How Candy Crush Convinced This 22-Year-Old Startup CEO That Games Are NOT The Future Of Mobile Advertising

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The worst kept secret of the mobile ad world is that a huge percentage of its revenues come from ads for games. Agencies talk a lot about how mobile ads — and their location-based targeting — will change everything for brands. But the real money in mobile ads right now is in promoting game app downloads.

So Brian Wong, the 22-year-old CEO of mobile ad company Kiip, decided recently that his company was not going to become dependent on mobile games, even though the original basis of the company was to serve ads between levels in games, he told Business Insider.

His decision was validated by King.com's recent decision to banish all advertising from Candy Crush Saga, the hottest and most lucrative game on the market right now. Until a few weeks ago, Candy Crush featured ads between levels, just like a lot of games. But so many people were paying for in-game boosts that King found it could make more money by killing off the ad placements in favor of in-game payment offers for extra lives and game boosts.

Wong believes that the growth of in-app payments can be exponential, whereas growth in mobile ads is more linear. For instance, a Candy Crush addict can rapidly increase the amount they spend inside the game, but ads only get served once per level.

"Games have a variety of tactics to monetize and optimize their revenue streams and as such, occasionally decide to focus their resources on only a few. Because advertising has a reputation still in games for being interruptive (something we are changing with rewards), it typically isn't at the top of the priority list," Wong tells us.

And as Candy Crush proves, if your game is truly successful it will actually kill off all its ads.

That's a problem when your entire business is based on serving ads in games. We became interested in Kiip last year because its ads aren't standard banners and interruptive units. They offer rewards — discounts, free products and so on — for players who complete game levels. (Interpublic became interested, too, and bought a stake in the company.)

Kiip still has plenty of game clients, of course.

But since January it has pushed heavily into non-game apps like Wake, the super-cool alarm app, and MapMyRun, the fitness app. Kiip's ads now reward people who achieve new "moments" inside those apps, such as completing a certain distance run (which earns users free Propel water from Kiip client PepsiCo).

There are, of course, many, many more moments inside non-game apps that are virtually unexploited. And some non-game apps are hurting their user experience with standard banner ads when they could be rewarding consumers simply for using them, Wong believes.

Kiip has taken $15.3 million in funding in addition to the Interpublic stake, and Wong says 2013 revenue will be somewhere in the eight-figure range. The San Francisco company has 55 employees, including a small sales team in New York.