Kongregate's Greer Details Rise Of Virtual Goods In Business

Fielding questions on Kongregate, CEO Jim Greer shared a wealth of data about the core-targeted web game portal and revealed that his company is not only breaking even but expects to be consistently profitable in 2010. Attracting some 8.5 million unique visitors who play a total of 21 million hours per month, Kongregate offers nearly 27,000 free games uploaded by indie developers. The company launched in October 2006 and has so far picked up $9 million after three rounds of funding from backers like LinkedIn founder Reid Hoffman, Amazon CEO Jeff Bezos, and Greylock. Greer explained that Kongregate stays out of the red by making around two-thirds of its revenue from advertisements and one-third from Kreds, the site's universal virtual currency for purchasing digital goods in MMOs on the site's platform. He expects the company to be "consistently profitable" this year. "If it weren't for the 25-50 percent share of revenue we give to developers we'd be quite profitable," said Greer in an open Q&A session on community site Reddit. "Of course then we wouldn't have such good games... Among single player games, there are lots of developers making tens of thousands of dollars in their share of ad revenue." While microtransactions account for a third of his company's revenue, the CEO notes that only around 1 percent of gamers who play freemium titles ever buy anything. Greer then added that some of the games on Kongregate's platform with virtual goods are on track to earn $500,000 to a million dollars in total revenue this year. He admitted, though, that Kongregate is a hit-driven site: "One thing I'll say is that the highest-rated 10 percent of games do about 90 percent of the gameplays. The top 1 percent of games do about 50 percent." Greer also discussed the gender break-up of Kongregate's audience, revealing that 10 percent of the portal's registered users are female. But after researching the most popular games with women over 30 years old, the company found its female users tend to like the same games as men, with tower defense titles accounting for seven of the top ten popular games with females. "I think our brand looks kind of male, and our first users were the developers who uploaded the games and their friends. Those guys are [overwhelmingly] male," said the CEO. "I also think that while women enjoy earning achievements as much as men, core gamers are more likely to respond enthusiastically when they hear about a 'Flash games site with achievements', which is how a lot of people describe us." Greer even went so far as to share bandwidth details for Kongregate: "Our 95 percent peak bandwidth usage from the datacenter is 75 Mbps, but that's just for HTML. All our assets are delivered through an Akamai CDN. I'm told that connections is up to 9600 bps, but we'll soon upgrade to 14.4. Actually it goes over 1 Gbps pretty often." When asked if he intends to ever sell the portal, he confessed that he would prefer not to but cannot rule it out: "While I would love to run Kongregate as an independent private company forever, once you take VC money you are committed to having an exit for them eventually. That typically means either an IPO or selling to a larger company." "We would never sell Kongregate if we were unsure about its future as part of the larger company," Greer continued. "And frankly, the track record of startups that get bought is not great. So we would be very picky - and we have turned down multiple acquisition offers already."