AdCritic: So how was E3?
Mitch Davis: E3 is always fun! I was saying to someone out there that it's a bit like going to a Metallica concert for five days straight. [Laughs] It might give you lasting, permanent brain damage. But it was a lot of fun, and a good show.
AC: Was in-game advertising more prevalent at this year's show?
MD: No question. I think back to E3 2003, when we took the notion of in-game advertising to the show for the first time—we were talking to publishers who hadn't previously thought about putting advertising in games, so there was a lot of skepticism, and a somewhat cynical approach about what they perceived to be commercializing games. Then, fast forward to the E3 that just finished a couple weeks ago, and we've now signed 38 publishers into the Massive network, and we've got 70 games that are live in the network. It's now a part of the industry, and I think a very well accepted part, almost institutionalized to some extent. So this year, it was all about meeting with publishers and talking about upcoming titles, particularly for the Xbox 360. We had a lot of big advertisers there as well, like Chrysler and Subway, and big agencies like FCB. They're there just to see the games and get the buzz and excitement of the game industry.
AC: What were the big trends that you noticed? Are there any new genres of games that are becoming more open to in-game advertising that maybe weren't at the beginning?
MD: We're certainly seeing a breadth of different game genres in our network now. We're bringing in a lot of sports titles—we recently launched Major League Baseball with 2K Sports. We've been expanding out our racing titles, we've got a number of first person shooters, stealth games, action games. We've got three MMOGs, and we're expanding out the number of MMOGs that we have in the network, which is a really key piece for us. And now that we're going live with Xbox 360 titles in August and September of this year, we're going to see some new game genres come in.
AC: The Microsoft merger has been getting a lot of attention. First of all, why make that deal?
MD: Well, I think the benefits for the game publishers are self-evident. First, it means that we've got access to—and will be providing advertising on—their Xbox 360 titles, which is great. And that's key for us, because Xbox 360 is all about online gameplay. The second primary benefit is that the merger with MSN gives us access to over 700 advertisers that are buying on the MSN network, which means that we now have a truly global ad sales infrastructure. So we have operations right across Europe, North America and Asia, and that means we're able to sell advertising in our publishing partners' games, wherever they're selling games.
AC: How will Massive's day-to-day operations change?
MD: We're greatly accelerating our growth. We'll double the size of the organization in the next six to nine months. We're rapidly expanding our development team, our ad operations and ad sales team, and other aspects of the business that are needed to support the kind of scale that we're building into the business.
AC: So Massive will remain an independent entity within the Microsoft family?
MD: Correct. And obviously, there are tremendous technological and developmental benefits from being part of Microsoft and MSN. We're able to use and integrate the very sophisticated ad serving technologies that MSN has. We're also able to take advantage of some extraordinary R&D capabilities that will help improve our technology and take it to even greater levels, and to innovate those resources around new and exciting ad formats that we can put into the games and provide even greater levels of porting and data mining capabilities for the advertisers.
AC: How does the deal affect the pre-existing Massive game network?
MD: Not at all. In fact, all of our publishing partners are moving forward with the company, now that it's part of Microsoft as a subsidiary. And I think that the publishers across the board thought it was a great deal. What we're going to see, quite frankly, is rather than seeing a kind of steady state growth in in-game advertising, we're going to see a catalytic effect because of the acquisition. This global scale, full of international resources and the depth of resources here in the U.S.—now we're going to be selling a lot more advertising. [Laughs] But to make one caveat here, we're not going to change the amount of advertising that the gamer sees. We still only serve about four minutes of advertising per hour, and we're not going to change that. We're not going to saturate the games, because the key issue here is customer satisfaction. You've got to make sure the gamers are happy.
AC: Up until now, Massive has concentrated mostly on dynamic ad-serving—billboards, posters, etc. With the Microsoft deal, do you have any plans to expand your static ad offerings?
MD: We're certainly going to see 3D object replacement, and what I would call dynamic product integration. So for instance, we'll be doing things like changing car models out dynamically, changing clothing on characters out dynamically—all of which provide advertising and marketing opportunities. We're also starting to do hard-coded product integrations as part of an advertising solution for clients, where there is a dynamic component, but provides a campaign-based advertising program as well. So yes, we're expanding out the portfolio.
AC: In-game advertising is getting increasingly more creative—we just ran a story on Atari's upcoming Test Drive Unlimited, in which players can go into a Ben Sherman store and actually try on clothes. Can you speculate on what new forms in-game ads might take in the near future?
MD: I think that first and foremost, you've got to make sure that you're enhancing the gameplay experience. So you have to be very sensitive to the impact that you have on the game, and to how a gamer is going to perceive and react to the kind of advertising opportunities you put in the games. That's the first caveat. So we do a lot of research and beta testing of concepts before we launch them live in the network. And in that way, we've learned through research that some things, gamers just will not tolerate—and others they're really happy and comfortable with. So we're really careful to predicate our launch programs on what makes sense for gamers. So what kinds of things will we see? We'll certainly see dynamic content changing in the form of advertising and coupons, and also benefits to the gamers. We'll be rolling out advertising programs later in the year that provide direct benefits for the gamers—they might be power-ups, points or rewards. So we'll definitely do those sorts of things with our advertising and publishing partners. The notion of walking into a store and trying on clothes is an interesting concept, but we want to see what the gamer reaction is before we go that far. I'd need to see that the gamers will respond positively to it.
AC: Can you tell us specifically which Xbox 360 titles coming out this fall will be on the Massive network?
MD: I don't think we're in a position to announce those, but I can tell you very confidently that we'll have over 20 Xbox 360 titles live in the network from September through December. And all A titles—some are absolutely the best titles on the market!