Supersonic sees big growth for ‘rewarded video ads’ in mobile games (interview)

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Supersonic specializes in in-app monetization and user acquisition for mobile apps and games. And the company has seen skyrocketing growth for its rewarded video ads in 2015.

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Gil Shoham, chief executive of San Francisco-based Supersonic, said in an interview with GamesBeat that more and more brands are sponsoring video ads that reward players with valuable gear in their favorite apps. And these ads are particularly effective. Click-through rates for the rewarded videos are around 20 to 35 percent, according to Supersonic. Finding such alternative monetization opportunities to direct in-app purchases is increasingly important in the highly competitive mobile-game business, where a million other rivals are competing for $30 billion in worldwide mobile-game revenues.

The video ads — which are provided by a number of big mobile ad networks on Supersonic’s platform — are a good way to keep people engaged, and a great way for developers to drive revenue, said Shoham. They work because the ads are targeted toward the interests of the gamer or app user. The video ads also spur more conversation between non-paying and paying users.

The company is making the announcement about the popularity of the opt-in rewarded videos at the Game Developers Conference this week in San Francisco. The growth has enabled Supersonic to triple its revenues every year, and grow to more than 200 employees.

Supersonic’s rewarded video platform is being used by publishers such as Electronic Arts, Kongregate, Gree, Pocket Gems, Pretty Simple, Social Point, and DeNA. At GDC, Supersonic’s booth will feature indie game developers showcasing their titles. It will rotate and developers will show off the games for an hour or two at a time.

I caught up with Shoham at our VentureBeat Mobile Summit event last week in Sausalito, Calif. We talked about rewarded video as well as the overall state of the mobile-game industry. Here’s an edited transcript of our interview.

GamesBeat: Please give us a recap about Supersonic.

Gil Shoham: Supersonic is a monetization and marketing platform for mobile-app developers. Our main focus is on the gaming space. Most of our clients are in gaming, perhaps 65 or 70 percent. They’re publishers and advertisers or game developers. On the publisher side, around 70 percent are in gaming, and the rest are mainly social networking, messaging, and dating. We help publishers monetize by running ads and helping them support their apps on the monetization side. The advertisers are advertising on the platform.

We have a supply-side platform that works with large publishers like EA, one of our biggest clients. It’s software that helps them manage the different integrations of monetization in their apps. Instead of plugging in multiple ad networks, each one with its own SDK and integration, we try to make it very simple by creating one layer, where you plug in all the different demand sources and ad networks. It eases integration and creates yield optimization. It’ll decide how to auction to each network based on performance. It’s a bidding war for each user and each impression. It’s a bit like Rubicon Project in the desktop world, or even DoubleClick, for the mobile-app economy, with a very specific focus on gaming.

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The biggest ad format for us is video — some video interstitials, which can be a pop-up with a video, but mainly reward-based video. The users can earn credits in an EA app, like Tetris or Bejeweled Blitz, to progress in the game if they watch a video ad. These videos can be brands — a trailer for a film, anything — but mainly it’s app trailers, a video for another game. You get a reward if you watch the video, and then you can install the app, although that’s not rewarded. You can explore other apps.

GamesBeat: Are companies like AdColony going to be your partners or your rivals?

Shoham: They’re partners. Well, it’s a mix. Part of our business is that we have our own ad network as well, which is baked into the platform. It’s built for publishers that start with one integration, to add monetization from day one. Then they’ll add AdColony. All these guys are supported by our platform. Just for transparency, there’s a level playing field for everyone. It’s two platforms in one — the ad network and the supply-side platform.

GamesBeat: A year or two years ago, how big a part of your business was that?

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Shoham: We started on Facebook, on desktop. Our first partners were gaming-app developers on Facebook. Zynga was a client back then. They still are today. Same with EA. At some point, that business plateaued. We also had a direct partnership with Facebook to do one of their exclusive monetization partners.

Two and a half years ago, we migrated and totally transitioned from desktop to mobile. Our mobile business is just under three years old. We’re growing very quickly. We’re tripling our revenue every year. Today, we’re nearly 200 employees. We’re backed by Greylock Partners in Israel and also by SAIF Partners, which is a VC in Beijing. The company is profitable and growing fast.

Our main focus is on video. We’re trying to become the largest in-app video supply-side platform, competing with DoubleClick and other players.

GamesBeat: Where do you feel the opportunities are right now?

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Shoham: Hugely in gaming. More and more game developers understand that utilizing video as a way to monetize [their] users is a safe route to take as far as the user experience. The experience is opt-in. The user isn’t forced to watch a video. The completion rates are very high. There’s no churn, no negative impact, because of the positive rewarding experience. We’re seeing a lot of publishers work with us, like these companies I mentioned, that are rolling out new apps or advertising new apps. Just from existing partners in gaming, we’re growing very fast.

New segments are mainly social networking and text messaging apps. They’re implementing credit systems or freemium models, which [lean] toward this type of advertising as well.

GamesBeat: Which territories offer you the best opportunities?

Shoham: For us, the U.S. and Europe are the biggest territories. The U.S. is a third of our business and Europe is a bit more than a third. We started in Europe. I was based in London for three years. The next territory that’s growing for us is China. Our office in Beijing is working with local developers, mainly those that are trying to localize their apps for the U.S. and Europe. It’s an interesting trend now. Big publishers, companies like Tencent and Baidu, are building apps and trying to localize them for other markets. We’re helping them grow their business and monetize well.

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GamesBeat: People have talked about this stage as the beginning of mobile gaming. But we’ve also seen a bit of a slowdown. Tim Merel [founder of Digi-Capital] pushed out his forecast one year for when the worldwide game business reaches $100 billion. What’s your outlook? Are things growing as far as you can see them, or do you have some concern that you’re going to hit a wall and slow down?

Shoham: Obviously, it’s still growing very fast, but it’s also becoming much more competitive, which is a huge challenge. It’s becoming much harder to promote your apps on iOS and Android, mainly on iOS. It’s becoming more expensive to advertise on platforms like Facebook. The more time goes by, the inherent advantage the big players have is growing. That’s where what I call the third-party ecosystem — companies like Supersonic — is important. We help developers monetize and acquire new users in innovative ways.

The biggest [threats] to this growth [are] the platforms themselves, Android and iOS trying to control more of the monetization. All the payments are going through them and all of the promotion as well. That’s slowing down growth, unfortunately.

GamesBeat: We’ve seen charts saying that Google Play isn’t the biggest store anymore. The stores in China are bigger.

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Shoham: Much bigger.

GamesBeat: It’s interesting to see changes like that still happening.

Shoham: The biggest change is that indie developers are struggling now. It’s harder for them to break through very quickly like they could two years ago. That has an impact on the quality of content and the growth of the ecosystem.

GamesBeat: When you see breakthroughs, somebody mentioned that maybe they’re sharper and shorter now. Trivia Crack is a great game right now, but who knows how long that can last?

Shoham: It’s very hard to stay. You need more resources to be able to stay up in the charts.

GamesBeat: As far as competition goes, is there any change on that front? You have global competition. Some companies are coming out of China itself.

Shoham: Yeah, it’s becoming more and more competitive. It’s a very lucrative space. The biggest [threats are] actually the desktop platforms, like Rubicon or Rocket Fuel. These guys are not yet in the app space at all, but they know they have to be there. They’re starting to make acquisitions and invest more in that direction. We’re seeing a lot of competition coming from these companies. Google as well and DoubleClick.

GamesBeat: Have you seen any companies in your space fail? What mistakes do they make?

Shoham: We’ve seen a lot of companies in the last five years. Supersonic has been running for five and a half years, while some other companies are no longer around. There are different reasons. One is taking too much risk with a platform’s policy. Push-notification companies don’t exist anymore, because that was [ruled out] by Google and Apple. Another reason is the need to innovate all the time. At some point, if you stop innovating, the big players like Google, Facebook, Apple, and Twitter start doing what you’re doing. You need to think about the next thing — the next ad format, or how to utilize data in an innovative way. What’s going to give you the advantage in the next few years? That’s important.

GamesBeat: I hear different pitches about people trying to do things like improve retention. I wonder whether you guys would experiment in some of these places, just because it’s a new opportunity.

Shoham: We have to. We’re mainly experimenting and innovating in video now. We’re trying to focus because we see a huge opportunity there. But you have to try new things all the time and push the envelope within the platform as much as you can.

GamesBeat: Are playable ads starting to look interesting?

Shoham: We experimented with those a few times. For now, it’s not working as well as video. We’re probably going to do a test that combines a video and an interactive ad. You’ll watch a trailer for the app and then you can interact with it, creating a mini-experience of the gameplay within the ad unit. It’s very heavy. The SDK is not light. We always pre-cache the video assets before it plays, so it doesn’t buffer. You hit play, and it runs immediately. To pre-cache a game is a problem. It’s going to take over your bandwidth. The publishers don’t like that. Meanwhile, if you buffer, the user doesn’t like that because the experience isn’t good. That’s mainly the problem.

GamesBeat: What insight do you get from all the data you collect?

Shoham: We’re still mainly focusing on the gaming ecosystem, so we’re trying to collect data on device IDs that help us forecast what a user is going to like in terms of gameplay — what type of games and what type of apps.

We get four channels, four ways that we collect data. The first is from the publishers themselves. A lot of our publishers, as part of our SSP optimization, they share age, gender, the genre of the app, if the user is or is not a paid user, and their level of engagement on a scale they share with us. That helps us optimize the different networks that are plugged in to that publisher.

The second is our SDK. One-hundred percent of our supply comes from our SDK, integrated into apps. Through the SDK, you can see location, the type of device, whether they’re on wi-fi or 3G, the size of the screen, and so on.

The third is advertiser data. Advertisers share what happens after an install. For instance, if the user watches an ad, clicks on it, and installs an app, what is the funnel that happens after that? If the user is engaging with the app — it can be a travel app, a game, whatever — how many levels are they crossing? How well did that work? That helps us perfect the quality of the device ID data we have.

The fourth, which is still small, is third parties. We’re buying data from DMPs, from data platforms. But these guys are still behind compared to the data we gather ourselves.

GamesBeat: It’s interesting how, on analytics at least, everything has moved more and more into real time. Do you feel like you’re moving in that direction, throwing more computing resources at the problem to be closer to real time?

Shoham: I think it has to be like that. We had a discussion before about brands and why brands are still behind on mobile. They’re not investing enough. Or if you look at the consumption of mobile, ad dollars invested in mobile versus TV for instance, it doesn’t make sense. TV is so much bigger. Mobile has a lot of room to grow.

The ability to track data in real time and understand what format and what channel in mobile works for you — brands that are mobile first, they’re better at tracking and having integrated analytic platforms like Mixpanel and others, to decide if each user is the right user. Based on that, the advertiser can tell if an advertising form or channel makes sense or not.

The guys that are mobile first, they get it. A lot of brands are not doing it. It’s absolutely critical. If you look at native mobile advertising, there are lots of forums — reward-based advertising, video, interstitials, banners. Our approach is that the advertisers need to test everything, but they can only do that if they have the ability to track in real time, shut down things that don’t work, and invest more in others that do. You have to do that.

GamesBeat: Are you surprised by every game that comes along and skyrockets to the top of the charts? Trivia Crack is the latest to come out of nowhere. Why is a trivia game on top? My kids are fanatically playing it now. It seems like they want to learn something again.

Shoham: It’s amazing how users, mainly youngsters, adapt so quickly. They’ll shift from one game to another, even if the game mechanics are the same. Maybe the music is a bit different, whatever the reason is, but there’s no loyalty at all. They shift immediately.

GamesBeat: What else do you notice about games that are trending or catching on, the kind that you would bet on in the future?

Shoham: I’d look more at companies. What’s the process that brings these game developers to launch a game and test it? Good examples are Machine Zone, King, and EA as well. They have a lot of studios and a process of creating a lot of games. They A/B test them very quickly; is this working or is this not working? Smaller developers are more of a hit-driven business. They get lucky building one game, and it turns into a huge hit, which is impossible to forecast.

The bigger developers have this machine, which is more of a business intelligence machine as opposed to something creative, an art. That gives them a bigger advantage.

GamesBeat: What did you think about some of these companies that went for Super Bowl ads?

Shoham: I’m proud to see it happening. There were three ads, right? It’s a good investment. These guys are buying everywhere — buying on Facebook all the time, all the channels — so they have to do more.

GamesBeat: They’re trying to reach every user on the planet.

Shoham: What’s next, right? The Super Bowl must be the next thing.

GamesBeat: It seemed so ephemeral, though. I wonder if it was still a good use of that money. I guess if you’re that big, you can try out something like that.

Shoham: From a user acquisition perspective, what does it cost to draw a user? The Super Bowl is, what, [$2 million to $3 million] for 15 seconds, with a viewership of 200 million or thereabouts? If you make that calculation, it’s probably significantly cheaper than paid user acquisition. With these guys, the majority of the users out there are their clients already. It’s not only new user acquisition but also brand awareness, or a form of re-engagement for existing clients.

GamesBeat: It’s still a very mysterious business as far as what’s taking off and what’s not.

Shoham: Well, so is the music business. It’s very hard to forecast. That’s why I look more at the production houses and studios. What studios have the process to very analytically create something that can engage with users? As opposed to just having an idea? That’s not enough to create a good game. An idea is not enough.

GamesBeat: Do you know enough to bet on any one particular company?

Shoham: I’d keep betting on EA. If you look at their stock in the last few months, it went up significantly, and for good reason.

GamesBeat: Supersonic is really just providing the ammunition for this war, right?

Shoham: We’re basically an enabler. We’re helping publishers find users and generate revenue from non-paying users, which is critical to managing their business. The VC funding will stop at some point. Or it won’t stop, but I don’t think 2014 is going to continue as far as the amount of money these guys are raising. These businesses have to become businesses. They need to be able to monetize and be profitable — not just in paying users, but on average. That includes non-paying users as well. That’s our job.

GamesBeat: It does seem like we have a very good group of winning companies right now. Not enough of them are in the U.S. In a healthy way, it’s spread throughout the world. It’s not just Japan, Europe, and the U.S., like it is for consoles. Successful game companies are rising all over the place. But it seems like the U.S. companies have to get up and do something about that. Helsinki is outdoing the entire United States right now.

Shoham: One reason is that these guys in Europe, from day one they think about other markets. They’re not just thinking about their own. That’s also happening in Israel, where our company is originally from. We started from day one thinking about other markets, experimenting in multiple markets from the beginning. U.S. companies probably focus mainly on the U.S. in the beginning, which is much more competitive. You get lucky, or you have more data and find more opportunities if you think of a few more markets, the global market. The same thing is also true in Asia. The Korean developers, from day one, think about non-Korean users. It’s an advantage. And it’s easier for them to scale globally afterward, because they have that practice.