Interview with Exent Technologies' Yoav Tzruya

May 7, 2007

In this weeks interview, the last before OGDC 2007, we talk with Yoav Tzruya about in-game advertising. As the COO of Exent Technologies, Yoav has more than 15 years of experience in software development, marketing, in-game advertising and digital distribution of entertainment content. He is responsible for evaluating potential markets for Exent, defining product strategy and roadmaps and bringing Exent's messages and products to the market. Yoav will be presenting his session, The Evolution of In-Game Advertising on Friday at 3:00 pm.

Edward Van Duering: Thank you for your time Yoav, and we appreciate your interest in answering a few of our questions. Start us off by telling us how you've been involved in the game industry and what road ultimately brought you to Exent Technologies.

Yoav Tzruya: Personally, I’ve been involved in planning, developing, and implementing value-added services for portals, broadband service providers, and third party independent content providers, in both B2C as well as B2B models for the last 10 years. I’ve helped set up the infrastructure for early online music services, online presence of newspapers and then for some of the world’s earliest IP-based VoD services, as well as some of the Western world’s first MMOGs. Then, about 4 years ago, I decided to focus exclusively on my childhood passion, video games. I identified Exent as an innovative company in the market, always one step before the crowd, and joined to lead marketing and product strategy. Exent’s digital distribution technology has been recognized by leading players, including Verizon, Comcast, Turner Broadcasting, Intel, Deutsche Telecom and France Telecom to be the best around. We’ve lately complemented that with our unique approach to in-game advertising – providing unprecedented capability to enable any game for in-game advertising.

What new in-game advertising innovations (technology, types, etc) are there that developers should be aware of?

In-game advertising is a rapidly growing revenue source for game developers. In this ever changing environment, in-game billboards, 3D objects, storyline objects and interactive ads are already “standard,” in the sense that they are offered by all. There are two very exciting innovations that were introduced lately.

The first is the ability to insert in-game advertising to every game, without needing any specific support from the developer. This innovation, offered by Exent, unleashes the inventory of the hundreds of millions of game units already in the field. In contrast, there are only a few million game units that are integrated at any given time with an in-game advertising SDK.

The second exciting innovation we see is the creative thinking around enabling contextual advertising even for games that are not situated in an urban, 20th century storyline. We see unique ad units being developed to enable in-game ads for fantasy MMOG, futuristic games and other types of games that don’t lend themselves that well to “standard” in-game advertising.

What steps are needed to make in-game advertising fully integrated into entertainment software? Or, has that already been accomplished?

From a technical stand-point, there are two approaches to enabling a game for in-game advertising.

One approach is to take that into consideration in the pressed time during the development of the game, making a design-time decision in regards to which ad-insertion technology, and even more important - which ad-serving and ad-sales force, you team up with, selecting ad spots, quantity and units in advance, hard-coding (and limiting) the in-game inventory into the game.

The alternative approach, which we believe provides better flexibility and better returns, is to team up with technologies such as Exent’s that do not require any code integration. Thus the enablement for ads can be performed at any point during the game life cycle – development, QA, beta, production, distribution, and even after the game is installed on the user’s machine. This allows companies to not only serve dynamic ads into the games, but also define the inventory in a dynamic fashion. This makes it possible to fully capitalize on the in-game advertising revenue potential of the game by adapting it to real usage patterns of the game. This helps avoid being trapped in into limited design time decisions that tend to be risk averse in order not to alienate users. We can also use this as a risk-mitigating tool to prevent advertisers being associated with a title that tanks down with consumers. Since we can decide in an ad-hoc fashion which games are going to carry ads and how, we can capitalize on winners, rather than risking brands with unproven titles.

From a developer's point of view, what practical difference is there between using third-party tools and services and handling in-game advertising themselves?

Well, I don’t want to be the producer coming to the development team asking them to build a custom ad-insertion and ad-serving capability during the crunch time of game development. Added on top of that is the technology development cost, which can amount to hundreds of thousands of dollars, for building a one-off, custom ad-insertion and ad-serving technology. Also, one has to take into account the fact that third party tools and services in-game advertising companies have the experience of working with the players in the market. They typically come with existing advertiser relationships because they have already been tested and proven in the market so they are already accepted by advertisers and ad networks.

In platform terms, is it easier or more restrictive, than PCs and current-gen consoles, to incorporate in-game advertising in smaller form factor hardware like mobile phones and handheld game systems?

Well, it depends on what your goal is, from both a brand-lift/advertiser perspective as well as from a developer perspective looking to generate revenues. We should also separate mobile phone games and handheld game systems. Mobile phone form factors don’t lend themselves well for in-game advertising (apart from the niche of advergames). As such, brand interaction is limited and most revenues are generated from pre-roll and post-roll ads. This forces lower revenue potential on the developer side and less brand lift and affiliation for advertisers. On the other hand, we believe handheld game systems are easier to incorporate in-game ads into, albeit a bit more problematic on the connectivity side for dynamic in-game advertising.

Are there certain games, such as a medieval fantasy game versus a street basketball game, where in-game advertising is not feasible? If it’s a hurdle that can be overcome, how so?

I definitely agree with your viewpoint that it would be somewhere between funny and alienating to see a Nike or Dell ad inside games like World of Warcraft. However, we believe that unique ad units can also be developed for such games. These won’t be standard billboard or “storyline” objects integrated into the game. Rather, we see the incorporation of micro-transactions, online marketplaces, tournaments, mini-games, campaigns and user generated content with advertising or sponsorships as definitely feasible. We are already working on implementing such ad-units for several MMOGs.

Over the last several years, how have you seen players' responses to in-game advertising change?

Well, “players’ responses” is hard to define. It really depends on the context that in-game ads are presented in. Surveys that we’ve done along the years have always shown that a small chunk of users, typically no more than 15 - 25 percent (depending on the geography and game types), react negatively to in-game advertising. That number comes down when user incentives (e.g., tournaments or additional game features) are introduced into the picture.

The perception of a lot of the opposition to in-game ads comes from the fact that the small percentage that does object is a very vocal minority. On top of that, some mistakes done by some publishers and in-game advertising players in regards to data privacy have also created some bad publicity with consumers.

We find the biggest objection comes because consumers feel like they are getting nothing in return. Unfortunately, the first in-game advertising model most consumers saw was them still have to pay $50 – $60 at retail while at the same time being exposed to ads. When you ask them how they would feel if the games were discounted or even free because the title is using an ad-supported model, the objections disappear.

Share with us a little bit about your "The Evolution of In-Game Advertising" session at OGDC 2007 and what you hope attendees walk away with from that session?

In my session, I will try and cover the basics of in-game advertising business as well as existing barriers for its success (such as ad-units standardization, research, and third party measurement and auditing). The presentation will position in-game advertising as a viable advertising media-buy, discuss some of the implementations that are in the field and underway, and will try to create some alignment around the efforts needed to make it scale and benefit all parties involved.

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