Home Is Where The Ads Are

In-game ad firms are keen to get into Sony's new PS3 virtual community

In the past few years, with computers increasingly cutting down on the amount of face-to-face time people spend, a new popular phenomenon has risen: virtual communities. Different than standard MMOs, these online social refuges focus more on acquiring virtual property and interacting with other like minded individuals than on reaching a level cap. Today, there are several different options on the PC, including Entropia Universe, Habbo and Second Life (to name a few) and soon they will be joined by the first console equivalent: Sony's Home for PS3.

Now, granted Xbox Live has many of the same underlying qualities as home and Wii has its Mii avatar creation, but neither holds the exact scope that Home aspires to offer. Players can not only create avatars, but they can customize their wardrobe with many different options and lay out their own personal spaces with fancy looking furniture. Along with being able to meet people and talk to them in general lobbies, there will be spaces specific to particular games and companies that users can check out. All of this comes without any subscription fee to speak of... and leaves advertisers licking their chops.

We chatted with in-game ad specialists Jon Epstein, president and CEO of Double Fusion, and Justin Townsend, CEO of IGA Worldwide, about Home's rather significant potential.

Home, Sweet, Home

To date, Sony has mentioned three possibilities for how Home will be supported including content purchases in the form of clothing and accessories for your avatar, general advertising, and content auctions. The direct advertising part is obviously what has the most potential for in-game advertisers. Banner ads and billboards provide a steady, consistent level of income to a game.

"We're exceptionally excited for gamers, publishers and Sony," said Epstein. "I think Sony is making a quantum leap forward defining what an online game service can be. Sony is serious about online and anything that brings a higher percentage of gamers online is good for Double Fusion. It recognizes the importance of advertising in games. This was demonstrated with spaces for moving and 3D ads and we're a big believer in rich media ads. It also gives advertisers multiple contexts to approach gamers. Games, in general, are an emotional experience and advertisers can benefit by attaching their brands to those emotions. PS3 Home gives another context, social, for marketers to reach that same audience of gamers. As the service develops, we think it will be a big factor in what consoles people choose to get."

"It takes time to get console rushes right. It's to their credit that they came out with something like this. It's not that there weren't issues with the release, but they were treated unfairly by the press. A lot of people forget that Xbox didn't have Live in the first year, and the first Halo never supported it. Would it have been great online sooner? Yes, but I'd rather have something with this potential now."

"It's been a while in the making, we've heard the first rumblings about a year ago, and we've been waiting to see the sort of vision that PS3 Home was going to take," ventured Townsend. "In some respects, it's not too much different from what has been offered on Xbox 360 and Wii. However, with PS3 and other multimedia devices, having gamers spend time in media environments is the Holy Grail for advertisers and was crucial given the recent Live announcements."

With virtual content sales, there's another level of potential for advertising in Home. Just like every piece of furniture and clothing you own in real life is branded, virtual items in Home have that same capacity. While GameDaily BIZ recalls a period in middle-school where social standing was often determined by the presence of a Starter jacket, we realize that these instincts of one-upmanship never really leave and are still thoroughly present in even virtual communities.

"These are markets that have a lot of potential," commented Epstein. "Different categories of advertisers have different tastes.

For instance, if a designer gets a portion of their clothing being downloaded, that's doable. But if it's going out and spending a million to get a brand or product, I don't think so. As a paradigm, though, it makes sense."

"It's the sort of thing that goes beyond billboards," described Townsend. "With this, it's 'positive product association.' For example, Red Bull gives you energy in real life then, as an item, it has to give your character energy. Michelin tires have to make your car faster, and so forth. It's different but still vital. What we're delivering is geometries. Generally, any product placement has to be hard coded, but what we can do is serve code dynamically. So the amount of effort to integrate an item into games is less."

You can go Home again?

Shortly after the announcement of Home Sony further detailed what the service could offer, pointing out the "virtually limitless" possibilities for promotion and advertising. Sony obviously has plenty of faith in the viability of ad placements considering that this new social network is going to be primarily supported by it. Casting their hat into the ring of in-game ads showed the significance of the ad medium and certainly gave pause to any company impacted.

"You look at these live networks and advertising is one revenue stream," said Townsend. "When you look at how one can monetize digital assets, these sorts of things are critical going forward. They have the games that they produce, the forums that gamers will be able to use and provide an isolated universe for each game. They want as large an audience as possible so they can monetize more people. In-game ads are still embryonic, but the money is increasing. It's getting more and more significant."

"They haven't defined how the advertising opportunities will work," said Epstein simply. "It's tremendously important to Sony publishers to help their revenues with their games. And while the Home announcement wasn't about in-game, it says strongly 'We believe in advertising and believe it has a place on consoles.'"

It's clearly obvious that both Double Fusion and IGA would want to be involved with Home. As yet, however, Sony has not officially stated how or if these companies will be involved with their 3D online community. Indeed, Sony declined to comment because it's hammering out advertising deals with companies right now, so the details revealed to GameDaily BIZ on the record were only in the most general of terms.

"I'm limited in what I can say there," confessed Epstein. "We have partnerships with leading publishers across the PlayStation platforms. We don't take it as a right to be on the console. Our experience positions us very well to participate, but it's up to Sony. Publishers would certainly like to see the platform remain open. It's like Lending Tree; When in-game advertisers compete, you win. When you compete, you get leverage. When you're open, you'll have a wide variety. Should Sony want to work with us, we think the market would support us."

"We hope they'll be open to us, because otherwise that will lead to more fragmentation in the market," asserted Townsend. "Right now, when IGA goes to the market and starts to sell the ads in-game, there's going to be fragmentation with Massive on Xbox 360, whomever is on PS3, whatever is on PC. What Microsoft's does is have a buy bulk over different mediums. For example the CPM for Xbox 360 might be $15 dollars for ads, and on the PS3 be $31. This sort of attitude from Microsoft is very self-serving and undermining while we work with Madison Avenue and push this as premium medium. The question becomes: How can we maintain this moving forward? If 360 became an open system, IGA would take on all 3 SKUs of the game, we will have a higher CPM for it moving forward. As for how will Sony monetize? It's been rumored the toll be around 15 to 20 percent."

"These devices, the 360 and PS3, are more than games machines; they're media devices. Because of this gaming audience, which has a broadening demographic, there is a lot of opportunity to grow them. Major publishers have to start thinking like media companies, not game houses. Games are more than just games; they are hot media properties. The more collaboration between advertisers, console makers and in-game companies, the better," Townsend added.

What about the House that Mario built?

It seems likely that online communities such as Home will become more common on consoles. Whether third parties will try and bring such products in, or if they'll even be allowed, is unknown. As for Microsoft, they're offering something somewhat equivalent in Xbox Live, and while an online community with Miis would be a dream come true for many of Mario's true believers, only Nintendo really knows what Nintendo is going to do.

"I think we'll see the use of console devices in a lot of different ways, and Sony's pointing to one of them: as multimedia devices," commented Epstein. "Sony and others have not lost the focus on gaming, however. These are powerful computers hooked to the TV and now the Internet."

"You'll definitely see more online communities. You see the success Xbox has online with its community. You see it on PC. In Germany alone, we saw a great increase in gamers with the use of gaming communities. Communities like this lets them engage the gamer, and maybe monetize them. So yes, increasing performance," agreed Townsend. "So Xbox is heading in that direction anyway. Nintendo integrated a GameSpy option recently. I'm surprised Nintendo is using GameSpy instead of something internal, but it could be a short term solution. There are great qualities if you can connect gamers."

"If you're one of the big three, it's very efficient to market over e-mail These communities have multiple ways to be monetized. Most game publishers and branders look to more effective ways to reach their consumer in a more cost effective way. If you sought them in their communities you could reach them in a much more cost effective manner. If you they gave more incentives to register, like with media assets, it would help build these communities. It's just not happening effectively right now," Townsend concluded.

Before it's here, it's on the Bloomberg Terminal.