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Cold wind blows through Games Web sites

Ad networks cry tough

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Life is tough nowadays for gaming web sites, and the signs are that it's only going to get tougher, Andrew Smith writes.

When CNET announced last week that it was to pull the plug on its Gamecenter Alliance, owners of gaming sites sat up and paid attention. The one network that was expected to survive beyond all others will, at the end of the month, be history.

And when it emerged two days later that the UGO Network is slashing its affiliate payments to $1 per thousand ad impressions, a lot of people started to get very nervous.

The online gaming scene has been a staple of Internet life for as long as most participants can remember. It is a place where friendships are formed, careers are built and sites run by individuals or small teams can put the big boys to shame.

The ad networks gave the chance for many sites to operate on at least a semi-professional basis, while concentrating on what they did best - writing great content. But now the scene is falling apart at the seams.

Things turned ugly in October last year, when the GameFan network kicked the bucket. Over 40 affiliate sites were left out in the cold, given notice on a Friday afternoon that they had two days to find new hosts and advertising partners.

Then in November, Snowball, which owns the heavyweight IGN.com, radically restructured its hosting and advertising schemes. Many sites lost both their advertising and hosting services. Others were still served with ads but had to find new hosts. Only a select few were allowed to stay on board.

Most gaming sites are funded entirely by advertising revenue from affiliate networks.

Although decent earning potential does exist, with some sites paid upwards of $2 CPM ($2 per thousand ad impressions) and serving many millions of pages each month, there just aren't enough ads to go around. When the paid ads run out, networks serve unpaid fillers, but at the end of the month affiliate sites are still owed for every ad served, free or not.

Gaming networks are bleeding money, and some simply cannot continue.

"There is no question that the advertising market is tough these days," CNET's Josh McCloskey said, talking last week to one Gamecenter Alliance site, PCShooter.com.

But he played down suggestions that the financial losses affecting other networks had caught up with CNET, saying only that the company "has decided to re-dedicate resources". (Of course, CNET has no need for a games ad network anymore - through the acquisition of ZDNET, it gains its own massive games site - Gamespot.)

An unnamed UGO spokesperson told Gamers.com: "Right now in this market, it's difficult for any entertainment site to survive."

The situation affecting UGO is reportedly so bad that if affiliates don't play ball and negotiate a lower advertising rate, the network will cut payments regardless - and risk being sued for breach of contract.

So how can gaming sites continue? If advertising alone cannot sustain the huge bandwidth demands of these sites, and in some cases the salaries and freelance costs, what is the alternative?

Jakob Nielsen, the Web usability guru, believes subscription-based sites are the way forward: "Offering free services on websites is not a sustainable business model, nor is advertising, which doesn't work on the Web. Most Internet companies are now pursuing an enterprise strategy to make money, but they'll soon begin turning to individual customers for revenue as well."

"2001 will be the year that website operators come to their collective senses and start charging customers for service."

Nielsen is obsessed with this theme, but he appears to have found one convert already in the sector: gaming site CombatSim.com has already switched to a subscription model, charging $3.95 per month for access to articles and forums. According to owner Douglas Helmer, the site had been chewing through over 500Gb of traffic per month and was "on the verge of ceasing to exist" without charging for access.

The question of whether or not other site owners will follow Helmer's lead is a tricky one as, either way, some sites are sure to fail.

CombatSim.com is a unique site, and there is no comparable alternative immediately available. But if any of the myriad of gaming news, editorial or discussion sites were to introduce subscription charges their notoriously fickle audience would no doubt just go elsewhere.

So unless every site starts charging at the same time, after which the strongest would survive, those who try at first are doomed to go under. Besides, the big league games Web sites, such as Gamespot or Gameplay, massively well-funded with heaps of different revenue streams and dedicated sales teams will have no intention of helping out the little leaguers by charging for their content.

In the gaming world, where fun is paramount, these are not fun times at all. ®

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