Casual gaming community Kongregate has closed a $5 million series A round led by Greylock today. This is on top of a $1 million angel round they raised from Reid Hoffman, Joe Kraus, Jeff Clavier and Richard Wolpert, among others. The casual gaming category consists of all those addictive online flash games that often distract you during your downtime (remember desktop tower defense?). James Slavet of Greylock pegs the casual game market at $500 million and expects it to grow even larger.
Compared to the incumbents like Miniclip, Kongregate is modeling itself after Xbox Live. They have built a gamer social network around the games, where gamers can gain ranking, earn awards, and collect trading cards (used in another game). Developers are encouraged to upload games to the site through “game of the week” contests and a revenue share of the ads that are displayed next to the games as they are played (25%-50% depending on exclusivity).
Kongregate plans on putting the lions share of the cash towards site development. As part of that, Kongregate will be financing 8 to 9 developers to create premium games for about $20-$80,000 each. Each of the games will have a free version with an optional paid upgrade to a full version. In exchange for a limited time exclusive distribution agreement, developers will get the majority of that income. Development times are expected to take 2 to 6 months. Kongregate also plans on monetizing through game specific sponsorships (once they hire an advertising manager). They’ve taken a large round considering their burn rate is $80,000 a month for a team of 9.
Since launching last October, Kongregate has gone through some significant growth. The site has grown to 800,000 uniques last month (300K May, 50K March), with 60,000 registered users. Those visitors can choose from a library of 1,400 games and play for an overage of 38 minutes on the site.
Now if they can only give me my weekend of Desktop Tower Defense back.
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I do like that they already have a monetization model in place, unlike many of these startups that haven’t the single clue of how to monetize their traffic.
Revenue sharing with the developers is another winner in my book, and I believe going forward it should gain more momentum. Now if only I have all this time to play these mindless games
Some other casual game portals could follow this model soon.
Kongregate rocks, I’ve been super impressed with them and they have real good people working there. Congrats everybody over there!
I’ve been tinkering around on Kongregate since it was in alpha, and it’s really become my new favorite casual game site. Sure, there’s the usual crappy games there - but the good games, the achievement system, and the weekly challenges more than make up for it. The whole staff they’ve got working there do a bang up job and keep the site fun and lighthearted.
I highly recommend checking Kongregate out if you’ve got a few spare minutes, it really is a blast - and such a nice contrast to other flash gaming sites like Newgrounds and Miniclip.
Kongregate won the Audience Choice Award for Gaming at the Under The Radar Entertainment and Media conference in June. Kongregate founder Jim Greer has a lot experience in online gaming, including a stint at Pogo.com. He told us he sees Kongregate’s ability to claim a stake in the very crowded online game space due in part by involving developers and gamers in a social network. Greylock may be investing in the network as much as in the games…
Kongregate is the best casual gaming site I’ve stumbled upon.