MySpace’s Co-Founder Preps Second Act Jam City for Possible IPOby
Mobile games company is profitable with $400 million in sales
‘Peanuts’ title, expansion to Asia are part of 2017 plans
Chris DeWolfe became a tech industry celebrity as co-founder of MySpace, the social networking site that got clobbered by Facebook Inc. With his new venture Jam City Inc., he’s out to prove he can build another startup with a multi-hundred-million-dollar market value and this time make it last.
“We monetized MySpace too hard, too early,” DeWolfe said in an interview at Jam City’s warehouse-like office space in Culver City, California. “It’s great to stay focused and go a mile deep and be a category winner in every category.”
Jam City, which DeWolfe started with three MySpace colleagues in 2010, is headed in the right direction. The business, which makes mobile games with names like Cookie Jam and Genies & Gems, is profitable on annual revenue of about $400 million, DeWolfe said. There may be an opportunity for outside investors, too, as DeWolfe considers an initial public offering, probably in the second half of this year.
Before that, DeWolfe, 50, wants to achieve a few other things, such as the new Snoopy Pop game, tied to the Peanuts characters, as part of a broader push into entertainment-licensed games. He also wants to expand in Asia -- and got $130 million in funding last year from Netmarble Games Corp., a Seoul-based company backed by China’s Tencent Holdings Ltd. Jam City also received $28 million in 2010 from investors led by Austin Ventures LLC.
“They are killing it, seeing great growth,” said Michael Pachter, an analyst at Wedbush Securities Inc. who follows the video-game industry. “I think he made some mistakes a decade ago, and he learned from them.”
MySpace, which DeWolfe co-founded with Tom Anderson in 2003, once boasted 130 million users. It was sold to Rupert Murdoch’s News Corp. for $580 million in 2005. Under a more aggressive ad-sales strategy, however, MySpace turned off customers. News Corp. sold it in 2011 for $35 million and the site is now owned by Time Inc.
At Jam City, DeWolfe describes a measured, 15-month product development cycle that involves extensive market research, beta testing and analysis of customer retention rates and revenue per user, all before a game has its official launch. Those are followed by weekly changes and events designed to keep players engaged.
Jam City’s top-ranked game, Panda Pop, is the 27th highest-grossing iPhone game app in the U.S., according to the research site App Annie. In it, players posing as a mama panda try to pop balloons to free kidnapped baby pandas. Like all of Jam City’s games, Panda Pop is free to play at first, but customers can pay real money to get special skills, such as extended aim, that allow them to advance faster to higher levels.
About 8 percent of players end up paying something, DeWolfe said. Cognizant of his MySpace days, when three or four ads popped up per page, marketing that also made the site clunkier to load, DeWolfe is going more slowly with an initiative to place ads in Jam City’s games, a growth area for rivals such as Zynga Inc. and Activision Blizzard Inc.
“It’s a lot easier to figure out how to monetize the user later than it is to win back one who got upset because the game wasn’t fun,” he said.
Casual gaming companies haven’t thrived as public companies. Zynga, a pioneer, went public at $10 a share in December 2011 and has struggled to develop new hits to replace FarmVille and Words with Friends. It closed at $2.72 on Friday. The industry leader, King Digital Entertainment, home of Candy Crush, sold shares at $22.50 in March 2014 and was acquired by Activision almost two years later for $18.
DeWolfe said his company’s focus on continually improving and refreshing its titles has allowed games to last.
“Our two big hits, Panda Pop and Cookie Jam, we started both four years ago,” he said. “They both continue to get larger every month.”