First established in 2007, InnoGames hit 30 million hardcore players in its first two years, and doubled that to 60 million this year. It might not be the biggest player in the online browser market, but it achieved very respectable numbers with a simple strategy of releasing only a few titles regularly updated with new content. And last year it got the kind of executive attention it deserved when former European boss for Electronic Arts, Gerhard Florin, took the role of chairman at the company.
In this exclusive interview with GamesIndustry.biz Florin details the growth of the company, games as a service, consolidation in the online markets, and why the company is cautious of entering the Facebook space.
Q: How are you finding your first year at InnoGames?
Gerhard Florin: It's interesting. There's always ups and downs, but more ups than downs. It's a very exciting market.
Q: InnoGames has had remarkable growth, from around 30 million users in 2009 to 60 million this year. Can you put that in context? What has the company done to double its user-base in two years?
Gerhard Florin: It's mainly about constant service for the main games. InnoGames doesn't release too many games each year; it has four main games and two that have been the main drivers of growth. These require a constant update, a constant service to that community, so it's about investment in a game after its release. That investment in the community is a strong foundation for growth.
Q: And that's a conscious decision to only release a small about of games and build on those rather than pushing out a lot of games and seeing what sticks with an audience?
Gerhard Florin: In that market it's down to retaining customers and monetising your customers very well. It's a conscious decision that it's not quantity, it's quality of the game service that matters. Which is why InnoGames puts a lot of work not only into games before they are released but more importantly after release. The users will get bored very quickly if you don't come up with new updates and content for them - you have to feed them constantly.
InnoGames is more interested in the revenue than the millions of people inflating my servers but never paying anything
Gerhard Florin, InnoGames
The concept of doing that is very, very old. It's much cheaper to retain a customer than get a new one. That's marketing wisdom from the past 60 years. The old book clubs did the same, and it's the most rewarding thing to do. If you look at the investment budgets it's fairly evenly split between new investments and new undertakings and updates on existing games.
Q: How much of InnoGames' growth has been a reflection of general growth in the free-to-play market? The old saying of a rising tide lifts all springs to mind.
Gerhard Florin: It's always easier to grow in a growing sector than in a shrinking or stagnant sector because you don't necessarily have to increase your market share in order to grow with the market. InnoGames is always trying to outgrow the market.
But this market is highly fragmented. It's not like playing against two or three big companies. Increasing market share is not really seen as taking that share from somebody else like it is in a very mature market. I wouldn't say that these markets are comparative. It's a little bit easier to grow, and in the main so far it's been good commerce to concentrate on domains - strategic, role-playing games and browser based games.
It wasn't necessary to go to mobile - we have some thoughts that might be developed further down the line. We don't have to go deeply into the Facebook arena, we don't have to go after new consumers. There are thoughts of going after the female gaming group, but so far the growth has come from the core gamers.
Q: You mention the fragmentation of the market, but would you expect that market to continue to consolidate with more mergers and acquisitions?
Gerhard Florin: To a certain extent I would say yes. The main driver for consolidation is the cost it takes to maintain the games, develop the games and service the games. You need deeper pockets because the quality requirements are going up. The customer is expecting more and more depth, better graphical fidelity, the tools for new programming languages being offered in browsers. Eventually we will see 3D coming in browsers as well. All of this will drive up the budgets and as soon as the budget goes up it gets harder for the smaller companies to stay in the market.
Q: Do you find the audience in the free-to-play market more fickle? Players haven't made an initial financial investment, so is it harder to prevent them from looking elsewhere?
Gerhard Florin: There are two investments you make when you start a game. One is the money you pay - if you've paid £50 for a disc game, online or not, there's a certain likelihood you will stay with that game. The other factor is the invested time and knowledge. If you have built an avatar or built a village, invested 100 hours in a game, you are not going to leave it so easily. That's equally a barrier to access.
The only reason you will leave a game is because you get bored by the game. As soon as you stop offering new things for the players they will begin to leave. What we've got are not casual games with five minutes of investment; we have hours of investment. And the consumer is loyal as long as you offer fresh content.
Q: You've got a small presence on Facebook, but do you think you can expand that and cater to a real hardcore audience on Facebook?
Gerhard Florin: That's one of the most interesting questions. I cannot say yes or no but there's plenty of talk. We can see very clearly that hardcore gamers, like everyone else, do have Facebook accounts. But still the majority of Facebook game players are a completely different target group than the core gamer. And we've asked core gamers why they don't play Facebook games and they say it would tarnish their image. But I think it's not that the core gamer isn't interested in Facebook but that the games it offers aren't right. As soon as a real hardcore game is offered on Facebook then these players will flock to it.
Q: But do you think InnoGames can be one of the companies to do that - take a hardcore game to Facebook and really grab that audience?
Gerhard Florin: Well we had one offering, West Wars, but it was not really done with full force and full energy. It was more of a test... it's still a discussion that we're clearly having. From my point of view, I think it's a worthwhile platform and we could pioneer it very easily with our strong brands. But you have to use the top brands. The difference is that with InnoGames people play against users they don't know, they only know their avatars. On Facebook you have to play against your social graph if there's enough friends online playing that same type of game.
Latin America monetises okay, but Asia usually monetises very poorly. Going there you not only have tough competition but you have very different cultural experiences, especially in Korea and China. We have two people in Korea scouting for games that we might take to Europe. Asia is not a high priority but it's good for reach. If I want lots of MAUs and DAUs then I go to the Philippines but I'll never make any money there.
InnoGames is more interested in the revenue than the millions of people inflating my servers but never paying anything. The balance needs to be kept and I would say the US is more interesting, and InnoGames has more roots there than Asia. The Philippines and Indonesia are huge Facebook markets, but have extremely small revenue.