Almost lost in Zynga’s disappointing fourth-quarter earnings report was one bright spot: advertising. Ad revenues jumped 230%, to $27 million in the fourth quarter–almost four times the social gaming company’s 59% rise in overall revenues. Chalk it up in part to a new, more interactive kind of ad from “engagement marketing” firm SocialVibe.
Ads are still a small portion of Zynga’s business, which is far more dependent on sales of virtual goods in its Facebook social games such as FarmVille and CityVille. But CEO Mark Pincus said during the Q4 conference call that ads will be especially important in the second half of this year, which Zynga is promising will be stronger than the first half. And advertising is the sole revenue model for Zynga’s increasingly popular new mobile games such as Words With Friends.
One reason brands such as Best Buy and McDonald’s are starting to flock to Zynga is an emerging ad format called engagement ads. These ads prompt people to answer questions about a brand or purchase behavior, watch a video, or take part in other activities in return for in-game currency with which they can buy virtual tractors and cops. The idea of charging advertisers only when someone interacts with an ad isn’t new. Facebook is testing engagement ads using a pricing model it calls “action-optimized CPM” (cost per thousand views), no doubt tied to its rollout of new kinds of “actions” beyond simple “Likes” that app developers and marketers can let Facebook uses take.
Zynga’s engagement ads in particular, however, are the brainchild of Los Angeles-based SocialVibe. Microsoft, for instance, in 2010 let FarmVille players explore various parts of its Bing search engine and gave people virtual currency for Liking Bing on Facebook. Bing tripled its Facebook fan count in one day. More recently, Zynga ran engagement ads in CityVille in which players could get more “energy” needed to keep their cities humming by completing a survey for MasterCard or watching a trailer for 20th Century Fox’s film What’s Your Number?.
Now, to be clear, SocialVibe is not claiming to be responsible for the majority for Zynga’s ad revenues. Zynga’s own sales force sells engagement ads and sponsorships as well, along with branded virtual goods and mobile ads. But SocialVibe is Zynga’s only outside partner in engagement ads.
SocialVibe cofounder and “free safety” Dave Levy says the company’s mission was to provide more opportunities for brands in an era when only the click seems to matter. “We felt like brand advertising was broken online and needed to be fixed,” says Levy. “Brand advertising is about telling a story and connecting with people emotionally. You have to have authentic, active attention to do that.”
Ad models that have depended on getting people to do something in return for money or other considerations (in other words, bribe consumers) haven’t always fared so well. But Levy drew a distinction with SocialVibe’s ads: Rather than simply get people to, say, Like a brand in return for a discount, SocialVibe ads mostly aim to get people to more actively do something that, in the best cases, is intrinsic to the brand.
And SocialVibe claims consumers do engage, not just on Zynga but on other sites SocialVibe serves, such as the music service Pandora and the Huffington Post. Some 80% of people viewing the ad complete the entire engagement, and 41% of those then click through to a brand page. Which is a good thing, since Zynga or any other publisher doesn’t get paid unless the consumer actually engages with the ad. Display ads may or may not be seen, which is why Google’s search ads, measured by clicks, are so appealing to marketers.
Engagement ads are another step beyond the click to active interaction, the kind of thing brand advertisers have always wanted but rarely gotten online–or anywhere else for that matter. “Impressions can be faked,” says Joe Marchese, a cofounder and former president who’s now senior VP of marketing and digital at music TV network Fuse.tv. “Engagement can’t.”
Today, SocialVibe is releasing some metrics on those ads that indicate they’re getting some traction. The company did 500 engagement campaigns, double the total in 2010, for 200 brands last year, including General Electric and American Express. Consumers spent more than 1.7 billion seconds (or around 28 million minutes) engaged with the ads. That translates to an average of 63 seconds spent with each engagement.
Ian Schafer, CEO of the agency Deep Focus that did Microsoft’s Bing campaign on Zynga, says engagement ads hold promise at a time when it’s easier than ever to ignore ads. But he says the big challenge will be getting marketers to understand the value of the engagements, which encompass a lot of different kinds of activities. “Brands need to figure out what the impact on consumer behavior is,” he says.
The company also needs to provide a less hands-on way to do a lot of engagement campaigns if it wants to become a large company. (It may be telling that SocialVibe won’t yet reveal its revenues or growth rate.) Levy admits achieving scale is a “hurdle,” but says the company is investing a lot of money into technology and tools, including a software development kit, that eventually will make it easier for agencies to create campaigns quickly.
SocialVibe, which has raised $32 million, has seen some ups and downs, changing its name (to SVnetwork and back again) and some of its top management in the past couple of years. CEO Jay Samit left in November, replaced by Todd Tappin, former SocialVibe COO and CFO and onetime founding CFO of digital ad pioneer Overture. Marchese departed a year ago, when the company raised a $20 million round from Norwest Venture Partners, though he says he believes the company is on track. “I use them” at Fuse.tv, he adds.
Article source: http://www.forbes.com/sites/roberthof/2012/02/22/meet-the-company-behind-zyngas-fastest-growing-business-ads/?feed=rss_home
