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Youth App Maker TabTale Buys Kids Games Club For $3-4M, Preps New Buying Club Model

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The market for children’s and educational apps continues to grow — evidenced by Apple last week announcing 1 billion downloads of educational apps from iTunes U — and that growth is leading to both consolidation and new business models. In one of the latest developments, TabTale, a publisher of children’s and family apps, has bought Kids Games Club, maker of apps like “Paint Sparkles” (a favorite of my kids), in a deal that TechCrunch understands was in the region of $3 million – $4 million. Together, the two Israel-based companies have produced nearly 200 apps, covering close to 100 million downloads. That makes it one of the bigger publishers of youth/family apps around, says TabTale CEO Sagi Schliesser.

Schliesser says that the two companies were both profitable before the acquisition, and that they’re both still at an early stage of growth. “We’ll be disappointed if we only make $10 million in revenue this year,” he said.

Although both TabTale and Kids Games Club are focused on a young audience, the two are actually complementary: TabTale, as its name implies, focuses largely on tablet apps and stories, while Kids Games Club makes — you guessed it — lots of games and educational interactive content, largely designed for smartphones.

Both are mainly focused on iOS apps, although TabTale’s newer business on the Android platform, Schliesser says, will reach 5 million downloads this year. Similarly, although up to now both have been mainly aimed at apps for under-12s, now they are looking to extend that to users in the 12-18 year old bracket. The idea is to follow their users as they get older but and to try to “keep our DNA via things like ‘nice’ arcade games,” says Schliesser.

And just as an audience matures, so does the business of apps, and that is leading to TabTale exploring new revenue models. Up to now, the companies’ apps have been a mix of ad-free, paid downloads and free, ad-supported apps. But now that they have a sizeable catalogue, the two are also working on something new: subscription models, based on the idea of book clubs, where users paid a monthly fee for a certain number of apps.

There are a couple of reasons to consider a book-club-style model. For one, it would create a consistent and predictable revenue stream by way of repeat subscriptions — something we’ve seen extend to other areas of e-commerce like fashion by way of companies like JustFab. Additionally, it would be to help promote some of the newer or lesser-known content in its catalogue — such as some of its song books and educational games. (Not unlike a book club.) It is also a model being explored by other kids’ app makers like Playtales and follows the usage pattern that TabTale sees across its catalog already.

“We see users downloading between eight and ten apps every month, and we believe that children want diversity, so this kind of thing would be good,” said Schliesser. On platforms like iOS, the “club” would run through Apple’s iTunes, and work not unlike in-app subscriptions. He says that he believes it will take another business quarter to get it into place.

Another push will be in growing the publisher’s international presence. With almost all of the content in English today, some 60% of the combined company’s downloads come from the U.S. with the UK at number two. Strangely, the third most popular market is Saudi Arabia. “We don’t have an explanation for why this is the case,” said Schliesser. The company is currently adding more localized language support to grow usage in other markets.