I got the first glimpse of what advertising within a VR experience might look like when I saw a demo of some ads playing on the Immersv platform. I was within an movie theater similar to Oculus Cinema watching a 2D video screen where there was a 30-second video of a VR game being advertised. It’s still early days for advertising in VR, but Immersv co-founder & CEO Mihir Shah expects that VR has the potential to become a content marketing platform on steroids once it becomes easier to produce 3D spherical videos of VR gameplay, movies, and tourist destinations.
With the amount of immersion and engagement that virtual reality provides, Immersv expects that VR advertising will eventually draw some of the highest CPM rates as compared to other mediums. I had a chance to talk to Mihir at GDC about their initial per-view ad rates, how much VR developers are getting per view, their plans for growing the number of VR developers using their platform, and how they’re initially targeting causal VR experiences.
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Rough Transcript
[00:00:05.412] Kent Bye: The Voices of VR Podcast.
[00:00:11.921] Mihir Shah: My name is Mihir Shah, and I'm the co-founder and CEO of Immersive. And Immersive is in the business of generating distribution and revenues for VR app developers. So in effect, what we're doing is we're serving VR native ads within a VR environment. And those ads are really all ads for other VR apps. And so there are trailers at play, just like a movie trailer, in a VR experience. And at the end of the trailer experience, a consumer can download that app, or they can just go back into the existing game they're playing. So it's a wonderful way for VR app developers to do user acquisition and also to make some ad revenues. But as importantly, it's a wonderful way for consumers to discover great VR content. Because right now, as you know, it's really hard. I mean, the stores are not that mature. There's not a lot of really good curated discovery tools.
[00:01:01.547] Kent Bye: Yeah, so in the demos that you're showing here, you start up the game and then you're transported into a number of different 3D immersive environments, say a movie theater or a drive-in theater. But all of them have this screen that you're looking at, so it's kind of like a lot of the Oculus Cinema type of experiences where you're in an immersive theater, but you're watching a 2D ad. Is that what you see this kind of starting?
[00:01:23.333] Mihir Shah: Yeah, it's actually a great question and it certainly pops out. Look, you know, our point of view is that we want to give app developers in VR the ability to do user acquisition even if they don't have full spherical trailers, right? So there's a mechanics issue. So actually the ads that we show within VR can be 2D like you saw. They can also be 3D, like a 3D movie, but they can also be fully spherical. where it envelops the consumer. Now the challenge with spherical is really that most app developers, even in VR, don't have spherical trailers. They only have 2D trailers that get generated out of Unity. So as the market matures, and more app developers have the resources to spend and create spherical gameplay. as a trailer, not just a game. We'll run those because the platform supports all of it. But I think right now you're seeing a very practical reality that the market's early and many VR app developers just want to do 2D trailers because it's so easy to generate out of Unity. But I think you'll see in the months and the quarters to come more and more fully immersive, right? But the platform supports it.
[00:02:22.210] Kent Bye: Yeah, I know Dee from EverydayVR YouTube channel was hired by VRkive to be able to create a Unity camera to capture a 360 spherical video of a scene in Unity. So if you wanted to create an immersive 360 video from gameplay within Unity, you could put that camera in there and it would slowly render out at a high frame rate because it is a little difficult to do something like that in real time right now at this point. Are there any other tools that you've seen that are out there in the Unity Asset Store? Are there ways that you would point developers who want to create this vehicle 360 video yet?
[00:02:55.699] Mihir Shah: It's interesting, there aren't very good tools. I mean, we're having to do it manually right now, right? We basically manually manipulate the output files from Unity. I imagine that'll change and we'll probably be posting some tools as well.
[00:03:08.282] Kent Bye: So one of the challenges that I see with advertising in VR in general is that you're going into a virtual reality experience and you're creating a sense of presence. So where would you see an ad from Immersive appear? Would this be in the middle of experience or at the beginning or an end of experience? How do you see that working?
[00:03:26.516] Mihir Shah: I'll give you some examples. So Archiac, which is this wonderful VR developer based up in Vancouver, they have a number of Gear VR and Cardboard titles. They actually have a, so it's an endless runner game called Lampard. You're a bee and you're flying through an experience and you're catching honey. and flowers are trying to eat you, and it's just a great experience. But if you turn around to take a break, there's actually a little magical theater that's behind you. And so you can take a break any time in the app to look at advertising content. So it's kind of like this billboard that follows you around through the experience, and it's user opt-in. You don't have to look at them. It doesn't break up your gameplay. And it's been really wonderful. Now it's still early, but we're looking at the data to see how that works. Another of our VR app developers, this is a developer based in Armenia. They have an aliens attack game, and you basically, it's a first person shooter and you're shooting aliens. Our ad appears when you die, and you get another life after you watch the ad. Right, so there's a variety of things, and really where the placement of the ad is up to the developer. It's not up to us.
[00:04:28.202] Kent Bye: Now, in these scenes that I saw, it looked like you had a theater, like a drive-in theater, and let's say you have a game that's set in the age of dinosaurs, and it wouldn't contextually make sense to see all this technology in a theater. So, would you allow developers to create their own 3D scene to then view the ad?
[00:04:46.348] Mihir Shah: Yeah, so, you know, back to my Archaic example of the Bumblebees, they actually created that scene where the ad lives. So it's their artwork, it's their scene that our ads appear into. So absolutely. Now, you know, we actually are serving ads into a Jurassic VR app. It's one of the top downloaded apps on Google Play. You can actually see our ads. And one of the things we're talking about is kind of a Flintstones-esque scene where it's a bunch of stone benches and you've got like a stone wall where the movies are playing.
[00:05:14.609] Kent Bye: Do you imagine ever having ads come in in the middle of a game, or do you see it that it really only makes sense when it is stopping in some way?
[00:05:22.260] Mihir Shah: Well, I have a pretty strong point of view about this, and I think part of this is just sequencing. I think in 2016, we have a significant responsibility to treat the user really fairly. And I have a strong point of view that most of the ads should be user opt-in or easy to opt out. I think we need to avoid things like interstitials. I think we need to avoid takeovers. Look, if we start doing that nonsense early, it's a great way to kill the experience. And so, look, we at Immersive really believe that an ad experience should be something that is wonderful and adds to the experience, not detracts from it. So, no, we're not going to do any interstitials. We're not going to do any takeovers. And we'll see how the market develops.
[00:06:05.162] Kent Bye: I know in a game like Techno Lust it's a cyberpunk future where you're walking around in a city and he's actually got a lot of billboards and you know he may end up selling that as ad space but do you imagine another sort of you know instead of video content playing in immersive theater do you imagine a time when there could be some sort of billboards that are out there that you'd be able to sell like static images within a VR experience?
[00:06:26.772] Mihir Shah: Yeah, but it comes down to a trade-off of the economics you generate from those non-immersive static experience to the distraction to the consumer, right? Immersive video ads pay out really well because the user's engaged, the user opts in, there's a value exchange with the consumer, right? And so the value of those ads is high. which means that if I'm an app developer and I'm showing immersive video ads, I'm making good money. Integrating static kind of banner ads, I just don't know if the economics make sense in exchange for that distraction. I'm just not sure. But if it does, we'd certainly be willing to serve them. I'm just cautious about it.
[00:07:04.323] Kent Bye: So tell me a bit about the history of your company, how long you've been out, and then sort of what you have deployed out in the wild in terms of some of these ads already.
[00:07:12.827] Mihir Shah: Sure, so we started development in the summer of 2015. We released our first beta to a number of developers in December of 15. And this week, we've just gone public with our SDK and the ad server. And so we're integrating in scores of applications as we speak. And it's been a phenomenal ride. It's been very exciting. The team is mostly from a company called Tapjoy, which was doing something relatively similar in mobile. And some of us are also from RockYou, who did something very similar in Facebook. And so it's a team that knows each other, likes to play together, and we're just having a blast. In terms of in the wild, right now we are live in about 30 different apps. That is accelerating on a day-to-day, week-to-week basis. We can't announce it yet, but we just did a deal with a Russian developer that has 15 apps, for example. And so the amount of inventory that's being generated. In our beta test, we ran the test with about 100,000 unique VR consumers. And we had phenomenal data. We had just one anecdote is 80% view-through rate, which is about double what you see on mobile. And we've gotten phenomenal comments from users. That was a great experience.
[00:08:21.199] Kent Bye: So in looking at the different ad rates, they usually do cost per 1,000 views or so. And so in a web app, it may be as low as $1. For a podcast ad, it could be $20 per 1,000 views. What is the CPM rate for doing immersive ads?
[00:08:37.442] Mihir Shah: It's the right question. The short answer is I don't know yet. It's too early. But how we are charging is actually not on a CPM basis or on a thousand views. We're actually charging on a per view basis. So an advertiser on our network can bid a per view price. And we're seeing bids anywhere between three cents and five cents a view. Now, ultimately for our advertisers who are VR app developers, they want to know what that backs into an install rate, right? And a user rate. How much did it cost them to get a new user? That's the important part. Now, in terms of how that translates into CPMs on the publisher side, I imagine we'll see north of $20 CPMs. Well north.
[00:09:17.271] Kent Bye: So if you're doing about $0.03 per view, times that to $1,000, that'd be around a $30 CPM.
[00:09:23.496] Mihir Shah: So the reality is, users in opt-in ads like ours, for each unique user, we average about four views.
[00:09:31.915] Kent Bye: Okay, so what you're trying to say is that instead of unique views, so a CPM rate may be for unique views, but what you're saying is that if you re-watch it like four times, then it's even more.
[00:09:41.503] Mihir Shah: Well, they're gonna watch four different ads, so it's not the same ad, right? So they might watch an ad for Jurassic VR, and then they might watch an ad for Aliens Attack, and then they might watch an ad for two other games, right? So what we're seeing early in the network is each unique user generates four unique views.
[00:09:57.990] Kent Bye: I see. In terms of the rates, could you imagine a time when a game that's super popular would be able to demand higher rates for ads just because, I don't know how they would measure that, but how do you start to sort out the metrics in terms of how much an ad would be worth on a game?
[00:10:14.276] Mihir Shah: That's a great question. So, early in these markets, same as Facebook and mobile, now we're seeing it on VR, early in the markets being primarily based on country location, right? So, for example, North America, Western Europe, and on unique daily active users. You know, as the market matures, we're going to see more in targeting and more in value, but early on, it's going to be really about volume and location.
[00:10:36.267] Kent Bye: And so in the demo that I saw, you either click through to play, or you click to download. And so what are the differences in terms of the incentive for, does it cost more for people to have a click-through rate, or is it just charged the same?
[00:10:50.120] Mihir Shah: Right now, it's just charged the same. We can imagine as we mature and we get more data, we may tweak that a bit. But right now, early in the market, we're just charging on a per view basis, regardless if the user clicks or not. But as long as they view the entire ad, then we're triggering an economic event.
[00:11:06.075] Kent Bye: Right. And so it sounds like you're going to be targeting mostly, is it mobile apps? So for the Gear VR and the Google Cardboard?
[00:11:13.238] Mihir Shah: Yeah, I mean, I think about it a little differently. So we're targeting the casual market, so casual gaming, casual YouTube-like experiences, right? And most of those are being produced for Gear VR and Google Cardboard. But if casual gaming moves to the Vive, we'll support the Vive, right? So it's less about the platform and more about the type of experience. Because in premium experiences, you know, think Halo for VR, you don't want to add something in there. People pay for that. So we're really about generating modernization for casual gaming and casual experiences. And that's our market. We're not in a premium console market.
[00:11:49.382] Kent Bye: And so as a developer, first of all, how would you get integrated? If you wanted to sell ads, what would the process be to be able to integrate this into your application?
[00:11:58.444] Mihir Shah: So we have a very easy to integrate SDK. That SDK is a number of ad calls that the developer puts into their app, into their Unity pipeline. Most of the developers have done it within an hour that are already on the platform. And they're serving ads as soon as they submit that build to either the Oculus Store or Google Play. You know, we've been doing this for a while, these SDK-based ad units, and it takes less than an hour.
[00:12:22.571] Kent Bye: What do you think some of the biggest open problems with advertising in VR is right now?
[00:12:29.216] Mihir Shah: Oh, gosh. You know, I think it's less about problems and more about volume, right? I mean, there is no doubt that mobile VR is not like mobile, right? I mean, there's no comparison in the volumes. There's no comparison in the amount of user acquisition you can generate. And so if there's a problem, it's one of mass market adoption.
[00:12:47.465] Kent Bye: And so for running ads, what is the split in terms of percentage when it comes to per view? I imagine that Immersive is taking a cut of that. So what's the split between how much you take and how much the app developer would get?
[00:12:59.112] Mihir Shah: Yeah, we actually haven't announced that yet. So we are paying out publishers, so people who show our ads, between $0.01 and $0.02 a view. So $0.01 for more casual experiences and $0.02 for a little bit more engaged experiences, depending on the quality of the content. And we're doing those deals up front. And then we're taking whatever's in between that, $0.01 or $0.02, whatever we charge.
[00:13:20.841] Kent Bye: Is there anything in VR that you would really like to experience?
[00:13:24.216] Mihir Shah: Well, look, I think we're just starting on social gaming and social free-to-play, and I think that's going to change the complexion of the industry. When app developers start launching, like, you know, we can give Zynga a hard time all we want, but they changed how we talked about Facebook gaming five, six, seven years ago. And, you know, guys like Tapulous and DNA and Gree changed how we talked about mobile gaming four years ago, right? With very social, very interesting casual games. That's coming to VR. Right? So most of the conversation's been about really immersive gaming content and multiplayer role-playing and shoot. Well, you know, I think the real revolution is going to be very casual social gaming.
[00:14:05.328] Kent Bye: And in terms of the social, is there anything that Immersive is looking at that's a special consideration when you have a game that's, you know, because most mobile gaming has been single person, but with VR you have the potential to have shared social spaces with people. And so what are the implications for what you could do with advertising with Immersive there?
[00:14:21.352] Mihir Shah: Well, you know, it's no different than on the social platforms. I mean, for us, you know, Oculus Social and then what Google's going to be coming out with later this spring is really exciting because people, just like they do on their social feeds or their mobile feeds, can share their content that they're watching, right? And they can invite other players. If they discover a great new game, you should be able to invite your friends to come play with you because it makes it more fun. Especially in VR, we're kind of closed off, right? So we're hugely bullish on the social titles coming.
[00:14:51.101] Kent Bye: Awesome. So what are the big next steps for Immersive then?
[00:14:54.903] Mihir Shah: This is a business that's very hard to execute. And so the most important thing for us is to integrate and partner with app developers. This is all about getting reach with our app developer partners to create the ecosystem such that we can drive lots of user acquisition for our advertisers. So over the next few months, you'll be seeing a number of major app developers join the platform to create that supply that then advertisers can tap into.
[00:15:19.245] Kent Bye: And finally, what do you see as kind of the ultimate potential of virtual reality and what it might be able to enable?
[00:15:26.147] Mihir Shah: Well, I don't know if I'm smart enough for that. You know, there's some amazing content being developed. You know, from an advertising standpoint, which I can speak to, which is far less interesting than maybe other people. It's interesting to me. I mean, we have never had a content marketing platform on steroids like this. I mean, imagine being able to do a little bit of gameplay fully immersed before you actually download the game. right, so you can actually try it out before you buy it in effect. Imagine if you could do that, right, because you're in the experience. Imagine if you can actually try out the new BMW from the cockpit, you know, before you go to the dealer, right, so you know what you're talking about, or you can skip the dealer, right, finally, right, where you can actually try the car out in your VR experience. Imagine if you can go try, you know, the Hilton on Maui before you fly out there, right? I mean, It's just phenomenal, and I actually think there's a huge consumer utility. But again, advertising is not as sexy as content development, but that's what gets me excited.
[00:16:21.103] Kent Bye: Yeah, well I think that, you know, they talk a lot about VR and tourism, where it could take you anywhere in the world, and I think that there's a lot of things that you have to either go and look at cars, go and look at IKEA, you know, furniture, to get really the size and proportion and scale, but also I could imagine travel agencies and all sorts of things to put you in a location and say, hey, use this airline to go there.
[00:16:41.238] Mihir Shah: Absolutely, we're already seeing it. And the other thing we're seeing is in real estate. where you can actually be inside the home before you go to the open house, right? So you can talk to your spouse, your partner about the things you really want to go see when you get there. It's just, look, we're just beginning here. But this whole concept of just content marketing, right? Not just advertising, but real content marketing where the consumer gets some value out of it, right? Not just annoyance with banner ads. I mean, I cannot stand banner ads. Literally, you could print this, right? If we ever do a banner ad, somebody needs to come punch me, right? because there's so much wonderful opportunity that consumers can actually benefit from.
[00:17:16.166] Kent Bye: Yeah, it seems like, you know, you have the future potential where people actually enjoy the ads. So, you know, what is it about all of this that makes you the most excited, I guess?
[00:17:24.029] Mihir Shah: Well, I think that's it, right? I mean, there's a great example of this, which is movie trailers. I think for the most part, I mean, maybe you don't want eight movie trailers before your movie starts, but for the most part, people like trailers. I mean, if you, you know, look at the new Avengers movie, how many views, like 100 million views in the first 24 hours of that trailer? That's advertising, right? And I think there's very, very similar here, where you can really be immersed into this movie trailer effect into other industries like travel, like real estate, like games, right? Where you can actually check out the game. I just think VR is perfect for it.
[00:17:58.175] Kent Bye: Is there anything else that's left unsaid that you'd like to say?
[00:18:01.383] Mihir Shah: It's one of those wonderful greenfield platforms. It feels to me like when we were at Roku in the mid-2000s, right when Facebook opened up the APIs, and everybody was friendly to each other, and we were all just trying to figure it out together, but we knew it was going to be huge. Same thing with iOS when Apple opened up the APIs in 08. When we were at Tapshoy very early, which is a team of eight, this is what it feels like. It feels like everybody's working together, and it's a content-driven market, right? So you've got the best in the business delivering great content. VR is right there again. So it's actually fun.
[00:18:33.438] Kent Bye: Awesome. Well, thank you so much. Thank you. And thank you for listening. If you'd like to support the Voices of VR podcast, then please consider becoming a patron at patreon.com slash voices of VR.
