Kabam spreads its wings beyond Facebook

In some ways, Kabam, a social gaming company, is a textbook case on how to survive on Facebook without the resources of a much larger rival — namely, Zynga.

Kabam’s approach since its founding in 2006 has been to differentiate itself from Zynga, which develops more casual games designed to appeal to a mass audience, by targetting a narrow audience of players who are into role-playing games such as “World of Warcraft� or “EverQuest.�

Kabam’s games lived on Facebook, taking advantage of the social network ability to spread the word among its 900 million users. In the past year, however, Kabam has moved several of its key titles to other platforms as well, including Apple’s iOS, following the path of several other developers, includingCrowdStar, Zynga and King.com, to name a few.

As a result, Kabam’s revenue, dominated by Facebook, now comes from players on mobile and tablet devices as well.

While the escalating cost of finding players on Facebook has discouraged many independent developers from doing business on the platform, a savvy few like Electronic Arts, Kixeye and Kabam, are finding ways to survive and in some cases thrive on Facebook.

In a recent interview for our story about games on Facebook, Chris Carvalho, Kabam’s chief operating officer, insisted that his company has not abandoned Facebook. Rather, Kabam, like so many other developers, is “diversifying� its revenue. Here’s an edited transcript of the interview.

Q: What is Kabam’s revenue reliance on Facebook currently?

CC: Less than 30% of current gross revenue.

Q: How has that changed over the past two years?

CC: One year ago this month, Kabam’s gross revenue was 100% on Facebook. We have invested a lot of time and attention to diversifying our distribution to multiple platforms ... all while growing our business from the $100-million-plus gross revenue in 2011.

Q: Has Facebook been helpful to game developers such as Kabam looking to reach new audiences?

CC: Facebook is improving how they help developers because the 230 million Facebook users who play games each month want great content. We talk to Facebook frequently, and they are focused on two things that will be very beneficial to Kabam. They’ve just launched an ability for game developers to market their games to their mobile audience of more than 400 million users. Facebook has the best marketing and consumer targeting platform in the world. We are able to focus on the users who are most likely to want to play Kabam games. Additionally, Facebook is continuing to look for ways to promote titles on the Facebook web platform — especially for companies that have more “gamer� or “core� games. They have a number of features that will be attractive to Kabam players that are coming shortly.

Q: How does the cost to acquire players on Facebook compare to costs on other platforms?

CC: Facebook has the best user acquisition targeting in the world. That said, the combination of the implementation of the 30% Facebook Credits tax in July of 2011 and player acquisition costs on their Web platform provide a lower return on marketing dollars than on iOS, even though iOS has the same 30% tax and the acquisition marketing is not as targeted. This is primarily driven for three reasons. The percent of iOS users who play games is greater than 60% while the percent of Facebook users who play games is around 25%.

Secondly, people use smartphones and tablets differently. On mobile, you can be playing a game while you’re commuting to work, in line at the grocery store, or watching TV. There are a lot more opportunities to play, and that’s reflected in how often players return to Kabam games.

Finally, Apple has hundreds of millions of credit cards on file and approximately 10 years’ experience running a digital ecommerce business. That translates to a much higher conversion of players into payers of our premium content. Kabam’s “Kingdoms of Camelot� game on iOS, for example, has been the No. 3 or higher highest-grossing app 111 days in the past five months.

Q: Has it become easier or harder for smaller, independent developers to compete and get their games discovered on Facebook in the past year?

CC: It’s probably harder on all platforms for smaller developers to get their content discovered. I have three boys, and they have grown up in a world where there is more information and entertainment in the palm of their hand than the richest person in the world probably had access to even 25 years ago. Kabam has been able to thrive even with thousands of games to choose from on Facebook and other platforms because our customer acquisition team is armed with a very structured and sophisticated approach to identify players that will want to play Kabam games.

Q: Is it possible to build a thriving games business being solely on Facebook? Or do developers need to diversify their reach to make the model work?

CC: Kabam has found that diversity is a good model with Facebook continuing as a strong business partner.

Q: Overall, has it gotten easier or harder for developers to make money on Facebook today compared to two years ago?

CC: It’s more difficult on the bottom line because of the introduction of the 30% Facebook Credits tax, but Facebook’s audience continues to grow. And if they figure out how to attack mobile, they will again be the best gaming platform in the world.

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