Growth Matters: King.com dominates games of skill online
With all the gloom in the global economy, I got to wondering whether there is anything else going on in the world of business. I'm looking for growth because I think that's what will ultimately bring the economy out of the doldrums. Not surprisingly, that growth is coming from technology companies. In Growth Matters, I look at consumer technology companies that point the way to growth trends -- and in the process introduce services and products you may want to explore.
If you like games of skill and chance, King.com may be for you. I interviewed Riccardo Zacconi, CEO of King.com, who said, "King.com is the world's largest skill gaming site. King.com hosts 40 million games played per month in 50 countries. We launched in August 2003, and the King.com site is now available in nine languages and seven currencies."
Zacconi is a successful entrepreneur. As he said, "I had started two companies before founding King.com. The first was Spray Networks, a portal that we sold to Lycos for $750 million. Next I founded Ubit, which we sold to InterActive Corp. (IACI) in 2002. I was the chief technology officer there. At the end of 2002, we were wondering what we would do next."
"Spray had been involved in the game space in Europe, so we got money and people from Sweden and started coding. We launched in 2003 in the U.K., Sweden, and Germany. It took time to get traction. We became profitable in January 2005, and we sold shares to institutional investors, including Apex and Index Ventures, in September 2005."
King.com benefited from that venture investment. As Zacconi said, "After we got the money, we expanded from Europe to the U.S. We called on Microsoft (MSFT) and Yahoo! (YHOO) and got money for advertising from revenue sharing. Most portals were then paying to have games on their portals to attract users and would share revenues. They could quantify the value through the conversion rates. They offered guarantees for partnership placements. We gave partners higher guarantees in exchange for exclusivity, and we became partners with Yahoo!, AOL, and MSN in Europe."
King.com's free online games involve puzzles, cards, words and many others. It makes money by selling game related items and advertising. According to Zacconi, "People compete for small stakes, such as 50 cents in the U.S. or $1.50 when playing globally. A small percentage of the users who don't play for prizes can plan for free if they watch advertising. This is something that we started recently."
He continued, "For the most part, we charge a fee to members for hosting games for small stakes. But users can buy additional items for the avatar platform. People compete for money and prizes (which are a way for players to display their pride in what they have accomplished). Many users have virtual cabinets to display all the awards that they've won. About 80% have set up virtual coins to buy items for their Avatar."
Sounds like fun. If you use King.com, what do you think?
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.