If you play games on your smart phone, chances are you've noticed the video advertisements that pop up while you are playing. Though annoying, they keep the app free - and are the newest link in the evolution of gaming.
Nearly half of all mobile phone users in Europe have downloaded a gaming app - and of that group, 40 percent play it every day. But one company from California with a significant beachhead in Berlin seems to have solved the puzzle of serving ads without interrupting the gaming experience.
Ville Heijari of in-app advertising platform Vungle says such platforms are bridging a gap: they are helping game developers earn money from mobile users who are generally reluctant to pay for apps, while at the same time delivering advertisers a new captive audience for mobile ads.
About 50 percent of the advertisements that Vungle places inside mobile games for Android and Apple iOS are actually promoting other games or smart phone apps. The strategy is to build up a customer base and increase app usage overall, in order to create space to plug in ads for consumer brands. Indeed, the other half of the ads on Vungle's platform are paid for by companies like Unilever and Nokia.
But Heijari says Vungle's platform differs from similar offerings by the way it gives gamers incentives to watch ads.
"Advertising traditionally used to be something that disrupted the game play and drove people out of the game," Heijari explains. "But when we do an opt-in approach, people actually want to see the ads," he adds.
"They download the other applications that are being advertised, but they also gain some kind of benefit within the game or app."
Ads for hints
One game on the Vungle platform is RGB Express. Its developer, Markus Kaikkonen - a Finn who divides his time between Berlin and Helsinki - says his puzzle game became a number-one hit after Apple made it a free download of the week last September.
"Usually it costs a little under 3 euros [$3.50] in the app store," Kaikkonen says. "And it got 2.6 million downloads in eight days, at that time."
"We didn't get money from those sales, but we got a huge amount of publicity," Kaikkonen adds.
Five months on, RGB Express is still selling well in the Apple store. But when Kaikkonen launched the app for Android this past December, he chose a different strategy: He decided to offer the Android version of his app for free.
Only 1 to 2 percent of Android users pay for apps. To make money with Android, Kaikkonen joined the Vungle platform, which serves video ads inside his game and rewards players with hints or game credit for watching 15-second advertisements.
"In the Android version of the game, the player can use hints to watch the solutions for the problems," Kaikkonen said. "He can buy more hints if he wants to, but if he doesn't want to buy those, he can watch a Vungle video ad to get a free hint."
Vungle's work is the newest development in brands trying to reach consumers through video games. One of the first product-oriented video games was launched by Johnson & Johnson in 1983. It ran on the Atari 2600 system, with a gaming premise like a cross between Pong and Space Invaders.
Fast-forward three decades, and the advertising gaming experience is more sophisticated. Tanya Lee of Vungle says today, brands want to be sure people are actually watching the ads.
"One thing that we're going to be testing out is a video for a major American car maker, as well as a game that will test whether users have seen the ad - what color that car was, that sort of thing," Lee says.
"I think what you're going to see is that there will be a lot more of that - efforts to make the users recall, interact and engage," Lee adds.
For Finnish puzzle app maker Markus Kaikkonen, video ads in mobile games are a welcome change from popup banner images that usually interrupt game play. A more seamless advertising experience satisfies his need to make money, along with users' demands for a constant stream of free mobile games.
"Especially with smart phone games, users have this idea that games are free," Kaikkonen says. "Advertising is the only way to make money for most of the apps from most of the players."