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eSports Series ft. Itamar Benedy

August 11, 2020

eSports Series ft. Itamar Benedy
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In this episode, Ryan and Itamar talk about the business model of Anzu.io, sponsorships and partnerships, branded content in gaming, and eSports tournaments.


To follow along in the series or to check out more episodes, visit our website theradcast.com | @the.rad.cast or @ryanalford on Instagram 

Transcript

Ryan Alford [00:00:00] Hey guys, what's up? It's Ryan Alford and Riley Clarke. Here on today's episode of the Radcast, we're continuing a multipart series on eSports, all things eSports, Gaming, and excited to have Itamar Benedy. He is the CEO and founder of Anzu.io. What's up? How are you?

 Itamar Benedy [00:00:35] I'm good. Thank you for having me here.

 Ryan Alford  [00:00:37]: Excited to have you on. So, being a quasi-marketer and business podcast, as we talked a little pre-episode, Itamar, it's nice to have something a little mainstream down the line on the marketing and advertising side for eSports with your ad platform, which I know we'll get into. So we're excited to talk a little more about marketing shops than we've been talking about. Real broad sports and the opportunity and really the growth of sports, but excited to get into it and hear all you've been up to.

 Itamar Benedy[00:01:15] I mean eSports is getting tremendous traction in the last year from brands and even brands investing in these sports teams and investing in leagues. But someone needs to do the business model. Right?

 Ryan Alford [00:01:17] Well, let's start there and maybe you can give us a little bit about your career journey, your experience in eSports, and then maybe that'll build us up to where you're at today.

 Itamar Benedy [00:01:45] Sounds good. Hi everyone, I'm Itamar Benedy the founder and CEO of Anzu. io and I have a long love-hate relationship with the advertising landscape where I started in the early days. When the App Store was launched we were building advertising and monetization solutions dedicated to mobile. We saw that mobile was a new platform that the rules from the web and cookies could not apply. We took advantage of that very fast-growing market in the last four years. We spotted that there was a need for something new, a new business model for eSports game developers. ESport was just starting to rise, but there were some questions about how exactly it would work. And then brands on the other side were looking at new ways to engage with audiences because a lot of the eyeballs from the audiences had moved to platforms like Netflix where there is no advertising model, and people started to watch less and less TV. We were looking at how to take our previous experience and connect it with this opportunity in the market and founded Anzu.

 Ryan Alford [00:03:04] So let's talk about what Anzu is and what you have both accomplished and where you're heading with the platform.  I guess there are multiple layers, but at its core, it's going to be a programmatic type ad solution within the gaming environment of different games. So you work with both the developers and then the marketers that want to run ads. Am I summarizing it correctly or if not,  do you want to fill in the blanks a little?

 Itamar Benedy  [00:03:25] This is perfect if you want to join us to pitch to clients. The way we look at Anzu is that for game developers this is a new business model bringing authentic native advertising. The way we see this is that advertising should not be a tradeoff with a bad user experience. People don't hate ads, people hate bad ads.  And if you can bring in an ad experience that respects the game or respects the gameplay, basically exactly how we consume content in the real world, for example, think about the billboards inside the game, logo on a t-shirt, the poster on a wall, the outcome of it will be;

Number one: The community will accept it and will prefer it.

Number two: Bigger games that didn't monetize and put ads until now for the first time will be happy to do that.

 Number three: We're the first company in the world to bring those monetization and programmatic capabilities for console games and not only for mobile games.

So that's like from a game developer, how we look at this and we saw cases of the game putting fake ads to make the game more realistic to earn money from it. If there's a billboard on the side of Hilton the hotel, from a marketer's perspective, it's a new advertising category. It's a way to reach hard-to-reach audiences and scale. When we looked at the gaming landscape, we saw a really good environment for brands on the scale of how many people play games and of course the eSports rise. How are brands safe and authentic and how do the environments look? But it was about how do we make it easy for brands to work with us and that's where programmatic help. And secondly, how do we help brands to get confidence around the media value and the effectiveness of that?

 Ryan Alford  [00:05:30] Yeah, that's great. So it seems like then it starts with the games. I'm curious about the mechanics, owning a digital agency, and doing a lot of programmatic on the Internet and things like that. Trying to wrap my head around it and I'm sure our listeners would love to understand without getting into any proprietary nature of anything, but the mechanics of are you working with, I imagine, the consoles, and I'm going to focus just on console gaming right now, for the console versus the game developer, because I imagine it's got to be two parts there. After all, if you're serving the automatic, you've got the Internet feeding the game, but the game has to be developed in a way to accept that, right?

 Itamar Benedy  [00:06:08] Yes. There are three layers of how we look at that. First: There is the layer of the platform, Xbox, PlayStation, PC, mobile, VR, cloud gaming, and we support all the platforms. And then there is the layer of the engine: The game engine of the platform, if it's unreal or unique to your company, is it their game engine? And then third: There is the actual content owner, the game developer, or the publisher depending on the structure. And basically, we partner with the game developers, but we have the business deals and we support all the layers of the engines and the platforms.

 

Ryan Alford  [00:06:47]  Are there only certain games right now that can display this type of advertising, like in-game on the console level?

 Itamar Benedy [00:7:02]  So there are two ways to look at this. Number one: From a platform perspective. So, for example, Nintendo doesn't allow advertising on the platform, in terms of their terms and conditions. But it's funny because they allow porn content on their platform, but I guess that will change over time as more and more games move to free-to-play and are looking for new business models. So there are some blockers from the platforms. That's number one. Number two: Some games are fantasy games, that ad experiences are not very blended authentic. So there are not a lot of good ways of how to put the ads in to make sense from a game or a community perspective. So that's number two. And number three: There are very violent games that the brands will be a bit concerned about advertising in those games. But we're moving those three ad limitations and there's quite a big business here. We predict the addressable market for all platforms like console, mobile, and eSports combined to be Twenty-five billion a year. So there are a lot of opportunities.

 Ryan Alford [00:08:24] For instance, my kids, and I have four boys under the age of 11, and so they all play Fortnite among other things. Now, is that kind of a walled garden as big as the franchise's Fortnite is, or should we expect to see programmatic ads within Fortnite?

 Itamar Benedy [00:08:48]  So every second marketer I meet tells me, hey, this is cool. Can I start with Fortnite? And then and of course, with Fortnite, it will take time. It's a big company and that's the first company to adopt new technologies. And the way we see it is that before our solution, the only way to advertise in console games is with what we call hardcoded deals. So, for example, if you play the FIFA game, you see some brands and environments. But the thing is that first, it's very expensive to do these campaigns and very few games and very few brands can do these deals once you launched the version of the game the content cannot change, so it is not programmatic, no analytics, and no personalization.  And, the joke about those deals is that the only data the brands get for the game is the invoice and the source. And we are here to make it very affordable and very accessible. We're small and the campaigns are spent with a connection to Google into all the media bank platforms. So no integration is needed, no special creation of creatives. We can start campaigns and get really good media value in the sense of what exactly is the opportunity and should the brand invest more? How can the brand compare advertising in our environment versus other environments? That's basically what we're bringing here from a marketer's perspective.

 Riley Clarke [00:10:29] I'm curious, with the growth of the company, are there any partnerships that you're particularly proud of that you're able to talk about on the podcast with us?

 Itamar Benedy [00:10:39] Of course, so we recently launched with Ubisoft Trackmania, a big partnership, and Trackmania is a very known franchise and a very high-end game, triple-A game, which has a lot of really good placement for brands to advertise. So from a game developer perspective that's something we're very happy about. And there's tremendous excitement for marketers in general. We signed 14 exclusive deals with console game developers for two or three years to be able to sell their media to developers like Lion Castle and maybe preloaded on tablets and Vivid and Ubisoft Trackmania. So this makes this big volume and then venture ready for marketers. And then from a brand perspective, we announced big deals with Vodafone, with PepsiCo, with American Eagle, Samsung. So we have big brands and big games already part of the platform.

 Ryan Alford [00:11:47] What would be the most popular US-played game that your platform is doing programmatic in-game ads on?  Our audience is probably getting worldwide now, but it is probably 90 percent the US. What would be a game title that we could see that's played here that the platform is sitting on?

 Itamar Benedy 2 [00:12:10] So from the games I'm allowed to say, there are big companies I signed like dozens of Beechcraft Company and Ubisoft Trackmania, which will be the most popular game.

 Ryan Alford [00:12:25] That's Trackmania?  Are you guys developing a platform that might be self-served for agencies or is it always going to be a brand direct kind of opening? What are the avenues there for where you see it going for marketers coming to you guys?

 Itamar Benedy [00:12:52] So brands love innovation and hate to change the way they work, right? 

 Ryan Alford [00:13:07] Well said. You've been around the agency world. This is what I love. Bring us big ideas and we don't want to. Let's go back to that one.

 Itamar Benedy [00:13:12] We tried to make it as easy as possible for them to choose how they want to work with us. Some brands want us to run the campaign from our DSP in our platform, of course, with full transparency and some brands want to run the campaign from the Media Bank platform they are already using, be it a Google or Trade Desk or any of the popular DSP. So basically, we made sure to support all the media bank platforms of the ad units or the creatives, like basically everything that we know from a technical perspective, from a buying mechanism that can work differently between the buyers and support all of those options. We support forty-five different creative formats because we know the brand can be excited to work with us. But if he has two creative formats and we don't support them, then unfortunately it will take two years to make a campaign happen.

 Ryan Alford [00:13:22] Where is eSports, the growth of it is just so enormous and we've been talking a lot about just general in-game, but on the eSports side, the competitive side within the leagues and all of that; does the mechanism for marketing within your platform work the same, or is that a different kind of event more like a one-off structure?

 Itamar Benedy [00:13:43]  There are two ways of how we have touchpoints with eSport.  First, let's differentiate eSport tournaments and game streaming content. It starts from the fact that when we integrate into  Trackmania, Trackmania has people who broadcast themselves on the game on Twitch, on YouTube, and other platforms. And because of what we do, we change the texture of the game object with the branded content, now making the brand and content part of the game. So if we do a campaign with American Eagle, American Eagle is part of the content of the game. So everywhere in the game, the branded content is going to be. This opens for us opportunities to offer brands to sponsor eSports tournaments in a very authentic way. Instead of putting the logo of the brand in the stadium, we put it inside the game while the game is played in the tournament. And it's not only the people who see the game in the physical tournament, it also will be broadcasted on TV channels and streaming platforms. It will increase the media rights value. So that's one touchpoint.  And so now we can offer eSports leagues and eSports teams to sell their sponsorships ads inside the game while they're playing it. So that's one dimension. And the second one is the streaming platform. We can work with some specific streamer to personalize the content only on his device, only for when he broadcasts to personalize the brand and content to his viewers and his audience. So this is basically how we can extend the brand and content to new environments and to partner with the leagues, the teams, the streamers, and all that.

 Riley Clarke [00:16:45] Have you gone to a tournament? I'm curious, have you been able to go to an eSports tournament? What was it like if you've gone to one?

 Itamar Benedy [00:16:50] Yes.  First I'll admit I wasn't the gamer before we started. And I  do come from an advertising background. For me, it was just exciting to work with those big, big brands. But to my two co-founders, our chief product and CTO are both gamers. So for them, it was exciting to partner with games that they're playing themselves. And there are two different layers of excitement in my opinion around eSport tournaments. Number one: The first time you go to a tournament, this is something that you have never experienced. The audience and excitement and how much they're into it, and it's like it's a phenomenon, right. And the second thing is: When you go to games that are harder to understand, there are games like Rocket League that even if you didn't play the game a lot, you will pretty quickly understand what the game is about.

Ryan Alford [00:17:54] Oh, no, I'll kick your ass at some rocket league. Don't mess with me. That's the only game that I could play worth anything on the platform.

 Itamar  Benedy [00:18:10]  There are games in Osisko that are hard to understand how to play. And for someone coming to the eSport tournament and seeing one of these games, if he doesn't know exactly what's about it, this feels like a random connection between what's happening in the game and the audience getting excited.  I think it depends on the genre of the game.

 Riley Clarke [00:18:35] We hear so much about the tournaments that it makes me want to go.

 Ryan Alford [00:18:40]  We try not to go down this path too much on the podcast but has covid impacted your business? I mean it seems to be blowing up eSports more because obviously, it has removed the in-person tournaments, which I'm sure is a drag on a lot of the sponsorships and things like that. But at the same time, the growth of playing in the exposure of it in general, I think is just growing. But how have you guys been impacted if you have?

 Itamar Benedy [00:19:20] So three impacts, two are positive and one is negative. So let us start with the negative so we can finish positive. A lot of the game developers postponed the releases of their games because of covid. So for example, we finished integration with some really big games and I'd be very excited to give you those names, but because of covid they postponed when they will launch the games, we need to wait for half a year or one year to be able to make that happen. And that's a pity because brands are waiting in line for those games and we just need to wait until we can make it happen.

 

Ryan Alford [00:20:03] So they've got some now, some right here on the Radcast. And we won't fail you we promise we'll keep it a secret.

 

Itamar Benedy [00:20:07]  I have a deal to offer you, when we can announce it, let's regroup and it will be ok then for you to tell your audience. Now let's talk about the positives:  So number one, people are more at home, people are playing more games, so there are just more advertising eyeballs on the platform. We had a huge growth in our platform just because of the usage going up. That's number one. I think more important to the ecosystem is what happened on the marketer site, and there are two layers to that. One: On a practical layer sports events are getting canceled on the one side and second out-of-home interactions are happening less these days. So brands are looking for new ways to engage with audiences in digital and virtual environments or maybe a good way to do that. So gaming looks like the main way around that because what do people do? They play games or watch Netflix right?  That sums it up. So that's one thing. We saw in the last two months or the first two months of covid a growth that we didn't see in 10 years in the space. Brands spoke for five years about gaming or about even digital, and now for the first time, they do something. So that's one there. But I think a big or important point is the perception point. Three years ago, almost every brand or agency I would listen to and this is really cool, but gaming is like geeks locked in their basement. It's not our audience versus now gaming is pop culture. It's a pop phenomenon. It's a social network of the metaverse world and everyone gets excited. I think there is a huge change in perception. I mean, maybe it's a good time to mention WPP, the biggest advertising group in the world and one of our investors. And I got a lot of rejections from them in the early days I noted for many years. And eventually, even they saw that this is coming and coming to mainstream and this will become a big advertising category. So this perception is positive for us. 

Ryan Alford [00:22:48] That's very interesting about WPP. Is there any kind of integration? They own a lot of ad agencies, are they integrating with their media tools? Like Anzu, is there any integration there or are they letting you guys do your thing? 

Itamar Benedy [00:23:07]  Yeah.  At first, it took me some time to understand their complicated structure, and that's number one. And number two,  it was not like a plug-and-play, we saw an investment the day after. So they manage fifty billion dollars media per year, so the day after, budgets are being thrown at us and I remember some of our other investors who know. So Beechcraft is the biggest eSports funded and maybe you heard about this, the guy who founded DSL, he's our other investor. So he doesn't come from advertising he just told me, listen, we signed with WPP, let's just allocate one or two percent from their 50 billion and I think that would be good. So it doesn't work like that, right?  We integrate it into their platforms to access their media bank platform and discover products. And I think we're in a really strong place knowing their teams and have the structure to now bring with them the business, of course, with all the exclusive inventory and coming on board. I think it's also important to mention the way we structure the deal, that we have no limitations. We work with the other holding groups. There is no board to know about the rights. So it can help us to be unbiased and realistic. 

Ryan Alford [00:24:30] Hey, they want you to sell more ads. They don't care who you sell them to. That would be bad for business. They want to recoup their investment and make more on top. We got to sell to everybody. 

Itamar Benedy1 [00:24:42]  I promised them x-twenty on the investment, so let's see. 

Ryan Alford [00:24:48] Where is this all going?  What is the future looking like for eSports, advertising, and marketing? What's in your crystal ball or in your I don't know the magic plan?

 Itamar Benedy [00:25:03]  For five, ten, fifteen years we saw a lot of movies of people spending time in the virtual world. There were other movies and for some reason in real life that didn't happen. People didn't spend half of their day in the virtual environment. I think eSports can be a trigger for that to change. And we see that with Fortnite and ROBLOX and the metaverse concept. And people are starting to consume content inside games and the game platform is becoming like a social network to chat with friends and to consume content. So I think the world is going in that direction. And when the younger audiences who were born into the Fortnite world, when they become parents the industry there will look very different. So I think it's going to be a very digital virtual world. Maybe it has a lot of problems. But I think that's where it's heading for marketers. There are really good opportunities to engage in that world because, for me, part of the power of a brand like McDonald's is that every place in the world even in Zimbabwe, you'll see their sign. Now, there are younger audiences who don't spend a lot of time watching TV, who don't travel the world a lot, and they will be less familiar with those big brands. So brands will need to adapt and find a way of reaching them effectively because those audiences will use ad blockers if they don’t like the user experience. So I think there are some challenges and opportunities for brands here.

 Ryan Alford [00:27:03] So we have a wide range of listeners as far as the size of their companies, and this strikes me as going down the path that might actually make it attainable for more medium-sized businesses. You mentioned McDonald's and Pepsi and these huge brands with millions of dollars in the budget, before going to the Verizon deal phase Klann. I mean, these are millions of dollars agreements, but what strikes me with your platform is potentially an entry point for more medium-sized brands to get in the game, literally and figuratively.

 Itamar Benedy [00:27:49]  It is exactly about that. A small brand most chance is buying media from Google. So take the same platform of where you buy media, take the same creatives you have, take a smaller budget, and start to advertise in games and it can be localized to what he is looking for. So I think that's the beauty of how we make these environments accessible and affordable for SMEs.

 Ryan Alford [00:27:20] What's the scale of this right now?  We work with some bigger southeastern companies in the US. Is the scale there in the US on these platforms to make a legitimate programmatic buy that has the scale and reach that you need for a US-based company besides a McDonald's or Pepsi?

 Itamar Benedy [00:28:27]  Yes. There is an ecosystem in our platform and from an ecosystem play, Two-point seven billion people play at least one game a month. That is eighty-six percent of the people connected to the Internet. So I would say every brand in the world has an overlap with the gaming audience. And the question is what type of games, sports games versus shooter games, and what type of platforms, Xbox versus mobile, are the right games for that brand? So that's number one. And number two, on our platform today, we serve ads to 150 million people every month. We serve billions of impressions. And the US is, of course, our biggest market. So there's already enough volumes and skin in the game to be attractive on one side for the big brands who want bigger campaigns. And on the other side for smaller brands who want a very niche audience, but still have enough of the traction coming from it.

Ryan Alford [00:29:51] Is there anything else that you'd think would be of interest with where eSports is going, where you guys are going, anything else so we can close out here?

 Itamar Benedy [00:30:02]

 Yeah. I can speak a lot about this topic, so if there's anyone interested to continue these conversations, of course, we can speak about that.  I think because of all the changes we see in the advertising landscape. So if the cookies are dropping and ideas phased in mobile are getting out and people are using more ad blockers and what's happening with Facebook and the concern around brand safety and we saw the same with YouTube. I think there is a need for a rethinking of, what's the best way to use each platform and how to play the mix? I would argue that's saying that there is a strategy around our deal in and out of home and social and search, and TV gaming should be part of the mix from an ad category perspective. And it's just about doing it right, because gaming is a very fragmented topic from working with teams to working with leagues, to working with the switch to work with us, so there are just a lot of different ways. And there are not a lot of best practices and experts to navigate that. So I think that's what we're going to see in the next year. But there are still opportunities for brands to be early adopters and to be innovators in the space. And it's not too late for that. And yet this is basically what we do for a living. 

Ryan Alford [00:31:44] I love it. Last question, because you kind of made me go there. You do the streaming companies like Twitch and others come with their hands out to you guys eventually because, OK, I'm playing Trackmania and that Pepsi billboard runs and it's suddenly on Twitch and another two hundred thousand people see it. Is that factored in? 

Itamar  Benedy [00:32:18]  The short answer is, it's complicated because I think what's important to understand here is, the perspective of where each player is coming from. For me, my partner is a game developer. For Twitch his partner is the streamer. Now Twitch and the streamer are basically building a business on top of what the game is built. In many cases, the game has done pretty well-getting money from it. But what Twitch will claim is, listen, you should thank us, we are bringing a lot of organics and we're pruning you. And then if you ask the game, they will say, hey, fine, we should get a slice from the revenues as well. So it's a complicated topic. And of course, even between Twitch, YouTube, Facebook, and until recently Mixer, there were very different opinions of how each one of these companies sees it. And of course, as the game developers are bigger, then they have more control over those relationships versus the smaller ones. And the same with the big streamers and the small streamers and it adds to making it even more complicated, the companies who are providing extensions for the streamers out of what the platforms like Twitter are doing. So I think it's complicated is a good way to answer it. 

Ryan Alford [00:33:18] Well, Itamar, it's been a pleasure. I know the listeners will appreciate the in-depth marketing side and it sounds like it's got all the potential in the world. And if you're a brand out there thinking about your marketing mix, I think you need to be thinking about gaming. 

Riley Clarke [00:34:04] And Itamar we're going to be holding you to that deal too. 

Ryan Alford [00:34:08] Yeah, we're going to get the full scoop. Do note it. The official breaking news of any of those partnerships we will

 do it again here as we follow up. And thank you so much for your time. 

Itamar Benedy [00:34:10] Thanks for having me here. 

Ryan Alford [00:34:29] Hey, guys, it's Ryan Alford and Riley Clarke, we'll see you next time on the Radcast. Follow along at the Radcast.com or at the.Rad.cast on Instagram. See you then.

Itamar

Co-Founder & CEO at Anzu.io