Created by Bartle Bogle Hegarty, the 51-second clip, which showed a person's life from birth to the grave using the strapline "Life is short, play more", picked up the award in the Best Creative Film category.
Of all of the creative treatments used in the launch of Xbox, "Champagne" is arguably the most memorable - yet it only made a fleeting appearance on television.
The original clip was developed solely for the internet and was only later edited down to a 30-second cinema and television ad. It was promptly banned by the Independent Television Commission after it received complaints from viewers who had recently suffered a bereavement.
"If I had to isolate one piece of communication that most showed what the Xbox brand is like, that would be it. I think the 'Champagne' viral film was a highlight," Harvey Eagle, the European advertising manager at Xbox, says.
"It was our intention to create a really compelling piece of content, which would then be passed on. Only much later after its viral success did we look at using it on TV. We believed strongly in the whole concept and it had to have high production values to make it work."
Eagle says the clip was spread by Xbox staff, the employees of Xbox's agencies and journalist contacts. Momentum gathered from there.
While Xbox specifically targeted the internet because of the youthful demographic it attracts, other brands such as Durex have taken advantage of the unregulated nature of the web to transmit more risque versions of their television advertising.
In June, Durex launched the "estate agent" television campaign, created by McCann-Erickson Manchester, which depicted hundreds of actors dressed as sperm being shown around a giant condom, their prospective home.
The agency's digital arm, McCann-I, in conjunction with the streaming company Groovy Gecko, decided to use the internet to run a re-edited version of the original creative.
It was available at www.durex.co.uk with a link to the commercial e-mailed to 10,000 consumers. Durex claims it has been viewed more than 200,000 times.
"The original ad had a more risque ending which we thought would have more cut-through with consumers, but it was decided it wouldn't be allowed to run on TV so we gave it new life online," Chris Conlan, a project manager at McCann-I, says.
"The internet clip gave us the chance to have the added credibility of the original ad."
Eagle argues that the very nature of a viral clip - that it is voluntarily passed on from consumer to consumer - is its greatest strength. "The critical difference is that something viral is passed to you by someone who is effectively recommending it - a friend that is endorsing the ad and the product," he explains.
"Television can be an intrusive medium and is not an invited communication."
But relying on consumers to pass on an execution does pose big risks and is the Achilles heel of the viral as a medium. If consumers don't like a viral they won't forward it and the ad will disappear as it is deleted from e-mail inboxes. This means that using compelling creative is the life or death of any viral campaign.
Tony Evans, a planner at TBWA/London responsible for the John Smith's viral in which Peter Kay describes explaining the facts of life to his daughter Britney, argues that viral content must be unique from what is offered on television.
The spot was so risque it was never considered for television, but it did become one of the most talked about viral clips of the year. Ads aren't cheap to make, but Evans says the treatment was worth running for the added brand dimension it gave the client.
"It was set in the same scenario as one of the television ads so it wasn't too expensive for us to create," he says. "What we identified was an opportunity for a completely adult perspective on the whole John Smith's 'no-nonsense' theme."
According to Ed Robinson, the joint managing director at The Viral Factory, the cost of making a viral ad solely for internet use is less than half that of making a TV spot. He says crew and post-production fees, for example, are much lower for non-TV ads.
He says: "It is a form of peer-to-peer marketing and that is what every brand is after, you also have to remember that it is free media space for a brand, so it can be cost effective."
The Viral Factory recently created internet-only viral ads called "burp" and "fetch", which feature couch potatoes who spend too much time indoors, as part of Ford Fiesta's "get out more" campaign.
Robinson explains that running Fiesta's television treatments online would have failed because when consumers are online they are looking to be marketed at in a different way.
"The 'get out more' TV ads show a before and after effect of what happens to people's lives when they get a Ford Fiesta. Running that on the internet just wouldn't work so we took the 'before' element and added a twist," Robinson says.
"With the internet you can't focus too much on product. Viral clips need to hit the zeitgeist and have a shock, surprise or rib-tickling element because that is how friends who forward it relate to each other."