Peter Relan On How CrowdStar Plans To Take On Zynga, EA And Playdom In 2011

With 45 million monthly active users on Facebook, CrowdStar is now the second largest social gaming network behind Zynga (which has 275 million monthly active users). Second in line in the social gaming race isn’t bad for a startup that has received only $100,000 in funding and is one-tenth the size of Zynga in terms of employees. And with a new CEO at the helm and a fast growing set of popular games, CrowdStar is gearing up for a big 2011 to help the company grow in terms of users and games.

We sat down with Peter Relan, newly appointed CEO of CrowdStar to talk about how he plans to move the company forward in 2011. Relan is also the chairman of the incubator YouWeb (where CrowdStar first received funding), but stepped into the CEO role recently.

CrowdStar, which is best known for producing Facebook social games Happy Aquarium, It Girl, Happy Pets and Mighty Pirates, is currently seeing 50 percent of its traffic coming from international markets. Relan says that expanding globally is going to be a huge market opportunity for CrowdStar in the coming year.

One way CrowdStar is hoping to expand to additional markets is through mobile initiatives. But Relan says that it’s not as simple as just putting CrowdStar games in native apps for smartphones or feature phones. “Social gaming on Facebook is totally different than interacting with a game on a mobile phone,” says Relan.

He says that with Facebook, users tend to stumble upon games either through advertising or notifications whereas with mobile versions, users actually have to take the action to download the game. This action, he explains, makes a mobile gaming app more of a destination and make the games more hit-driven as a whole.

While Relan couldn’t get into too many specifics around product features, he did shed light on how the startup is planning to create this potential mobile gaming hits. First, CrowdStar’s mobile games will take into account location. Geolocation is a key component of mobile interactions, says Relan, and he believes that this technology can seamlessly fit into social gaming.

CrowdStar’s mobile games also have a lot more focus on push notifications and will also monetize in a slightly different way from the Facebook economy. Relan says that monetization will still be around virtual goods, but the economic designs are different on mobile apps.

Zynga’s expansion strategy has centralized around acquisitions, adding new games, mobile technologies and talent by buying a number of game studios, both in the U.S. and internationally. Relan says that over the next year he plans to build up CrowdStar’s social games on Facebook with a few select acquisitions and would consider raising capital for these purchases. But he’s hesitant to buy game studios that are specializing in mobile technologies, explaining that ‘mobile is still young’, and no one has really figured out what will succeed in mobile gaming yet.

Another area where Relan will be focusing his efforts on is building talent. CrowdStar has around 75 employees, mostly made up of developers and artists, and plans to double its employees this year. Acquisitions can help in this department, but Relan says that the competition for talent is a challenge in Silicon Valley. One advantage CrowdStar has over companies like EA’s Playfish or even Zynga, is more of a startup culture. We have more access, and can offer much more equity to employees, he says.

Similar to Zynga, Facebook is a central part of CrowdStar’s social gaming platform, as the network brings the social component to the actual games. Relan says that Facebook’s changes in the news feed, most notably eliminating game updates from the feed, definitely had a negative impact on traffic for CrowdStar’s games.

But he sees the potential for the ecosystem to be recharged with the now mandatory Facebook Credits, which the gaming platform has adopted. One way in which Credits could help increase virtual goods transactions, says Relan, is if the virtual currency became an entire ecosystem, and brought a more seamless experience to social gaming. Relan envisions Credits becoming a frictionless platform, similar to the way iTunes is across the Apple platforms.

There’s no doubt that for CrowdStar, 2011 will be a pivotal year. The gaming company has a long way to go to catch up to Zynga, which is rumored to be raising $500 million in funding in advance of an IPO in 2012. And there are a number of other players with deep pockets, including EA’s Playfish, and Disney’s Playdom that are also competitive with the bootstrapped gaming company. A large round of funding would certainly help the company keep up in terms of acquisitions.

But being the underdog can be a good thing for a startup. Clearly, Relan has a clear plan for how CrowdStar is going to increase traffic and games to its platform and it should be interesting to see if the new CEO can execute on this vision. And while social gaming is seeing massive traction currently, Relan sees a tremendous amount of future growth in arena. “Social gaming is sitting on perfect storm,” add Relan, “And the storm revolves around three basic areas-mobile, internaional and Facebook.”