There’s a fantastic book by a British author, Tom Chatfield, which is essential reading for anyone interested in why it seems games are so high profile right now. What Tom does is place games in a cultural and historical context, right back to the emergence of video games, and explore the rise and rise of gaming as a media phenomenon.

And what a phenomenon that is. Some figures – 40 per cent of Facebook users play social games – that amounts to 300m users, and growing fast. One in four gamers are 50 years old or above, and 48 per cent are female – thus subverting decades of assumptions that male teens dominate this sector. Last year, projections were made that by 2015, the virtual economy in the US alone would be worth $5bn (£3.2bn) – a figure that is sure to be revised ever higher as the social games and virtual world bonanza shows no sign of abating.

Case studies
So perhaps the initial question needs rephrasing. Perhaps we should instead be asking why it is that brands seem to be so reluctant to dive into the world of games with both feet. There are some well-trodden case studies, most from the US, about big brands that have partnered with Zynga on branded virtual goods inside that company’s games, and the in-game advertising market is estimated to be worth close to $1bn already. However, set against the $30bn US online advertising market, this is sure to rise rapidly. Why? Because games are increasingly where media consumers (i.e. customers) are choosing to spend an ever-increasing amount of their time, and opportunities to reach customers via games are proliferating, as specialised companies emerge to help you spend brands’ digital ad dollars, pounds and euros effectively inside games and virtual worlds.

Which is not to say that any of this is simple – far from it. A clunky in-game ad can alienate players, and be completely ineffective. Game creators remain broadly reluctant to reach out to brands and agencies, preferring to stick to their tried-and-tested monetisation channels direct from gamers. It’s clear that a company like Zynga, with a large pool of players spending their own money, has a more robust monetisation strategy than a company that relies on advertising, but even Zynga is seeing a more compressed cycle of explosive growth in users of new games, followed by steeper drop-offs in player numbers.

To overcome this, enter advergaming. This is where brands, agencies and content owners commission their own branded, proprietary games. Many companies now offer fantastic games content – and this is an area of particular strength in the UK, where TIGA, representing the UK games industry, has recently created a casual games committee to better serve the interests of studios doing work for hire. Examples include Matmi, 4T2, Kempt, Kerb, TAMBA, Koko Digital and Huzutech.

As Jeremy Waite, head of social media at Phones4U, who will be presenting a case study at Games for Brands on 27 October, puts it: “Social gaming is the most important part of our social media strategy for 2012.”

Gamification
So, the decision would appear to be between integrating brand messaging into an existing game, and creating a branded game. However, there is another trend which is making waves, and its name is gamification. Many people hate the term, but it would appear to be here to stay. In essence, gamification is the application of game mechanics and principles of game design, harnessing the insight into player psychology garnered from decades of video game research, to marketing. The idea is that if you know how to push certain buttons to obtain certain results, which good game designers do, these learnings are applicable to other domains. Thus a website can incorporate elements such as progress bars, status badges, achievement points and leaderboards to make users more engaged with the content on the site.

Businesses with physical locations can turn visiting those businesses into a giant game – perhaps a treasure hunt based on Facebook Places or Foursquare. Loyalty programmes can evolve from rewarding members with free stuff to giving them virtual stuff at lower marginal (or opportunity) cost. People can be “nudged” into doing stuff by tinkering with the presentation of information, offers, price and product information – and the stats speak of a brave new world for gamification:

• The corporate market for gamification is projected to grow from $100m in 2010 to $2.8bn by 2016
• By 2014, 70 per cent of corporates are expected to have adopted gamification
• According to Gartner, 50 per cent of corporate processes are expected to be gamified, with a vibrant market emerging to facilitate this

One further area that will be of interest will be the extent to which gambling mechanics become integrated into marketing activities. Already, McDonalds finds that its Monopoly promotion is not allowed in certain US states and other jurisdictions which restrict games of chance. Of course, brands have offered prizes in competitions for decades – will there be an increasing desire to embrace the thrill of landing three cherries on a fruit machine to incentivise customers and get them to keep coming back? It’s sure to be an area of some controversy.

Endaf Kerfoot is thinker-in-chief at gamesforbrands.com. The Games For Brands conference takes place in London on 27 October