Facebook drives growth of social gaming developers

London Riccardo Zacconi will always remember Christmas Eve 2003 — it was when his company almost went bust.

Instead of jetting off to spend time with his family, Zacconi and his then business partner, Toby Rowland, son of the late Tiny Rowland, were hunched over the office fax machine waiting for a letter of fin-ancial support that would keep their online gaming operation afloat.

At the last minute, the vital document arrived, with the promise of backing from an old colleague. Nearly nine years later, that vote of confidence looks likely to prove a shrewd investment.

The company, King.com, has evolved into Britain's leading player in the fast-growing social gaming market, taking on the likes of Zynga, creator of Farmville, and other American rivals such as Electronic Arts. King.com could even emulate Zynga and pursue a lucrative listing on Nasdaq.

Social gaming is booming. It is estimated that the amount spent on such games will hit more than $8 billion (Dh29.4 billion) globally this year, and nearly $15 billion by 2015.

Many of the most popular games are played by Facebook users. Apple's App Store has become a centre for developers of smart phone applications. Similarly, the social network's huge worldwide membership makes it the prime destination for games creators.

It is this that has helped propel King.com to the front ranks of the industry. When Zacconi, a 44-year-old dotcom veteran, and Rowland started the company in 2003, it foc-used on internet versions of board games, word games and quizzes on its own website.

Funding hiccup

After the initial funding hiccup, it went well, turning a profit every year since 2005. By the summer of 2009, however, Zacconi realised the market was evolving. "People were moving away from large portals to play games on Facebook," he said. "Initially, the quality was low, but you could play with your friends."

King.com needed a new strategy to compete. The solution was to set up a team to develop products for Facebook in parallel with the existing website. The company calculated that many of the King.com games could be adapted for Facebook. The first to make the move was Bubble Saga, which quickly took off.

It was soon followed by a Facebook version of mah jong.

King.com went from about 300 million games played a month to more than 2.5 billion after joining Facebook. Bubble Witch Saga, launched last September, helped make it the fourth-biggest gaming company on the site. Zynga is comfortably on top, followed by Electronic Arts and Wooga.

On Zynga's trail

Zacconi has Zynga, which clocks up more than 50 million daily users, in his sights. "We are going after them," he said.

King.com has quite a way to go — it attracts less than 20 per cent of the players Zynga has — but it is growing fast. The most recent accounts for the London company show turnover of €35 million (Dh169.59 million) and pre-tax profits of nearly €1 million — down from €4 million in 2009 because of the investment required to expand into social games.

Zacconi is coy about discussing the group's latest figures, but they are up substantially. He expects revenues to top €100 million this year, thanks to income from advertising and from players buying extra lives to help complete the games.

The stock market is likely to come calling, not least to provide an exit for two venture capital firms, Apax Partners and Index Ventures, that invested in 2005 — an age ago in tech terms.

The business has already made Rowland, who left in 2006, and Zacconi wealthy — they were able to take money off the table when the venture capitalists bought in. The deal valued King.com at €75 million.

Zacconi would like to follow Zynga onto Nasdaq. The American firm was valued at $7 billion when it listed in December. "It's something we are thinking about. We have an option next year to go public," he said.

A sale is another possibility, particularly as social gaming companies are changing hands for big bucks. In 2009, Electronic Arts, famous for sports games such as Fifa 12, picked up Playfish for $300 million. In January, Double Down Interactive, which has a casino game, sold for about $500 million.

There could be increasing convergence between social gaming developers and their online gambling cousins. Bwin Party Digital Entertainment, which runs poker, sports betting, roulette and bingo, is examining the market and has helped set up an investment fund dedicated to social games. "It's an area that is of great interest to gambling companies," one City leisure analyst said.

There is even talk that Zynga, or one of its ilk, could expand by buying an online gambling group. Either way, future Christmases promise to be rather less stressful in the Zacconi household.