Gaming is huge. The industry turns over more than $60 billion per year. But gamers have a huge problem, beyond the presumed drain on their wallets. It's that pesky thing called real life, and now comes a startup that aims to connect the two.
Some 40 percent of that goes to gaming consoles such as the Microsoft's Xbox. Another 40 percent goes to games for PCs. And the remaining 20 percent is divided between games on mobile and games on social networks, which are known as "casual games." But phone games are for kids. When real gamers play, they do it full-screen and become part of the game.
The Israeli startup Overwolf wants to make money from the fact that gamers want to live the virtual life, but at least occasionally need to live the real one too.
How can this be done? Overwolf is developing a platform for add-ons that allows players to carry out various real-world actions without leaving the game, such as updating a status on Facebook, tweeting, sending an email, chatting and talking over Skype.
The platform has about 45 add-ons. About 30 were developed in-house and the rest were developed by third-party developers, since the platform is an open one.
Overwolf’s software is available for free download.
“About 2.7 million gamers have installed the product so far," says company co-founder and CEO, Uri Marchand. "We’re growing significantly; just this September we had 300,000 installations thanks to a new feature we added."
Now Overwolf technology can be present in about 450 games without talking to the game developers themselves, he says.
For all its popularity, the Overwolf technology is still in its beta phase, which means it's still undergoing development and testing – it's not what the company considers to be its final product. "In early 2014, we’ll get out of beta and launch the official product, and we anticipate rapid growth,” says Marchand.
On Tuesday, Overwolf completed a first fundraising round of $5.3 million. The round was led by the New York-based investment firm, Marker, headed by Yuval Shachar and Ohad Finkelstein (the latter will shortly become the company’s chairman). Other investors included Bruce Hack, the active angel who presided over the giant merger of the gaming companies Blizzard and Activision, and Yossi Vardi, who led a group of private investors in providing Overwolf’s seed funding.
Overwolf began operating in early 2010. It has not begun taking in revenue yet, and intends to adopt a business model of recommendations for installing games among Overwolf users. For example, a user might see a message saying: “Your friend X is playing game Y. Would you like to check it out?”
Marchand says, “Games are a broad field. Some companies, such as Zynga, specialize in casual and social games, a field that, incidentally, is very strong in Israel but having a hard time of it in the world. We specialize in hard-core gaming. In this world, there are two models: pay for play and free to play. Companies began using the free to play model because of piracy. They make money by selling you digital goods throughout the game. The statistic is that a bit more than 10 percent of customers are willing to pay, and this model is gaining strength. The more focus there is on the free model, the more users the company wants to bring in, and that’s where we’ll be. Gaming companies will pay us to provide them with leads. A gaming company knows exactly how much each user is worth to it, and will be willing to pay for that.”
Overwolf has 12 employees in its Tel Aviv offices, all of them gamers and all of them men, except for the HR manager. At every lunch break, after the workers finish eating the take-away food they ordered, they get another half-hour to play — computer games, of course. Overworf is hiring, and their goal is to bring another 20 employees on board early next year.