Jupiter: Online Game Sector Ad Revenues Set to Improve

Citing 1997 as a dismal year for online game companies, a recent Jupiter Communications report says the $8
million advertising market for those sites will increase to $465 million by
2002, and will do so by appealing to a much more youthful demographic.

With the overall market pegged at $1.1 billion in five years, the Jupiter
report, released to clients of its Strategic Planning Services (SPS) program,
projected that 60% of the audience for online games will be under 18 by 2002–up from a mere 7% today.

Although subscription-based revenues for online game sites were strong in
1997, the proliferation of free, ad-supported sites had far more momentum in
terms of growth.

New York City-based Jupiter said it believes that services
with ad-supported and subscription elements will dominate in the future as
game aggregators and portals bundle subscription packages to consumers–resulting in cost savings for the user and increased revenue potential for businesses that can successfully collect and distribute a wide variety of games.

In addition, subscription services lend themselves well to tiered pricing plans–drawing in players with low prices and then raising prices and privileges as users become more involved in the services.

“Though advertising will account for the greatest source of revenue by 2002,
subscription revenues run a close second,” said Mark Mooradian, group
director, Consumer Content at new media research firm Jupiter. “And this still
won’t guarantee that games sites realize a profit. Companies need to redefine
their business plans to attract the predominant demographic and must phase out
pay-per-time and pay-per-play revenue models, except as options to a
subscription plan.”

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