Sam Morgan Invests in Fast-Growing Social Game SmallWorlds

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Sam Morgan Invests in Fast-Growing Social Game SmallWorlds

Investment will fuel expansion into the booming multi-billion dollar US and Non-English speaking online social gaming markets

AUCKLAND, 15 May, 2011- Fast-growing Auckland-based social game SmallWorlds has received $2.5m in an investment round led by TradeMe founder Sam Morgan to capitalise on the booming market for games played via social networks. Gaming is the fastest growing entertainment sector globally, and has already overtaken both the music and film industry in revenues.

Launched in 2008 by entrepreneurs Mitch Olson and Darren Green, SmallWorlds is New Zealand’s largest social gaming company with 6.5 million registered players. The investment will fuel SmallWorlds’ expansion in the billion-dollar social gaming sector, with the company aiming to be a $100m export earner by 2013. Games on social networks earned over US$1 billion last year, and are expected to be a US$5 billion industry by 2015.

“One of the keys to our success has been the creation of an experience that is deeply engaging, and at the same time really accessible. Visually, we believe we have one of the most attractive and advanced social games available in a web browser,” says SmallWorlds Co-Founder Mitch Olson.

SmallWorlds players can choose to buy ‘virtual goods’ to personalise their character and spaces in sophisticated ways. This business model of selling ‘virtual goods’ for ‘micro-transactions’ to a large online audience is increasingly popular, and the practice has been adopted by companies such as Disney, Nickelodeon, Sony and Microsoft.

“The game is free to play but the scale we can achieve with social networking audiences means that only a small percentage of players need to purchase premium content and virtual goods in order to create significant revenues,” says Olson.

The site’s audience is already growing by about 200,000 players each month, predominately made up of teenagers, as well as females in their 40s, with 80% of players coming from the US. Benchmarks suggest that SmallWorlds players spend well above industry averages.

The new investment will be used to grow SmallWorlds’ audience internationally. This will include expansion into non-English speaking markets, and better integration with gaming platforms and social networks like Facebook. Over 300m people play games on Facebook alone each month.

SmallWorlds currently employs 35 staff and plans to create 20 new jobs this year.

TradeMe Founder Sam Morgan, Jade Software CEO Craig Richardson and US technology investor Payman Pouladdej have recently been appointed to SmallWorlds’ board.

Investor Sam Morgan says SmallWorlds is well positioned for further growth. “Online businesses like this are hugely scalable and can grow incredibly quickly while maintaining high margins. SmallWorlds has already proven its audience appeal, technology and management capability.

“Gaming is a huge export opportunity for New Zealand, occupying the sweetspot between technology and creativity. It’s easy to draw parallels with an internationally recognised company like Weta Digital, who also successfully combine these two elements.

“Our next wave of multi-million dollar exporters may well be trading virtual goods, which is a real and significant global market,” says Morgan.

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About ‘Social Gaming’ and Virtual Goods
• Games are the fastest growing entertainment sector globally, and have surpassed music and films in revenues. For example, in the US game sales were around $22 billion in 2008, compared to music sales of $10b and movie revenues of $9.5 billion, according to the Video Game Sales Wiki.
• 53% of Facebook members aged over 18 have played a social game, according to Lightspeed Research.
• 65 percent of those people who have played a social game started in just the last year.
• 13 percent of people with Internet access have bought virtual goods in the past 12 months, according to Magid and Associates.
• Games on social networks earned over US$1 billion last year, and are expected to be a US$5 billion industry by 2015, according to Parks Associates
• US$7.1 billion was spent on virtual goods across all platforms globally in 2010, according to estimates by market research agency In-Stat.
• In July 2010, Disney purchased social gaming firm Playdom for US$563 million plus bonuses.
• Three-year old social-gaming company Zynga, creators of the popular Facebook game Farmville, is valued at between USD$7 billion and $9 billion, according to the Wall Street Journal.
• 91 gaming companies globally raised more than US$1.05 billion investment capital in 2010, up 58 percent from a year ago, according to research by VentureBeat.

About SmallWorlds
SmallWorlds is a new generation fun virtual world that runs inside your web browser, without the need to download or install any other software. SmallWorlds combines casual games, social networking, media and web content into a highly accessible and compelling 3D world that integrates seamlessly with the rest of the web, bringing Virtual Worlds into the mainstream.

SmallWorlds allows users to create and customize their own rooms and worlds, and fill them with a wide variety of items and activities for them and their friends to enjoy together. With their online friends and acquaintances, they can share experiences like playing games, watching YouTube videos, listening to their favorite bands, browsing through photo galleries, and so much more.
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