THE MGI FLYWHEEL

The MGI Flywheel

The MGI business model is based on a flywheel that is driven by the software platform synergies between its Ad Software Platform and its games, differentiated through a transparent and open source approach versus other participants in the open internet, and which is further accelerated through M&A and innovation. In summary, a stronger proprietary games portfolio (meaning a larger audience and more first party data) will lead to more advertisers using MGI for user acquisition as they can reach a broader audience in a more targeted way (thus increasing the ROI of their user acquisition campaigns). This in turn attracts more publishers who also want to monetize their ad inventory via MGI’s Ad Software Platform, as there is higher demand and as they therefore can sell their ad inventory at a higher price (thus increasing their CPMs). The resulting strengths of MGI’s Ad Software Platform leads to better monetization of MGI’s game ads, as well as better user acquisition for MGI’s own games, increasing MGI’s owned audience and access to first-party data. M&A and innovation can additionally accelerate the flywheel. For example, in case of buying a mobile games company, MGI’s audience and access to first-party data would increase significantly. Also by developing new innovative products like eg. ATOM, MGI has the chance to gain additional advertisers and publishers. In the following, we will go into more detail about the individual parts of the flywheel.

1. FIRST PARTY CONTENT ACCESS

MGI has more than 5,000 casual games and more than 10 premium games with a total of more than 100m registered players. In addition, MGI’s SDKs (‘Software Development Kit) are integrated into the apps of more than 5,000 publishers, reaching up to 2bn users. Together, this gives MGI one of the largest proprietary first party data platforms in the ad market. First party data enables, amongst others, better targeting and greater transparency in reporting and monitoring of advertising campaigns and reduces vulnerability to fraud. In addition, it makes less dependent on third-party data, which is becoming increasingly regulated and scarce. Overall, first-party data creates a strong competitive advantage. MGI continuously broadens its games portfolio and its launch pipeline at very reasonable investment volumes. As recently announced, MGI has established a new launch department to further increase the number of game launches. Launching games is risky as there are well over 2,000 game launches per month, all fighting for new players. Overall, a portfolio approach also makes MGI less dependent on the success of individual own or third-party IPs. Further games are added via acquisitions.

Now that MGI has reached a basic substantial size and has a strong competitive advantage in user acquisition with the combination of games and media, the new games launch pipeline will be further expanded significantly in the coming quarters, including new licenses, new content for the existing portfolio, as well as internationalization and porting to new devices.

In order to benefit even more from the synergies between ad tech and games in the future, the management has decided to focus much more strongly on mobile games. Already in 2021, three mobile games were licensed: Golf Champion, Heroes of Twilight and Fantasy Town, further mobile games are expected to follow in 2022. In M&A, the focus is also shifting towards the acquisition of mobile games companies.

1.1 MGI Casual Games

MGI operates and develops a broad portfolio of casual, online and mobile games for consumers in Europe and North America. The games cover a broad range of genres including e.g. puzzle, hidden object, bubble shooter, etc. Typically, 3 to 5 new games are launched weekly. The casual games are usually either owned or non-exclusively licensed worldwide or for certain regional territories. The casual games are mostly advertising based, though they also generate revenues from subscriptions and in-game item sales. Play times per game-session are typically not very long.

1.2 MGI Premium Games

MGI operates 10 large premium so-called free-to-play massively multiplayer online (MMO) games for consumers in Europe, North America and South America.  The games are mostly either roleplay or strategy games. MGI does not develop new MMO’s because of the long and costly development cycles which in combination with low launch success rates pose a too high risk for MGI. The target is however to launch a few games per year that are developed by third party studios that also took the development risk. 8 out of the current 10 largest games are owned by MGI, whereas the others are licensed. The games are mostly free to play games where revenues are generated via in-game item sales, advertising, subscriptions or a mix of these. MMO means that several thousand users often meet, interact, and are often connected to each other through fixed player communities (so-called ”guilds” or ”clans”) on a playing field or server environment, which also creates a strong bond between the users and the game. This business model requires ongoing support of the games, in close coordination with the users (”games as a service”). In addition to regular events and competitions, new items (e.g. new costumes) and expansions (e.g. new functions, levels and characters) are provided on a regular basis to increase the fun of the game and/or to enable faster success. Based on the extensive content as well as the active support of the games, users often remain loyal to the game for many years and become loyal paying players that invest money in the game over long periods. For the premium games, over 50 percent of the Company’s revenues are generated by users who have been active in the game for more than five years.

1.3 MGI’s SDK base

Via its extensive SDK base MGI has access to a large number of mobile gaming apps, especially mobile games. Being integrated into those game apps enables MGI to get first party user consent and as result of that also first party data.

SDK stands for Software Development Kit. Essentially, it is a downloadable set of code that translates into a set of tools serving a specific purpose that an app developer can plug into their app. A mobile monetization SDK comes with the full pre-built functionality of serving ads inside a mobile app: it will request mediated ads from different ad sources, and make sure that the right ad format is served and rendered without disrupting the user experience.

A well-implemented SDK can increase the value of mobile app inventory and create a much more dynamic in-app advertising experience. For app publishers, however, the question arises as to which SDKs should be implemented by which provider. Multiple SDKs generally impair the functionality and thus the usability of an app, as do SDKs that are very large.

The advantage of MGI’s mobile monetization SDK is that their code is openly accessible (open source). This gives publishers complete visibility into the code, a good starting point for identifying desired or undesired behavior. Transparency is important so that publishers retain control over any structural additions to the code that might impact their app – a big reason why MGI’s HyBid SDK, for example, is open source to publishers. The benefits go both ways: By providing an open and collaborative environment for publishers, MGI is able to fix any bugs quickly and efficiently to ensure a smooth and disruption-free ad experience.

Mobile monetization SDKs are not one-off solutions. A good mobile monetization SDK is constantly evolving. Regular updates help publishers adapt to changing market conditions or solve the latest monetization challenges. As an example, take the elimination of Apple’s Identifier for Advertisers (IDFA) and the implications for publishers. MGI, in response, recently introduced ATOM (Anonymized Targeting on Mobile), a powerful new extension to MGI’s HyBid SDK that makes audience segments targetable without the use of personal identifiers.

2. DATA ENRICHMENT ENGINE

The Data Enrichement Engine is the data part of the platform that enables advertisers to target better and upgrades publishers ad-spaces.

Without the seamless (and fast) collection, integration, management and activation of this data, its value cannot be fully realized. Accordingly, a technology-enabled solution – a central hub – is needed to take on this task. In the ad-tech sector, so-called data management platforms (“DMPs”) have developed for this purpose. They collect and process data not only from publishers, but also from advertisers and their advertising campaigns, which span various formats and channels.

The resulting data volumes are huge. Accordingly, the IAB. defines a DMP as a “big data solution for multi-channel advertising, marketing, media and audience activation”. A DMP, therefore, is a technology-centric solution for aggregating, integrating, managing, and deploying disparate information sources to create new, usable customer insights that can be leveraged to improve performance across the enterprise. As such, the DMP is a hub for maximizing the value of key customer data assets – both proprietary and third-party – that would otherwise go unused.

MGI has started to buy and develop its own data management platforms as part of its full stack approach, such as the contextual data specialist Beemray, which has been further developed in recent months. The advantage of having your own DMP is that no information is shared outside of the ecosystem when transferring data between advertisers, DSPs, DMPs, SSPs and publishers.

2.1 First Party Data

Through its own games (over 5,000), as well as the more than 5,000 publishers that use the Verve SDKs, MGI has access to a large pool of first-party data. Based on consent, data can be collected, audiences and segments can be formed and as a result targeting can be done very granular leading to good results and optimization possibilities for advertisers.

2.2 Contextual Data

MGI has started early on to focus on the use of privacy and data protection compliant data, as the company expects that soon up to 90% of the internet will be anonymous. This is partly due to stricter legal frameworks and partly due to the fact that the industry itself is driving this development, as can be seen in Apple’s and Google’s handling of identifiers. MGI welcomes this development as it has the potential to create more trust in and acceptance for digital advertising. Furthermore, it opens up the possibility of gaining significant market share with correspondingly innovative solutions – which are privacy-compliant but still enable efficient user acquisition on the one hand and efficient monetization on the other.

MGI’s platform focuses on aggregating, integrating, managing and delivering contextual data. With this approach, Verve does not rely on the use of identifiers like Apple’s IDFA. With the help of intelligent deep learning algorithms, information can now be drawn and optimized from and on any media – text, image, audio, or video. Additionally, these deep learning mechanisms allow for analysis on inventory sentiment, identifying content with positive connotations, and therefore offering more sophisticated measures to ensure brand safety. Verve’s contextual targeting solution performs these tasks in 10 milliseconds and in real time during the moment a user opens a website. During this time, it assigns the user to one or more of the currently more than 700 available user segments. If, for example, information on kids gaming or kids shopping is found on the website that is opened, the user is assigned to the “young mother” segment, for example.

2.3 ATOM

ATOM is the Industry’s First Anonymized and On-Device Audience Targeting Solution for Mobile Marketers. Marketers can target: anonymized and cohorted audiences with near-deterministic accuracy and at scale, without relying on persistent and deprecated device identifiers, like IDFA. ATOM uses as its base a universe of non-addressable (anonymized) audiences (app users who do not consent to the use of IDFA) using a mobile phone. Then, ATOM uses contextual data (app context, device signals, or ad context) and privacy-centric machine learning to divide users into segments. This process takes place directly on the user’s device without pulling data from the device, for example in a cloud.

3. SCALED DISTRIBUTION AND MONETIZATION

In the past years MGI has built a full stack platform under its Verve Group, that serves both advertisers – by helping them to efficiently acquire users – and publishers – by helping them to efficiently monetize advertising inventory and that is multi channel, serving In-App, Mobile Web, Web, Connected TV and Digital Out of Home as well as multi-format, including eg.  banners, interstitials and video ads.

3.1 Verve DSP

With Verve DSP, MGI simplifies programmatic ad buying, connecting advertisers to global audiences. Advertisers can use Verve to reach up to 2 billion unique users across more than 5,000 directly integrated publishers and apps, as well as MGI’s own games, in all major content verticals. Verve Group’s powerful programmatic DSP combines performance and scale with control and transparency based on its strong access to first-party-data. Thanks to a powerful data enrichment engine with proprietary machine learning algorithms, advertisers can target and engage the right users at the right time with optimal bids for each impression.

With Match2One, MGI has acquired a unique DSP in 2021 that is aimed primarily at small and medium-sized companies that want to make themselves independent of expensive agencies or complex DSPs or that have not yet become programmatically active at all for this reason. Their User Interface (UI) is designed to be so user-friendly that it can be used by in-house marketing teams that have no previous experience in the execution of programmatic campaigns. By integrating with Verve, Match2One users will have access to Verve’s entire first-party audience, providing its customers with strong transparency and better Returns On Advertising Spend (ROAS).

3.2 Verve SSP

With the Verve SSP, MGI helps publishers monetize their content through advertising and maximize ad revenues. Through the Verve SSP, publishers can sell their advertising inventory to over 5,000 advertisers connected to Verve and an additional well over 80 third-party DSPs also connected to Verve Exchange. Publishers connect to the Verve SSP by integrating one of the Verve SDKs into their app. They can then sell their ad inventory to advertisers using real-time bidding techniques. Through Verve’s powerful data enrichment engine, users of the app are segmented in a privacy compliant manner. As a result, advertisers who consider the user most valuable based on the segmentation will bid the most for the ad space. In this way, the advertising space can be sold by publishers in the most efficient and profitable way. In addition to the open exchange, the Verve marketplace also offers private and guaranteed deals across display, video and CTV. The Verve SSP features full ad serving transparency, real-time insights and advanced debugging tools, and was ranked #1 in the Sellers Trust Index for mobile exchanges by Pixalate.

3.3 Hybid Cloud

Verve’s Hybid Cloud is a SaaS Ad Monetization Toolkit for Publishers. Publishers can use it to organize the entire sales process of their inventory. They are connected to the Verve SSP, but can also bring other third-party SSPs into the platform that they can then manage via a self-serve interface.

3.4 Verve White Label Ad-Software platform

Verve’s White Label Ad-Software platform is work in progress. While still weaker/missing parts of Verve’s full stack horizontal/vertical platform are being optimized or respectively acquired, tests of a roll out of this platform as a white label platform have started with first partners. With those partners we are optimizing the platform and also tailoring it to their needs. Sectors for a first roll-out are game companies, ad-agencies and retail-media. As part of this White Label approach open source is an important element. At the same time, transparency and possibility to use own data and assets while also having access to the open internet are equally important. As usual in B2B acceptance as well as development cycles take longer. The Verve White Label Ad-Software platform is however an important element of our Vision 2025.