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Growing Pains

Mon 19 Dec 2011 3:03pm GMT / 10:03am EST / 7:03am PST
OnlinePublishingFree-to-Play

Innogames co-founder Hendrik Klindworth on the importance of quality, catching Bigpoint, and the restrictive nature of Facebook

Companies are founded for many reasons, but InnoGames may be alone in owing its existence to a lack of variety in German television programming.

One evening early in 2003, Hendrik and Eike Klindworth and their lifelong friend Michael Zillmer were spoiling for something to do, and the television schedules offered little in the way of excitement. They faced the dubious prospect of providing their own entertainment, so, with the help of numerous bottles of cold beer, they decided to invent a game. The result was Tribal Wars, an online strategy game in the mould of Ensemble Studios' Age of Empires series, only playable for free, through a browser, and with multiplayer as an integral part of the experience.

In trying to build a game that their friends could access quickly and easily, Eike, Hendrik and Michael had unwittingly entered what would prove to be one of the games industry's major growth markets. Within a few weeks of removing password protection their servers were dangerously crowded with enthusiastic gamers.

"The players came and came," Hendrik recalls, "and then we had to close it again, because 4000 players, 5000 players was our server capacity at that moment."

"We did all the game development and supporting the game as a hobby project, but it became bigger and bigger. At the end of 2005, it just took so much time that we decided we had to focus on either going to university, or focus completely on the game."

We have a smaller number of games and a higher number of players per game, which is related to the fact that we focus so much on each individual product

"The chances were good, and it was already profitable at that time, but that decision was the moment where we became a company."

Incidentally, there was a fourth person involved in the creation of Tribal Wars; another childhood friend who decided that the risks involved with launching a game company were simply too much to bear. Instead, he opted for what, in 2005, when InnoGames had a single product and 50,000 players, must have looked like security and stability.

Today, standing in the company's sleek, glass-and-steel headquarters in Hamburg's rapidly modernising riverside landscape, that fourth, errant friend would be forgiven for cursing his own sensible tendencies. InnoGames now has almost 200 employees, half of whom have joined the company in the last 12 months, and Hendrik Klindworth promises that there will be further growth in 2012.

InnoGames may be a free-to-play browser developer as much by accident as design, but the level of success it has achieved since is no coincidence.

"For us it felt very natural to make it free," Klindworth says. "In the beginning we felt it was almost like an internet service we were providing. Everybody expects everything to be free on the internet, so for us it felt very natural to make it free from the beginning."

"In some ways, of course, we always look at the market and at what is going on. I think we have a different focus than, for example, Bigpoint, which does a lot of action-based games. We have strategy-based games. We look at what others do but we know where our strengths are."

Certainly, Bigpoint is a useful point of comparison; it is, after all, another Hamburg-based company making millions from free-to-play browser games. However, the differences between them are more telling than these surface similarities indicate.

Bigpoint has more than 200 million registered accounts spread across a portfolio of more than 70 products; InnoGames has 70 million registered accounts across a portfolio of just 6 titles. According to data from ComScore, in June 2011 Bigpoint had 2.4 million players investing 7.4 million hours in 71 games; in the same month, InnoGames had 1.1 million players investing 4.1 million hours in five games.

The picture that emerges is of two very distinct approaches to the same market, and Klindworth is very clear about the merits of the path InnoGames' has chosen to take. By building a smaller, more focused portfolio of high quality games, and involving the community at every stage of a product's development and post-release evolution, InnoGames is trying to eradicate the high churn rate that a company with 70 titles simply takes for granted.

"We have a smaller number of games and a higher number of players per game, which is related to the fact that we focus so much on each individual product," Klindworth says. "We put a strong team on each game, focus on quality. We don't want to rush out with 20 or 30 games, but have enough energy for each game to make it a success."

"We have a smaller number of games and a higher number of players per game, which is related to the fact that we focus so much on each individual games," Klindworth says. "We put a strong team on each game, focus on quality. We don't want to rush out with 20 or 30 games, but have enough energy for each game to make it a success."

At InnoGames, player retention is everything. The company has around 100 community managers in locations all over the world in an attempt to get the clearest possible picture of what its customers need. Loyalty is a valuable but rare commodity in the world of free-to-play browser games, yet Klindworth claims that the, if you discount the people that just try a game for 20 seconds and leave, the average InnoGames customer sticks with a single product for more than 6 months.

"There's a big difference from Facebook," Klindworth points out. "Our audience is more loyal to our games, and we have significantly higher DAU to MAU ratios."

Indeed, Klindworth regards the company's one and only Facebook game, West Wars, as an "experiment" - one that did little to convince InnoGames to follow the herd into the increasingly crowded social space.

Our audience is on Facebook because so many people are on Facebook, but they wouldn't want to play on Facebook

"In the long-term we want to integrate Facebook Connect in all of our games, [and] use the social graph of Facebook," he says. "We want to use the features of Facebook but we don't want to be inside Facebook. We want to have the players of our own games, and build up our own audience, and use our own payment methods."

"Facebook limits you in three aspects. A bit in marketing, because you can't reach out to everyone - some people do not want to play in Facebook or don't have a Facebook account. It limits you on technology; especially because, you can go full-screen of course, but in the beginning you are inside Facebook, and for a rich game experience you need as much space as possible."

"And then service and payment, of course, because it's convenient for the player to have one payment method, but they first have to load their Facebook credits, and then there's the revenue share... That's just money missing for new game development and new game features."

Klindworth believes that there is an audience of core gamers on Facebook - the very same people that InnoGames has targeted up to this point - but what many developers rushing to make core-focused social titles have misunderstood is that those people don't regard it as a compelling environment for gaming.

"Yes, our audience is on Facebook, because so many people are on Facebook, but they wouldn't want to play on Facebook. There is a core audience that doesn't want its real-life friends to know that they've just milked a cow, or done something in the game. I'm a core audience player, and more and more games have Facebook integration, but I always try and make sure that they don't post on my wall."

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Klindworth is unwilling to rule out other Facebook games in the future, but for now InnoGames is focused on expanding its audience by playing to its strengths. This is exemplified by two forthcoming projects: Forge of Empires, a strategy game that seems equal parts Age of Empires and Civilization, and Lagoonia, a hybrid of The Sims and The Settlers that represents the company's strongest attempt at reaching out to a female audience.

Both games are visually striking - particularly Forge of Empires - but they also impress in other, more surprising ways. In a market where the vast majority of games are based around combat and violence Lagoonia displays admirable pacifism, rewarding co-operation and constructive behavior. Forge of Empires, on the other hand, is arguably more typical of browser games in general, but its combination of empire-building, hex-based PvP battles, and a diverse range of win conditions is a generous amount of gameplay for a free-to-play release. The similarities to existing games are impossible to overlook, of course, but they wear the comparison well.

According to Volker Dressel, the company's chief marketing officer, the audience InnoGames wants to attract with games like Forge of Empires and Lagoonia is the very same one that Nintendo tapped with the Wii and DS. He believes that many of those people now also play on Facebook, but regard the lack of depth in most social games as a necessary compromise to gain access for free. InnoGames wants to offer a superior alternative, and Dressel claims that the public's understanding that sophisticated games are now available through a browser for free is growing all the time.

"Our aim is to bring in the best quality of gamers. The people have to find us. You cannot wait for only for virality, so our main target is to find the right places to communicate, as cheaply as possible, with as many high quality gamers as possible," he says.

"There are differences in the markets. In the UK market [people don't know that high quality browser games are available], but when you go to France or Germany it is the other way around. People do know what the quality is - perhaps because the market is driven by German companies - but they do now understand what the quality is, what they can expect out of the games."

"In the last few years there were a lot of Asian grinder games coming up. For this type of game I think there is still a market, but people are sick of this. It doesn't have the gameplay they need, it doesn't have the game design that is needed in the Western hemisphere. Right now, the goal for success is to develop the right game for each market, and have good localisation. That means much more than translation."

The fact that people want to enter our market and we don't want to enter theirs speaks for itself

"That is a big challenge for us in the future: that we have the right games for South America, as well as Europe, and for North America, and the Far East."

However, while global expansion is a priority for the future, in the near term the focus is on growth in Europe. InnoGames' home market contributes by far the largest share of its annual revenue, so cracking America, Brazil, China, and the other markets mentioned in our lengthy discussion will not take precedence over closing in on the current European market leader, Bigpoint.

"The most important task is to strengthen our audience with new games and in our existing games," Klindworth says. "We will have the biggest growth still in Europe. It's a huge market, and we can get bigger here. The home market, in absolute numbers, is the highest growth."

But change is certainly coming. InnoGames' meteoric rise has coincided with the rapid growth of the browser market in general, and the future is certain to involve two things that could upset the successful balance that the company has struck so far: rising production budgets, and the entry into the market of the many publishers for whom digital content is an integral part of their strategy.

"When we made Tribal Wars back in 2003 we had basically no budget, whereas today there are browser games that have a production budget above €1 million, or at the very least several hundred-thousand," Klindworth says.

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"I think that, in the future, every audience will demand high production values. You will see that in all social game development, all browser-based game development; the production budgets, they rise up."

"I would say that it's not really negative for us, because the revenues within the games also increase. Of course, I wouldn't like to have million dollar budgets for browser-based game development, but we are still far away from that."

However, the threat from the sort of multi-billion companies that currently dominate the console market may not be so far away. Companies like Electronic Arts, Ubisoft, Capcom and others have been dabbling in social and mobile development for some time, but this year saw these new markets folded seamlessly into their overall strategy.

It seems more a matter of 'when' rather than 'if' that free-to-play browser games become as essential to new product launches as iOS and Facebook games are now. But if Klindworth is at all concerned about InnoGames' place in the future of the browser market, he certainly hides it well.

"The fact that people want to enter our market and we don't want to enter theirs speaks for itself."

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