With the game industry buzzing about a potential initial public offering for Zynga Inc., competing social game maker Kabam Inc. said it has raised an $85 million funding round that ranks second only to Zynga for the largest single round raised by a U.S. gaming company.
Google Ventures and Pinnacle Ventures wrote the biggest checks in the Series C round, but Kabam also attracted participation from SK Telecom Ventures, the venture arm of the Korean telecom giant. Previous investors Canaan Partners, Intel Capital and Redpoint Ventures also participated.
The company has now raised a total of $124.5 million from investors.
Investors have flooded money into gaming companies in recent years.
- Zynga - Raised a $180 million round in 2009 and a reported $300 million in 2010.
- Big Fish Games - Gathered $83 million in funding in 2008.
- Playdom Inc. - Raised $76 million in 2009.
- Trion World Network - Landed $70 million in 2008.
- Rovio Mobile Ltd - Creator of "Angry Birds" raised $42 million in April.
Kabam produces four social games Kingdoms of Camelot®, Dragons of Atlantis™, Glory of Rome™ and Global Warfare™, have been praised by the press and, more importantly, our players for their depth of play and social interaction. In fact, Kingdoms of Camelot was recently voted Readers’ Choice Facebook Game of 2010 by IGN readers.
Kabam Chief Executive Kevin Chou said a portion of the new money is earmarked to provide liquidity to early investors, however none elected to take money off the table. As part of its investment, Google Ventures Partner Joe Kraus will join the Kabam board.
Whereas most social gaming companies like Zynga attract most of their traffic from middle-aged women, Chief Executive Kevin Chou said Kabam isn't a gaming company for soccer moms. The company aims to differentiate itself with an offering that appeals to the 18-to-35-year-old male gamer.
Says Chou,
"Social games is synonymous with casual games, and we're very different. We have a hardcore gaming audience. These are players who own gaming consoles and also play PC games."
Chou said a survey of its users found that 82% also play games on consoles like the Xbox or Playstation. Says Chou,
"These are people spending hundreds of dollars per year on their gaming experience. "We're not trying to get $10 out of someone who hasn't been a gamer before. We're trying to get a bigger share of the dollars already being spent by core gamers."
Still, like the casual social games, Kabam is monetizing through in-game, virtual items. Chou declined to provide revenue figures or a valuation.
The new Series D funding will be used in part to fuel Kabam's worldwide expansion, especially in Asia, as it joins other gaming companies that have raced to reach users in an international gaming market that is rapidly consolidating.
Over the past two years, some of the biggest social gaming companies made moves of their own to go abroad. Earlier this year, RockYou Inc. acquired U.K.-based Playdemic. And last June it raised $10 million from Japanese conglomerate Softbank and took over the joint venture it had had with the Japanese firm--just as Zynga Inc. was muscling into its own partnership with Softbank.
That wasn't the only deal Zynga was doing in the spring and summer of 2010. It not only bought a small gaming company in Beijing and launched an office in Bangalore, it also acquired Tokyo-based game developer Unoh Co. in addition to setting up the Softbank joint venture.
Meanwhile Walt Disney Co.-owned Playdom bought up an Argentine game developer and three Bay Area gaming companies before it was brought into the Disney fold.
Compared with these powerhouses, Kabam is "the biggest company most people have never heard of," said Andy Lee, managing director for Kabam Asia.
Kabam's mission is to take its more "hardcore" audience that regularly plays immersive, massively multiplayer online games like "World of Warcraft" and offer them something on a social networking platform like Facebook. As with "World of Warcraft," a feature of Kabam's games is the ability of players to interact with each other in real time.
"The founders themselves really liked to play Blizzard [Entertainment Inc.] games and 'World of Warcraft.' So they built something that they thought would be fun and that they would play themselves," Lee said.
Since the launch of its first game "Kingdoms of Camelot" in 2009, Kabam has released four titles. As of January it had 7 million unique monthly players and more than 1 million gamers playing one of its games every day.
In addition to international expansion, Kabam plans look at possible acquisitions and strengthen its mobile platform. Chou said the company plans to launch five new games before the end of the year.
Kabam is looking eastward for revenue growth, but the company could find the going tougher than expected in places like Japan, Korea and China, according to an analyst who tracks the gaming industry.
"Given the sensitivity around gaming content and the near-hyper sensitivity around foreign content and the turf war that erupted between the Ministry of Culture and the General Administration of Press and Publication, it doesn't seem to be a good time to enter the market as a foreign vendor," said the analyst.
Still, competitors loom across the Pacific, where leading Japanese mobile gaming companies like Gree Inc. and DeNA Co. are also moving westward in the hunt for new markets for their own mobile social games and services. Gree bought U.S.-based game developer OpenFeint for $104 million and partnered with Tencent Inc. in China, while DeNA Co. spent $400 million on San Francisco-based mobile game designer Ngmoco.
And looming in the background is Beijing-based Tencent, which made a big bet on gaming of its own with its $400 million Riot Games Inc. acquisition, announced in February.
According to a 2010 report by Niko Partners, an analytics firm that exclusively tracks China's gaming industry, the market for online games could reach $9.2 billion in 2014, up from $3.57 billion in 2009. The firm expects a growing percentage of that revenue to come from online games. About 88% of the gamers Niko surveyed said they played online games, and the overall growth of gamers in China should rise to 141 million by 2014 from 68 million in 2009.
COMMENTARY: Kabam was founded in 2006 by Kevin Chou, Michael Li, Holly Liu and Wayne Chan, and originally focused on building community apps for sports and entertainment fans, amassing more than 25 million users on Facebook and other social networks.
Kabam has approximately 400+ employees across its offices in Redwood Shores, San Francisco, Calif., Beijing, China and Saarbruecken, Germany.
Kabam had acquired WonderHill and has expanded from 100 to 200 employees.
In terms of users, Kabam is dominated by market leader Zynga (poised for a possible initial public offering), which has 247 million monthly active users on Facebook. Kabam has just 7.2 million monthly active users.
According to Chou, about 80 percent of the company’s players say they play hardcore games on the consoles or the PC. And now they are spending less time with those games and more time with Kabam games. This had to happen. With nearly 700 million users, Facebook has become a mirror of society. And society includes a lot of hardcore games. Kabam is one of the few companies to realize this and to target those gamers, who are accustomed to spending a lot of money on games. Kabam blends the immersive game play of massively multiplayer online games with the social satisfaction of social networking games.
Kabam's gamers are all hardcore role-playing gamers where users play for four hours at a session, compared to maybe 10 minutes for a Zynga game. About 90 percent of Kabam’s players log into their games six or seven times a week. That’s what Kevin Chou, chief executive of Kabam, calls engagement. Those gamers are running the game in the background while they’re multitasking. That allows them to have lots of time to play all day long, even as they do other work. Such gamers would never have a four-hour stretch to play a console game.
Courtesy of an article dated May 26, 2011 appearing in The Wall Street Journal's Venture Wire
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