Don't miss
  • 12
  • 6468
  • 6097
  • 20

Are IGA’s woes company-specific or are advertisers turning off games?

By on March 16, 2009
Print Friendly

Venturebeat published a very downbeat article on the future of IGA today.

Entitled “Struggling in-game ad firm IGA Worldwide seeks investments or possible sale“, Venturebeat reporter Dean Takahashi tries very hard to imply that IGA is in financial trouble.

The company has hired investment bank Gordian Group to either seek a buyer or investment with bids due by the 27th March. The company has raised over $46 million in two rounds of funding to date and is generating less than $1 million a month in revenue. One of the company’s biggest problems was that it had previously “guaranteed payments to the publishers in exchange for the right to insert games into their games”, a model which meant that if IGA failed to sell the advertising space in publishers’ games, it still had to pay them for the inventory.

Venturebeat quotes Justin Townsend, former CEO and now chairman, as saying that the company would prefer to close a third round of funding in the next few weeks, but that the directors have a fiduciary duty to consider a sale. While that’s true, in my experience that’s often used as the excuse to justify why a company is being touted around for sale.

As Venturebeat comments, the bigger question is whether IGA’s issues are company-specific or are affecting the whole advertising/games nexus. My experience at the moment, talking to brands, agencies and developers, is that advertisers remain extremely interested in talking to gamers, whether that is in game or around game. They may not have the budgets of the boom, but they are still spending. CPMs are holding up and at times, it can be getting enough inventory that is the problem for advertisers.

The problem for IGA is that they have investors who have sunk a lot of money into the project, and who were hoping for a payout similar to that when Massive was acquired by Microsoft ($200 million to $400 million, depending on who you believe). The list of buyers is also problematic. It would be tough for a games company to justify paying a premium, since that would immediately negate the value of IGA’s contracts with all the other games publishers.  Advertising agencies want to increase their ability to help brands reach gamers, but the challenge there is that most agencies advise brands (i.e. they are on the buy-side), and IGA is sell-side (i.e. it sells media space for publishers), meaning that there is an inherent conflict of interest. Sony is one possibility, but has shown much less interest in in-game advertising than Microsoft.

In the current environment, new investors are unlikely to be enthused by a company that has made a number of mis-steps, existing investors may be wary of doubling down and buyers are much less aggressive than they once were. For IGA’s sake, I hope that they have a path to profitability that does not require external financing.

(Thanks to GamesIndustry.biz for the lead)

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com