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Billion Dollar Unicorns: Machine Zone Translates Multi-Player Games to Multi-Billion Valuation

Posted on Wednesday, Nov 25th 2015

According to Superdata Research, the online massively-multiplayer (MMO) game industry is estimated to grow to $11 billion in 2015, accounting for 21% of the worldwide digital games market. The industry is estimated to be worth $13 billion by 2017. Free-to-play constitutes the biggest pie of this market with $9.3 billion in revenues in 2015 and growing to $11.1 billion by 2017. The pay-to-play segment is expected to grow from $2.3 billion in 2015 to $1.7 billion by 2017. Leading online MMO game developer and Billion Dollar Unicorn Machine Zone is already witnessing rapid growth in adoption and market valuation.

Machine Zone’s Offerings

Palo Alto-based Machine Zone was not always a gaming company. They were founded in 2008 as a dating app called Addmired by Gabriel Leydon, Halbert Nakagawa, and Michael Sherrill. Within a year, the Y Combinator startup had diversified into publishing strategy games for mobile devices. They started their gaming portfolio with the launch of iMob, an iPhone-based game that boasted of an appealing interface, an intuitive menu system, and features such as GPS functionality and real-time messaging. The game allowed players to search for nearby players using the iPhone’s GPS capabilities and allowed them to invite friends and family to play. By 2012, the game had evolved significantly with advanced social messaging capabilities, new storylines, and communities. The company claimed to have over 37 million downloads and renamed themselves as Machine Zone with a focus to continue to build MMO strategy games.

Machine Zone has expanded their game titles and now has titles including Game of War – Fire Age, iMob 2, Original Gangstaz, and Global War under their belt. But their biggest game is the Game of War: Fire Age which is a real-time MMO strategy game. The empire-building game expects players to construct a city, raise and feed an army, craft weapons, and enter into alliances with as many as 100 players to form a kingdom to vie for the throne. But the game’s biggest selling feature is its advanced features that allow for a parallel chat-speak translation application and its ability to connect gamers globally in a virtual universe. The game’s technology translates over 40 languages for its players in real-time so that gamers can chat in any of these languages and the chat is automatically translated to the other gamer’s language. The game has become so popular that as of 2014, Machine Zone claimed that the players were playing on an average 2 hours a day, 7 days a week.

Machine Zone claims that they have more than 45 million game players worldwide playing their games. All of their games have reached Top Grossing App Store rankings and Game of War has been among the top 3 games on the app store for over a year.

Machine Zone’s Financials

Like other gaming companies, Machine Zone relies mostly on the sale of virtual goods. Gamers can purchase capabilities such as the ability to build things faster to make them preferred members in an alliance. Its detailed financials are not known, but according to market reports, Game of War alone was expected to bring in $600 million in revenues last year. Analysts estimate that its annual revenues last year were trending at $831 million. For the current year, revenues are estimated to have grown to $1.1 billion.

Unlike other gaming companies, Machine Zone is also expected to be profitable. It has raised an estimated $260 million in funding so far from Menlo Ventures, Anthos Capital, Baseline Ventures, and JPMorgan Chase & Co. The last round of funding was held in summer last year when it raised $250 million at a valuation of $3 billion. According to market reports, Machine Zone is now looking to raise another $500 million at a valuation of $6 billion. Some of the funds are expected to go toward the aggressive marketing by adding celebrities like Kate Upton for its TV ads.

I have been skeptical of skyrocketing valuations. And while Machine Zone’s little known financials may appear to be impressive, one needs to keep in mind that it, like other gaming companies, is also a one-trick-pony.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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