Growth Matters: Playfish is fun for you and your friends

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.

Do you like to play games with your online friends? If so, you should know about Playfish. I interviewed Kristian Segerstale, Playfish's CEO, who said, "Playfish is one of the largest developers and publishers of video games on social networks, with more than 18 million monthly players across its games. Responsible for many of the top 10 games on Facebook, Playfish also has games on MySpace and Bebo and is one of the first open applications to launch on MyYahoo! Playfish's games include the popular Who Has the Biggest Brain, Bowling Buddies, and Pet Society."

Playfish has an interesting pedigree and history. According to Segerstale, "Playfish was set up at the end of 2007 by several former staff from Glu Mobile's Europe, Middle East and Africa (EMEA) team. We went from 0 to 45 million players and raised $25 million in venture capital. We have headquarters in London and offices in Beijing, San Francisco, and elsewhere. We have five of the top 10 titles in Facebook."

Segerstale said, "We are growing really fast. Between October 2008 and January 2009, we increased the number of video impressions per month from 200 million to 300 million. Why such rapid growth? Mobile gaming began six years ago with companies like Mocospace and Glu Mobile (which I started and it became a public company). That growth experience made me realize that growth is faster if you are not constrained by a particular gaming device."

Why the growth? In Segerstale's view, "That's the beauty of social gaming that is free from the constraints of a particular device or a distribution channel. There are 500 million active users. And 85% of the growth is viral because people invite their friends to be part of it. Friends are playing. It's as if they told a friend: 'Here's an interesting news feed. Try it out.'"

Playfish makes money through selling in-game items and by advertising. Playfish generates revenues from selling items to users who are playing its games. As Segerstale said, "If you like it, the game offers items inside the game play that you can buy. For example, in the Geochallenge game, you can buy Geopacks for $5 to $6 that can help you do better in the game."

"There are 300 million video advertising slots inside games. Google's (GOOG) AdSense for Games is a big partner of Playfish. Advertisements consist of 15-second video slots that are designed to be fun and to provide a way to take a break from the intensity of the game for a player after three or four minutes of play. The player is walking past a billboard and decides to view a video advertisement. It doesn't feel intrusive."

It sounds like fun and profit at Playfish. Do you use Playfish? How do you like it?

Peter Cohan is president ofPeter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.

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