Startup Live Gamer is betting that it can build a big business around advertising to gamers—it just acquired two game advertising companies, BrandPort and gamerDNA, and it's using them to form a new business unit called Live Gamer Media.
Until now, Live Gamer has focused on virtual goods. It provides the technology that allowed gamers to pay real money for objects in games from publishers like Electronic Arts and Sony Online. President and co-founder Andrew Schneider said the company is following the dominant business model for popular social games like Zynga's FarmVille. He estimated that 1 to 5 percent of casual social game players are buying virtual goods, and even though that percentage increases to 10 or 15 percent when you look at sites aimed at dedicated gamers, it still means publishers are only making money off a small percentage of players.
So how can they make money off the rest of their audience? Advertising seems like an obvious solution. In Live Gamer's case, it's rebranding BrandPort's product as a new advertising unit called Ad Elements. Once again, players try to earn virtual goods, but instead of paying, they watch video ads, rate them, then receive points that can be redeemed for goods.
It gives gamers a real incentive to watch ads, and Schneider said that the results from the initial campaigns have been impressive—more than 90 percent of gamers watched the ads to completion and recalled the brand and its message a week later.
Meanwhile, gamerDNA offers a more traditional approach to display advertising across a network aimed at the core gaming audience of males between 18 and 34. The company says the network reaches more than 48 million unique visitors each month around the world. Across all of its sites, ad networks, and custom campaigns, measurement firm comScore ranked gamerDNA as the seventh-largest gamer focused ad network in the US in May. (Break Media led the rankings).
Live Gamer isn't sharing the financial terms of the deals. As for where the company goes from here, Schneider said its next big opportunity is in mobile advertising.