Toronto company launches new business model for online gaming

Groove Games has teamed up with Sports Illustrated to launch a new online game next month that company executives hope will attract a million players and $10,000 daily in revenue. It's a new business model for the Toronto-based gaming company - one based on banner ads, product placements, brand loyalty and no fees.The Flash-based game - Golf.com Pro Challenge - will be free to visitors at www.golf.com and available on Facebook."We've done branded games in the past," CEO Jon Walsh tells Canadian New Media, following a presentation during Toronto Tech Week."But this is our first foray in this type of business model, where you give away the game for free in a high-traffic platform and you monetize through advertising."Groove has been developing games since 2001 for PCs, PlayStation and Xbox and will continues to do so. But Walsh says the market is opening in new directions and Groove wanted to be one of the first to tee off."We took a step back a year ago to look at where the market was going. Developing costs are skyrocketing and we felt we built a nice enough niche for ourselves and we could leverage our technology to build new gaming experiences," he explains. "One of the keys to our strategy was to build games from the ground up specifically to incorporate an advertising model."During his presentation, Walsh stressed the importance of making the brand part of the experience while still engaging the audience."Golf is a fairly natural example where there are already sponsorships in the real world."Associating the game with high-traffic websites could pay off. As of May, Facebook boasted about 13 million unique users in Canada alone. South of the border the numbers are even more impressive: an estimated 37.4 million Americans as of June."We decided to spend a lot of money and time on our flash games to make them much better than the games that are out today," Walsh began. "Our goal is to get a million games (played) a day; (and) to translate that into $10,000 a day in advertising revenue. And with Facebook, there are lots of games with far lower production values than ours that are beating those numbers."Unlike games that are developed specifically for an advertising campaign, such as Red Bull's Flugtag Flight Tab, Groove's new offerings will be stand-alone projects, combining traditional Internet advertising with new opportunities."We recognize that we couldn't go too far ahead without giving advertisers a revenue model that they couldn't relate to," he tells CNM. "We're still using banners, we service our ads through DART so we can monitor them, but we also have a lot of other opportunities that are available but not measurable through traditional CPM rates, but add a lot of value to the user experience and in terms of advertising dollars."Negotiations underway with advertisersWhile Groove has yet to secure advertising partners, they've been meeting with several key brands. "We've been talking with Nike and several other partners. We haven't sealed the deal yet, but we're pretty close and we're hoping to come out of the gate with in-game promotions in November," says Walsh.Advertisers will be able to equip players with their latest clubs and clothing; and billboards on the greens open the door to non-sports related companies, such as car manufacturers. Walsh and his group are in the midst of developing a virtual store, where players can earn and redeem virtual cash for branded products."The beauty of going through sites such as Facebook is that you can get detailed demographic information, based on users' profiles, on a continual, nearly hourly basis," Walsh says pointing to Facebook's Insights offerings. Combined with Groove's platform, they can measure "who's playing the game, for how long they're exposed to each brand for, who owns what clubs, where users live geographically," explains Walsh.As users register for the free game on www.golf.com, they can opt-in to promotional messages from advertisers, providing yet another venue for marketers to reach out."A year ago we couldn't have made this game in Flash, and now we can. Technology is evolving very quickly and there are a lot of exciting things happening in the industry. I imagine you'll start seeing a lot more of these types of business models in coming months."

Toronto company launches new business model for online gaming

News | 10/14/2008 6:59 pm EDT

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