Game Maker Says iI Did Not Approve Ad Insertions

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The deal: In an effort to reach young men, Subway Restaurants paired up with in-game ad firm Engage to place a promotion within a popular online game called "Counter-Strike."

The result: Increased awareness, higher sales and a possible lawsuit.

NEW YORK -- A Subway Restaurants' Franchisee Advertising Fund Trust campaign to reach young men through ads in a popular game was successful in every way, except one. Someone apparently forgot to tell the game maker. Now, along with stronger sales, Subway may have to fight a lawsuit.
'Counter-Strike' is a terrorist/counter-terrorist shooter game popular with young males.

The project involved three companies and seemed like a good idea initially, but has now deteriorated into a squabble, the exact details of which are not known. The three companies -- game maker Valve, in-game ad broker Engage In-Game Advertising and in-game advertising agency IGA Partners -- declined to comment on the controversy that is being debated on game and advertising blogs across the Internet.

The original objective of the marketing effort was to increase awareness about the Subway $2.49 daily special and drive sales from 18- to 34-year-old men, who are among the most frequent visitors to the restaurant.

Targeted three cities

Because the restaurant chain wanted to reach this demographic in three particular cities -- San Francisco, Las Vegas and Sacramento -- and wanted to reach them where they are spending more of their time, Subway went with in-game ad placements.

The game chosen was "Counter-Strike," a terrorist/counter-terrorist shooter game popular with the target demographic created by Bellevue, Wash.-based Valve. To be able to serve the ads to players in the three target cities, IGA Partners, which serves ads dynamically to users while they are online, was brought into the arrangement. The logistical details after that are not known, but someone apparently facilitated the dynamic insertion of paid Subway advertising into the games.

Engage later boasted about the ads' results. In a press release it said the in-game Subway ads had reached 31,000 unique gamers and "19,000 eyeball hours of exposure in one market alone." The three markets are seeing "a measurable increase in traffic and sales." A post-campaign survey showed a 94% ad recall among the target. "For every penny we paid, our brand received one minute of exposure," Shawn Hazeghazam, a local advertising board chair for Subway, said in the release.

'Now a legal matter'

Valve, in a statement released by Doug Lombardi, director of marketing, said, "At no time did Valve grant permission nor discuss these advertisements with Engage. As such, this is now a legal matter. Advertising or any other commercial use of our games requires our written permission." He would not comment further.

When contacted about Valve's claims for this story, Engage spokeswoman Jennifer Whitty would say only that an "internal review across a number of companies" has been completed. She said no legal complaint had yet been filed against her firm.

IGA Partners did not return repeated calls for comment.

But a spokesman from Subway said, "Once we learned about [the lawsuit] we made the call to pull the ads from the game and now we are responding to Valve's concerns." He said the ads were pulled Jan. 19 after conducting an internal review after a Jan. 10 notification. "We're gathering all the facts." He said that the deal was made between Engage and co-op agency J. Stokes & Associates, Walnut Creek, Calif., without the knowledge of the Subway headquarters. The agency handles local marketing for 730 restaurants in six markets in California and Nevada.

$300 million ad budget

The Subway chain, with more than 24,500 units worldwide, had an ad budget of about $300 million for 2005.

While Subway last year began allowing more autonomy for local markets to create advertising and marketing programs, all local and national programs must be reviewed by a committee. "This was not done on our approval," the Subway spokesman said. The J. Stokes agency couldn't be immediately reached for comment.

A post by Nate Anderson on the tech community blog Ars Technica reported that "Counter-Strike" is not hosted on a central server, but rather by a team of local server operators who volunteer their expertise to run the game. The suggestion was that Engage or IGA recruited local server operators in the cities Subway was targeting to run the technology that served the ads.

Valve's user license agreement states that while its game software may be used by consumers, it cannot be "exploited for any commercial purpose."

'Things leak out of the channels'

"We're living in a world where things leak out of the channels they were created for," said Greg Smith, exec VP-insights planning and analysis at online agency Carat Fusion, a media-buying and creative agency that is heavily involved in in-game advertising but is not involved in the Subway situation. "Today, content and anything in that content flows freely. You have to write those [licensing] agreements thinking of every possible permutation," he said. And, "you have to be careful what you put out there."

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Kate MacArthur contributed to this report
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