Q&A: Kongregate's Greer On Funding The Flash Renaissance

Independent gaming portal Kongregate has announced that it has secured an investment round of over $5 million in venture funding in a round led by Greylock Partners. Greylock’s track record includes companies like Digg, LinkedIn and Facebook, so at a glance it may seem surprising that they’re putting such a vote of confidence in a games site. But Kongregate’s more than just a Flash portal – with more than 1,400 games from 750 independent and small-studio developers, it’s an independent gaming social network, with chat, user profiles and Xbox Live-style achievements, It's intending to create an entirely user-supported community in favor of the independent developer – who retains all rights to the games they upload and can earn up to 50 percent of all of the ad-supported revenue they generate. With this new funding, Kongregate aims to actually advance indie developers with solid pitches anywhere from $20,000 to $100,000, depending on the project scope, who make multiplayer games incorporating microtransactions and strong community elements, Those developers, once they recoup the advance, can earn 70 percent of the back-end revenue on their game, still without surrendering a shred of their IP control. Gamasutra spoke with co-founder and CEO Jim Greer about Kongregate’s burgeoning community and its big plans. Kongregate is calling itself “the YouTube of Games.” What exactly does that mean? Well, I think that’s the most compact way of saying that we take indie games that are uploaded by the developer and we create a community around them, which is analogous to what YouTube does with short form video. Once you go beyond that, though, the nature of games and the developer community is very different from the nature of video. So that only goes so deep, but it is a good way of summarizing it in four words. Most of what we want to announce now is really quite different from anything that you would associate with YouTube particularly, but it’s still an extension of having developers participate directly on our site with gamers, and having them vote for which games they like best, and having that drive the homepage and everywhere else games are featured on the site. So the dynamic of developers uploading and users rating is the core cycle of the site. So now that you’ve secured the funding, what’s next? There’s a lot going on with us. We’ve grown from 30,000 users monthly in March to 300,000 in May to 800,000 now, and we’re up to about 1,400 games -- and adding a couple hundred a month. So the basic site is growing fast. The real appeal for gamers is the achievements, challenges and persistent rewards that are associated with these games. We’re going to keep doing that. There are a lot of great developers who are profiting from their games and doing well, but none of them are making a living yet. So we need to keep growing the ad base, but we also want to experiment with some games that are driven by microtransactions. Right now you’ve got free Flash games and $20 downloadable games, like on PopCap or Real Arcade, but nothing in between. So what we want to do are indie flash games of a slightly larger scale that really emphasize co-op multiplayer, and the persistent world that the game takes place in. So, little tiny MMOs, or 2D RPGs, or a real-time strategy game in a persistent world done in 2D -- those kinds of games have great gameplay and are great at building community around co-op play. How will you do that? The goal is to deepen the offering on our site, bring more gamers to our site, and give developers another way of earning money on their games. Right now, if you’re doing a game that’s just driven by ads, there’s not a lot of incentive to, say, spend nine months on it and hire a fulltime artist. Some people do that anyway -- out of love and pride, rather than economic rationales. But we will have a wallet system, rich multiplayer support for persistent elements in our database, and we’ll give developers the tools to create games that have this kind of microtransaction component to them. And first off, we recognize that a lot of people come to Flash games expecting a free experience. So say a game has 10 maps; maybe 2 or 3 will be free and you pay to unlock the rest. So you get a low price point and a great free experience. And I think the multiplayer elements will clearly differentiate them to people from free flash games. We recognize the bar is pretty high to get a young audience to open their wallets, but we’re hoping that if they know that the lion’s share of that is going straight to the developer, and if the games are great games, we think that we can do enough microtransactions to make financial sense. Eventually the goal is to have a community of developers who see this as a great place to put their games. Like XBLA, which has people fighting to get their games on the service. But when they launched it, that wasn’t the case. Microsoft had to fund the initial gameplay developent to create a strong launch lineup, and that’s kind of what we’re doing here. How will that funding and revenue aspect work? We’re funding developers as an advance against royalties on the microtransactions anywhere from $20,000 to $100,000, depending on the scope of the game. We’re looking at development cycles of 4 to 6 months with teams 2 to 3 people -- some even less -- in development, but we want to keep the initial experiments contained. And we’re guaranteeing the developer, “you’re going to pay all your expenses and make a little profit on these advances. But then if the game does well, you can keep 70% of the back end.” So, take a game with a $50,000 dev budget. If you can get 100,000 people to pay 3 dollars and the developer keeps 70%, that’s a great return on investment, and we benefit from having that game on our site, and associating Kongregate with that kind of game. So that’s what we’re going for. What about the intellectual property rights? The one really unusual aspect of this is typically, if someone funds your game, they then own the IP. That’s not what were doing here. We ask in exchange for tight integration with our site and a period of exclusivity, and after that period is over you’re free to put it elsewhere; you can put it on your own site, you can even put it on a competing portal. And you’re completely free to do the sequel however you want; you can put it on XBLA, for example. We see this as a very easy decision for developers to make, and very unrestrictive. So Kongregate won’t actually publish any of the games? Our goal is not to become a publisher and have our own IP stable; our goal is to become the hub of a marketplace for small developers doing great games, and this is more of a way of seeding the ecosystem. We’ve hired a director of games; Chris Pasley, the guy who was the head of Adult Swim games, and he’s going to bring his sensibility in. After we seed this, we’re going to continue to do some development, and he’s going be great for that. He’s really excited about the indie community; one of the things that frustrated him at Adult Swim is that developers would pitch their ideas, but Turner would buy the game and they’d sold the rights to their work, but they didn’t get any long-term benefit from it. So he’s really pleased. Can you talk a little bit about Kongregate’s community features? I was previously a tech director at Pogo. Pogo obviously serves a different demographic of gamers, but it does a really good job of giving those players really cool ways to show off what they’ve done in those games. With badges, profiles, chat and all those elements, and that’s why it has 1.5 million paid subscribers. We’re not asking people to pay for the features, but the inspiration comes from there. We have profiles where people can browse achievements and leave messages, share favorites, on top of the chat – you can browse people’s stats directly in the chat without having to leave the page right in the Flash interface. Then we’ve got ratings and comments. Another big community feature is the game contests. Every week, and every month, we do contests for the top games. So people get into that -- they get their friends to vote for their favorites, which is great for us and for the developers because it spreads the game around. The players like the fact their ratings actually mean something, and the top game of the month gets $1500. Which is not enough to make a living, but it’s a nice little bonus. Currently a lot of our developers are high school kids, or college kids, and what we’re trying to do with the premium developer program is to give them a way to make a real living. How do the achievements work? All of our top games have achievements -- little pieces of art that you collect that go in your profile, like on XBLA. Pogo had them before XBLA, actually – that’s a little-known fact! We’ve seen our pageviews per user go up 50 percent in July because of the launch of achievements in June. So we’re adding more and more of ‘em, and have a large population of people who are hardcore addicts about getting them all. Which requires a lot of gameplay, so it drives a lot of loyalty. Further, we also have collectible cards, a digital version of something like a Magic the Gathering or a Yugioh Card. The difference between that and achievements is that there’s one a week -- usually you have to go through multiple games to earn them, and instead of being little badges they’re larger, prettier collectible cards with a character or weapon on them. And these are going to be playable in a multiplayer collectible card game we’ll be debuting at PAX. How will you choose the premium developers to receive the funding? Chris Pasley is going to be taking pitches. They should tell why your game is fun; a playable prototype is awesome, or some examples of the art. We’re looking for games that have a unique hook that’s going to make people talk about the game. But more importantly, we want awesome community gameplay. It really needs to be designed with community play in mind. It could be a single-player game with a great way of showing off your character, or house, or castle or whatever, but it needs that community element. For example, we’ve had a pitch for a game that’s sort of like a tower defense game -- except you and a group of players defend a whole city. During the night, the city’s overrun with creatures, and in the day you can build new structures and then upgrade them, and go on quests. If you build a larger tower, you might need four other players to join you. It kind of builds community around the concept and the game keeps going when you’re not around – there’s that persistent element. Can you be more specific about how all the developers earn revenue, versus the premium developers selected for this initiative? For ad-based games you get up to 50 percent. It starts at 25, actually, and then goes up based on how well the game integrates with the site. For the premium developer using the microtransactions element, they get 70 percent off the back end after they recoup their advance. The reason we’re being so generous is that these developers have put a lot of sweat into these games, and we want them to make a living. With this initiative we’re trying to get out in front of things like XBLA that make you fund games yourself. Eventually, we’re expecting developers to fund things themselves down the road, once we have an established platform. Can anyone upload any kind of homemade game content they want, or are there controls? It’s completely self-service, like YouTube in that sense. You upload your Flash file with a description and the instructions, and it’s immediately live on the site. People have to click on the hot new games to display all the new uploads, but once it has a certain number of ratings, if those ratings are good then it goes on the homepage. If content is inappropriate or stolen, the users flag it. There’s a button to ‘flag as inappropriate’, so rather than us reviewing them before they go up, our community does that. What about if it’s just a really awful build, or it’s incomplete? Well, then the user ratings will probably reflect that. But there’s a community element there, too – what we’ll see a lot is this guy who’s a pretty good programmer and his art is terrible, and then there’s some other guy who is a good artist but needs a programmer to work with, so there are a lot of teams like that forming around the site. What will happen if bigger, more polished developers become interested in Kongregate and want to intersperse their content with the indies? Is there a cut-off point? As it happens we’ll evolve and adapt to it, but my basic instinct is that in the context of a 2D Flash game with a pretty small screen, all the limitations of the web put a real emphasis on gameplay and fun. A lot of the most popular games on our site are not visually impressive or polished, but you get hooked by playing them. And being a big company or a professional developer only helps you to the extent that you have a good intuition for what makes a good game; you can’t throw money around and beat someone else, like in the retail world. Especially in the world of Flash games – there are already pro developers on other sites, but the indies are still competing very well. Spending $2m on a Flash game doesn’t give you that much of an advantage over a great idea.