You don’t need a lot of users on Facebook to haul in a good amount of revenue, according to Brandon Barber, SVP of marketing at Facebook games site Kixeye.Kixeye has 4 million people playing its games on Facebook, and Barber says it’s already profitable. For context, Zynga has 200 million users. Only around 2.4 per cent of those users are actually paying customers, according to Macquarie’s Ben Schachter. The proportion is higher with Kixeye’s players, closer to 6%-9%.
Kixeye makes more money off its users than many other developers on Facebook because it makes “hardcore” Facebook games. Those games have high production values and are designed to pull in more money per user.
Below is a transcript of our conversation with Barber. Here are the bullets:
- Kixeye — like other hardcore Facebook app developers — generates more revenue per user than companies like Zynga. The games are more “sticky” and attract a different demographic than typical Zynga games. Kixeye ends up with a smaller number of users, but still has a pretty effective model. That number can be as much as 10 times higher.
- Kixeye is also already profitable, starting in January last year. Like Zynga, it became profitable pretty quickly in its lifetime. Zynga also launched in 2007 and was profitable by 2010.
- It hasn’t touched its funding. Kixeye raised $18 million in its most recent funding round in August last year, which was attributed to a third round. It’s raised more than that, though the company wouldn’t disclose how much.
- The company is pretty over the top and aggressive. They all have goofy photos on their site, including this Patton photo for Barber.
BUSINESS INSIDER: So how do you actually pronounce the name?
Brandon Barber: Kixeye with an X. It’s one of those strange brand dilemmas, I hear kicks-eye and kick-eye and some other variants. We’re gonna have to sort that out sometime soon.
BI: Tell me a little bit about it. How are you guys different from Zynga?
Brandon Barber: We were unhappy with the trajectory of social gaming on Facebook and really wanted to show you could make games that were worth playing — particularly games that we were interested in playing. See the games we’ve launched, Backyard Monsters, Battle Pirates, War Commander, these are really immersive, almost synchronous game experiences with extremely high production value. They look and feel much more like the core games people are used to playing off of Facebook. We’re kind of looking to make games we were interested in playing as gamers.
Kixeye operates in a pretty different niche than a lot of the companies. The social gaming space is entering into maturity, it’s now four-plus years old after Zynga and a few applications before started to experiment a little with it. I think the first phase was about really rapid growth and building awareness that you could have really high-quality gaming experiences on the Facebook platform — not just for people who play games, but people who had never played a game before. Zynga really took a hold of that and started doing some things for girls, for mostly female audiences that were looking to fill some time. The games have really reflected that focus.
BI: So you’re looking for hardcore gamers that can deliver higher revenue…BB: Yep. That strategy is pretty aggressive. Not only is it not risky but you can build long-term relationships with gamers. They’re investing into games they actually care about on an emotional level. When you play Battle Pirates and building a fleet and competing against other strangers and trying to express your dominance, you build an emotional connection to the product. It’s something that people are really hesitant to leave which translates into really long retention windows, which are 5 to 7 times longer than traditional social games.
I think we’re on par with games like World of Warcraft, it really speaks to the kind of game that presents to gamers. That style the game presents, we’re not talking about a company that’s a pure time waster, it entails a lot of strategic thinking. The way people spend time in these games, it’s very much in line with the way that some of the MMOs that people often think about in this context, it’s in that same vein. We have a lot more in common, a tremendous amount more in common with World of Warcraft than we do with CastleVille or FarmVille.
BI: Are you guys looking for a very specific audience when you advertise?
BB: Facebook provides an extremely efficient platform for user acquisition. First of all, because the social graph lets you communicate to everyone you know what you’re doing and what you’re excited about. A lot of the growth comes from viral channels, it speaks to the fact that we have games that people are interested in sharing with friends. We have gamers that might not be interested in sharing the fact that they just harvested some corn, but might be interested in saying they took down their friend Matthew’s base in Battle Pirates. The extent to which our games can create that, the more users we can get.
BI: Where does the core group of engineers and such come from?
BB: We’re not looking for a specific profile for people we bring to the company. We’re looking for talent and ability, and that comes from a broad spectrum of places. They’re coming from all over the place. I have background in consumer entertainment, software perspective on EA. Gaming is kind of in my blood. Will (Harbin), who is our CEO and chairman, comes from the kind of tech and web space and was successful at a company called Affinity Labs. He was always a really hardcore gamer and really interested in getting into the space.
BI: What kind of growth have you guys seen this year?
BB: When Backyard Monsters came out there were no games like it on Facebook. It was innovative game design, execution, really exciting technically because you had this player-versus-player combat element. We focused really hard on understanding what was working about backyard monsters and how to grow it and it really has over the last couple of years continued to grow and continued to perform and that allowed us the opportunity to create more games.
The success has been meteoric. We’re a highly cash-flow positive business, we’re continuing to scale operationally and we’re at well over 100 people and plan to grow exponentially in 2012. Pretty much by any measure, we’ve had tremendous success so far.
BI: What about other hardcore Facebook game makers?
BB: When we think about Kixeye versus the competition, it’s really about game developers in the broader sense. We don’t really see ourselves as a social gaming company, we see ourselves as a game developer. Kabam is doing their own thing, I think they have a set of games that they’re trying to grow, but we don’t really spend too much time looking at our numbers vs. theirs. We’re more interested in creating new and exciting game experiences on Facebook and wherever our audiences are.
We could easily have much more impressive DAU numbers, but we’re extremely selective about the types of installs we’re looking to bring into the game when we’re buying ads on Facebook and going out in other places to find users. We’re looking for higher-value users. Traditionally our games will have much lower DAUs, but 10 times higher average revenue per user (ARPU). That speaks to the type of gamer we’re appealing to, they’re willing to spend more time and more energy and more resources against their experience with this game.
Some of the more casual gamers, the 45-year-old female demographic that Zynga caters to, aren’t really as interested in spending money. It’s not as overtly competitive as the products we’re making. That style of game is what we’re all about.
BI: So who comes out on top?
BB: The best way to approach whatever our competition, whether that’s Electronic Arts or Rumble Games, is to continue to launch amazing products and grow them. That’s kind of what we have in store for 2012. You’ll probably see 3-4 new games from us that are kind of expanding the strategic combat niche that we’re involved in. The best way to compete is to just continue doing what we’re doing. For us, continue to establish the leaders in the space.
We’ve raised more than $15 million. We actually haven’t touched that money, we’re generating enough profit now to fund our growth. We’re in a good position in a business perspective. The extent to which we continue to grow our games. All of our resources are being channeled into growth and expansion. We’re looking to continue to hire the best talent and the valley. Our focus is to continue to make super high quality games and to do that you need the best talent in the world.
We’ve been profitable for some time, I don’t have a specific number for you. The types of games we’re developing, they have some different revenue characteristics than traditional games.