The 1M1M Deal Radar 2010: Fantage

Fantage (short for “Fantastic Age”) is a virtual world created specifically for young computer users from about age 6 to age 14 but is accessible to everyone. Developed as a flash game, this virtual playground requires no download. The site offers “towns” to explore through a user’s avatar, games to play, and ways to chat safely and meet new friends.

In early 2002, cofounder David Hwang started a new business on the East Coast, and his family moved from California. Hwang and his wife Cindy had a problem with their first child, Alyssa, who was then three years old. She missed her friends from Silicon Valley and wanted play dates with them.  The Hwangs hoped to develop an online virtual playground for their daughter and her friends, but they assumed it was very difficult and expensive to do. In the summer of 2006, Hwang visited Peter Bae, his business school buddy, and they talked about the game idea again. Bae was still involved in startup businesses and knew more about current IT technologies. They spent the night discussing the kid’s online game idea, quit their old jobs next morning, and started to design their own virtual world.  They met Frank,  a friend of Cindy’s, in early 2007  and the four of them started to build Fantage.com.

Since 2007, Fantage seen quite an explosion in virtual world sites. The company counted 14 new virtual worlds in 2008 and about 9 more in 2009. When it started in 2007, the online free-to-play market was estimated to be around $30 million. Today, with the explosion of the number of virtual world sites, market acceptance of virtual goods sales, and Facebook social games, Fantage believes that the market has grown about tenfold, if not more.

The competition has also increased. In 2006, Club Penguin wasn’t as big as it is today. Whyville and Neopets were especially strong at that time. The company also considered flash game portals and MMOs (massively multiplayer online games) as potential competition. Following the success of Club Penguin and Webkinz, the online game market for kids has become increasingly crowded, with significant funds coming in. However, some early games have already started to disappear. Large companies such as Sony have also entered, but specialized stand-alone game companies seem to be performing better recently. Fantage aims to differentiate itself through its content and by providing site that 1) parents trust and kids love; 2) a site that anyone can enjoy, whether by playing games, chatting, or shopping; 3) a site where parents can ask their kids and friends about new ideas and future projects; and 4) a site that understand parents and what they expect of a site that their children spend an hour a day visiting.

The top target segments are boys and girls 6–14 years old who live in a household with Internet access and who speak English or want to learn English. The site operates in English and in Japanese, through Nexon Corp. The site gained traction through early adoption of Google AdWords and by delivering the right content prior to summer vacation: Between the first June and August after launch, growth increased rapidly as parents let their children spend more time online.

Fantage’s basic model is free-to-play. The company also has premium memberships for a monthly subscription of $5.99 per month and $54.99 per year. Premium members have access to premium items and medals, among other features. Fantage has since included many different types of premium memberships, from as little as one day.

The company is planning to include a micro-transaction system called e-Coin, a virtual goods currency that users can buy and then use on the site. Under this hybrid model, premium members still enjoy special status (even when they buy e-Coins) and regular free members have a chance to buy premium items.

Revenues are about $4 million. Fantage started with Hwang’s and Bae’s savings and credit cards. Family and friends supported the company until it launched commercially. The budget for development, which took about one year, was about $250,000. Fantage was a founder-family-friend funded company until 2008. Hwang says that looking back, the team was extremely lucky, as even a small detour could have cost a huge amount of time and money. In 2009 and 2010, Fantage received strategic investments from a large game company to expand vertically and horizontally and is not seeking any more funding at this time; these investments will be enough for Fantage to achieve its short- and long-term goals. “One of the beautiful things about being a game development company is that when the right team is set up, it does not take additional capital to develop new content,” says Hwang.

In the two and half years since the site launched, Fantage has reached a total of 6.5 million users. The company is growing at a rate of 100,000 new registered users a week and recently reached 6.5 million total users, who spend an average of 55 minutes online per session. Hwang says that Fantage has been more focused on service quality and traffic growth rather than revenue thus far. However, the team plans to reach a second breakeven point by the end of this year.

Increasing site stickiness and enriching the site with relevant and meaningful content are Fantage’s top priorities and its primary source of growth. On top of that, the company is focusing on a couple of areas it thinks are important this year and in the future. One is global expansion. Fantage has witnessed a steady increase in the number of of users and interactions from dozens of countries outside the United States and Canada. Another goal is to let users have more options on how to pay for virtual goods. The new micro-transaction system, e-Coin, will give all users a chance to have a better user experience on top of the premium memberships and at the same time pick and choose the virtual goods they like. Premium members will have additional benefits since they get double the e-Coins for the same amount of cash as regular members.

Fantage also has a few new ecosystems coming throughout June and July. One is a new Pet World system and another a new School Zone system. Pet World will be a great addition for users who love to take care of others. School Zone will be an interactive, educational, and competitive game zone where users will play different roles than just a student.

There is no specific exit plan at present. The team is enjoying their work and striving to build a lasting brand.

Recommended Reading
Deal Radar 2010: Brandissimo!
Deal Radar 2010: Zong

This segment is a part in the series : The 1M1M Deal Radar 2010