Jonathan Epstein, Game On

NEW YORK What if advertisers could place a product, say a can of Pepsi, into a game for the player to interact with, then swap it for a can of Budweiser the next time the game was played?

Jonathan Epstein, president and CEO of Double Fusion, an in-game advertising network based in San Francisco, is working to make that happen. His company recently introduced fusion.runtime, a program that allows advertisers to place products in games much later in their development cycle than previously possible.

Ultimately, Epstein, 43, expects the technology to facilitate in-game ad changes on the fly.

Q: Double Fusion mainly takes existing creative and modifies it to fit into games. Are there any plans to start a division to make ads specifically for video games?
A: Most of the creative comes from ad agencies. You would expect to see creative continuity between what the advertiser might put in print, online and TV. When the fundamental paradigm had been graphics and video, you saw a lot of crossover. When you see more 3-D objects or linking of objects in games to real-world offers, that will necessitate and create opportunities for that. We don’t want to compete with agencies we work with. In the case of 3-D objects, which is a skill a smaller number of ad agencies have, we have relationships with outside companies that do object modeling work on games themselves, and we would put them together to create original in-game ads.

What are some reasons brands have given for not advertising in video games?
It is incumbent on us as a medium to satisfy the needs and desires of the ad community in a way that is appropriate to our medium. For the large majority of advertisers, content standards are the most frequently cited reason not to advertise. Some advertisers are looking for more than signs on a wall. The initial stage of ads in games has been a virtual outdoors. There is real value in that, but you have to understand why advertisers would look at games that are 3-D and interactive and ask for that. Also, it’s always important to have buyers and clients comfortable with the measurements and statistics. We’ve come a long way, and there is still more work to be done.

Such as developing a standard of measurement for in-game advertisements?
There are services emerging. Nielsen, for example, uses a panel as the basis for measuring the size and nature of the audience as market revenue. Game measurements are currently quarterly. More frequent measurement tools will emerge for us just as they did on the Web. The PC side is pretty ably measured, but when you look at the audience for consoles and handheld games, different approaches are needed. [The Nielsen Co. is Adweek‘s parent.]

How do you counter advertisers who say no to being in games?
By explaining the engagement value of the medium. It’s not a sit-back experience, it’s a lean forward one. It’s not like TV where you can have it on in the background or the Internet where ads may be well above screen. Advertisers are attracted to passion. Games are about excitement and the adrenaline rush, and advertisers are able to capture the audience in that emotional framework.

What would advertisers like you to do that you aren’t doing now?
Fusion.runtime has opened up a discussion with advertisers about how do we move beyond the limits of pre-defined ad slots. When a game comes out, there are slots for X number of ads that are fixed in one place. It’s like saying to an Internet site owner, “Figure out where the ads are going to go and never change them.” Advertisers have been in games for years through product placement. The more experienced ones say, “How do you give me the level of integration I’ve enjoyed through product placement that is dynamic and that I can run for different periods of time?” We can now customize ad campaigns across different games that could involve 3-D objects or things that are linked to specific achievements in the game, like a free pair of Warner Bros. movie tickets if you reach a certain level. We are currently working with Ubisoft, NCsoft and Oberon Media, among others, to deploy this technology.

Your closest competitor, Massive, is owned by Microsoft. Earlier this year, Google bought Adscape, an in-game network. Does your company need to partner with Sony or Nintendo in order to survive?
I don’t feel that’s necessary to our survival. When you look at the numbers, roughly 85 to 90 percent of the world’s online gaming population is PC based. There are opportunities for success with consoles, and opportunities for success without consoles. I believe that long-term growth is in open-sales platforms, where people can buy Tony Hawk, for example, across all platforms and not have to go to different people for different versions.

Bloggers are asking why games with advertising still sell at the full price of $50 to $60.
That’s a publisher’s decision. Right now, the revenue contribution of in-game ads is only beginning to be predictable enough to be a consideration in pricing. Certain genres, like sports and racing, where ads are expected, you don’t really hear that kind of complaint, unless there’s a concept issue. With fusion.runtime you’ll see more sponsorship of back catalogs, or new maps and levels. When we’ve done those programs, it’s a different, more positive reaction from the blogsophere.

What video games are you playing now?
Guitar Hero ’80s expansion pack. I like to play games I can win.

You aim to make it easier for advertisers to get products into games, but what kinds of advertisers are wrong for in-game ads?
From a demographic standpoint, obviously there will be ads that don’t fit the makeup for video games. The other area of concern that advertisers have had is the question of “Is my game and brand relevant to the world of the game?” As we look to interstitials and other forms of advertising that allow people to reach into the gaming audience, content limitation will go away. Some games are mature, just like certain TV programs are, and advertisers should always consider the content environment they want to be associated with. The burden has been on the game publisher to ensure that the ways in which ads are present are appropriate to the game.

What can Double Fusion do better?
Ours is an ongoing process of evangelizing the market. It’s less a question of what we can do better, but what can we do more of. It’d be great if we could extend our outreach and do more research in the field.

Recently, analysts at the Yankee Group scaled back their projections for in-game ad sales from $2 billion to just over $971 million by 2011. What has changed?
Greater visibility on the market. When those first projections were made, there was a good static market, but the dynamic market was in the low millions of dollars. As the years have passed there has been greater visibility into what accelerates growth and what impedes growth. Massive is the only company that sells consoles dynamically right now, and having other sources of inventory and just general access to that audience are all things that will accelerate growth. It’s those companies’ decision to determine how and when and if to do it. [After this interview was completed, Sony, maker of the PlayStation, announced it was forming its own in-game advertising division.]

What demographic does Double Fusion have the most reach with?
It is the traditional gamer demographic [males, 18-34]. As our partnerships with other companies in the casual-game space proceed, we should have a rough equivalent with the female audience. Any one casual game, on average, is probably played by fewer people than the kinds of core games we work with. Because it’s a different business model, they don’t release core games that will sell to hundreds of thousands of people. Some casual games may be played by only 2,000 people but still be successful.

What’s an interesting in-game advertisement you’ve seen recently that Double Fusion was not involved in?
Massive is doing some interesting stuff akin to what we’re doing in linked-ad creative, where the ad starts off as one thing and based on user action, such as clicking or touching it or moving near it, the ad plays a movie trailer or something.

Which game, that currently doesn’t have in-game advertising, would you love to see get some?
Any PS3 game. We work with 2KSports and do product integration, and are chaffing to do dynamic ads. We’d love to do Madden and Guitar Hero appropriately. We’d like to work with and approach the larger game publishers, and they’re starting to open up to more dynamic advertisers.

Which Double Fusion in-game ad are you most proud of?
Our work with Adidas on Power Football. What was unique is that it combined dynamic elements and tournament-type marketing. What was remarkable about the campaign was it established product differentiation between two types of soccer boots-this boot means this and this one means that. It’s important to show a 3-D campaign in action, to show your product and use the product.

Who has had the greatest influence on your career?
I had a very excellent mentor, Pat Kenealy. Pat hired me into publishing as an editorial assistant at IDG [International Data Group]. He gave me my first publishing job and gave me the freedom to spread my wings and supported my desire to get into digital or whatever we called it back in 1995. I started as an editor at the No. 2 computer company in the world. My initial experience was writing reviews about software and peripherals, and then I went on to become the publisher of a magazine called Multimedia World. He’s currently an investor in Double Fusion through IDG’s investor fund.

What’s the smartest business decision you’ve ever made?
It was leaving IDG to start a Web site called Gamespot.com in 1996 with two other guys [Pete Deemer and Vince Broady], and throwing myself fully and early into the world of the Internet, because there is nothing more fun than creating a new business from scratch.

And the dumbest?
Some might say leaving IDG to start Gamespot. We sold Gamespot too early, and we did OK. I don’t have regrets, and I don’t look back. In those days, we didn’t have the kind of expertise or connection to the VC community and didn’t really know what we were doing. We didn’t have as much conviction in ourselves or as much as we should have in our ability to compete with larger companies like Ziff Davis, who we eventually sold to.

Where do you get your inspiration?
What keeps me going is we’re really creating something new. It’s very exciting to bring together a team of people and help them grow and explore the same way Pat Kenealy did for me.

Name one person you’re dying to work with.
Steve Jobs would be a good place to start. Or Barry Diller. Or even Rupert Murdoch. In all these people you have executives with tremendous vision and forethought in their own way. They’ve been able to look beyond the current landscape and predict and develop world-class companies, sometimes in the face of serious adversity.

What advice would you give to anyone just starting out in the in-game ad business?
Gird your loins. This is a remarkably complex business. It faces game publishers, advertisers, technology challenges and operational things that need to be figured out. If you’re going to play here, there is a tremendous chance for growth, but be prepared to work hard.