Cellufun takes on Zynga and Playdom by providing social games on "non-smart" mobile devices

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In case you didn’t notice, social gaming is taking off. And despite mounting criticism, the market is continuing to grow and doesn’t look like it’s going to stop. But so far, most of the major players are either on the major social networks (i.e., Facebook, MySpace) or on the major smartphone platforms (i.e., iPhone, Android). But here’s an interesting thought: millions of people are still on regular mobile phones, and they want to play social games, too, right? That’s exactly the thought that came to Cellufun’s founding team, which has quietly built a business aiming to provide social games to the hundreds of millions of people who aren’t on Smartphones (but have access to the mobile web). How? They partner with carriers such as Verizon Wireless, T-Mobile, MetroPCS, and Rogers Communications and provide Cellufun through their mobile website (m.cellufun.com).

I talked to Cellufun CEO Neil Edwards, former CEO of dotMobi, who gave me the breakdown on what they’ve been doing. He thinks that they’re about ready to “hockey stick” with their social gaming platform on mobile devices. Essentially, Cellufun’s 19 employees have worked to build a platform for social gaming – every user who wants to play a Cellufun game first creates an account with Cellufun and builds a full-body avatar. 2.7 million users have registered with Cellufun (resulting in 220 million page views), and the number is growing fast. That’s small compared to the other gaming companies such as Zynga and Playfish, which have tens of millions playing each of their games (Zynga claims to have 130 million social gamers). However, Cellufun’s relationship with wireless carriers and their ability to push content to a large number of phones provides them with strong growth potential (their revenues are up 400% from last year) and a defensible product. Thus far, Cellufun has raised $7 Million from Longworth Venture Partners and is currently raising an equally sized Series B.

Cellufun started out providing one-off games on mobile devices such as Hellofun, a Halloween game, and “The Mobile Ring,” a pre-election game where you could punch Presidential hopefuls in the face. Since hiring Neil in February of this year, they’ve focused their development on the virtual goods platform, which launched 3 months ago. This platform has since done 2.5 million transactions, where users buy anything from a “flirt” (like Facebook’s poke) to a new bathing suit for their full-body avatar. Now, 40% percent of their transactions come from offers provided to customers such as filling a marketing survey or “non-subscription-oriented special offers”, which have received criticism of late, most notably from TechCrunch’s Michael Arrington. I’m not going to criticize these offers here (though I agree with Mike completely), and Neil was adamant that they do not allow offers to charge the customer’s phone bill. The rest of their revenue came from advertising (30%) and paid transactions (30%). They are generating a $1.31 average revenue per user.

Cellufun is quietly (albeit slowly) creeping up on social gaming companies like Playdom by taking a “bottom-up” approach to users: they start at the simplest of data-enabled mobile devices and will soon be introducing iPhone and Android versions as well. Users can access Cellufun either through a phone’s web browser (m.cellufun.com) or through their carrier. Cellufun also differ slightly from the major gaming companies because they treat their product as a platform, meaning that users always go to Cellufun before going to the game they want to play. Instead, Zynga and Playfish usually don’t have an over-arching platform that relates the different games they offer. Cellufun actually gets a lot of revenue from users before they actually play a game. The full-body avatar each user creates can be “upgraded” by purchasing virtual clothing and accessories. In this way, Cellufun isn’t just a competitor to the social gaming companies, but it’s also similar to Second Life on mobile devices.

Keep your eye on Cellufun as their social gaming platform and virtual world continue to take off on mobile devices. CEO Neil Edwards was clear: they’ve got huge potential and can ship product onto 7,000+ phone models and hundreds of millions of mobile devices in a matter of days. That’s power that few companies have and the pending move into iPhone and Android will only build on those numbers. Also, because of the “me-too” attitude of social gaming companies, where one person creates a great game and everyone else just copies it, Cellufun’s unique market means that it can copy games without competing with existing companies.

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