• by Steve Smith , Staff Writer @popeyesm, July 13, 2015

Even as massive amounts of money, attention and technology shift to the mobile ecosystem, publishers of all small-screen content remain vexed by a simple issue: Are the miniature banners and boxes, ad nets and exchanges that drove ad growth here really enough to build sustainable content businesses? Does enough money really trickle down to the content builders?

Most mobile screens can carry limited ad loads before breaking consumer tolerance. The ad stack itself sucks out of the system enormous shares of the revenue spent before leaving fractions to the publisher. Is there a real ad-supported business here for content?

One of the oldest and most successful mobile game publishers of them all, Gameloft had been playing the mobile ad net game for a number of years, but in 2014 the company decided that it had had enough. “Last year advertising represented less than 1% of our revenue,” says Sylvain Baudry, senior director of advertising USA.

The company is best known for long-running franchises like the Asphalt racing and Modern Combat shooter series,  licensed titles like Spiderman Unlimited and many casual games. About 90% of the titles use a freemium model that typically monetize off a very small percentage of highly involved players buying upgrades through in-app purchases.

“We didn’t have much control of what was happening in the games, either the advertisers or the execution itself,” says Baudry. The solution was to go all-in with in-house. “Last year we decided to remove all external SDKs from our games and create our own advertising division,” Baudry says. “We developed our own ad server and our own ad units.” This has been no small investment. Beyond the technology, the company is building direct ad sales teams in 40 countries.

There is both a revenue and content strategy behind this move, and Baudry believes the two are intertwined. “Since we are a gaming company and care about the end-user experience, we want to be able to control both the quality of the ads and the execution.” Gameloft believes the effectiveness of mobile ads are connected directly to their role in the experience. In fact, the ads are designed and placed in consultation with the game design teams themselves to ensure the appearance of an interstitial display unit or promotional video does not disrupt the game flow. “We don’t put too much pressure on the user,” he says.

Less is more. Baudry contends that if users are seeing ads every ten screen, they simply stop retaining the information. Using effective creative at judiciously determined intervals pays off. “We have seen so far in our results that completed video views and clickthrough rates are pretty high compared to the industry.”

On the revenue side, Gameloft simply saw no business sense in ceding such a high share of revenue to third parties. “At the end of the day, the difference between what the agency or brand spent and what you see as the owner of the media is very big. By going direct we believe we can get a higher revenue share on the budgets and bring more value to the table for the advertiser.” For their part, advertisers may get greater performance but also considerably more transparency. While few other game publishers are going fully direct, Baudry sees signs of other publishers starting to opt out of the mobile ad network ecosystem for much the same reasons: control and revenue.

In terms of scale and targeting, Gameloft reaches 22 million uniques monthly in the U.S. alone, 16 million of which are already in the current ad-enabled games. It age-gates its games, but is increasingly gathering gender and other demographic and location data through quarterly surveys and Facebook Connect registration. Any given survey typically render over 10,000 replies because players want to participate in improving both the game and ad experiences. About 35% of Gameloft’s audience are kids and another 35% are Millennials.  

Experience and moderation matter when it comes to increasing ad effectiveness, Gameloft contends, and it believes the performance metrics show it. It uses capping techniques like limiting players to a single game revive or in-game purchase a  day for viewing a video. Its completed video view rates are over 95% even with a skip button. Full-screen interstitials do not interrupt game play but only come between sessions or at maximum rates of one for every three minutes of casual play.

From its earliest days, the mobile content economy has managed many middlemen between publishers and advertisers, media and carriers. Before the app economy, media companies relied on content aggregators to get them onto carrier decks. Much of the early mobile Web was built with the direct help of the early ad networks that helped both create and monetize publisher sites. And yet in all of these cases media companies were relying on third parties to manage and mediate relationships with the real source of the revenue. If relationships or priorities changed at these aggregators, the publishers had no way of retrieving the relationship with the ad client or the carrier.

Baudry admits it is possible for publishers to realize considerable ad revenue from some third-party relationships, but it may be in the short term and without much visibility into future earnings. “If you don’t control the chain, you are at the mercy of players you don’t control,” says Baudry. And to be sure, Gameloft has a sustainable game business now through its consumer revenue. But the freemium model leaves a lot of ad inventory on the table. “We are willing to invest a lot today to get a sustainable [ad] business,” he says. "This is really long term.”