Ring of Fire

There are two principal challenges facing mobile game developers today. The first is app discovery. Amid an increasing sea of choices, it’s never been more difficult to gain user mind share and crucial mobile device home screen real estate. Secondly, once a developer has acquired its users, it still has to figure out how to monetize them. Given the trend toward free-to-download mobile games, the cost of customer acquisition can quickly become prohibitive, before real money virtual goods revenue has a chance to catch up.

It’s no surprise then that a startup that is directly addressing these challenges and getting rave reviews among developers is catching the attention of top investors. Chartboost, a mobile game discovery and monetization platform, announced $19 million in Series B financing today led by Sequoia Capital, with participation from existing investors TransLink Capital and SK Telecom Ventures. The sizeable check is a reflection of the 14-month-old company’s torrid growth, which Sequoia partner and Chartboost board member Jim Goetz described as the fastest his firm has ever seen in the mobile space.

The platform, which allows mobile developers to cross-promote their apps amongst one another, has grown to support 300 million unique active devices and more than 6 billion game sessions per month, across more than 12,000 games – stats that the company believes make it the world’s largest games-only network on mobile. One of many growth accelerants was the hiring of former Google Admob head of mobile platform and partnership strategy Clay Kellogg in June. Interestingly, Goetz was on the board of Admob prior to its acquisition by Google.

Since celebrating its one year anniversary in November, Chartboost has seen 50 percent growth in both total games on its platform and monthly game sessions. The platform is used by many of the top game publishers worldwide, including Supercell, TinyCo, PocketGems, Kiloo, Get Set Games, and others. The company currently supports the iOS, Android, and Kindle Fire platforms.

Chartboost operates on a freemium model, wherein developers have three options to promote their apps through the platform. First, they can cross-promote their own various titles within their own portfolio. Second, they can execute direct cross-promotion partnerships with other developers, effectively trading traffic. Each of these first two options are free, and although possible outside Chartboost, the platform’s plug and play API makes it a far more seamless process.

The third option is to buy and sell excess inventory within the company’s internal traffic exchange, aka its Direct Deals Marketplace. Developers get completely transparent pricing and analytics, and the platform takes a revenue share. Given the size of the Chartboost network, publishers can test campaigns across thousands of games and identify the top performers.

San Francisco-based Chartboost was founded by Maria Alegre and Sean Fannan, its CEO and CTO respectively. The pair were previously senior team members at juggernaut gaming publisher Tapulous, which developed the Tap Tap Revolution and Tap Tap Revenge franchises before selling to The Walt Disney Company for a reported $30 million to $50 million in 2010.

Alegre and Fannan point to this experience, both the phenomenal successes and the less discussed challenges, as the impetus for creating a better, more developer-centric solution to mobile app discovery and monetization. Despite the phenomenal success of its most well-known titles, Tapulous had several failed apps along the way, Alegre tells me, and was regularly frustrated by the need to “start from scratch” in terms of audience acquisition when releasing an updated version of its hit franchises. These lessons informed much of the early Chartboost product.

According to Goetz, the key to Chartboost’s early success has been equal parts the radical transparency and authenticity that it delivers to developers, and the compelling and non-spammy discovery experience that it offers consumers. The company is so “loved by developers,” to use his words, that it was several Sequoia portfolio companies that first brought the game discovery platform to the firm’s attention.

Given the role of reputation and word-of-mouth in its early success, Goetz in turn worries about Chartboost losing this developer and consumer advocacy as it grows, acknowledging the temptation to cater instead to economics or the competition from mobile-ad networks Tapjoy, Flurry, JumpTap, LifeStreet Media, Millennial Media, and others. Just because Chartboost seems to have these companies beat today, doesn’t mean they won’t present a threat tomorrow. There are hundreds of millions of dollars of venture capital backing the above challengers, and thousands of brilliant minds trying to crack open the mobile advertising ecosystem.

Fortunately, Chartboost has no intentions of resting on its laurels. The startup currently employs 36 people, but recently moved into a new office in the city’s SOMA district that accommodates 100. The company isn’t looking to play roller hockey. Rather it plans to expand rapidly over the coming year. The growing team will be equal parts customer acquisition and technical product development. In addition to its current app discovery tool set, Chartboost aims to further expand its in-app monetization and analytics product offerings. With the new capital and the physical space to support this growth, the only limitation is the ability to find the right talent. Like any company growing anywhere near this fast, Goetz calls Chartboost “dramatically understaffed,” likening it to another weed-like company, Dropbox. Handsome company to be in, if it can live up to these expectations.

Chartboost previously raised a $2.1 million Series A round from XG Ventures, SK Telecom Ventures, and Translink Capital in October 2011. The company is currently profitable, although this could change in the future given its ambitious hiring plans. Alegre’s company is currently independent, growing rapidly, and winning market share away from traditional mobile game ad networks. It’s hard to argue with it’s positioning going into what is sure to be an incredibly competitive next phase of growth.