VentureBeat

Mochi Media, the San Francisco company that offers ads that run in online casual games, and analytics services that look at game performance, is coming out with a new service. It has packaged its ads and analytics services together with its catalog of white-label games it syndicates, creating a way for web site publishers to both engage users through games and make money from that engagement.

Partners that are using the service include virtual world Gaia Online, social network application makers Slide and RockYou, and anime site Crunchyroll.

One of the target customers are the large game portals, like MSN Games or Yahoo Games, that are always looking for fresh games to offer. Mochi is a one-stop shop for finding, measuring and monetizing games. Some portals, at least, would otherwise, need to build their own ads and analytics services, or work with a variety of partners.

Revenue from ads on the publisher game network is shared between the publisher, the game’s creator, and Mochi. Games are rights-free, so the publishers don’t have to worry about complicated negotiations — or lawsuits. Ads can be targeted to web domain, game category and geographical location of users.

A similar concept was recently launched by NeoEdge Networks, a company that has built an ad network around downloadable casual games. NeoEdge, whose chairman is Atari founder Nolan Bushnell and which we recently wrote about, wraps its ads into the games, which are beefier and more complex than the Flash-based games that Mochi creates. Then NeoEdge allows customers to post widgets on their sites that let players download and play the games. NeoEdge gets a cut of the ad revenue. While the company strategies are very similar, both say they are in different markets because of Mochi’s Flash emphasis and NeoEdge’s downloadable focus.

While Mochi isn’t disclosing many numbers, it does tell me that its network is getting 60 million global unique visitors a month. Having only launched in October, this is pretty impressive — and a growth pattern we’ve been covering.

Mochi Media, an online ad and analytics company that helps online game developers run ads within their works, has hired a new vice president of engineering away from Yahoo. It’s Eric Boyd, a Yahoo employee of ten years and a former member of the notorious card shark outfit at MIT, which the movie 21 is based on. (He’s pictured, middle, with his comrades at the movie’s premier.)

Boyd has worked as an engineer and product manager on core services, most recently Yahoo’s member login — he’s probably one of the people that Yahoo has been trying to retain through lucrative packages.

San Francisco-based Mochi hasn’t offered many details on its growth to date — other than to claim a leadership position in the so-called in-game ad market, as Boyd tells me. Mochi ads are getting an average of between five and seven percent click-through rates, with 20 percent month-to-month growth in traffic.

Mochi, which works both directly with large brands, and with ad networks, is already making some developers thousands of dollars, he says, adding that one of the attractive things about Mochi is that it has a revenue stream already.

Boyd’s experience building and running large software systems will come in handy, as Mochi intends to be a sort of Google AdSense for game developers.

Mochi Media is helping to define the future of casual gaming on the web — not through new games, but by showing how games can be monetized and distributed across the Web. The company says it’s seeing 30 percent growth a month, and just today it added on massively multiplayer online (MMO) game portal Aeria as a partner.

What Mochi Media offers is two closely connected tools used by game developers. MochiAds is Mochi’s advertising platform, launched last October, which inserts ads directly into games. The second, MochiBot, is an analytics tracker that reports back with statistics as a game is picked up by different portals and web pages.

Mochi’s ad platform allows everyone to benefit from a game being shared. Aeria Games, for example, gets to take any games it likes from Mochi’s community of over 2,000 independent developers. Those developers, in turn, get revenue back from the advertising that’s embedded in the game, and benefit from more traffic to their site.

Although Aeria has a formal agreement with Mochi, no agreement is really necessary — any gaming portal or site can “steal” the games for themselves, and the advertising guarantees that the developer will still be paid, while a link to more games at the end sends players their way. The closest comparison is an embedded YouTube video, which shows links to other videos when it’s finished playing.

The MochiBot tracker helps small developers see just how widely their games can spread. Bloons, one of the most popular casual games at the moment, has spread to 1,400 host sites and over 30,000 individual pages, according to co-creator Chris Harris, but he wouldn’t have been able to see just how many sites had it without MochiBot.

MochiAds isn’t the sole source of income for a game like Bloons; separate advertising can also run on the developer’s home site. Because MochiAds is driving players back to their site, there’s often a double benefit between the in-game advertising and a boost in visitors far beyond what developers might see if they tried to keep their games exclusive to their own sites. “People that are new to this space don’t understand, it’s not just about revenue,” CEO Jameson Hsu told me in an interview.

The question is whether advertising alone will be enough to pay off developers for their creations. I’ve heard from several top developers that they make, at minimum, a living wage from their creations — but those are all individuals or small teams who have one of the few games that makes it big.

For the moment, there’s not enough revenue floating around to support large teams or companies, which means that various pay-to-play models will continue to be popular with some developers, while micro-transactions will work for others.

Ad revenue will go up over time. The total ad spend for games is estimated to roughly triple over by 2011, according to a 2007 eMarketer report. New forms of in-game ads like video, which Mochi will begin doing soon, may help drive up returns on individual ads, and the company also has a competitor called Neoedge, which will compete to offer better rates.

Mochi Media is based in San Francisco, and is funded by Accel Partners, which put an undisclosed amount into it in the second half of last year.

IGA Worldwide, a New York-based provider of advertising that appears within video games, has raised $25 million from a collection of venture capital, private equity and large media firms.

The potential market for in-game advertising is big, even as some analysts trying to measure it are prone to hype. It made only $55 million last year, but is expected to pass $800 million in 2012 with total video game ad spending reaching $2 billion that year, according to Park Associates.

IGA claims to be the largest independent in-game advertising company using an ad-serving network. It helps advertisers target video-game players across gaming platforms and genres, and works with game developers to try to make the advertising relevant.

Greg Blonder, a partner at Morgenthaler Ventures who was an early investor in IGA, says that in-game advertising is starting to become acceptable to game players and publishers — even though both groups were nervous at first.

Competitors include Microsoft, which purchased rival Massive last year, allowing it to include in-game advertising as another option for its advertising network. According to Blonder, Microsoft doesn’t have the cultural DNA to put ads into games in a way that users are comfortable with, something he thinks IGA’s executive team understands better because of their backgrounds in game publishing and advertising.

An interesting startup working on a similar idea is Mochi Media’s MochiAds. It lets game developers build games in Flash and include advertising, then splits the revenue with them.

IGA says the market potential is what created interest among strategic investors. The company has run ads for Discovery, FHM, Intel, MTV, T-Mobile and others. It also provides a communications consultancy, called Hive.

A lead investors in this round, GE/NBC Universal’s Peacock Equity, said that the gaming industry has growth potential “that can shape the future of the new media advertising industry.”

It will probably be another generation of video games — one to three years from now — that build advertising in as part of the game, Blonder said.

Other investors in this round include KTB Ventures as well as other existing investors Easton Capital, Intel Capital and DN Capital.