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RockYou raises $10M to give old games a second life

RockYou purchases older, but still profitable, titles from gaming studios that no longer want them

Financial trends and news by Steven Loeb
July 31, 2014 | Comments
Short URL: http://vator.tv/n/386a

Where do games go when they are no longer fresh and new? Or when a developer has gotten tired of Facebook and wants to go mobile? They go to RockYoua cross-platform advertising network for games. The company buys up old titles that are still profitable, and gives them a home, where people can still play them, and they can still make money.

RockYou has just announced that it has raised $10 million in new funding. The investment came from FastPaya financial platform for digital media.

Founded in 2005 as widget maker, with a focus a slide show service, RockYou pivoted its model in 2010 to put its focus, instead, on in-game monetization. Prior to that pivot, the company had raised $125 million. Since then it has raised $20 million in equity, along with $16 million in debt.

"All of our deals have been financed with debt," RockYou CEO Lisa Marino explained to me in an interview. "Because our acquisitions are all cash flow positive, we pay off the debt deal by deal basis, and then use that money to buy more titles."

Here's how RockYou works: the company buys the rights to older titles, meaning games that have been around  for a few years, and which are past their apex. RockYou buys them, and wrings profit out of them through advertising and digital goods.

"One thing that people don’t know is how profitable, and long-tail, titles are on Facebook and mobile," Marino said. "They may be past their apex, but they also may have many years of life left."

There are three scenarios she described to me under which a company would sell of one of its titles, despite the fact that there is still money to be made from it.

First, there are the one-hit wonder companies, who have to figure out what they want to do next. RockYou will give them cash for the title, and continue to run it.

"They might have one game that is very profitable, but they are hard time making anything new," Marino said. "Would they rather take a big slug of cash from RockYou, or would they rather keep running the title and see where things go?"

The second scenario is a big company, such as Disney, which may have a profitable game, but one that is not making enough money to make it worth their while.

"Lets be realistic, for us they are fantastic titles and they contribute significantly. Disney is a multi-hundred billion a year company. Something that does a few million a month doesn’t move the needle," Marino explained. "They can see that type of revenue in a day at one of their parks, so when you start rolling things up, for Disney its just not worth it."

The scenario are companies that are in financial trouble. They might don’t want to shut down games, so they give them to RockYou instead so they can have a second life. 

The company currently operates 15 games, and plans to use the new funding to buy more of them. It currently has two big deals in the pipeline, one that wikk added $2.2 million in top-line revenue, and another that will add another $1.5 million. Both deals should be done by October. 

In addition to the funding, RockYou also announced some new growth statistics. 

The company has grown revenues by 250% year over year, primarily been driven through the acquisition and monetization of 12 titles from publishers such as Disney Interactive and 50 Cubes, including games like Words of Wonder, Gardens of Time and City Girl.

It has also grown impressions for its titles by a factor of 10, with between 300 million and 500 million total monthly impressions each month. RockYou currently sees an average of 2 millon daily active users, and between 10 and 12 million momthly active users.

While Marino could not disclose specific revenue numbers with me, she did say that the company makes between 35% and 40% of its net revenue from advertising, with the other 60% to 65% coming from digital goods. 

"No one else is really taking the bet we are by rolling out these games," she said. "The mentality has been that games are a hits driven business, but we don’t have a single game in development, but we take titles that are past their apex, and manage them through the end of their life."

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