In 2008, the Barack Obama campaign placed ads inside the Electronic Arts game Burnout Paradise, giving the U.S. presidential candidate a spot on billboards overlooking the video game's racing action.

It was perhaps the first time anyone running for the world's top elected office catered so directly to the generation that grew up with the Super Mario brothers.

In February and March 2010, Ottawa placed similar ads inside 43 different video games, encouraging players to apply for federal apprenticeship programs. The one-month campaign cost taxpayers $30,000, and it's believed the ads were viewed 20 million times.

Clearly, politicians and governments already see the potential in using video games to send messages to the electorate, but corporate advertisers are also starting to wake up to the medium's potential.

No longer just a game

Microsoft says Canadians spend more than five million hours a month playing games over the company's online Xbox live service.

For the first time, the Interactive Advertiser's Bureau of Canada, an advertising industry trade group, included in-game advertising revenue in its annual report on Canadian ad revenue in 2009.

In a bureau survey, more than 100 firms that publish more than 1,000 games combined across Canada were asked how much they earned from in-game advertising last year.

The total: $3 million. A tiny drop in the ocean of advertising dollars to be sure, IAB president Paula Gignac says, but likely just the tip of the iceberg.

"There definitely is a lot more being spent in gaming than we're reporting but we're just trying to get a number out there and make advertisers aware of it."

In-game advertising might be in its early days yet, but a few companies already see the vast potential. Estimates put revenues at more than $1 billion US in the next few years.

Jeffrey Dickstein, a gaming solutions executive at Massive Inc., is a true believer. Massive, a Microsoft subsidiary, works with advertisers to get dynamic ads into video games played by their target markets.

Video games used to be ad-free and "isolating," Dickstein said — not exactly fertile ground for interactive ad campaigns.

"Some people dipped their toe into the water of product placement and static ads. Now we're at the point where we can do interactive, dynamic things we just couldn't before."

He slips a copy of NBA 2K10 into an Xbox 360 at a recent event in Toronto to demonstrate what he means.

The game fires up and L.A. Lakers guard Kobe Bryant is shown, courtside, stretching his arms and getting ready to play. A teammate sidles up and gives him a hug. Over their shoulder, on the scorer's bench, ads for Toronto-Dominion Bank and Telus Corp. appear.

No such ads exist in the bricks and mortar Staples Center, where the L.A. Lakers play. But a gaming console fired up in Toronto gets those images, tailored to the local market by local brands. A player in Seattle might see Starbucks coffee or Microsoft.

A little later, when Laker guard Derek Fisher brings the ball up the court, the same ad space that once pitched TD Bank now feature a billboard for the league itself. Later still, they switch back to TD, but now it's paired with Gatorade sports drink.

"We already know who's playing what game and when, so we can tailor to the game," Dickstein said, offering as examples a GM ad in a racing game, or a cellphone ad in a game with an urban setting.

The appeal is obvious for advertisers — they can ensure that those viewing the ad speak a certain language, live in a certain area and like to play in the evenings, for example.

But gaming experts say gamers themselves are surprisingly receptive to the idea.

Dickstein cites internal research that found 80 per cent of gamers surveyed were ambivalent or positively inclined towards the idea of in-game ads.

"It adds to the realism," he said. "It wouldn't make sense to be in a hockey rink and not see board ads, and it wouldn't make sense to see a New York City streetscape that doesn't have billboards in Times Square."

Gignac agrees. "You're in an immersive environment," she said. "You expect is to mimic the real world. Gamers expect ads to be in places where they really would be.

'It used to be Mountain Dew … Now, it's TD Bank'— Jeffrey Dickstein, Massive Inc.

"As long as it's not disruptive, most gamers welcome it."

In-game ads come at gamers when they're relaxed at home, and thus more receptive to advertising, Dickstein says. The proof is in the pudding, since virtual ads are leading to real-world sales, according to research.

U.S.-based shoe retailer TOMS recently launched a mobile, online and in-game ad campaign to promote its One Day Without Shoes promotion.

In a post-campaign survey, of those who reported seeing the campaign across all platforms, an impressive 44 per cent said they went into a physical TOMS store to purchase shoes.

"I am very happy with the results," TOMS founder Blake Mycoskie said of the company's test of video game advertising.

Vancouver-based Telus Corp. also has glowing reviews of their work with Massive on multiple in-game campaigns.

This image shows the same screenshot inside Tony Hawk: Ride, but with two different ads. Dynamic ads inside games allow advertisers to tailor their campaigns (CBC)

"It's important to us to reach our customers where they work, live and play," marketing vice-president Anne-Marie Laberge said. "As such, we are always looking for innovative ways to reach each and every one of them in their favorite environment. This platform is a great opportunity for us to speak with our customers in a very cool setting."

As more and more advertisers embrace the medium, the cost of purchasing space in the games is rising.

"We're seeing spot buys turn into regular campaigns," Dickstein said. "Buys in the past that used to be $5,000 or $6,000 are now $30,000 or $40,000."

The main difference is the profile of those buying the space, which is tending more and more toward large, mainstream corporations. Dickstein says he's seen a lot in his 10 years working in the video-game industry — first with a game developer and now on the ad side of things.

"It used to be Mountain Dew, and skateboards, and Intel chips," he said. "Now, it's TD Bank."

With files from Jennifer Hollett