FEB. 18, 2010 • It made a lot of sense for a robust online gaming industry to develop in South Korea after that nation built one of the fastest data networks in the world. Not so long ago though Europe would have seemed an improbable market for web-based gaming. Online access was sparse, and speeds were uniformly sluggish. A few years can make a huge difference, however. Europeans today benefit from some of the fastest and widespread broadband Internet carriers, which has led to a rash of successful online content providers like Bigpoint GmbH.

Based in Hamburg, Germany, Bigpoint claims to be the largest browser game portal. Bigpoint adopted a business model that is widely used in Korea/Asia, which is based on micro-transactions (for virtual goods), while the games are free to play. Premium subscriptions which provide additional benefits and bonuses for a monthly fee are also available. Currently over 90% of Bigpoint’s revenue comes from microtransactions, with virtual goods that are sold at price range of €2 to €90. In 2008, Bigpoint struck deals with Maybelline Jade, C&A, Umbro, FIBA and telefonbuch.de for in-game advertising in Bigpoint browser games, and currently ad sales provide about 4% of Bigpoint’s revenue.

The company was founded by Heiko Hubertz in 2002 under the name m.wire GmbH, and in May 2005 the company reorganized into e-sport GmbH. At the time the company had 3 titles: IceFighter, F1Manager and SoccerManager – all sports games. Its first strategy game “Mafia1930” was launched in 2005 as well and by the end of the year the company had 8 games in its portfolio. By the end of 2006, the company already concluded three investment waves (the first was in 2005, the third was a 12.51% shareholding acquisition by United Internet AG), broke the 1 million user mark, launched the Bigpoint. com portal that gathered all of the company’s titles to the same place which at that point reached 16.

In 2007 e-sport changed its name to Bigpoint GmbH, increased its game portfolio to 22 titles and recorded over 10 million registrations. By 2008 Bigpoint had over 45 million registrations, and over 30 games. Bigpoint turned positive cash-flow during 2008, with annual revenues for the year estimated at €20 million.

In June 2008, Bigpoint was acquired by two private equity funds GMT Communications Partners and the Peacock Equity Fund for €70 million, with each owning 35% of the company.

Based on usage figures, it appears Bigpoint saw explosive growth in 2009. At the end of 2009 the company relaunched with a core MMO focus, and spun its casual games content off into a new brand.

Of course, looking at this type of growth led DFC to discuss Bigpoint’s business strategy with chief creative officer Nils-Holger Henning.

DFC: So give us the big picture overview of Bigpoint GmbH. What are your primary products? How many employees do you have? How many users do you have?

Nils: Bigpoint is an online-game publisher, content provider for large media concerns and browser-based game developer. We have approximately 320 employees from over 35 different nations working for us; the majority of which work at our Hamburg-Eppendorf location in Germany. We are also currently working on expanding our American office. Over 100 million users are registered at Bigpoint.com, making us the world’s largest browser game portal. Our top MMOs Seafight and DarkOrbit, for example, have more than 25 million registered players.

DFC: You recently relaunched with a refocus of Bigpoint.com into MMOs, and shifting your casual titles into a new portal called Bipogames.com. How is this transition going? How are users reacting?

Nils: Our core gamers are happy with Bigpoint.com’s new content and numerous community functions. Bipogames.com has made it possible for us to meet the ever-increasing demand to supply casual games and attract a completely new target audience.

DFC: What were your reasons for this relaunch and separation of content?

Nils: As developer and publisher, it’s our future goal to cover the entire spectrum of games. By dividing the content and creating a new platform, we primarily wanted to concentrate our sights on catering to all our users’ individual needs.

DFC: How do you expect these separate core and casual portals will increase your growth?

Nils: Both portals are growing exceptionally well. Bigpoint.com alone receives approximately 200,000 new users from around the globe each day. There is a strong connection between the platforms through the use of cross-marketing, for example. This allows us to offer core gamers the right game for an occasional pastime diversion and introduce casual gamers to more elaborate gaming content.

DFC: Given these recent changes, how would you define your primary business mode going forward? Can you give an estimate of how revenue breaks down by 1) advertising, 2) subscription; 3) sales of games to consumers; 4) sales of virtual items to consumers?

Nils: Despite this slight change in direction, Bigpoint’s business model has basically remained the same: We offer freeto-play games with payable in-game items. This means that our players can play for free and pay when they want. Most of our revenue (90%) is made by selling virtual goods; less than 5% of our revenue is generated from advertising and player memberships. Revenue made by consumer game sales is even less significant – less than 1%.

DFC: As we understand it, Bigpoint.com is primarily driven by ad revenue and virtual items. Is the same true for Bipogames. com? Can you give a percentage estimate of how your revenue breaks down?

Nils: In comparison to core games, there’s little point in selling virtual goods in casual games – that’s only natural. Casual games are good sources of temporary entertainment, but most players seldom get so deeply involved that they are willing to invest their own money in them. Bipogames.com is all about creating traffic and extending our market reach, that’s why Bipogames.com’s main source of revenue comes predominantly from advertising – 75%-plus.

DFC: Where do you see revenue growth potential from your EXISTING user base? Is it advertising, subscriptions, selling games and/or virtual items, etc? Which of these areas has the greatest growth potential?

Nils: The sale of virtual goods in our games has turned out to be the best source of revenue for us, and there’s still a lot of growth potential in this area.

DFC: We understand that advertisers can put messages on actual in-game characters. How popular is that option, is it a growth area for you, and how do users react to such ads?

Nils: At the moment, we don’t work much with in-game advertising, but we are very open to the idea of using this medium. The important thing here is that the advertising is well implemented – it shouldn’t be annoying and should fit within the context. This means that it needs to be seamlessly integrated into a game and make the player’s experience more realistic. If these requirements are met, in-game advertising can be a very good revenue source, and one which is accepted by the majority of players; market research has already shown this quite clearly. That’s why we planned on incorporating in-game advertising into our MMO action adventure Poisonville right from its very conception. It will be the next game to use this medium. Users can dress their characters in trendy brand-name clothes here and then buy these same items in real life. Realistically, however, I don’t see a breakthrough in this sector for another three to five years.

DFC: The last time we looked Bigpoint was 70% owned by Peacock Equity Fund and GMT Communications Partners. How does the prospected acquisition of NBC Universal by Comcast affect Bigpoint?

Nils: Comcast’s pending takeover of NBC hasn’t affected Bigpoint yet, as we are one of the top investments for both NBC International and Comcast.

DFC: At last count we had Bigpoint with 40 titles in 20 languages. What are the numbers today, given the spin-off of casual titles, and how many new titles do you expect to add annually?

Nils: Bigpoint currently has more than 50 full-title games in 25 different languages and countless casual games which are available in over 50 countries. We plan on publishing 100 new titles this year. This will include games we have produced ourselves, such as the long-awaited Poisonville and a few other Hollywood IPs – the names of which I cannot reveal to you yet. We’ll also be publishing many other games in 2010. The 2D anime RPG Wonderking already went into Open Beta on January 13, 2010. The real-time strategy game Nemesis 2030 and the MMOs Emporea and World of Battles are also soon to come.

DFC: How is Bigpoint.com leveraging the rising popularity of online social networking?

Nils: The social network market is very exciting, and of course, we want to meet the ever-increasing demands of users. For that reason, we’ll soon be launching our first game on Facebook. We expect to gain lots of experience here and introduce additional social games to the market later this year. Browser games will continue to be our core business, however.

DFC: How do your media partners like NBC and MTV drive users to Bigpoint?

Nils: Our media partners integrate Bigpoint games into their highly-frequented websites and profit from current, highquality content (white label integration). The games are promoted using online and on-air advertising and the revenue is split.

DFC: In what markets worldwide is Bigpoint exceptionally strong in market share?

Nils: Bigpoint.com is already remarkably strong within the “Western World” (Europe, South America and North America). France and the USA are extremely important markets for us.

DFC: What is Bigpoint’s strategy on emerging markets? Which emerging markets have you entered, and which do you plan on entering in the near future?

Nils: We want to intensify our games’ presence in Eastern Europe, Asia and Latin America. We’ve got a good chance of succeeding here thanks to our business model of free-to-play browser games. For the users, this means a minimal initial investment low hardware requirements.

DFC: Is Seafight still your favorite game with users? If so, what makes that game so popular?

Nils: Seafight and DarkOrbit are still two of our most popular and strongest growing games. The easy introduction into the game, the fascinating setting, low hardware requirements and a very active community keep users coming back again and again for more Seafight action.

DFC: How popular are games on your site? How much growth have you seen over the past year? What games and type of games are most popular?

Nils: Since Bigpoint.com’s launch in 2006, over 100 million users have registered at Bigpoint, proving just how much our games are loved. We’ve managed to reach a yearly growth of several hundred percent. Browser-based multiplayer action games like Seafight, DarkOrbit, Deepolis, Gladius2 or XBlaster are especially popular. In the future, we’re going to expand our portfolio with in-house productions and licensed titles from other game genres.

DFC: Please give us a fuller description of your virtual item sales, and what those items are.

Nils: Since our games are “free to play,” it means that we don’t sell any items directly. We do, however, offer users the chance to buy in-game currency for time advantages. This way, if players don’t have as much time on their hands to play as their friends do, they can easily catch up using in-game currency. It isn’t possible for players to buy any special skills or experience, meaning that they have to play together with others in order to improve in these areas.

DFC: What is your monetization strategy for virtual items moving forward?

Nils: Our goal is to offer even more virtual goods and make them even more appealing – all, of course, without upsetting the natural balance of the game.

DFC: How is payment processing being done for virtual currency and items? What are the most popular forms of payment and how do they differ by demographic and region?

Nils: Bigpoint games usually have two types of in-game currency: a primary and secondary currency. While players can receive the primary currency through active playing and success in the game, the second currency – e.g. gold or pearls – is generally only available to buy using real money; it is only rarely available in the game. Using the secondary currency, players can buy advantages in the game by purchasing certain items immediately. We have over 200 different payment methods available for users to select from to complete their purchases. The most popular ways of paying are with text messages, direct debit and credit card – but this also changes depending on the country.

DFC: Does Bigpoint have its own virtual currency? If so, how difficult was it for you to add a virtual currency system? If not, how will you implement virtual currency?

Nils: Bigpoint does not have its own virtual currency at the moment, but we might think of introducing one in the future. Right now, each game has its own in-game currency which is only good for that game and cannot be used in the other games.

DFC: What types of applications and products do you see as being the most popular for consumers spending virtual currency?

Nils: Our customers can test our games first for as long as they want and only pay when they really like the product. If the users don’t like a game, they won’t invest any money or time into expanding their game account and they also won’t recommend us to anyone else. That’s why it’s so important for us to offer an amazing experience right at the start and create some kind of incentive to keep our users playing over an extended period of time. Last but not least, the items offered in the game have to have some kind of real value, such as a time advantage or the chance to personalize their account.

DFC: Where do you see revenue growth potential from your EXISTING products and features? Which of these areas has the greatest growth potential?

Nils: All of our top games are continuing to grow. Above all, there is plenty of growth potential for the sale of virtual goods.

DFC: How has the financial crisis impacted Bigpoint.com?

Nils: The financial crisis actually helped to strengthen our growth. Consumers have started to compare prices, and this includes gaming as well. Our free-toplay business model makes it possible for gamers to choose the alternative offering them the best value for their dollar.

DFC: Outside of advertising, what way do you have for companies to monetize games on Bigpoint.com?

Nils: Companies offering their games on Bigpoint.com profit first and foremost from our large and active community. Through users’ completed payment transactions for subscriptions or the sale of new items, we are also able to offer a comfortable method of generating revenue on an international basis.