Sramana: What was the result of making a strategic shift to develop gaming applications following a B2B strategy?
Kenny Rosenblatt: We saw explosive growth. We had four people and now have over 80.
Sramana: You have obviously hit on a different business model. You also had different partners positioned all over the world working for you on good financial terms. When it came time to start building the team, where did you start building?
Kenny Rosenblatt: The Ukrainian offshore company had 100 employees, and we were working with five of them. That company was about to be acquired, so I pleaded with their CEO to carve out my team of five from the M&A conversation and eventually came to terms with him. I paid him $90,000 to buy that team, and I started a representative office of Arkadium in Ukraine. We then used our efforts growing that team.
Sramana: From 2003 to 2011, how much has the Ukrainian team grown?
Kenny Rosenblatt: That team now has 65 people. We have 55 people based in the United States.
Sramana: What is the work distribution? What does the United States team do?
Kenny Rosenblatt: We mirror each other exactly with the exception of sales and marketing. There are programmers in New York and Ukraine, and there are artists in New York and the Ukraine. The only think that the Ukraine does not have is sales and marketing.
Sramana: Do you still have the same clientele today that is centered on large companies?
Kenny Rosenblatt: The interesting thing is that once again, things changed. In doing these projects for various companies, we were never able to shake our heart and passion, which is reaching the end user directly. In 2010 with Facebook gaming taking off, we decided to shift back to B2C. This time we had tons of experience building games, and we had a great staff. We started shifting our business back gradually.
Sramana: What revenue level were you at when you decided to make the shift back to B2C?
Kenny Rosenblatt: It was $6.4 million with a 10 to 12 percent EBITA. We still had the B2B business going strong, and we knew we could not just stop doing B2B. The idea was to use our profits to invest in ourselves and try to do both B2B and B2C. We felt the long-term upside was going after the end user because we could scale that way. In 2010 we ended up doing $8.4 million in revenue, and 20 percent of that came from the end user. That gave us great confidence in our strategy. In 2011 we found that 50 percent of our revenues came from consumers, and we expect that number to grow to 75 percent in 2012.
Sramana: What was the first B2C game you launched, and what was the business model of that game?
Kenny Rosenblatt: It was called Mahjongg Dimensions. It was a popular game mechanic that was an instant hit with consumers. We launched it in January 2010. The game was focused on micro transactions. People can play the game free and then choose to buy improvements ranging from 10 cents to 1 dollar to help improve their score. It was a typical freemium social media game. We found that 3 percent of users were converting into paid users. That is slightly higher than average.
Sramana: What is the average revenue that you make from paying users?
Kenny Rosenblatt: We look at average revenue per user across all users, paying and non-paying. That is about 20 cents.