While the social gaming market has made everybody in the games business sit up and take note in the past couple of years, the online casual space has also been growing steadily.
One of the most successful European companies in that genre is Spil Games, base in The Netherlands, and here CEO Peter Driessen explains how it has adapted to changing market conditions, and what the challenges and opportunities are ahead.
Q: Where did the company come from?
Peter Driessen: We started it up in 2001, with a vision to become one of the world's leading companies in game traffic - but we started up as a Dutch company focused on the Dutch market, especially for chat communities.
Q: It's an intensely competitive market place, particularly now - how has the company changed to compete on that level internationally?
Peter Driessen: Well we went through a learning curve in the first few years, and saw that it was difficult to gain to gain a lot of traffic within chat communities, for example. We also saw that gaming companies, especially in Holland where we one of the first countries to have big broadband penetration, with online games were doing great.
So we looked at that space and thought there was a chance for us. We bought our first gaming portal back in 2004, Spelletjes.nl (Dutch for "games"), and soon after we saw the fast growth in that site. We looked at the opportunities abroad, especially in countries where the broadband penetration was lower - for example Germany, Poland and others. We saw the space wasn't really conquered there, so Holland was more or less ahead of the market at that time.
We invested a lot, looking to go international - first with Europe, then the rest of the world - and we went out a bought a lot of nice domain names to start with.
Q: How do you evaluate your position in the market now - how far have you come?
Peter Driessen: I think that we've done very well in the past few years, growing from fifth place to second place in comScore, passing partners like EA, MSN, Miniclip and others. We know we can increase growth and pretty much double where we are now, plus we'll have a more segmented approach, different portals aimed at a more specialised audience.
Q: Give us some examples of the specific segments you're talking about.
Peter Driessen: We have family portals - these are more broad sites for a generic population, as well as children, girls, boys, and especially mothers. But then we also have portals just for girls, for tweens, for teens, and we're also in discussions to open portals for other target groups as well.
Q: As you've expanded into other markets what differences have you noticed between different countries or regions?
Peter Driessen: Well in some regions it's much easier to get into them than others. Within Europe, you look at a country like Poland and see that it was much easier for us, because we were there at the starting point of the business - broadband penetration was just picking up - they were so early on the growth curve.
If you look to other countries, where we entered later - such as the UK - it was quite difficult and our growth wasn't all that exceptional. But after we were able to acquire the Games.co.uk domain it was the opening for us - we were recognised within the country and had a name we could use for much better search engine optimisation.
From there the curve grew dramatically, especially if you look at last year, when we at least tripled our reach in the UK. It was very high growth last year.
Q: You mention domain acquisition - clearly that's a crucial part of it for casual users. It's because people just search for "games" so anything with that in is going to work well?
Peter Driessen: That's quite right, and the same word in different languages - it's the first thing they'll put into Google, and find us like that.
Q: What about the US market - that's a pretty mature market with a lot of big players?
Peter Driessen: Last year, according to comScore, our growth was 269 per cent, so we did quite well. If you look at it, the market there for an online portal with low barriers to entry - there wasn't that much there, just a couple there, but nobody taking a segmented approach.
Girlsgogames.com for example is doing very well, especially within the United States, because there wasn't anything specifically for girls. Also the tween portal is doing well, and Gamesgames.com is too.
I'm expecting that as we grew to be tenth place in comScore last year there, we can do even better this year.
Q: What about territories to watch this year?
Peter Driessen: Brazil, Mexico, China and Indonesia - they're important areas. And India, although broadband penetration uptake there is still slow.
Q: People talk about India, China and South-east Asia, but not many talk about South America - they don't have much presence in the core gaming market, but clearly you feel there's an opportunity there for casual games?
Peter Driessen: Yes, we're actually the market leader in Brazil and Mexico, and you'll see a lot of growth possibilities. At the moment it's a bit more difficult to monetise it there, compared to the more developed countries, but if you look at the development of, say, Brazil over five years, it's good to be there now - to be the market leader and expect to be in the same position in five years.
Because then, to buy an opportunity like that... in my view it wouldn't be viable, because the cost would be too high. It's the same with China, just the same story.
Q: What sort of level of growth are you expecting in Brazil and Mexico in the next year or so?
Peter Driessen: We're expecting growth of around 50 per cent.
Q: What's your business model at the moment?
Peter Driessen: It's a mixture of advertising on one hand and deals with affiliate partners on the other - companies like Real, Oberon and so on, and getting a revenue share from them on the downloads we sell within our audience.
Q: Much has been said about the future for casual games in a tight economy - as a casual games company, are you expecting an impact in the next year to 18 months?
Peter Driessen: No, we've already seen that growth within our portals bigger than last year, so what we're seeing is that there are more people coming to them. We think that people are spending more time at home online, and less going to fancy restaurants, to the movies, and so on, and they've looking for home entertainment.
We deliver that for free, so I think the economic situation will help us to grow even faster - that's one part of the answer.
Of course I do think that getting the advertising revenues will be much more difficult, to keep the same CPMs as they were in the past, but if you can work on the basis of better profiling and better targeting, you can keep them the same.
And on the affiliate side, people do keep spending little amounts of money, maybe a dollar of credit here and there for a game, or for some items within a game. They don't spend the money to buy a new car, or expensive items.
So at this time we don't see any sign that people are spending less with us. Altogether this leads to much faster growth than in the past and combines with a situation that the spending of the consumer will be about the same, with a little bit less from advertising. If I look at our targets this year, we'll meet them - we'll not be affected.
Q: For advertisers, proof of targeting will be more crucial - what sort of information are you able to collect on your users?
Peter Driessen: At this time we're working towards better targeting, but because we've got portals without a lot of profiling systems we have to be careful in the way we'll do that. Most likely we'll do that by coming out with a profiling system which is specifically for segmented portals, and for people who pay for a lot of extras to have a profile - like high scores, playing new games first, and so on.
We know that a percentage of our audience is willing to subscribe, but for all the people who want to play without subscription, we'll keep delivering the same low barriers as we do now.
We're in the discussions about the profiling now, and most likely in the third quarter of this year we'll implement them.
Peter Driessen is the CEO of Spil Games. Interview by Phil Elliott.