SEPT. 26, 2012 • Europe is a strong market for the kind of enthusiast gamer-friendly online games that are starting to catch on via social networks.  The recent DFC report The Market for Browser and Social Network Games discusses how these games have done better in Europe than the U.S.  DFC Intelligence forecasts that the market for these games in Europe will reach $2.6 billion in 2016. There also is a higher proportion of core-themed strategy titles available through the browser in Europe than is often seen in Asian markets like South Korea where huge client downloads are more common.

A relatively new company out of Europe is InnoGames GmbH based in Hamburg. Earlier this year they released an ambitious strategy game called Forge of Empires, and already have more than 3 million players worldwide. The company has no less ambitious designs on becoming a major provider of mobile games by an all-platform strategy. To get a better handle on this successful newcomer, DFC spoke with InnoGames’ Dennis Heinert.

DFC: As we understand it, InnoGames got started back in 2007 as a result of the need to operate and expand your first title, Tribal Wars. Please give us a feel for how InnoGames has grown, how you define your business model, and what it takes to launch a new company with established competitors like Bigpoint and GameForge?

Dennis: Since InnoGames grew because of the popularity of Tribal Wars – which was developed in 2003 as a hobby project – and entered the browser gaming sphere quite early on, competition wasn’t a main concern at the time. We have grown rapidly since the beginning and continue to grow at a healthy rate, despite competition.

Our business model is free-to-play. This means that anyone can play any of our games in their entireties for free. We make the most money by the minority of players who choose to buy premium points with micropayments. These premium points can be used for comfort or time advantages in-game, but we strive to make gameplay fair between paying and non-paying users. There is no subscription, and players can come and go as they please.

DFC: How exactly are your users finding your games? Besides your own portal and various free-to-play portals, InnoGames titles such as The West and Grepolis are also on Facebook. What works best for you in reaching new users?

Dennis: We utilize marketing and PR campaigns, host events, attend expos, have a presence in social media, and facilitate word-of-mouth as much as possible, on top of being present on several portals, and the Google Play/iTunes Stores. Marketing campaigns reach the largest amount of new users, but all the methods have their pros and cons.

DFC: Your own portal launched its beta back in January 2011. How quickly have users of your games migrated to your portal and what percentage of those playing your browser games access them via innogames.com?

Dennis: Currently, the number of players which use the stand-alone pages like Grepolis.com clearly outranks those using the portal. We see the portal rather as an additional feature for users who are playing more than one InnoGames title. The single sign-on is the biggest plus here. On the other hand, our marketing campaigns normally lead to the stand-alone pages, as a dedicated game page always attracts more than a game portal.

DFC: Taking your games to mobile platforms is one of InnoGames’ stated goals. Tribal War was first, followed by Forge of Empires and Grepolis. How much do the browser and mobile versions share features?

Dennis: Our strategy titles Tribal Wars and Grepolis especially are a bit tricky to move onto mobile because there is just so much content in them – for instance huge maps, alliance forums, and lots of detailed city overviews. We put out a basic version of both mobile games first to see which features players use the most on the go, and then worked from there. With every update, we add more functionality, and in the near future, plan to have most features that you can find in the browser also in the apps.

With our upcoming titles, we are beginning to think of our cross-platform strategy from the beginning. This means that the game design will be optimized for all platforms, and we won’t have the same problems with content that is near impossible to add to mobile apps. All of our future titles will also come out in a mobile version with all or near-all functionality.

DFC: To succeed, we’ve heard you believe your franchises have to get better by going mobile. What does that mean exactly?

Dennis: The browser versions of our games are quite successful alone, however, bringing our titles to mobile is an important next step for a couple reasons. For one, our players demand it. Especially with our strategy titles, being able to access the game on the go is crucial to the players’ success. They can receive helpful push notifications if they are being attacked, they can recruit, farm, etc. when they just have a minute while traveling or in between meetings. Secondly, we think that gaming companies who do not think cross-platform are missing out on a huge chunk of modern gamers. The mobile gaming sector is growing so rapidly, and is such a great opportunity to expand game usage, that it makes no sense for us not to take part.

DFC: As cross-platform distribution is a major part of your business model, why was Forge of Empires developed in Flash?  Did you consider HTML 5?  If so, why did you choose in favor of Flash?

Dennis: We develop each platform on a case-by-case basis, meaning we pick the best solution for each platform separately as we want each to be the best quality possible. Flash happened to be the best solution for Forge of Empires at the time that development started nearly two years ago.

DFC: Browser game development usually means keeping the amount of data involved as compact as possible. That said, Forge of Empires gets high marks for on-screen graphics with a high level of detail and quality.  How did you make that happen?

Dennis: Forge of Empires has over 200 partially animated buildings. Because of this, it was important for us to do something that allowed for people with slower DSL lines or poor quality connections to play the game, as well. We came up with a modular design, which begins with a relatively small application. This then signals the first resource package that includes graphics for the interface and dialogs. All the other images are retrieved only when needed by the servers, and are mostly bundled together. By doing this, we can effectively reduce the number of requests to the server and use the LZMA compression, introduced in Flash Player 11.2. But also entire parts of the program – for example the campaign map and battle system – are put into separate modules that only get requested after a specific user action. This is one of the many tactics that make the high-end graphics of Forge of Empires in a browser possible.

DFC: It seems like Forge of Empires has embraced a good deal of realism – structures seem very realistic for their periods, and the physical proportions between buildings and people seems to be about right. What was your goal vis-a-vis in-game realism, and is it true that the design team got a little carried away during development?

Dennis: The team is especially proud of the game’s graphics, and it proved to be a new level of quality for InnoGames. Our graphic artists spent a lot of time looking at architecture from each time period and modeling the buildings to their likeness with tons of detail. We wanted to take more of a realistic approach, as we weren’t as fond of a cartoon-like look since the market was already a bit flooded with it.

DFC: Unlike Tribal Wars and Grepolis, Forge of Empires is not exclusively a PvP game.  What led you to embrace more peaceable pursuits?

Dennis: We wanted to reach a broader audience with Forge of Empires than just hardcore players that love games like Tribal Wars and Grepolis. Forge of Empires has casual elements, like city building, and also mid-core elements, like battle strategy. In Forge of Empires, you have more freedom of choice and can decide which way to play the game. Furthermore, it was important for us to create a game where you cannot be conquered and lose your city completely.

DFC: What encouragement do you give players to pursue non-PvP activities in the game?

Dennis: The game starts with the city builder element, and one has to at least get to a certain point in building in order to participate in battles. After that, upgrading armies is only possible after putting some time into your city. It is possible, however, for players to focus mainly on PvP if they choose.  City rankings are also a big encouragement to keep up with others.

DFC: Similarly, how do you encourage players to cooperate versus fighting each other?

Dennis: Players receive bonuses when they help others, and strategic players gain a lot by creating a trade network. It will especially be important with the upcoming Great Buildings feature to have allies, as these buildings take multiple people to erect. The game is still in beta, so there will be several more updates in the future that will further encourage cooperation, as well as fighting.

DFC: Forge of Empires is considered ambitious for a browser game in featuring six full historical ages for players to experience.  What is your own philosophy regarding depth in gameplay for browsers?  Where are consumer preferences on this subject, and are online game companies keeping up?

Dennis: Browser games differ from console and PC titles because our users spend months, and even years at times, playing our games. Our goal is to give our players as much content as possible in order to stay for a long time. Long-term motivation is a crucial point for us and we see this as one of InnoGames’ biggest strengths.

DFC: Please tell us about your in-game currency. What can you purchase in game that can help you develop your city and experience?

Dennis: Our in-game currency is diamonds, and you can use these to purchase particular buildings, collect double the resources, unlock some technologies on the tree, etc. We do our best to keep a fair balance between those who purchase premium and those who play for free. Generally, what you can buy gives you time advantages but there are no levels etc. that cannot be reached without premium currency.

DFC: How has the player community responded to virtual item purchases? What is popular, what is not so popular? How much does item cost play a part?

Dennis: All the premium features are popular, and in general, there is a positive response to the monetization model (particularly building and recruitment time reduction). Of course, there are always people who don’t like it, but almost everything you can purchase in Forge of Empires can also be worked for without spending a cent.

DFC: What percentage of monthly active users make purchases during the month in Forge of Empires?

Dennis: That heavily depends on the single markets but in general, it is around 10 percent.

DFC: How does that compare to your other titles?

Dennis: Forge of Empires has been our most successful game start financially. We are really looking forward to its continued improvement and even more success in the future.

DFC: The last we heard your conversion rate in your games was between 5% and 20%. Is that still the case?

Dennis: Yes, those numbers are still valid. It differs a lot from market to market and from game to game.

DFC: Which titles have higher conversion rates, and what would account for that?

Dennis: The game is a factor, but also the way players find a game is very important. Those who come to the game via word of mouth or other organic methods tend to stay in the game for a long time and take advantage of the premium system, whereas players who come from advertising campaigns are less likely to do these things.

DFC: After four months you already have 3 million Forge of Empires players worldwide.  Did that response surprise you?  How does this launch compare to those of your earlier franchises?

Dennis: This didn’t surprise us, but it was higher than we initially planned for. Forge of Empires is the most successful launch in InnoGames’ history. We are also very happy about the very quick and professional international roll-out. That helped a lot. Lately, we started the 22nd language version: Korean. That market had one of the best starts worldwide so far.

DFC: Of those Forge of Empires users, how many have purchased premium accounts?  How much of your revenue comes from premium accounts?

Dennis: The revenue generated by premium services makes more than 90 percent of the overall revenue for InnoGames. Even after four months, Forge of Empires is already a very important financial factor for us, and ranks amongst the top three games in importance to InnoGames.

DFC: What advantages does a premium account offer in the game?

Dennis: Players can double their resource production, buy special buildings, recruit more soldiers and unlock several technologies on the tree. They can also get rare goods like wine quicker.

DFC: Forge of Empires is a turn-based online strategy game. With so many online players accustomed to real-time combat, how quickly has your user base taken to turn-based?

Dennis: Only the combat system is turn-based, and the whole city building aspect is real-time. The mostly casual to mid-core gamers that are playing Forge of Empires generally like this less intense type of combat. After all, turn-based is not that unusual for online gamers, as you know from games like Heroes of Might & Magic for example.

DFC: Which leads us to ask, what kind of demographic is most attracted to the game: old strategy game hands, or people completely new to turn-based strategy?

Dennis: We designed the game to attract a wide variety of gamers – but the title mostly attracts casual to mid-core gamers.

DFC: What are your best tools for user acquisition? Marketing costs to acquire new players are going up. What does a company like InnoGames have to do today to attract new players?  And what will need to be done differently in the years ahead?

Dennis: Players acquired by advertising are usually not as active as players referred to by friends or from organic methods. Because of this, we focus a lot on community events, and keep our communities strong and happy – while also promoting friend invite features in-game. However, marketing is of course very important for us. Next to online advertisement, we focus on TV advertisement as well.

DFC: What are your tools for boosting player retention? From our perspective users are tiring with games more swiftly than even a year ago.

Dennis: Keeping the players involved with community events and constant new challenges and updates is key. We are currently also setting up an improved CRM, with which we want to individualize the communication with the players more.

DFC: Please tell us more of how InnoGames implements advertising in its F2P titles? What is the consumer seeing in game, how often are they seeing it, and where do the ads appear in-game?

Dennis: Tribal Wars is the only game that has advertising actually in it. There are a couple others who display an ad when you log-out, but this isn’t a big focus for us – more of a small subsidy. Of course, we are observing new trends with in-game advertisements and have also done some test campaigns, for example with Fanta in Poland. But in general, this is not the core of our business model.

DFC: What percentage of your revenue is ad-based compared to virtual items sales?

Dennis: It is less than 10 percent.

DFC: By our count, within its first four months Forge of Empires is already localized in Brazil, the Czech Republic, Denmark, England, France, Germany, Greece, Hungary, Italy, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Thailand, Turkey and the U.S. How was it possible for you to localize in so many markets so quickly?

Dennis: We frequently outsource our translations, but our internal structure of community managers and moderators is vast and well organized, which enables us to support many country versions efficiently. All in all, InnoGames has a team of more than 100 local community managers and more than 1,000 local supporters. They are crucial to our success!

DFC: We hear that the U.S. market for browser games has been somewhat disappointing.  How is Forge of Empires doing on the U.S.? How many users have you attracted, and how many are playing actively?

Dennis: We wouldn’t say that the U.S. market is disappointing. Browser games there are still in their infancy popularity-wise, compared to Germany and France, for example. This is more exciting than disappointing, as we know there is a lot of room to grow, and are confident that we will grow there in the future. The Forge of Empires servers in the U.S. are performing quite well, with more than 200,000 total registrations. Compared to the huge potential of the market, there is of course room for expansion.

DFC: As launches go, how did the U.S. introduction compare to other non-European launches like Brazil, Thailand and Korea? How is your experience outside Europe the same, and different?  What have you learned? How much reach do you have outside Europe?

Dennis: Brazil is a very important market for us – we are quite successful there already and plan to do even more in the near future. We have an office in Korea because this is one of the most important Asian countries for us, but Asia will always be a bit harder to localize to than Latin America for many reasons, and we put less of a focus on it. In general, nearly 40 percent of our users are from outside of Europe. We managed to increase this number in the last two years continuously and want to continue in that direction in 2013.