Ubisoft Talks In-Game Ads

23 February 2006 - Next Generation

The promise of in-game advertising revenues is exciting to agencies, investors and, of course, publishers. But for this last group, there is a balance to be found, between grabbing the revenues, and protecting their products from over-zealous commercialization.

We've all seen movies that were ruined by overt product placement. Games can live without that sort of treatment.

But unlike the movie business, games have a limited number of revenue streams (there is no sell-through DVD market) and in an environment squeezed by rising budgets, anything that promises funds straight to the bottom line has got to be a good thing.

Ubisoft's vice president of publishing Jay Cohen is just one in this business, balancing the pros and cons of in-game advertising. Next-Gen.Biz visited Ubi's San Francisco offices to chat about the in-game advertising scene, where it's come from and where it's going...

Next-Gen.Biz: Tell us about Ubisoft's background with in-game advertising...

Jay Cohen: It's really interesting, the way it’s come about. When we entered the 3D era in the mid-1990s, we found we could create much more detailed environments that imitated real world settings. So we would call up brands, be they clothing, or fast food, asking for permission to use their logo. We'd say it would be really cool to use the Coca Cola sign as part of this game world, they'd say, 'no way’ and then they'd put the phone down. That was just seven years ago.

Then, five years ago, we'd call and suddenly they'd be 'okay let's do a cross promotion'. They said, 'We’ll send you 40 cases of our soft drink and you go ahead and put that logo in there'. We thought it was a big win, but we also knew that one day they would realize that we were talking to the same guys who they were spending millions trying to reach.

Today, our desire to have the environment enriched in this realistic manner is still there. We still want to have that logo for realistic interaction. Now we are seeing that the brands are willing to invest. They see it as a viable marketing tactic so they ask us 'how much?'

That is very new for us. We’re not a traditional media company; we've always been a media buyer be that print or radio or TV. We know how to buy; now people want to buy from us.

So we have structured a team that has to figure it out, and that is happening on an industry-wide level. We're all trying to work out what this means for us as an industry and as creators of entertainment. Ultimately, is this where we want to go?

Where do the advertising agencies fit into this puzzle?
The agencies are telling their clients where to go in TV, radio, PR, promotions and so on. There's a campaign solution for every line item. But there was never a line item that says 'videogames'.

It was hard for us to go in there as Ubisoft and convince the clients directly because they just listen to their agency. We needed the agencies to go in there and say 'this needs to be a line item', and 'this is a good investment for you'.

The agencies are there to find creative solutions. A lot of these folks are on point as far as what-pop-culture-is, and they are playing games. They know what's popular and now they are making recommendations to their clients. They understand this business pretty well.

We have been working with the agencies on our campaigns, and that knowledge has fed through to big mainstream brands, which are now working games into their overall campaigns.

How is it working on a practical level?
It’s interesting to sell to those brand-holders because we have traditionally had a buying relationship with many of them. Let's say it's a car manufacturer. We may have previously decided that we really, really wanted a Ford Mustang in our game and were willing to pay. But now, they might want to feature the new Mustang in selected games. So we have different people from the two companies talking to one another and some of them are saying 'pay me', and some are saying 'I’ll pay you' for the exact same thing.

It’s all really evolving. There is no right or wrong way. We're trying to be opportunistic and come to grips with how this will work.

For example, take an environment like Splinter Cell; which prides itself on ultra-realism on every front. If the player goes from one place to another it needs to be in a car. Do you want an acme car? No. You want it to be a modified bullet-proof GMC truck. But it’s not a racing game so should I pay for that or should they pay me? Or should we just agree it’s good for both of us?

So how much is this business going to be worth?
The measurement and the valuation are evolving. However, if you look in on the focus groups and you take averages and impressions, you see some impressive results.

Say they were driving your brand of car for ten minutes. The length and quality of that impression is extremely powerful. That consumer can close his eyes afterwards and know where all the controls are. That is much better than any TV spot.

Working from the value of those impressions and coming up with a valuation is instructive. It's worth ten times an ad on Monday Night football, more than a commercial at the Super Bowl. TV has the reach but they don't have the quality of the message delivered.

So - holy cow - it starts to seem like we can earn more money potentially from ad revenue generation than from the price of the game. It really goes to that stratospheric level.

But that is not our core business and we are not really designed right now for that. It's not what we want to do editorially. So we have to take a step back and ask about what is right and appropriate.

However, if there is an interested party we're going to show them that there is a lot of value here and if it's available, it's going to the guy who is willing to come to closer terms.

So it's an emerging opportunity, meaning we may be looking at a period of chaos in the months ahead?
Yes. We are in that beginning, bubbling stage of chaos. But we fancy ourselves as entertainers, artists, and creators of entertainment. It’s a much more consistent way of running the business than going the other way and looking for something that is heavily ad assisted.

We ask ourselves, 'What does that do to the integrity of the creation and the perception of the market?' We don’t know the answer to that but we are definitely quite scared of what it might be so we stay on the side of caution and stay with the consumer and their needs rather than the advertisers running the content for us.

We want the freedom of creativity to guide the business. Having said that, we as a company cannot turn a blind eye to the opportunity. We have severe restrictions in the way the business is run as far as generating ancillary revenue streams goes.

We get three to six months on the shelf and then you’re done and by the way the platform just died. Books or film or TV keep repackaging and redelivering and they’re seeing a 30 to 50-year revenue stream and so do all the players - the actor, the composer, the publisher. For us there’s none of that.

Look at the guy who spends years making the game and then it’s out and then it’s done. Does he work less hard than the book author or filmmaker? They never see royalties ten years down the line.

We have to look at other ways to help support the bottom line because it’s very short relative to the rest of the entertainment world. We have to be opportunistic and figure out how we make it sustainable and possible.