Messaging services are starting to attract insane valuations from both venture capitalists and large companies that want to stay on top of the shift to one-on-one mobile communications. The problem for many of these services isn’t acquiring users or raising funding, however: it’s making money from the hundreds of millions of people sending messages throughout the day.
A lot of messaging apps offer access to their services without a subscription fee, upfront cost, or clear monetization strategy. Those that do charge, like WhatsApp, ask for minuscule fees. Others are content to focus on attracting users and raising money until a company like Facebook is willing to acquire them even though they’ve never made a dollar in revenue. But what about those companies that want to build a sustainable business with their platforms?
Dmitry Grishin, the founder of Mail.ru and its My.com branch in the United States, says those companies will have to monetize through products that complement messaging without relying on it. That’s why My.com announced four new games meant to offer console-quality experiences with a free-to-play business model at the Game Developers Conference yesterday. One is a tank combat game, two are RPGs, and one is a racing game. The idea is that offering free games connected to a communications platform will lead to more users, some of whom will be eventually willing to pay for various add-ons and premium features.
Mail.ru has done the same thing in Russia for years. “We found that people who communicate with other people are ready to have fun,” says Grishin. “If you make the messaging products free and use them to drive traffic to video games, you can make money.” Now he plans to do the same thing with My.com to help the company expand its influence in the US market.
The trick is to create games that support a freemium model without making gamers feel like they’re being nickel-and-dimed or shamed into spamming their friends like early offerings from Zynga and other companies that built their business on Facebook. That’s why My.com is announcing games with advanced graphics (at least compared to many of their online counterparts) and gameplay that will appeal to the stereotypical “gamer” instead of to casual players who want to click on a few crops while they message their friends and family.
If My.com is able to balance all of those factors — attracting audiences large enough to support its communications business by appealing to both hardcore and casual gamers — it might be able to create a viable business model around its messaging platforms. Grishin is quick to note that Mail.ru has already done just that in China and Russia. Now it’s up to his team to figure out how it can take what it’s learned in those countries and apply it to the US.
Reactions from around the Web
The Next Web describes the four games announced on Thursday:
My.com is announcing today at GDC that it will launch four free-to-play massively multiplayer online (MMO) games this year for Windows PCs. Armored Warfare is a tank combat game, Skyforge and Evolution are both RPGs, while the first to launch will be World of Speed, a social racing game with team play and auto clubs that players can join.
The Mail.ru group notes the size of its gaming business in Russia and China:
With over 30 online games in its portfolio, games represent nearly 25% of MRG annual revenue. As MRG’s publishing brand of MMO games in non-Russian speaking markets, My.com games will also be available for gamers across the world, including the highly lucrative Russian market, where online-gaming generated more than $1.3 billion in revenue for 2012. As a publisher, Mail.Ru Group works with developers around the world and focuses on those who share the same passion for high-quality graphics and exciting gameplay experiences.
Pando weighs in
Pando alum Hamish McKenzie noted the importance of gaming to messaging platforms in October 2013:
The biggest of the messaging giants, and the most important to keep an eye on, however, sits in the world’s largest Internet market. And according to new figures from one of China’s leading Android app stores (the country doesn’t have a Google Play store, so there’s an abundance of pretenders), it’s clear that games are going to be a huge deal for it, too.
Given Tencent’s historical power as a game publisher and distributor – games account for much of the company’s revenue – some people may have been surprised that the company took so long to launch a gaming platform for WeChat. It wasn’t until August that Tencent finally flipped the switch on the messaging app’s gaming center. But now that it has done so, we’re already seeing early indications that games will be just as lucrative for WeChat as they are for Kakao and Line, whose games platform saw 150 million downloads in its first three months.
He then wrote in November 2013 that games — and other websites — are also becoming more important to the Kik messaging service:
Kik decided to bet on the mobile Web. It has spent more than two years now building out its HTML5 platform, which is predicated on “cards,” which are actually apps. For instance, in my version of Kik, I have access to cards that let me create and send memes, photos, YouTube videos, and drawings, to name a few. These are not, however, native apps living within a native app. They are, effectively, little websites running inside a mobile browser. And they run perfectly.
Some of these little websites are games. In July, Zynga quietly launched its first game for a mobile chat app: “1 Word.” I’ve since heard that the game picked up 1 million users in one 24-hour span. The same is true for a Kik-only game called “Costume Party,” which passed the 1 million user milestone within 22 hours of its launch.