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How To Build A Profitable Gaming Company: Kenny Rosenblatt, CEO of Arkadium (Part 7)

Posted on Wednesday, Dec 14th 2011

Sramana: What are the demographics of the people who play your games?

Kenny Rosenblatt: Our largest demographic is women 35 and older who live in the United States.

Sramana: There are some women-focused ad networks like Glam Media. Have you experienced those networks?

Kenny Rosenblatt: We have talked with Glam and others, but the deal terms were not favorable or we had little confidence that they would be any better than what we already had. Some of them simply did not want games as a category because they did not think they were relevant.

Sramana: How do the economics of building your own ad network and having your own sales team compare to what you already have in place? You are going to have to hire high-end ad salespeople, which can be very expensive.

Kenny Rosenblatt: We have done the math, and we are confident it will play out for us. If you think of a video display ad network doing 3- to 4-dollar CPMs that we have to split 50/50 versus a premium ad sales team doing 10-dollar CPMs without splitting the revenue with anybody, then the math works in our favor. We serve close to 100 million impressions every month. That quickly overcomes the expenses required to build our own network.

We are headquartered in New York City, which is the advertising capital of the world. We have created great partnerships with brands over the past 10 years that led to high-profile connections with media buyers. We are in a position to pay ad sales executives with great Rolodex files to work for us.

Sramana: How many games do you have in your portfolio to achieve 100 million impressions?

Kenny Rosenblatt: Over the past 10 years we have developed more than 150 games. We have them all over the Web, including games on Facebook as well as a destination site, GreatDayGames.com, which is a showcase of what we own.

Sramana: What other strategic points are worth discussing in your business?

Kenny Rosenblatt: We have just opened an office in Toronto, Canada, which focuses strictly on mobile games. We understand the mobile market is important, and we are using our own games and IP to monetize the user on the mobile platforms.

Sramana: Is your new site in Toronto a development center?

Kenny Rosenblatt: It is. The Toronto government recruited us because of the significant talent in the area available to us. For every million dollars we spend there, we will get about half of it back.

Sramana: There is a broad question in your industry right now regarding the amount of ad inventory out there, which is un-monetized because of all of the free games floating around. Do you have thoughts on this?

Kenny Rosenblatt: Our approach is to focus on the micro transaction and to let advertising play a complementary role. You have to remember that we know a lot about our audience and that is one of our differentiators. We can allow a very targeted ad rather than blindly putting remnant advertising in front of our users. We know who they are and what their behaviors are, and we can use that data more intelligently than a lot of others can.

Sramana: The maximum monetization you are going to get out of the micro-transactions will be 4%.

Kenny Rosenblatt: I don’t necessarily agree. If you think about what is happening in Asia, they can convert 10% of their users. Zynga is generating more than $1 billion from that 3%.

Sramana: I know Zynga very well. They still don’t monetize beyond 3% of their players through micro-transactions. They still have to bring in advertising.

Kenny Rosenblatt: Advertising plays a small portion of their revenue, which is why there is talk about the whales in the industry.

Sramana: There is definitely an impression ad inventory glut. There is too much ad inventory in the gaming space. There are a huge number of un-monetized impressions. I think there is a real question about how that gets monetized.

Kenny Rosenblatt: We have a simple equation we use; is the lifetime value of a player greater than the cost required to acquire that player plus the overhead required to support the game. When that model is positive, we have a very profitable business line.

Sramana: This has been a very interesting story. Thank you for taking the time to share your experiences.

This segment is part 7 in the series : How To Build A Profitable Gaming Company: Kenny Rosenblatt, CEO of Arkadium
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