Success story: At Kobojo virtual goods mean real money
22 August 2011
Founded three years ago, Kobojo develops games for social media such as Facebook. Now it is developing a business model that transforms virtual currencies into hard euros.
When they met at Paris’s computer college Epita in 2004, Vincent Vergonjeanne, Franck Tetzlaff and Philippe Desgranges set out to create a technology business. Working in Epita’s business intelligence lab, 3IE, they soon recognised the potential of social networks, with Facebook clearly the territory to conquer. They founded Kobojo in 2008 in order to take a share of that emerging market.
Kobojo’s games today attract 3.7 million individual users per month and the company is expecting revenues of €5 million in 2011. That’s the sort of growth that recently convinced venture investors Endeavour Vision and AGF Private Equity to back the company in a $7.5 million investment round.
Kobojo is now looking to consolidate its European lead in the highly competitive field of social gaming. Electrons may seem a cheap resource for creating a virtual product, but it still takes a lot of brain power to turn them into attractive games. So the company deployed its recently raised funds to hire developers and a new president – former Electronic Arts manager Gerhard Florin.
But like many Internet start-ups, Kobojo had to go through a process of trial and error before it could turn usage into revenues of €1.5 million in 2010 and make a profit, says CEO Vincent Vergonjeanne.
As part of Microsoft’s BizSpark programme, which supports software start-ups around the world, Kobojo had quick and easy access to Microsoft development tools and production licences for server products, with no upfront costs and minimal obligations. The company also saved a lot in infrastructure spending after it moved to cloud computing.
Back in 2008, the company’s first application – Adopt Me – attracted 100,000 users within a month of its release, but it made a profit of just $80. Clearly, social gaming was the right route for Kobojo to reach a large customer base almost instantly. But how could the company transform popularity into cash?
Kobojo then released a quiz game, Petites Questions Entre Amis (Small Questions Among Friends), which quickly drew 17 million users – typically Facebook enthusiasts. The next challenge was retaining those social media users, who are notoriously volatile.
The launch of GooBox in 2009 answered that question. A platform of 15 games that take up to four minutes to play, GooBox proved addictive. With 3 million regular users a month, it turned Kobojo into one of Europe’s top social games developers. But with money coming only from banner advertising, revenue was still an issue – it was difficult to scale the business internationally.
So in mid-2010, the company made a strategic U-turn. It bet the farm on virtual goods, which multiplayer online gamers can buy using real money to gain an edge. The timing looks right – after having made social relations virtual, Facebook is now doing the same for economic relations.
The development of Pyramidville is one example. Set in the Egypt of the pharaohs, the game allows players to buy items such as virtual housing to enhance their cities’ development. And they do buy. “On average 4 per cent of users buy virtual goods in a social game. We’re above that number with Pyramidville and that translates into significant revenues,” says Guillaume Berthet, Kobojo’s marketing manager. Not bad for something whose real cost is only a few bits of information in a computer cloud.
The team at Paris-based start-up Kobojo with social games, Pyramidville, ElementZ and Goobox
This article was originally published in Futures Magazine. Click here to view or download the full issue.
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