Sharon Wienbar got hooked on casual gaming in 2004. Her firm,
Instead, she noticed something funny happening. Consumers were frantically downloading not complex sports games but simple puzzlers and memory-based games like Brain Genius and Diner Dash. “Brain Genius became our biggest-selling game,” Wienbar says. “We cut back on sports games and started licensing more casual games.”
Like Wienbar, a lot of investors are now taking casual games quite seriously. The causal gaming market brings in $2.25 billion annually and is growing fast, according to a new report from the Causal Gaming Association.
Casual games are “games for the rest of us,” says Gus Tai, general partner at
As a result, casual games have seen adoption across a broad demographic, from pre-teen boys to 76-year-old grandmothers. They attract far more users than the serious games that require hours to learn and many more to master.
Another appeal to investors: Unlike Madden NFL or World of Warcraft, which each requires at least $20 million in R&D, causal games can be built by two guys in the Ukraine for less than $100,000.
This has opened up the field to many game developers. Scale Venture Partners now tracks about 100 companies in the space. Some have been around for a while and are seeking later-stage funding, others have not even launched yet.
Hany Nada, managing partner at
Granite Global hasn’t made any new investments in the space, but Nada says his firm is close to pulling the trigger in China, where there is an even more voracious appetite for casual games. “In China they’re called ‘office games,’ because that’s where everybody plays them,” he says. “The market is earlier there, but the opportunity is huge.”
More importantly than the sheer number of consumers is that advertisers realize they can reach large numbers of casual gamers and this has created an ad-based revenue model. That means casual-gaming platforms like Glu Mobile and PopCap can distribute their games for free. They make money by running ads on their sites and within the games themselves.
This is key to casual games’ appeal to advertisers. Whereas it is almost impossible to insert an ad in a serious game without annoying the user, casual games are well suited to ad placement.
“There are many periods when you finish a level and relax, and that’s when advertisements can be served up,” Tai says. “It isn’t intrusive as it is in a shoot-’em-up. You can’t pause a shoot-’em-up game, because if a bullet is about to hit you, you’re stuck.”
The challenge, of course, is maintaining popularity. Casual gamers can be a fickle group of customers, constantly in search of a more entertaining way to spend 20 minutes. But they are faithful to companies that continue to innovate, Tai says. “If you crack the code and you’re sticky and you have a relationship with your customers, you’re fine.”
And fine may be quite fine indeed for investors in the near future. “We see this unfolding over the next few years as a very easy, acquisition-rich sector,” says Zeisig of VIMAC. He points out that large portals and content companies are targeting casual gaming companies because they attract wide demographics, which means advertising, which means revenue.
For instance, Club Penguin, which was started by three guys in British Columbia without a dime in venture money, was sold in August to The Walt Disney Co. in a deal that could total $700 million.
Nothing casual about that.
A longer version of this story appears in the December 2007 issue of Venture Capital Journal, an affiliated publication.