Inside Social Games

A little-known Facebook social game developer, CrowdStar, has been blowing up on our leaderboards this past autumn, first with genre-defining virtual aquarium game Happy Aquarium, then with virtual pet-caring game Happy Pets. The company — or actually, two companies — is coming up as Zynga, the largest social game developer, has furthered its domination with Café World and Happy Aquarium competitor FishVille.

Zynga is going after every successful genre and developer — for example, its newest game, PetVille, is more like Playfish’s Pet Society than it is like Happy Pets. So the question is what CrowdStar is going to do to compete, seeing as is Zynga quickly and effectively creating games in the genre.

CrowdStar’s plan sounds difficult, but the company appears to be succeeding so far. “Every time they enter a category where we have gotten big,” chairman Peter Relan tells me, “we’ll launch an entirely new game within weeks.” He says to expect a new one this month.

The social gaming market is so “massive,” in Relan’s view, that there will be room for CrowdStar despite Zynga’s aggressive success. And, he says, the company will be doing it with a small team — it now has around 20 people, versus Zynga’s 600 — and hasn’t relied on Facebook advertising as much to help it grow. So, while Zynga is on track to make more than $200 million this year, from what we’ve heard, a lot of that revenue needs to go towards labor and advertising costs. CrowdStar has a very profitable model, and intends to keep it that way, according to Relan: “we want to be the most profitable social gaming company, not the one with the most revenue.”

So how is CrowdStar making money? Direct sales of virtual goods in its games, like other developers — although it has tried offers in the past and may use them again in the future. But that’s not its only type of revenue stream. CrowdStar is actually two companies, Relan also explains. Ireland-based CrowdStar International is a publishing company that, like traditional gaming companies, handles all the business operations. CrowdStar itself is the main studio. CSI, as one might abbreviate the international company, both handles some aspects of CrowdStar’s games, like direct payment vendor relationships, and cuts deals with third parties for things like toolbar promotion within CrowdStar games.

Meanwhile, CrowdStar, the San Francisco-based company, also has what Relan describes as a “skunk works,” CrowdStar Labs. This tiny group is charged with building and testing out new game ideas, with the most recent example being Restaurant Life, a virtual restaurant game with an interesting take on the genre (see our recent review, here).

CrowdStar may have seemed to appear overnight with the success of Happy Aquarium, but it actually is two years old. It built a battle role-playing game called World War II, a year ago. It monetized well, but didn’t grow very big. Then it built Know-It-All Trivia, a quiz game that got big but didn’t make a lot of money. It combined money and size with a test game last spring called Save the Reef, that relied heavily on virtual goods. It decided to go big with the fish theme, beginning work on Happy Aquarium in late July and launching it in early September.

While many developers have been concerned that Zynga is going to snuff out the competition, CrowdStar has proven the opposite. Look for it to play a much bigger role in the social gaming ecosystem in 2010.