Boston-based startup Lookout Gaming has drawn attention to the city’s often-overlooked consumer and mobile gaming community with a $1.3 million seed round from Boston investors Atlas Venture and Nextview Ventures, as well angels, including Mark Jung, former CEO of IGN.
Founders Andrew Paradise and Casey Chafkin are applying their merchandising and payment expertise to the plight of indie game developers, hoping to improve the revenue model for mobile games. Paradise, who also serves as Lookout Gaming’s CEO, tells us he is building a product that gives game developers a good alternative to in-game ads and virtual goods purchases for the purpose of monetizing their mobile gaming apps.
“The success of companies like Rovio has compelled many indie game developers to create really entertaining mobile games, but the developers have had limited success monetizing them,” Paradise says. When their games don’t go viral as paid downloads due to either bad luck or poor business acumen, the game developers change to a free download business model hoping to be rewarded with high download volumes that will be monetized later. Developers have had only two revenue models to generate revenue from free mobile games, in-game advertising which only works at an extreme scale and virtual goods purchases which works best when designed in from inception. Most frequently the change from paid to free doesn’t increase revenues.
The seed round of funding will support Lookout Gaming’s delivery of an SDK that will provide an undisclosed monetization option, Paradise says. This method of monetization that has been proven in the video game segment will be delivered as a service for mobile games employing the SDK. Paradise said that further details about the SDK will be made available at the product launch next year. What he is willing to reveal at this point is that the SDK will enable new and existing mobile games to incorporate a revenue creation technique that would otherwise be very challenging at the operating scale of an indie gaming studio.
Paradise cites an example from Lookout Gaming’s private testing, where a game with approximately 100,000 monthly active users yielding only $0.07 per user has realized a multifold improvement using this technique. “When we release the SDK we should be able to enhance revenue yield by an order of magnitude which will create intense developer loyalty,” Paradise says.
Investors stepped up to fund Lookout Gaming because of its founders’ experience. Paradise, a serial entrepreneur has already had two successful exits. He is fresh from selling his last company, AisleBuyer, to Intuit earlier this year. At AisleBuyer, Paradise and Chafkin, who was the fourth employee, were able to create an in-store mobile merchandizing and mobile payment opportunity for bricks-and-mortar retailers, which Paradise explains has many parallels to the system their team is building for the gaming industry.
“These underperforming mobile games are a virtual version of the merchandising and frictionless payment challenge that this team solved for the retail industry,” says Atlas Venture’s Jeff Fagnan. “This is a truly disruptive play as well, this time in online gaming.”