Zynga Grows One Thing Advertisers Want: Mass Reach

Farmville Creator Has 250 Million People Playing Its Games -- and Interacting With Marketers' Ads

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NEW YORK (AdAge.com) -- Zynga, the gaming giant behind time-sucking Facebook phenomena such as Farmville, Mafia Wars and Frontierville, is building a media giant out of tiny transactions from millions of people buying seeds, sheep, tractors, weapons, skill points and other virtual goods.

The company has a tortured history with advertising, and -- like Facebook -- was once known for low-rent lead-generation ads such as the IQ test and Video Professor. But over the past year, the company has perfected a different kind of advertising that appeals to brands: ads that pay consumers for their attention.

The network behind Zynga's ads -- SVNetwork -- started out as a company that marketed charitable causes through its website, Social Vibe. But over the course of the past year it has integrated that system into Zynga's stable of games which are operated as separate businesses, allowing marketers to buy "engagement ads." All of those ads follow a pretty simple formula: ask a player if they'd like to earn some currency or points to do something like watch a movie trailer, play a game, quiz or some other brand-related activity, and then share it on Facebook.

The company, led by former music exec and CEO Jay Samit and founder and President Joe Marchese, has placed more than 100 campaigns in Zynga games over the past year for marketers such as Microsoft, Visa, Apple, Kia, MillerCoors, Macy's and Discover.

Zynga in the past year has also done major integrations with McDonald's, 7-Eleven and Cascadian Farms, some brokered through startup Appssavvy, but the volume is coming from ads through SVNetwork, which charges from 60 cents to $1.60 for each engagement. Ultimately, those will be priced through auction, so advertisers can bid on an engagement with, say, a mom age 25 to 34.

"We based our whole idea on one philosophy: Brand ads are only valuable when they have a consumer's undivided attention. And the only way to do that is to get them to volunteer it," Mr. Marchese said.

And people seem to be playing along.

"[The players] are more receptive to having an entertainment experience with brands; they are so much more compelled to take action," said Marty Collins, group marketing manager at Microsoft, who oversaw campaigns for Bing and the new Windows Phone on SVNetwork.

There's nothing new about rewarding people for engaging with ads. Usually the trade-off is implicit, such as watching eight minutes of TV ads to get 22 minutes of programming. Online, Salon once tried the explicit approach, offering those who did not want to pay a subscription to watch an ad to get a Day Pass for content. Hulu does the same with its pre-roll selector before a show. Theoretically, any publisher or ad seller could concoct such a deal. The Wall Street Journal could lower its pay wall for people willing to watch an ad, for example.

What's making Zynga work well for brands is its sheer scale -- there's no need to concoct an offer relevant to every audience or website. The nearly 250 million people playing Zynga games around the world each month pretty much want one thing: to get better at the game.

"If an advertiser can help improve [a player's] performance, it's more likely the consumer will take part," said Ian Schafer, CEO of digital agency Deep Focus, which placed the Bing campaign.

So far, Zynga has been about growing scale in search of an ad model. According to its marketing documents, Zynga has 47 million players around the world each day and serves a billion daily ad impressions.

Despite a deal with Yahoo earlier this year, and a bevy of mobile apps, nearly all Zynga game play occurs within Facebook, and almost 97% in the U.S., according to Nielsen. Nielsen Online says the company's games received 25 million unique visitors in September, up 34% from last year.

Last spring, Cisco estimated players of Zynga's most popular game -- Farmville -- spent 68 minutes a day playing, on average. Mafia Wars players spent 52 minutes. Indeed the top four Facebook apps in time spent are all Zynga games.

While the market for virtual goods is booming -- worth perhaps $2.1 billion in 2011 according to Inside Network, publisher of Inside Social Games -- advertising is small, and forecast to stay that way. According to eMarketer, ads in social games are a $142 million market today, expected to grow to $192 million in 2011.

Advertisers on Zynga through SVNetwork also buy the virtual goods that are given away -- driving additional revenue beyond the cost-per-engagement revenue model. Zynga, in turn, is the largest advertiser on Facebook, according to multiple executives familiar with the social network's economics, buying ads to win over more converts to the games. Zynga said their ad plans are in flux and declined to comment.

The model appears to be adaptable for a wide range of advertisers. Even a serious marketer like GE, for example, built two "engagements," informational quizzes around the leading causes of disease or death, and how best to conserve energy.

Through SVNetwork, Zynga is now doing business with a cross-section of major brand advertisers. And while they're showing results that compare favorably with a standard banner click-through, the next question marketers have is why. Are consumers clicking because they want something or are they getting something memorable or valuable from the experience?

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