Red Bull, Puma seek customers in fantasy video game world.

When Pac-Man, the iconic 1980s video game character, needed the power to devour the ghosts that tormented him, he would swallow a generic white blob. If Pac-Man were alive today, his energy booster of choice might be a Red Bull.

Energy drinks, clothing, shoes, cellular phones and movies are becoming an increasingly ubiquitous feature of video games developed by, among others, Santa Monica-based Activision Inc. and THQ Inc., headquartered in Calabasas.

Video games, in fact, are the next frontier for product placement, which long ago took root in movies and television. The Yankee Group consulting firm recently projected that advertising in video games would reach $806 million in revenue by 2009, up from $117.6 million in 2004.

"Marketers are looking at alternative product marketing strategies such as product placement because of the clutter of ads on television and to some extent radio," said Leo Kivijarv, vice president and research director of the consultancy PQ Media. "It's trying to get to that elusive audience of 18- to 34-year-olds."

The games are an obvious medium for companies such as Red Bull GmbH, the Austrian energy drink company, and Puma, the German shoe and sportswear company. Both are trying to reach the youthful and mostly male market that doesn't spend much time reading newspapers or listening to radio--but does spend hours a week on video games such as Activision's "True Crime: Streets of Los Angeles," which features Puma products in a gritty urban tableau.

Sophisticated approach

The simplest form of product placement deal involves a company paying a video game manufacturer a fee to put the brand into the video game. But the deals often are becoming increasingly intricate, with advertisers using the Internet to beam new advertising campaigns, logos and products into players' PCs and Internet-connected game consoles. Some deals also use the advertiser as a vehicle to sell the video game. Activision's Tony Hawk games, for example, were sold at Puma stores.

"We've really approached and created relationships with packaged goods (manufacturers) in America based on who we think should be in the game," said Dave Anderson, senior director of business development at Activision, which has been a pioneer in the product placement field. "We're also looking to create additional awareness of our video games through their creation and distribution channels."

Most of the agencies that negotiate product placement in video games are not headquartered in Los Angeles, but some are expanding their local presence in recognition of the area's concentration of video game developers and movie studios, who are major advertisers.

IGA Partners Ltd., a British firm that has been a leader in deals for video game product placement, launched an American practice earlier this year and plans to open a Los Angeles office by year's end. Darren Herman, chief commercial officer for IGA Partners North America, said the L.A. office will help the company negotiate product placement deals with movie studios. One of IGA's competitors, Massive Incorporated Inc., opened an L.A. office last year to work more closely with entertainment companies. "The entertainment industry really has been one of the pioneers in this space," said Massive's chief marketing officer, Nicholas Longano.

Last year, IGA Partners inked a deal with Walt Disney Co. to use characters from the movie "The Incredibles" to give tips to people playing the online video game "Counterstrike," which is developed by Bay Area firm IGN Entertainment Inc.

Most product placements in video games still are static--burned into the video game software--and show the same logo or product each time the user plays the game. But companies such as IGA Partners are embracing dynamic in-game advertising, which connects to the Internet to download new product placements each time the game is played.

The approach is particularly attractive to movie studios, which constantly have new releases to promote. In a racing game, for example, billboards that line city streets are updated with the latest movie titles. "Everything in the games has got to be dynamic," Herman said.

The Internet also gives companies a better tool for measuring whether product placements in video games bring results. Using the player's Internet Protocol address--which allows marketers to determine where the user is based--companies such as IGA can vary product placements by different parts of the country, allowing clients to gauge the effectiveness of the advertising in different areas.

"The industry is still in its diapers," Herman said. "We're still trying to put as many matrices out there as possible to measure the effectiveness."