Mnectar has raised an additional $1 million in funding and built alliances with four more companies to promote its new ad platform dubbed Playable, which lets gamers try out a mobile game before they decide to download or buy it. The “playable ads” are a new form of advertising that enables potential purchasers to have a better shopping experience inside a game or app, according to cofounder and chief executive Wally Nguyen.

San Francisco-based Mnectar hopes to start an advertising shake-up by transforming the mobile ad from the staid banner to something much more enticing, and getting players to actually enjoy looking at ads. And that could help solve the problem of getting apps discovered amid a sea of millions of rivals in the app stores. The company takes a proprietary technology, which is similar to that pioneered by companies like OnLive and Gaikai (which Sony bought and uses in its PlayStation Now game-streaming service), and then applies it to making an ad into a playable demo.

“Now developers can integrate us right away without any delays,” Nguyen said in an interview with GamesBeat.

Wally Nguyen of mNectar

Above: Wally Nguyen of mNectar

Image Credit: Dean Takahashi

Mnectar is now fully integrated with the popular mobile integration platforms: Twitter’s MoPub, Opera Mediaworks’ AdMarvel, Sprint’s Pinsight Media+, and Fuse Powered’s AdRally. The collaboration with partners helps it reach more than 7,000 additional mobile app publishers. Those publishers can now use its Playable app streaming service to serve these ads. About 30 developers are using it now through the MoPub integration, and another 150 will start shortly, Nguyen said. Overall, 300 app publishers are mNectar’s customers.

The founder claims that the company is pioneering the use of cloud delivery and mobile app virtualization in mobile ads. It allows a customer to sample a working version of a game or app before downloading it. That, in turn, drives higher ad revenue for app developers and creates a more fun experience for mobile users. These interactive ads are so compelling that they are multiple times as effective as other mobile ads, Nguyen said.

Currently, most consumers rely on app reviews, friend recommendations, and app-ranking lists to figure out what they want to play. Ads such as banners, videos, and pop-ups are often either static or don’t show the true gameplay.

According to Nguyen, the user retention rates are four times as effective as other kinds of mobile advertisements such as interstitials, and the retention rates are twice as good as mobile video ads. He said those results have been verified by independent ad measurement companies.

Users can be disappointed if they blindly download a game, and it isn’t what they expected. That, in turn, leads to horrible retention rates and lousy yields for advertisers. The current state of mobile advertising, Nguyen said, is like a billboard. Users drive right by without engaging. Advertisers can vet users before paying to acquire them, and publishers benefit from attractive ads with high performance numbers.

With Playable, the user gets to play the real product for a short time. They can decide on the spot whether the game lives up to its billing or not. And they can proceed to download it immediately. Mnectar effectively turns actual app use and gameplay into marketing. You have fewer retention problems because the users know exactly what they are getting when they download the game, Nguyen said.

He added that the added interactivity of this platform has lots of benefits for developers. In the past, they might pay a lot of money to acquire new users, enticing them to download an app with various rewards. But once those users try it, they may never return. That might cause the developer to wrongly assume that the first stage of the game is messed up and should be redesigned. In fact, it may very well be that they have the wrong user, and that this individual never wanted to play this type of game in the first place.

When you sample a real app instantly to a user, you can get rid of this problem of mistakenly downloading something you really didn’t want to play. Once the user downloads the actual game after playing the Playable ad, then you know that the user is more committed. Retention rates are better and so is the lifetime value of the user.

The technology is based on cloud gaming. The playable game snippet is actually hosted in the cloud or web-connected data centers. When a user taps on a Playable ad, the data center serves a virtualized version of the game to the user. Since the interaction between the server and the mobile device is fast, the users don’t really know or care that the app isn’t yet downloaded onto their devices.

Rivals include Agawi’s AppGlimpse playable ads as well as Voxel’s “try before you buy” service. Mnectar distinguishes itself by offering a product that works with both iOS and Android. Developers do not have to integrate a software development kit to use the service.

Since Mnectar isn’t trying to stream an entire game to a user, the demands on the network and server technology aren’t as big as other cloud gaming providers such as OnLive. Nguyen said the latency, or delays in interaction, are minimal. The firm built its own proprietary distribution network, so the server times are short. Nothing is installed on the user’s device. The quality of the real-time game experience is where the ad platform will live or die.

“AdRally provides app publishers control of the user experience with fully customizable audience segmentation that delivers the right ad to the right user at the right time,” said Fuse Powered CEO Jon Walsh in a statement. “Integrating with mNectar, players benefit by getting a Playable ad they enjoy interacting with and that lets them discover more content they’ll like.”

Mnectar’s customers include Audible, Beats Music, CBS, Gameloft, Gree, Hotels.com, King Digital, Kabam, MobileDeluxe, OpenTable, Spotify, Wal-Mart, Wooga and ZeptoLab. The company has 24 employees.

“We are excited to include Mnectar as one of the ad networks available to our publishers,” said Pinsight Media+ director of product Brian Smith in a statement. “Our goal is to help developers create a monetization strategy that saves time and generates more revenue. We consistently achieve our publishers’ advertising objectives by leveraging our skilled ad operations team and collaborations with quality ad networks.”

The company has raised $8 million to date from New Enterprise Associates, Fenox Venture Capital, Social Starts, Correlation Ventures, and XG Ventures.