Did you beat a high score on your favourite smartphone game? Congratulations; have a coffee at Starbucks. Track the mileage of a good run? Grab a sports drink courtesy of your nearest grocery store.
According to Vancouver native Brian Wong, that’s the kind of offer advertisers should use if they want to reach customers through their mobile devices. The concept behind his startup, Kiip, is that people hate ads but like free stuff. It’s a concept that has fuelled enough growth that it now requires a digital wallet for users to keep track of all the offers on the network.
The San Francisco-based company places offers within mobile games and apps on behalf of companies; those companies offer discounts on their products or other free gifts as rewards linked to the game.
On Tuesday, the company is launching its own app called Kiipsake. It is similar to the mobile apps that other coupon services such as Groupon offer customers in that it allows users to store the rewards they’ve earned in a central "wallet," for use at any time. It also provides a list of other games they can play that earn them free offers -- therefore becoming a marketing tool for the game developers as well as for the advertisers.
Since the company began selling these in-game ads in the U.S. a year ago, its business has expanded significantly: last year it had a presence in 10 games, with roughly 10 advertisers including Dr. Pepper, Vitamin Water, and Sony. Today, Kiip shows up in roughly 400 games, serving up offers from 40 advertisers, including Procter & Gamble, Pepsi, and Best Buy.
The company does not design games; it uses existing mobile games and inserts rewards into them. Those include games such as Mega Jump, designed by Toronto-based company Get Set Games Inc., and others such as exercise tracking programs like Map My Run. Its advertised rewards now show up in games roughly 400,000 times every day. It also has a presence in the U.K. and Mexico.
However, while Mr. Wong is Canadian by birth and graduated from the University of British Columbia, and says that Canadians make up roughly 15 per cent of his employees, like many tech entrepreneurs he’s been forced to look to the U.S. for success. Canada remains mostly a test market for Kiip. It has the ability to place rewards in the same number of games here that it does in the U.S., but only one Canadian-based advertiser -- American Express Canada -- has signed on here so far.
Mr. Wong says that’s about to change. More advertisers are coming in the next six months or so, but his home country remains a much tougher sell than the U.S. He says that’s partly because the marketing departments of the biggest advertisers remain so separated in Canada, and sometimes hesitant to automatically adopt any strategy simply because it has been embraced by their American counterparts.
His pitch comes at a time when advertisers are scrambling to find the best way to reach consumers on mobile devices. The Cannes advertising festival launched a new awards category for mobile advertising for the first time this summer.
But Mr. Wong is selling his company by claiming that many advertisers are doing it wrong. Display ads -- those banners running across the top of a screen -- are ugly enough online and are simply not made for smartphones and tablets, he claims.
"They look like billboards, but they’ve become progressively more tiny and more annoying," he says.
Instead, Kiip aims to provide mobile ads that are welcome to users, interrupting their experience only the way the game already does, with congratulations messages for accomplishing something within the game.
For example, for Procter & Gamble’s anti-perspirant brand Secret, Kiip enabled an offer inside Map My Run for a free download of a song for a user’s workout mix. Advertisers such as P&G don’t have to pay to offer those songs, because Kiip has a relationship with Amazon. The online retailer trades the cost of providing a free song for the marketing opportunity it receives from being included in the offer.
The rewards are not always for real-world goods. Dr. Pepper did a campaign in Need for Speed<http://www.ea.com/mobile/nfs>, which gave away free cars for use in the game.
When users see the Kiip screen offering a discount on a coffee for example, or a free song download, they simply click on it and enter their email to get the promo code. Around 20 per cent of users actually click on an offer the first time they see one. Once they’ve used the service once, that number rises: roughly half of those who have used a Kiip reward before click on the ad.
Mr. Wong says the company does not sell use information, or share it with either the advertiser or the game developer whose product houses the ads.
The company is still in its growth stages and is not yet profitable. Last Tuesday, it received $11-million (U.S.) in Series B venture capital funding led by Toronto-based Relay Ventures, bringing its total funding (including its first round last year) to $15.5-million. Its main investors are Hummer Winblad Venture Partners V, L.P., True Ventures, and Verizon Ventures.
With the new Kiipsake app in place, one of his next priorities is continuing to woo Canadian marketers. Kiip's reach here is expanding: in April, the company served up 7.8-million offers to Canadian customers across the network of Kiip-partnered mobile games and apps; by this month, that number had expanded to 16.4-million in Canada.
"It’s a very basic principle," he said. "Let’s do it [mobile advertising] so people don’t hate you."