Interview: Kabam's $85M Facebook Slam

[Kabam pitches itself as the social games company for hardcore gamers. This morning it announced $85 million in Series D funding. Colin Campbell interviewed the principals to find out more.] Yesterday, I spent an hour with Kabam's senior execs, looking through the stats and slides that had been used to snag $85 million in funding from Google Ventures, Pinnacle Ventures and others, bringing the company's total funding up to $125 million. CEO Kevin Chou (pictured) and chief product officer Andrew Shepherd have pitched Kabam as a company that makes core games for social platforms. They wish to be the social games publisher for gamers. Their numbers state that such a thing is possible and desirable. Kabam wants to woo gamers away from their WoWs and their CoDs in order to play collaborative, complex strategy games in familiar fictional settings. Strategy MMOs like Kingdoms of Camelot and Glory of Rome allow players to harvest resources, build, expand and conquer. But they are played on Facebook, so players are encouraged to band together, trade resources, forge alliances. The company claims 20 percent of Kabam's players have been playing for a year or more. Seventy percent of active players spend more than an hour a day with the company's games. As they talk, the two companies Chou and Shepherd mention most are Blizzard and Zynga. One is the object of emulation, possibly even devotion. The other a striking example of what they don't want to be. "We don't want to spend our days making pink dogs and offering them to soccer moms," says Shepherd. "We want to make skill-based games, emergent gameplay, that allow people to ally in order to reach their goals, to enjoy each other." Chou, a StarCraft fanatic and self-confessed "finance guy" is dismissive of social-casual games. "Pet Society made me want to throw up," he says. Much of their presentation is founded on two principles designed to create a clear perception gap between Kabam and its rivals on Facebook, and between Kabam and the "old" game industry model of pay-before-you-play. The first is that free-to-play is the model with the most, offering zero barrier to entry for consumers at one end, and low-cost barrier to entry for a publisher at the other, as well as high income levels from devoted players and never-ending iteration within the game world (the WoW factor). The second is that Facebook is not merely a games platform for females-in-their-40s. The online games industry is poised to overtake the packaged games industry some time within the next year. Free-to-play is now the default setting for the emerging games industry. The winners are the companies that build the most compelling games, that build valuable relationships direct with consumers, and that create desire for transactions. Shepherd says, "We have grown from 25 people to 400 people in just over a year, but the people here are developers and game-makers. You look at Zynga, and it's all ex-EA people. For them, it's just about publishing to their audience, and they do a great job. For us, it's about making great games that people who love games want to play" I make the fairly obvious point that games players have far better platforms at their disposal than Facebook. Chou acknowledges that this may be true according to graphical fidelity, but it will be less true as new technologies arrive. And, of course, Facebook is part of the fabric of our lives. It has commoditized our relationships with one another, and allowed companies like Kabam and Zynga to exploit the ties that bind us. Kabam is not a major player among he social gaming set. It's a top 40 player, according to the MAU and DAU's collated by AppData. But Kabam says its secret sauce is in the particular devotion core gamers have to games. "In the digital and social space, no entertainment has more value than games," says Chou. Gamers are spending more time in the social space and less time with their consoles. Ergo, games on Facebook that cater to that audience can take dollars away from traditional game makers. Kabam says its research shows 55 percent of its players spending significantly less time on their traditional consoles, as they seek to expand their social empires. The company learned a lesson from Blizzard - you don't have to be the first into a market to succeed, you just have to be really, really good at one particular thing, and to keep improving that thing, year after year. Chou points out that he only ever spends $50 on core games, but here are some that he's willingly have spent $500 to buy (I agree with him on this). Free-to-play monetizes on players who love what they are doing; and no-one spends more time, more love, more money on games, than gamers. Kabam has five games on the market and another five to come this year. Chou says the investment money will be spent on international expansion, acquisitions of new games, and investing in those technologies that will allow Facebook games to compete visually with traditional games. Facebook is fast becoming a storefront, the ads competing for our clicks, the prices of those ads edging up and up. In the new publishing model, management of this inventory is key, extracting long-term value from each new customer acquisition is the ultimate goal of social games designers whether they are making pink dogs or mighty warlords. Ability to execute against a target audiences behavior patterns is important, but so is making great games that people want to play. And if there is a crash coming to Facebook games, it will harder hit crappy knock-offs than it will complex games with deep, devoted audiences. [Full Disclosure: As well as being business editor for Gamasutra, Colin Campbell works for a marketing agency that provides content and blogs to brands. You can follow him on Twitter @brandnarrative.]