Game maker Kabam finds its social niche
Every day, before his morning coffee, Frank Nunes takes stock of his domain. The 39-year-old makes sure his walls are secure, his allies are freshly supplied with troops and his fields well tended. Only then can Nunes begin his real-life workday as a furniture installer in Hayward, Calif.
Nunes’ day job is tame compared with life in Kingdoms of Camelot, a social game on Facebook developed by Kabam Inc., where a lot can happen overnight. In a matter of minutes, a player’s realm can be leveled, its crops looted and soldiers killed. Unlike many of the lighthearted social games in which players rarely lose, Camelot is serious business.
Titles such as Camelot that cater to hard-core gamers like Nunes are quietly gaining momentum on social networks worldwide. And the small companies that make them are thriving, even as behemoths such as Zynga Inc., Electronic Arts Inc. and Walt Disney Co. are carving up the larger market for casual players in the $1-billion social gaming sector.
“Niche social gaming companies that have solid content, great technology and talented designers are hot commodities right now, both for venture investors and as acquisition candidates,” said Dan Offner, an entertainment attorney at Loeb & Loeb in Century City. “Kabam is one of them.”
Since its founding in 2006, San Francisco-based Kabam has raised $124.5 million in four rounds of funding. Its last round in May pulled in $85 million from Google Ventures, Pinnacle Ventures, Redpoint Ventures, Canaan Partners, Intel Capital and others.
Kabam’s 31-year-old chief executive, Kevin Chou, himself an avid player, intends to use the cash to launch more titles, expand internationally and build out his company’s technology so it can publish its games on multiple Internet-connected platforms such as tablets, smartphones and even televisions.
Though serious gamers have tended to shun social games in favor of console or computer games, Chou is convinced that he can reel them in to Kabam’s no-nonsense titles by creating games that, like Camelot, have depth and meaningful consequences.
“The type of content will determine who plays it,” Chou said. “Hard-core games aren’t just going to be the domain of consoles. We think those types of games will also be on social networks, tablets and smartphones. That will be the trend going into the future.”
What makes Kabam so attractive to investors is not its size. Only about 9 million people on Facebook have played its games in the last month, according to AppData.com. That’s a fraction of the 260 million who have played games published by Zynga, whose titles include FarmVille, Mafia Wars and Empires & Allies. As a result, Kabam flies under the radar as the 27th-largest developer on Facebook.
Unlike other social games that cater to players who casually flit from game to game, spending no more than a few minutes on each, Kabam’s games require dedication.
Players of Camelot, for example, devote an average of three hours a day to the game, with 90% of them logging on every day. Nunes estimated that since he started playing 18 months ago he has spent six hours a day on Camelot, much of it at night after his five children go to bed.
It’s not just time. Camelot players also spend more money.
The average social game on Facebook succeeds in getting between 2% and 5% of players to spend money on the game, according to Pietro Macchiarella, an analyst with Parks Associates. Most pay to get special powers to advance faster in the games or to customize their games or avatars with virtual items.
Chou would not say what percentage of Kabam’s players become paying customers, but he noted that the company has been able to get a “significantly greater” portion of its players to pull out their wallets.
Nunes estimated that he’s already spent $400 to get a tactical advantage on his opponents. His favorite splurge is the Portal of War ability, which lets him instantly move his troops to an enemy site in a surprise attack. Nunes pays $9 each time he uses the portal.
“I’ve met someone who has spent upward of $2,000 on the game,” he said. “I personally don’t have that much to spend. But if I did, I would.”
Kabam is hoping to repeat its success with Camelot with its more recently released games — Dragons of Atlantis, Glory of Rome and Global Warfare. Whereas most social games skew toward older players and women, Kabam’s titles are designed to appeal to young men. Seven out of 10 of its players are male, and the same proportion are under 35.
“Zynga and companies like it have focused on games that have a broad reach,” said Justin Smith, founder of Inside Network, a research company. “Others like Kabam are choosing to build games for specific segments of players who are more engaged and, therefore, more likely to spend money on games. They make a genre of games that I call mid-core. They’re deeper than casual games, but they don’t require as much of an investment of time as hard-core games.”
While Zynga works on building volume, rolling up hundreds of millions of players a month, niche developers like Kabam are showing that “it’s possible to do very well with a smaller number of players,” Smith said.
Chou said Kabam was profitable in 2010 but declined to elaborate. The company is privately owned and does not release its financial data. He also declined to discuss whether Kabam plans to go public or is interested in being purchased, saying: “We’re focused on being the best company, long-term.”
Other companies are pursuing a similar niche strategy, rather than going head-to-head with Zynga, which has declared its intent to sell its shares on the stock market in an initial public offering later this year and has been on an acquisition binge, snapping up 15 companies in the last 14 months.
Ubisoft Entertainment, based in France, has released a number of social games aimed at a targeted audience, including Assassin’s Creed Project Legacy and Crime Scene Investigation: Crime City. Later this year, it plans to release Tom Clancy’s Ghost Recon Commander, based on its stealth shooter franchise.
BioWare, a studio owned by Electronic Arts, this year released Dragon Age Legends, a social game on Facebook that tied into Dragon Age II, a role-playing game with a hard-core fan base. And Take-Two Interactive Software Inc. this summer released on Facebook Civilization World, a version of its popular strategy franchise developed by veteran game designer Sid Meier.
“Kabam has managed to take a good spot in this niche,” said analyst Macchiarella, but “I expect more companies to compete in this space in the future.”
