brands that advertise within games as “innovative.”
• 36 percent “Bought or requested information of a product after seeing an in-game ad.”
• Gamers spend 8.4 seconds, on average, looking at an in-game advertisement.

You can see the figures for yourself in their video.

IGA Worldwide Video [Youtube via Joystiq]

IGA, one of the companies that serves up dynamic in-game ads for games like Burnout Paradise, is feeling the advertising pinch, reeling from a recession that has spawned mass layoffs and closures.

VentureBeat reports today that the in-game advertising group—not to be confused with Castlevania developer Koji “IGA” Igarashi—is in the process of securing funding, but is also looking at a potential sale of the company, as it braces for lower than projected revenues. The company has a solid track record of losing heaps of money, with losses of $11 million in 2007, $26 million in 2008.

IGA has had some wins over its few years of existence, securing exclusive contracts with Electronic Arts and helping to bring id Software’s Quake Live to online gamers, free of charge.

The in-game advertising firm trimmed back late last year, laying off approximately 25 percent of its staff.

Let’s all pray for their continued success. We’d hate to see more people out of work. And we’d miss those deodorant billboards.

Struggling in-game ad firm IGA Worldwide seeks investments or possible sale [VentureBeat - thanks, Leafer09!]

Swelling from 6 million users to 12 million since the beginning of this year, it has landed sponsors including McDonald’s and Doritos, the latter encouraging users to create a game around the brand. Nintendo Wii has grabbed headlines, but in marketers’ battle for the living room, Xbox Live is the real game-changer selling downloads of premium programming while delivering a expanding roster of original, ad-supported content.

Well played, Xbox Live! Keep working on those advertising opportunities. Don’t rest until your entire service is skinned to look like a McGriddles ad. I kid, that’s a ridiculous idea.

Digital Hot List: Dynamite Destinations & Devices of ‘08 [Adweek]

“The growth of in-game advertising, both current and projected, makes it an attractive medium for brands looking to reach hard-to-reach consumers”, said Elizabeth Harz, EA’s Senior Vice President of Global Media Sales. “This study solidifies what many in the industry have known for a long time: in-game ads are effective and well-received by the gaming community”.

Hooray! We’re only alienating 18% of the gaming public! Hit the jump for the rest of the numbers, most of which seem to be aimed more at attracting advertisers rather than assuaging consumer concerns.

Landmark IGA-Nielsen Study: 82% of Consumers React Positively to Receiving Contextual In-Game Ads During Game Play

New research data from 1,300+ consumers indicates brands receive measurable lift in perception, awareness when advertised in-game

Tuesday 17th June/…Integrating dynamic advertisements into videogame environments provides brands a measured lift in overall consumer awareness and opinion of the products they are exposed to during game play according to the Consumers’ Experience with In-Game Content & Brand Impact of In-Game Advertising Study, a landmark research study conducted by Nielsen BASES and Nielsen Games on behalf of IGA Worldwide, the leading in-game advertising network.

“With young adults now spending on average 6 hours a week gaming, advertisers should be excited at how well their messages were embraced and the brands positively perceived,” said Justin Townsend, CEO of IGA Worldwide. “The consumer insights we’ve gleaned from this data will help drive the industry’s first research-based in-game advertising measurement standards as well as strengthen IGA’s position as an effective in-game ad network brands can trust to efficiently deliver their message to target audiences.”

One of the most important factors confirmed by the Study is that most consumers reacted positively to in-game ads: 82 percent felt games were just as enjoyable with ads as without. In addition, there was an average 61 percent increase in consumers’ favourable opinions of products advertised in-game post-play.

“The growth of in-game advertising, both current and projected, makes it an attractive medium for brands looking to reach hard-to-reach consumers,” said Elizabeth Harz, EA’s Senior Vice President of Global Media Sales. “This study solidifies what many in the industry have known for a long time: in-game ads are effective and well-received by the gaming community.”

One of the most comprehensive in-game advertising effectiveness research studies completed to-date, Nielsen tested multiple variables with multiple brands across multiple games, as opposed to just a single brand in a single game. The research also showed how IGA’s in-game unique advertising opportunities generate significant advertising value across key ad metrics.

“In-game advertising is an opportunity to present targeted brand messaging to a highly desirable demographic. This new data shows how important it is how the targeted and contextual ads are displayed in videogames. Participating in this study with IGA Worldwide has provided valuable new insights into effectively using the medium.” said Chad Stoller, Executive Director, Emerging Platforms Organic, Inc.

Nielsen surveyed over 1,300 PC gaming participants in their homes by linking IGA’s proprietary measurement software with research trackers embedded within sample game disc. This unique methodology allowed for unprecedented in-depth analysis of consumer receptivity to in-game ads. The participating brand advertisers included Taco Bell, Jeep and Wrigley and game titles were provided by Electronic Arts and Activision.

Select Findings from the Study:

• There is an average 44 percent increase in post-game aided recall from pre-awareness;

• Positive brand attribute association increased 33 percent across all brands;

• Over 70 percent of consumers who were most opinionated about in-game ads, felt the ads made them feel better about the brand, feel more favourable toward the brand, make them more interested in the brand, and believe the ads are for innovative/cutting edge brands;

• Over 60 percent of the most opinionated consumers feel the ads catch their attention, make games more realistic, do not interrupt the game experience, and are promoting relevant products;

• In-game ad exposures with a duration over 2 seconds, as they are measured in IGA’s in-game ad methodology, generates on average an almost 30% increase in key ad metrics, including ad noticeability +100%, recall +42%, and fit +27%, vs. ad exposures with a duration of less than 1 second

“This study offers proof that dynamic in-game advertising is an influential digital ad medium,” said Dave Anderson, Senior Director Business Development, Activision. “Just as important to us is how users react to the ads. From the research it is clear that the overwhelming majority of consumers enjoyed the gaming experience just as much, if not more, with dynamic ads present. As game publishers, it is reassuring to know advertisers and consumers both stand to benefit from dynamic ads.”

IGA’s network offers dozens of games across multiple genres and platforms, as well as a range of standardized awareness advertising formats with digital measurability. The Company’s advertising products and metrics are in-line with the ad industry and measure ad exposure during game play, including key metrics like minimum time viewed, size and angle thresholds.

Videogame advertising is poised to grow to a $2B global industry by 2012 according to eMarketer, making games the fastest-growing major advertising medium. As a result, advertisers are making significant investments in the in-game environment as an effective strategy to reach target audiences.