Interview with Betable

I’ve been awfully busy of late, but you will see news from me on two fronts very soon. In the meanwhile, Tyler from Betable contacted me about a comment I made on one of their blogs. This turned into an interview where I found out he was also a CMU alum and where he found out that I drone on and on about things.

Dan Cook’s statement (and I paraphrase) that designers also have to be businessmen is never more appropriate than it is today. The new wave is Free to Play and I think it is a great leap forward. Too long has the conversation been framed as business vs. ideals as if it were two sides of a balance. The truth is that in this environment business has to trust design and design has to consider business. That’s not a fence-sitting cop-out–it’s my assessment of industry trends.

Anyway, here’s the interview, which is also cross-posted on their site.

When Betable published the blog post “Advertising in mobile games is broken”, we got a lot of great responses and feedback from our readers, but one in particular struck me as insightful. It was from Zack Hiwiller, a game industry veteran with a fantastic blog that covers game design and the industry as a whole. Our discussion prompted an interview for you to read below, which has some great insights for game developers for game monetization, especially in-game advertising.

Tyler: Hey Zack, great to talk to you today. Let’s begin with an open question: why do game developers consider in-game advertising?
Zack: When we talk about making money in games, the conversation tends to only lead to two conclusions: either sell the game at retail and get all your money up front or give the game away (or sell it for a trivial price) and jam ads in there. The problem with the former is that it is an immense barrier to entry for untrusted game types or developers. The problems with the latter are legion, including reduced screen real estate and wrecking immersion.

Tyler: How do other forms of entertainment do in-media advertising?
Zack: Television, movies and other static entertainment have to face this choice. Sell at the front or load with sponsorship? HBO, Showtime, and others chose the former and has been able to produce high quality dramas that draw viewers into other worlds. The networks chose the latter and sell expensive spots in the middle of piecemeal sitcoms and sporting events and make hand-over-fist money as well.

There’s an additional prong of revenue that came about in the last few decades that games are starting to incorporate: the paid product placement. Look at the Coke placement in American Idol and compare it to the Old Spice Swagger Rating in Madden for an example. Old Spice paid Electronic Arts to rebrand a player statistic–something with no tangible value–just to get a new kind of ad impression.

Tyler: Do you see this as an effective way for games to incorporate these brands?
Zack: Well, these are still ads, just placed in a non-obtrusive and seemingly more subliminal manner. Microsoft bought in-game advertising specialist Massive in 2006 for something like $400 million dollars. Yet Microsoft shut down Massive in 2010. If in-game advertising was the boon for interactive media that it was for static media, then surely they could have made that arrangement work?

Tyler: Ouch, that’s a tough loss to swallow. What does the failure of Massive say about consumers?
Zack: Unfortunately, consumers aren’t nearly as static as the media they consume. With DVRs, even technophobe parents and grandmothers are getting used to “skipping the commercials”. It is understood now to show up to a movie 15-20 minutes late to pass on the trite TV-style advertisements just to get to the real trailers which are themselves advertisements. And the least said about newspapers the better, but I don’t need to describe how the dynamics of the Internet destroyed any ad-related models they could throw at consumers.

Tyler: Fair enough. That said, what advice can you give game developers looking to better monetize their games?
Zack: The key to the future is to realize that consumers are dynamic. If you make it hard to pay for a TV show online, viewers will just pirate it. Producers don’t get to dictate to consumers as easily as they once could.

For games, the old retail model was to buy up front once and play forever. As media speeds exploded in the late 90s and BBS sharing made way for peer-to-peer and BitTorrent, piracy became the status quo. Companies had to change from “Pay me if you want to play” to “Will you please pay me if you play?”

Tyler: Piracy is such as interesting competitor, because you essentially need to provide a compelling reason for players to pay for your game. What’s a game company to do?
Zack: Unfortunately, this is the new normal. The “Free to Play” (F2P) genre is the business model du jour and it is easy to see why: games are impossible to pirate and revenues per player do not have a cap. Whereas a player buying a game in 2006 would likely pay $60 whether he played for an hour or a thousand hours, F2P gamers pay only when they feel they are comfortable paying and want access to exclusive content. Players can spend unlimited money in many cases.

In Farmville, players pay for extra energy to get more actions per day. In League of Legends, players pay for new characters that differ from the characters the free players can unlock. In Battlefield Heroes, players can buy new weapons or ammo. In most F2P games, players can buy “XP boosts” that make their characters better without having to spend the time pounding away at early levels. Developers have literally tapped into a way to get people to pay money to not play their game.

Tyler: Love the concepts you’ve mentioned, but while virtual currency has proven to be a great revenue engine for free-to-play games, many of them still rely on advertising for either their primary or secondary revenue stream. Do you have any tips for game developers looking to integrate advertising into their games effectively?
Zack: For in-game advertising to be effective in getting a tangential message across, it must necessarily take away from the game’s experience. Psychologist Mihaly Csikszentmihalyi has written extensively on the topic of “flow”. Flow, to not sound too new-age about it, is the concept of feeling “in the moment”. Imagine playing a racing game and not even thinking as you swerve in between cars. Or playing a rhythm game where your hands move on their own and the game seems to play itself. Games, due to their nature of scaled antagonism are natural flow-state delivery mechanisms.
What in-game advertising must do is avoid breaking the flow state, because the user will then think of advertised brand as intruding on their experience. The best in-game advertising exists in a way that the user notices but does not break the flow state. This most often occurs in games that don’t elicit a flow state at all: fantasy football is one place where in-game advertising cannot hurt much if a flow state is never achieved.

Tyler: Given the difficulties of incorporating in-game advertising and the commoditization of virtual goods, do you think free-to-play games need more monetization options?
Zack: The problem with framing the question this way is that it implies that there are standard monetization options that just drop in to whatever game you are creating as if it were an advertisement where it doesn’t matter if it is for Coke or Calvin Klein or Steak-Ums. But monetization is tricky because it necessarily changes a game’s dynamic systems. Every monetization system needs to be custom made to make sense with the game it is working within.

The solution is not that we need more monetization options, but that current monetization efforts should be created with thought to how these features affect the game’s systems as a whole. If new monetization options are created, they should think about how games can be built around them effectively.

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