Interview: Alex St. John Talks Digital Distribution, Microtransacations, and the Future of Gaming, Part One

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The MMO Gamer: I’d like for us to discuss a somewhat touchy subject, now: in-game advertisement, and advertisement support of titles, in general.

The developers of City of Heroes recently announced plans to introduce real-world ads into their game. There was, as is to be expected, the usual gnashing of teeth and hurling of accusations on the official boards and elsewhere that this was going to spell doom for the company, fans were going to quit in droves, etc.

Before we get into the heart of the issue, I’d like to first pose you a question:

People are already bombarded by advertisement everywhere they go… on TV, the radio, in newspapers and magazines, billboards, store windows… even on this very website. How does a developer go about justifying putting advertisements in their games, which are seen by many as their primary, if not only, means of escapism?

Alex St. John: You know that’s a hugely important question and to frame my answer I will first point out that WildTangent invented the first in-game advertising technology and delivered the fired web served 3D ad in an online game in 2000. It was a driving game we made for Toyota that carried MSN served ads in it. It was the first successful 3D advergame campaign ever run on the Internet. It was developed by WildTangent and hosted by Microsoft. WildTangent of course has the patents on in-game advertising. We did it first, learned the hard lessons and shifted our primary focus to much more scalable and effective models.
Here are the challenges with in-game advertising in a nutshell:

1: Throwing ads into games is risky, because it potentially alienates gamers which could ultimately turn away more revenue than it can generate. It does work in some instances and we still offer it to advertisers who want it as part of a larger advertising package, but it’s a fine line to walk and we’ve already seen many, many examples of people screwing this up.

There is no standard for serving, tracking or measuring the value of in-game ads, the result is that although some advertisers are buying them for their novelty or to experiment, it’s nearly impossible to measure. You can’t interrupt a game when somebody is playing, you can’t make them clickable, and your asking advertisers to take your word for it that it’s working. Again, we offer it to some of our advertisers, but generally only as a small portion of a much larger ad campaign.

2: It’s a huge PITA to crack retail games and manually plumb ad units into them.

Now that said, WildTangent makes 50% of its revenues from advertising in games but we are successful at it because we do something completely different. In our model the games are FREE, the user only sees an Ad if they choose to let a sponsor buy their gameplay for them instead of spending our WildCoin tokens on them.

We play a standard clickable video ad unit served by a standard media server in a standard web media format during the games load time. That works great. We’re not crapping up the interior of the game with ad placements; we’re not asking the developers to crack their games for us, the consumer only sees ads if they choose them and only during the wasted time when the game is loading anyway. That model works great because consumers have choice and control, we didn’t have to talk developers into messing with their games, the games are free and the advertisers can sponsor games and measure the results using standard web tools and metrics.

We’ve had a lot more experience with advertising and gaming, so we’ve learned how to do it right and I’m confident the rest of the game market will ultimately come to the same conclusion once the hype has died off and they start listening to the consumers and advertisers.

My advice to developers on in-game advertising is just don’t do it. It’s not worth the trouble or the risk to a hot title and the folks who can really monetize your game with advertising (like us) don’t need you to do anything other than make a great game and give it to us for online distribution.

The MMO Gamer: Honestly, that answer took me somewhat by surprise—so much so that I’m no longer going to ask the question that was a lead-in to.

I recall in our prior conversation that you seemed very enthusiastic about the prospect of advertising in MMOs, even floating a few hypotheticals about how they might be able to work ads into a game such as WoW without ruining its aesthetics or limiting creative integrity.

You even gave a working example, of an NPC who handed out gold in exchange for players viewing ads.

Was I just completely misinterpreting your statements at the time, or has something caused you to rethink your position in the meanwhile?

Alex St. John: There is an extremely important and fundamental difference between the in-game advertising models that you hear getting touted out there and the ones I believe in.

I think it is wrong to serve ads into games consumers have purchased and believe they own. I think one of the fundamental features of gaming that makes it superior to passive media like radio and television is consumer control, hence ads should only be served into games with a consumers consent and control.

We only serve ads into free gameplay, when a consumer buys a game from us we turn off ad serving. In an MMOG ads are only served to players who seek out a character designed into the game to offer advertiser sponsored quests in exchange for game currency. Serving ads dynamically into games consumers have purchased is a very risky enterprise in my opinion.

[Alex included the following image for illustration purposes]:

Continue on to Part Two of this interview…