In-game ads aren't simply an option for publishers to generate additional revenue; they're fast becoming essential for offsetting escalating costs, says Massive Inc. Naturally an in-game ad company would stress the importance of these ads, but there's no denying in-game ads are taking off, and so is Massive. Having recently launched version 3.0 of its ad tech, Massive discusses with us the present and the future for the company.
With chatter regarding in-game advertising at an all-time high, industry pioneers Massive Incorporated want to make one thing clear: they're here today with a live network serving millions of game sessions across dozens of titles. GameDAILY BIZ sat down with Massive CMO Nicholas Longano to discuss the company's ad technology, what is driving Massive's growth, and what challenges still lie ahead for the company. Massive may be just over three years old, but don't call them young.
In the Here and Now
Longano stressed that the company's central message is that dynamic, in-game advertising is not a technology to be talked about in a future tense. Massive's technology is out of the testing phase and is currently serving millions of ad impressions.
"There is one company that has a live network. We've logged 17 million game sessions accounting for over 25 million game hours," Longano said. "This is not a young industry. It is only a young market for those that aren't in it."
Being the first to market in such a rapidly growing business certainly gives Massive some bragging rights, but the company believes it has significant other competitive advantages over other companies now entering the space as well. Longano specifically pointed to the company's repeat business as an indicator of Massive's leadership position, beyond their early entry.
"It varies game-to-game... but in-game ads can increase publisher revenue an additional 20-30% above the amount generated by the title's retail sales," Nicholas Longano, CMO of Massive Inc.
"We deliver what we say we will deliver, which is why we're seeing repeat business from publishers. Publishers who were previously just dipping their toes [into in-game ads] are now taking a full-blown plunge," he said. "We have an enormous infrastructure in place now -- support teams, creative support, ad ops for streamlining ad approval from all organizations necessary, and a massive ad sales infrastructure."
Publishers Require Additional Revenue Streams
The video game business is different from virtually all other major forms of media in that publishers' only source of revenue comes from retail sales. Content publishers in virtually every other medium, (music, films, TV, etc.) are able to diversify their revenue sources more than publishers in the video game industry. That, coupled with rising development costs, is what Massive believes makes a strong case for the need for in-game ads, beyond merely the desire to make more money via their implementation.
"It is simply impossible to offset a 50% rise in development costs via retail sales. It just can't be done," Longano said. "Publishers are going to HAVE to have a secondary revenue source. It varies game-to-game depending on the specific ad implementation, but in-game ads can increase publisher revenue an additional 20-30% above the amount generated by the title's retail sales."
"I was on the other end before I joined Massive -- at a publisher. I was drawn to the company because I truly believe that this is the best thing I've heard [for publishers] in a long, long time," he continued.
Gamer's Value = Publisher's Value
No one yet knows how the details of next gen's economics will shake out, so hindsight will be the only true judge of whether Longano's concerns about skyrocketing rising costs are legitimate, or just an excellent way to drum up Massive interest. What is known is that in-game advertising becoming commonplace in appropriate titles will shift the economics of the industry, and give new importance to the term "replay value."
"We balance the ad to gameplay ratio to prevent any gaming experience to be overloaded with advertising, so I'm not sure that in-game ads could entirely subsidize development costs. I do believe that in-game ads could subsidize the development of new levels, however," Longano said.
Right now, the fact that publishers are putting so much emphasis on multiplayer online play and replay ability is in some ways actually hurting their bottom line. While it's true that an excellent online portion of a title will move some additional copies, who knows how many potential future sales are lost. Whether gamers spent 100 hours with Halo 2 thanks to Xbox Live or 15 hours with Ninja Gaiden, both publishers sold their products for the same $50 MSRP.
In-game advertising, for the first time, presents publishers with a real reason to infuse their titles with replay value (beyond merely wanting to release good games, of course). If gamers keep coming back for millions of multiplayer game hours, then that will generate a significantly higher amount of ad revenue than if the endgame content is merely lackluster.
Growing the Space
For the time being, Massive's primary goal is to continue growing the space, despite the company's insistence that the business has moved out of its infancy.
"Over the short term our biggest goal is simply to build this industry; to continue the migration of advertising dollars into this medium. To that end we're always signing on more publishers, more advertisers," Longano said. "Massive was formed by [people from] publishers. We were formed to get new forms of revenue for this industry."
