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Keonig predicts within a year or perhaps two, these online games will unquestionably become very
commercialized. "It's a natural progression," he says, adding he estimates over 100,000 people are online
every day playing. Games like Everquest, a role-playing game that takes players into a fantasy world where
they fight evil with swords and magic, provide a significant chance to reach the coveted youth market.

"Because so many people are going to be spending lots of time in these worlds - it's akin to sitting in front
of the television - we will begin to see partnerships," he says. "You'll be able to go into a town's general
store, outfit a character with name brands and then click on a link where you can order a pizza from

Aside from the direct business opportunity, Keonig adds that as the games become more reality-based, real-
world brands will be needed to add to the game's legitimacy.

"Any mass market consumer product will have the chance [to get in the game]. Also, the people who play
these games are technology-oriented and very Web-savvy so companies like Apple or Nintendo will be a
perfect fit," he explains. "Even the golden arches will work because it will make the world look more

Traditional console game-makers have taken notice of the popularity of online games. In August, Sony
Computer Entertainment's Playstation 2 will release a network adapter device, enabling users to connect via
a high-speed connection to play its titles with other gamers online.

Despite the opportunity, some game-makers are a little hesitant to permit full sponsorship within their titles.
San Francisco-based Ubi Soft Entertainment watches very carefully how it places ads in its games. It is,
however, speaking with a large number of unnamed consumer products companies about how to fit in their
messages, says Monika Madrid, Ubi Soft's non-retail sales and licensing manager.

The company's stance is if the advertising is appropriate, and if it fits in the storyline, then it will be
approved. Context is essential, she says. But game development is becoming increasingly expensive (some
analyst estimate that it costs up $1 million to develop a world-class game), so marketing sponsorship or ad
placement will in the future help even out the costs. Taking advantage of those opportunities without
cluttering a game with ads and while maintaining the game's integrity, she says, is a delicate balance.

"No developer would cheapen a game just for the sake of getting sponsorship. Our audience isn't stupid,"
she says. "Most marketers want in-game placement and it doesn't always work, so many have to walk
away. They have to better understand how to integrate with the look and feel of a game and not be the look
and feel."

One of Ubi Soft's most successful titles, "Tom Clancy's Ghost Recon," a first-person military-style shoot-
up-the-bad-guys game, has up to 500 gamers playing online at any given time. There is a chance for
marketers to sponsor the game, but because of the M-18 rating (simila r to a restricted movie rating), most
marketers won't even approach the company. Due to the graphic nature of the game, Madrid says, most fear
it could potentially damage a brand's image even though Ghost Recon is one of the most popular titles on
the Web. Ghost Recon does feature U.S. military canteen outfitter Camelbak in a product placement-style
role on packs on the backs of soldiers.

"The big money is still with offline console games, PC-based games just aren't as popular with advertisers,"
says Ubi Soft's brand manager, Sean McCann. "It's more lucrative now for people to stay offline. There's
still a stigma attached to an M-18 game that has less nudity and violence than a PG-13 movie.

"You also have to consider appropriateness. If you thought Generation X was savvy, Generation Y has
been bleached of all naiveté. If there's a Taco Bell in the game, for example, it had better be there for a
reason. "

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