The $28 billion U.S. video game industry is warming to the idea of social media games because doing so makes excellent business sense.

Social media marketers, whose industry is being so heavily impacted by the video game industry, need to join the game industry in comprehending and embracing change.

As more parts of our daily experience (both tasks that were traditionally online and those that are now just being connected with social networks) are tied to the community around us, gaming mechanics will play an increasingly important role in the customer experience.  Even if you are not seeking to implement a gaming system around your campaign, it’s worthwhile for every marketer to have a basic understanding of both the general economics affecting business decisions and the technical processes for designing effective games.

Video game industry leaders are responding to the social gaming challenge.

In March 2011, Electronic Arts (EA) announced that their “EA Partners” group will be offering publishing services to independent social and mobile game developers. Small devs will now be able to sign up with EA and access their marketing and development resources.  In the Facebook gaming world, small developers have great ideas and talent, and it’s in the best interest of a gaming giant like EA to try and recruit them to share some of their profits in exchange for a little push for the indie developer.

In December 2010, Sony Online Entertainment introduced another Facebook game that set the bar for future detective games.  Catch a Killer, based on James Patterson‘s novel, puts the user in the detective realm with all sorts of obstacles to overcome. The user not only investigates crime scenes, but also examines evidence, interviews witnesses and works with Alex Cross to solve the crime.

In November 2010, Microsoft introduced new social features in Microsoft Game Hub that included a unified social system across all its web-based gaming platforms, an overhaul of MSN Games, international expansion for Bing Games and a deal with social games publisher CrowdStar.  The new social features include leaderboards and Facebook integration.  Microsoft’s goal is to connect users with social gaming friends regardless of whether they’re using MSN Games, Bing or Windows Live Messenger—they don’t have to use the same portal as their friends to play with them or see their profile data.

One thing the video game industry clearly understands is that, despite its rapid growth, social gaming on Facebook is still in its infancy.  Nonetheless, video game industry executives can count and they see the future.

For example, Blizzard Entertainment’s World of Warcraft, one of the most successful traditional online games, has 12 million-plus players.  It also cost in excess of $100 million to make.

FarmVille at 48 million players has estimated development costs of between $200,000-$500,000 (though because Zynga is still private they aren’t forthcoming with real numbers).  So, while only 12 percent of Facebook’s user base is currently playing Zynga’s game, there are hundreds of millions of additional potential players on Facebook alone.  And with development costs for a social media hit game estimated at a fraction of the cost of a successful traditional online game, the numbers for a social media game look very attractive to a game company deciding whether to make their next game a social media game or go the traditional route.  Once the decision is made to make a social media game, the method to make it profitable is developed.

This process begins with knowing one’s audience.  According to Appdata.com, there are around 211 million users playing games each month.  These numbers cover a much larger age demographic today  than ever before, especially among women who are always a desirable consumer for any business.  With that many eyes on the screen, games provide potentially limitless areas for businesses to place advertising.  Customers can earn virtual currency or goods in return for making purchases at an e-retailer, subscribing to a monthly service, completing a survey or watching a video ad/movie trailer.  It has also been proven that gamers are more likely to click on ads due to the residual credits earned, versus the average online consumer who only clicks based on his or her actual interest in the product/service advertised.  Plus, gaming advertising can fit more organically within the construct of the game itself.  Instead of popup ads in the margins, the player is literally walking by virtual billboards and sales signs.

This “advergaming” is nothing new.  Pepsi Invaders was an advergame commissioned by Coca-Cola developed in 1983 by Atari for the Atari 2600 platform.

Demetri Detsaridis, general manager of Zynga New York, feels that the line between modern advergaming and social mechanics has shifted.  Creating a project with game mechanics is not very different from creating a pure-play Facebook game, he says.

In-game advertising (IGA) refers to the use of computer and video games as a medium in which to deliver advertising.  Increasing Internet connectivity has led to the growth of dynamic in-game advertising.  Unlike the fixed advertisements found in static in-game ads, dynamic advertisements can be altered remotely by the advertising agency.  Advertisements can be tailored according to geographical location or time of day, allowing for the delivery of time-critical advertising campaigns like those publicizing a movie launch. Information can be sent back from the player’s machine regarding advertisement performance.  Data such as time spent looking at advertisements, type of advertisement and viewing angle can be used to better formulate future campaigns and also allows the advertising agency to offer more flexible advertising campaigns to their clients.  In 2005, spending on in-game advertising totaled $56 million, with organizations like Yankee Group predicting this value to grow to between $732 million and $1 billion by 2014.