Q&A: Guildcafe's Radoff Talks VC Backing, Game 2.0

MMO-focused social networking site GuildCafe recently announced that it had raised venture capital through IDG Ventures Boston, an independent group concentrating on IT and life sciences ventures with over $280 million currently under management. The site was established in September and launched in December and is currently still in beta stages, though it has approximately 16,000 registered users. Of the deal, IDG Ventures Boston’s Jon Karlen – who will be joining the GuildCafe board of directors – notes that the site offers “new forms of interaction, driven by players”, as opposed to older communities, which treated gamers simply “as consumers of editorial content”. “Through its early lead, management experience and deep understanding of players,” he continues, “we believe GuildCafe is in a unique position to redefine the gaming media market.” Gamasutra spoke to GuildCafe founder and CEO Jon Radoff recently, and asked about the site’s growth over the last six months, its place in the industry, and what venture capital investment will mean for its future. How has the site changed since you established it in September? In September it was little more than an idea. Over the last few months the focus has been on creating features that allow gamers to find each other based on the things they care about—such as their gameplay preferences, favorite games, servers they’ve played on, or guilds they’ve been a member of. We’ve also added a ton of applications that help guild leaders organize their online activities. The fundamental idea is to help gamers connect with and compare themselves to other people in ways that expand the total entertainment experience of gaming. What was your projected audience demographic, and have you found that the users of the site are following this projection? We always assumed the site would attract a cross-section of all multiplayer gamers, which tends to fall within the 18 to 34 demographic. One thing that is a bit of surprise is the proportion of males to females. Most gaming sites are predominantly male, but we’re seeing a more even distribution on GuildCafe. How many users does the site have? We get around 100,000 unique visitors every month now. Registered beta users are growing rapidly—we’ve got around 16,000, which is triple what it was only a few weeks ago—but we’re still just getting started. How many games are currently represented on the site, and are the users of the site predominantly multi-MMO gamers? Over a hundred games show up with some amount of frequency on GuildCafe. This includes not only MMO titles, but other multiplayer games like first-person shooter and real-time strategy titles. You mentioned previously that the users of the site back in January were typically early adopters - has this changed, and what methods have you used to bring new users to the site? The users back in January were the people who heard about the idea and got excited about it. Now we’ve built a lot of the things that our members have told us they wanted, and we’re continuing to add more—so it’s just beginning to attract mainstream gamers, which is probably why growth has begun accelerating. We think we still need to build a lot more capabilities into the site, and that will fuel much greater growth. How are you attempting to introduce gamers to new titles, and how does this help GuildCafe? The beauty of GuildCafe is that we don’t introduce them to new titles—our members do. The site is built around a rich set of tools for expressing the aspects of games you enjoy, the content that excites you, the stories you have to tell about gaming experiences—we help you discover other games and gamers based on what you share with us. How close to actual integration with titles are you? We’ve already integrated with some titles by aggregating in-game data. For example, we already use data from the World of Warcraft armory to help automatically populate your gaming profile with information about your characters and experiences there. We’re working with other game companies to show them how exposing similar types of data makes it possible to take advantage of the “long tail.” We’re also talking to game studios who are excited about using some of the metadata we’ve gathered to enhance gameplay and identify better beta users. What has the feedback from publishers and developers been like? The most consistent feedback is that we’re building the sort of tools and communities that they themselves wished they could invest in, yet lack the resources (in time, focus, people, core competency and money) to really make it happen. Building a social media enterprise that’s as deep as something like LinkedIn or Facebook is an expensive, time-consuming proposition—our advantage is we can aggregate this cost across an entire industry rather than one specific walled-garden of games. And the other feedback we’ve received is a recognition that even if the resources did exist, players absolutely demand something that captures the 360-degree view of their gaming life—in other words, to be successful it demands that you build a social community that transcends any one family of games. To what degree do you think developers and publishers rely on outside community with MMOs? Originally, it was more about trying to control the community by creating some in-house forums run by overworked moderators. Now it is about engaging in conversations with your players and prospective customers. Those conversations happen everywhere—on outside forums, on blogs, on places like GuildCafe. The in-house forums are a tiny minority of very dedicated players; to really grok your community you need to go outside your walls and interact with people. Are you facing competition in this field at the moment? Most often, we’re compared to a few websites that describe themselves as “MySpace—but for gamers.” The problem is that MySpace for gamers already exists. It’s called Myspace! You have to bring something fundamentally new to the equation. Our focus is building something around the empathy players have with each other, based on the stories they have to tell, the history of their gaming experiences, their achievements, their gameplay preferences. Social networking may be fundamental to our DNA, but the manifestation of our functionality and user experience doesn’t fit into any convenient template like, “[----], but for gamers.” How have you been courting outside capital, and how long has this been happening? The fact is that we never courted outside capital. When word leaked out about what we were up to, I started getting contacted by a lot of potential investors. I knew from running my last company how time consuming it can be to raise capital, so I decided to focus on creating value and building functionality rather than looking for money. Why is it necessary for GuildCafe? Building a comprehensive social media enterprise requires significant capital, and the credibility and sustainability that comes with a venture capital partner is also key to attracting talented people and business partners. Why did you decide to work with IDG Ventures Boston? I didn’t have time to educate VCs on games or social media, but when IDG Ventures approached me they “got it” immediately. Even before funding us, they added a ton of value in terms of feedback and refining the business model. It also helped that a number of people on the IDG Ventures team had been at Greylock back when I was starting my last company, so I had crossed paths with some of them before. How much money does the deal involve? We aren’t disclosing financials at this point. The funding is adequate to expand our operations and gather the team of people that will be needed to make GuildCafe successful. How does this deal change the way you're going to be doing business? It won’t change the way we interact with our community—I’ll still be there every day listening to players and helping to create the site that everyone can get excited about. The big change is that it allows us to do more. It also allows us to stay focused on the core mission of GuildCafe, which is building a site people love to use, without spending our time chasing other funding alternatives. Why is it necessary to expand the management team? Online gaming is a huge industry, and the site that becomes the crossroads for online gamers of all kinds is going to be a large business. It requires expertise with a number of core competencies including community development, user experience, engineering and operations. We’re assembling a great team of people who have worked in social media and online gaming and want to create the Next Big Thing at the intersection of both. What additional functionality will you be adding using the added funding? Our core value proposition is to unite players with each other, with groups (guilds) and with games that are of interest to them. We’ll be adding a lot more that facilitates this type of interaction. Helping gaming groups recruit players better would be one example—along with a whole lot more things that we’re not ready to talk about yet. Why do you think venture capital interest in the games industry seems to focus on peripheral companies like GuildCafe, IGA or Double Fusion more so than developers or publishers? I think that’s a common misperception. Venture capital has always played an important role in the game industry, going back as far as the genesis of Electronic Arts. Venture capital investors invest in cases where innovative business models, management expertise or unique technologies offer a huge competitive advantage—so they don’t often invest in individual products like a particular game or even a game studio. Recently, venture capital has begun to pour into game companies with strong business plans—Turbine, Red 5 and CCP Games would be a few examples—as well as companies with unique approaches to profiting from the trends in gaming overall. Why do you believe that venture capital is more important for web based services than other funding avenues? So far, a lot of the popular websites built around MMO game content have been funded or acquired by companies in the RMT (real money trading, or gold-selling) business. Game companies understandably won’t work with them, so there’s no way to envision a future with the type of deep integration with game titles that we have in mind. Venture capital gives us the independence we need as well as the access to top management talent that will be necessary to create a significant company. Do you see venture capitalists becoming more involved in the games field in the future? No doubt. There’s a lot of companies in the deal pipeline already, and it’s growing. The key is business models. Entrepreneurs need to beyond the “cool idea” for a game and combine it with a great business idea. I think this is an exciting time for the industry because we’re likely to see more innovation and breakthroughs over the next few years transform every aspect of the industry.