It’s a sign of the times. Crowdstar is through with making games for Facebook and the company has just raised another $11.5 million to double-down on their move toward mobile gaming. The company’s existing investors including Time Warner, Intel Capital, YouWeb, The9, and NV Investments all topped up, bringing the company’s total funding to $35 million. Chief executive Peter Relan says there are some new investors too, but he couldn’t disclose who they are.
“Last year’s mission was pivot to mobile and this year’s mission is profitable growth,” Relan said in an interview. “We see the mobile market as five to six times larger than the Facebook social games market.”
You may know Crowdstar from such absurdist titles as Top Girl and Social Girl. In the game, you’re a girl who needs to buy virtual clothing, meet other virtual girlfriends and get a virtual boyfriend. At times, the game’s notifications have screamed at me, “YOU’RE NOT HOT ENOUGH!” I have also dated “Kevin, the Cutter of Meat” in the original Top Girl game.
Crowdstar is moving off Facebook as the platform is no longer as profitable as it once was for casual game developers. Facebook has clamped down on viral channels for game developers over the past two years, and its 30 percent revenue share is eating into profit margins. Even though Apple also takes the same revenue share, it has more than 250 million iTunes accounts. That means Apple has a wealth of credit cards to tap into, which makes it a lot easier for consumers to pay for things in games. Of the 845 million users that Facebook had by year-end of 2011, only 15 million people paid with Facebook Credits, according to its IPO filing.
Zynga is also definitively the leader on the Facebook platform, which makes it harder for new companies to break though (although Sweden’s King.com and Germany’s Wooga have had some success). In contrast, mobile gaming is still wide open. There’s still no single dominant player.
“Look at Temple Run and Dragonvale. The top mobile game can come from anywhere. The idea that the top game on Facebook could come from anywhere is silly,” Relan said, pointing to Zynga’s dominance on Facebook.
Unlike Zynga, Crowdstar’s titles skew a little younger. They’re for women ages 13 to 30. The mobile versions of the games have brought Crowdstar 25 million users and revenues are 80 percent from iOS and 20 percent from Android. Google Play and Amazon’s appstore are even in total monthly revenue. Amazon’s users are more lucrative. But since there are fewer of them, it balances out overall.
Crowdstar is also laying off about 25 people on the Facebook side of the company. Relan says he’s finding them jobs with other companies in his network. (He runs the gaming-centric YouWeb incubator, which has spawned companies like OpenFeint, which sold to GREE last year for $104 million.)
“The people no longer staying at CrowdStar’s Facebook studios have already been referred to other YouWeb companies as well as other games companies that we regard with great respect,” he said.
That’s not to say that mobile gaming will be a cakewalk. The profit margins on the business have come under pressure over the last 18 months with increasing competition. Apple has also cracked down on cheaper, and more unscrupulous, ways of acquiring users like download bots and offer walls.
Recent exits in the space like OMGPOP’s sale to Zynga and yesterday’s sale of Funzio to GREE have also set a benchmark valuation of roughly $200 million for leading gaming companies. Crowdstar’s $35 million in funding doesn’t imply a lot of room for return for later investors.
But Relan says that Crowdstar’s approach is more defensible since it’s highly focused on one demographic sliver of the market: young women.
“We’re not Pocket Gems and we’re not TinyCo,” Relan said, referring to the companies that top-tier venture firms Sequoia Capital and Andreessen Horowitz have bet on. “They’re going for a non-selective audience. They’re competing against the Zyngas and GREEs of the world.”