Peter Kafka

Recent Posts by Peter Kafka

Investors Bet $5 Million on Casual Game Site OMGPOP, Hope Users Start Paying Up

balloonoWeb start-ups that plan to make money from advertising are having a rough time raising money. But Web start-ups that say they’ll make money by charging customers? Still possible.

Today’s example: OMGPOP, the casual gaming site formerly known as iminlikewithyou, which has raised a $5 million round led by Bessemer Venture Partners. Previous investors Spark Capital and Ron Conway’s Baseline Ventures re-upped, but not Netscape/Ning/“Project A” investor Marc Andreessen, who took a flier on the company last summer.

The site has raised a little more than $6.5 million to date. A conservative valuation would still make the company worth north of $10 million.

Why is it worth anything? The company, which began life in 2006 as a dating site, has a dedicated user base that logs some three hours a month on the site. But it’s still pre-revenue, as they say.

CEO Dan Porter, who took over for highly visible founder Charles Forman earlier this year (Forman is still at the company, cranking out games), says that will change this spring. He will be selling “premium” accounts/subscriptions, most likely for $5 a month, along with virtual goods (think collectible items, power-ups, etc.).

It’s possible that the site will roll out some kind of advertising at some point–Porter says he’s been testing some ad units with Google (GOOG)–but those would be ancillary dollars (or dimes).

Can that work? Maybe. Casual games–free or low-cost Web games that take little time commitment–appear to be doing well so far in the recession, even as traditional videogame sales falter. And a lot of people are hopeful that the  market for virtual goods–big in Asia, but limited in the U.S. to a handful of games and a few oddities like Facebook’s “gift” items–will finally take off.

Not interested in thinking this one through? Fair enough. Try playing the site’s “Balloono” game, a knockoff of the Nintendo classic Bomberman. I’m waaaaaay older than the site’s core 15-25 demo, but I’ve spent an embarrassing amount of time on this one.


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