Chris tells us that Gaia's audience "is a teen audience. Our primary demo[graphic] is 13 to 24, 53% of whom are 13 - 17. In essence if you force advertising on them, they will just rebel. So we try to stay out of their face, so to speak. And we try to give them something that becomes part of the experience on the site. We find that rather than pushing and pushing and pushing the message at them, giving them the opportunity to interact with the brand like they would interact with Gaia makes the most sense. And they tend to really like that kind of engagement."
This is a very time-consuming endeavor. What are the concerns with advertising this way versus traditional ad marketing? "I think any property that is sticky -- any property that has a lot of engagement and a lot of time spent -- banner advertising will not work. Click-though rates are abhorrent. We aren't set up for click-through rates; we are set up for engagement for a brand and time spent." Chris expounds on this later in the interview: "It's definitely time-consuming. One of the balances that we are constantly monitoring internally is how much time does it cost us and take us... to produce these sponsorships and to, not only produce them, then what do we charge for them... So it's really a balancing that I have to constantly balance with my sales team and our team of developers and creative [team] internally."
Then, of course, there is the idea that maybe designers are forcing players to participate in sponsored games which leads us to ask what role do Gaia's microtransactions play in the whole MMO space? "They are completely elective. We get comments in our forums all the time about how they like participating the sponsorships. But then, of course, there is the pay-to-play economy, if you will, that is micro-transaction based and real-currency based. So that's a very big part of our business, then we have sponsorship sales which are also a big part of our business. When you combine those two elements, you combine the best of social gaming, frankly, because you're not forcing numbers to participate to earn something. You're giving them something for participating, but they really enjoy the experience associated with it... I feel as a result, it's equal for both sides of the house: those that don't want to participate -- they just want to trick out their avatar or post in forums or shop with the virtual gold currency . They can certainly do so. These are two distinct and separate economies. And, frankly, you can participate in whichever one appeals to you the most."
So only the most loyal members of a game will participate in microtransactions. Maybe it is the 80/20 rule. Eighty percent of your members will do the minimum, twenty percent will subscribe, and only twenty percent of that will fully engage in microtransactions. That's a pretty scary concept for an upstart F2P game. So what about advertising sponsors? "On the sponsorship side, I feel it may be little bit broader. And it may be a little bit broader because there is no monetary exchange. They are investing their time and their effort, but, again, they're getting something out of it."
Okay, so we are convinced this is a good thing. A combination of microtransaction and integrated sponsorship will help the F2P MMO market. What would you recommend to other companies seeking to enter this type of market, Chris? "Be prepared to invest your time and resources into really doing it correctly. Because it take a lot of time and effort to do it correctly. There is a lot different business from, you know, slapping a banner up. From an advertising stand point and certainly from a content and creative standpoint, it's a lot different business from just aggregating news, for instance, which is so popular right now. So it takes a lot of time and investment in the right creative resources, the right production resources, development resources, and, of course, all the different components to run a company. People may not take [that] as seriously as they need to as they enter the space. It's very time consuming, but very gratifying, too."
Thank you very much for your time, Chris. You have given us quite a bit to think about.