Mobile gaming has exploded into an $8 billion a year industry, but competition is fierce, casual gamers can be fickle and keeping them is getting more expensive.
Aiming to double its users per game and more than double its titles this year, fledgling mobile game network Game Insight has raised its first outside funding as it focuses on keeping its users loyal.
The profitable, Moscow-based company, known for its free-to-play casual games including Mystery Manor, Paradise Island, Airport City and Lord of Atlantis, recently raised $25 million at a valuation around $550 million, entirely from Russian venture investment company IMI. VC.
Founded by Alisa Chumachenko in 2010 and profitable since day one, Game Insight doubled annual revenue from $40 million in 2011 to $90 million in 2012 thanks to users purchasing virtual goods, the company said.
Now, with more than 120 million users and some 30 titles in the Android marketplace and to 20 million. That is our goal."
So, like GREE International, DeNA, Papaya Mobile and others that have been buying users as part of their long-term growth strategy, Game Insight will spend a large portion of the recent funding to buy more users. It won’t come cheap.
The cost per loyal user (as defined as someone who opens an app three or more times) has steadily increased this past year, now averaging close to $2, according to industry estimates.
“Getting loyal users is the most important thing,” said Chumachenko, noting the rising costs and increased competition for users from other gaming networks make it a top priority for her startup. Developing quality games, while also important, is not as much of a struggle, she said.
“For the price of one iOS developer here [in Silicon Valley] I can have five in Russia,” she said, noting development is one function she will keep within Russia because the price is low and the quality is high.
Game Insight employees, which total around 500, now operate from a new studio in the industrial city of Novosibirsk as well as from the Moscow headquarters and a new San Francisco office that handles public relations, marketing, analytics, publishing and branding.
“Google Facebook FB +1.89%...all our partners are here [in Silicon Valley],” said Chumachenko.
Matsanyuk, a former senior vice president at Russian email service company Mail. ru who founded IMI. VC with personal funds in 2010, said he expects Game Insight will do an additional $50 million round later this year.
He declined to provide details on IMI’s total assets under management, noting he does not have traditional limited partners nor does he operate like a typical venture firm. Co-founder of Mail. ru Group MAIL. LN −0.33%, Mikhail Vinchel, invested $75 million in IMI. VC in October 2012, joining the IMI board along with DST Founding Partner Gregory Finger and Matsanyuk. The firm has made 22 investments to date and in September launched Farminers, an incubator with 12 startups in its inaugural class.
IMI. VC is stage-agnostic and backs mobile companies that are “online, mass, cross-platform, trendy and innovative,” according to the firm’s website.