Making money in the video game business is usually a pretty simple proposition: you make a game; other people pay to play it. There may be some middlemen like producers and retailers in there, and the actual payment could be a purchase, subscription or rental, but when you boil it down, the pay-to-play model has defined the business of video games since the days of the arcade.

But the world of free-to-play browser-based Flash and Java games has largely thrown this business arrangement on its head. This is partly because it had to. People have been trained by sites like Hotmail and Google to expect web services -- even good ones -- to be free to use. The New York Times recently abandoned its Times Select online subscription service, possibly after realizing that people weren't willing to pay good money for the kinds of opinions that were available for free on hundreds of blogs. Similarly, any online game site that starts charging money for content risks losing players to the myriad free alternatives.

Do Ads Work?

Like most other producers of free web content, Flash developers are increasingly looking to ads to monetize their games. It's a tough balancing act, though, because it doesn't take much overt marketing to turn off a potential player. "Waiting through even a 15 second pre-loader ad is really annoying," says Jim Greer, CEO of Flash game aggregator Kongregate. "It means if you send the link to your friend, your friend's going to be annoyed because he's waiting through this ad. It's significant." For this reason, Greer says, Kongregate only shows ads outside the actual gameplay, on a small sidebar.

Others don't think putting a short message before a web game is a major inconvenience. "Pre-loader ads are nothing new," says Jameson Hsu, CEO of MochiAds, an ad network that provides interstitial ads that run at the beginning and in the middle of independent Flash games. "We're not adding anything artificial into the ecosystem. These types of things have been around for a long time -- people have put their logos, which are basically ads, at the beginning of the game, during the pre-loader. When we created MochiAds, we looked at it and said, 'Is this going to offend people?' After surveying the market, we realized this is already happening. People are already used to it."

MochiAds' system has a leg up on portal sites like Kongregate, Hsu claims, because their ads will stay with the game no matter how many sites it eventually ends up on. "Advertisers are trying to come to terms with how content is spreading on the web," Hsu says. "More and more we're in a fragmented market. Not everybody's gonna visit major portals anymore -- it's not about Yahoo or MSN or AOL. We're moving beyond the walled garden and people are spreading out to MySpace and Facebook -- everybody has their sort of niche sites. As these things spread, content spreads. We're trying to educate advertisers that it's not so much about the site they reach, but the people they reach."

This diffuse, multi-site advertising strategy is working well for many Flash developers, Hsu says, with some making thousands of dollars a month from MochiAds. "We're already seeing people make a full time job of making games and using MochiAds as their main source of income. It's very inspiring for us to get emails saying, 'Hey, I quit my job and I'm making games full time,' and we see from the revenues they're definitely able to do that. The beautiful thing is, not only are they getting ad income now but they're seeing more opportunities, licensing deals, development contracts... a lot of doors open up once these guys are able to devote more time to it, and that's what we're trying to do, help these guys step up and do something they really believe in."