Deal Radar 2009: Cellufun

Today’s Deal Radar shifts its focus back to mobile gaming with Cellufun. Arthur Goikhman, Steve Dacek, and Cary Torkelson founded Cellufun as a single-user downloadable game business in 2006. After creating a few downloadable games, the team learned that not only were they expensive to create, but they also had a hit-or-miss success rate and a limited shelf life.

Also, at the time Cellufun was launched, downloadable mobile games were still a relatively new concept, and the company produced free games supported by advertising. The New York-based company then started developing browser-based games that were social in nature. In 2008, Cellufun published a game called Call of the Pharaoh using the mobile Web. The game allowed users to invite friends and do things together in the game and chat with each other outside of it. The combination of the company’s “backend” ability backend ability to recognize different phone models and optimize the games for them, the “no download required” element, and a focus on community gaming clearly hit a sweet spot with consumers. The company succeeded in building a community on mobile where people. In 2008, the GSM Association awarded Cellufun with Mobile Game of the Year.

The company feels that its value proposition is simple: meet friends, play games, shop, and chat on one’s mobile free of charge. If users wants play some games faster or buy the coolest clothes, they can spend a few dollars and do that too—without touching their PCs. Cellufun feels that it has a technology lead that is difficult for others to beat since the company supports more than 7,000 different phone types in 10 different languages and bill on any mobile phone bill in the world. Further, the company also prides in itself on data collection; they know if a user is a 17-year-old student on a pre-paid phone or a 34-year-old high earner on a BlackBerry. They then market to those people differently through special virtual goods offers and careful merchandising on their site.

The company has two sources of revenue: advertising and virtual goods sales. For advertising, the company sells the space (it runs WWE run banner ads at the top of each page) either directly or works with ad networks to do so. The company groups the virtual goods sales into three buckets. The first is in-game advantage, when users pay 10 FunCoins (a dime) to build a level of their pyramid faster in the Call of the Pharaoh game. The second is self-expression, or what gamers call “peacocking”, which includes buying clothes for their avatars and, soon, their virtual houses. The third is giving gifts, which works just like on Facebook. The user can buy special FunFlirts to send to other users or FunCards (electronic greeting cards) for special occasions.

Cellufun estimates that that global virtual goods market is about $5.5 billion, with the United States taking up a small fraction of that and growing quickly. Global mobile ad spending will be about $500 million this year but is expected to grow to $2 billion in five years. The company targets users in the age group of 16 to 39. As of now, about 55% of its users are female and it gets about 25% of its traffic from smartphones and about 75% from 0-9 keypad phones. The company gets about 8 million unique visitors and 225 million pages monthly.

Cellufun was founded with money from friends and family and has raised $6 million from Longworth Partners from Boston so far. The company’s revenues have quadrupled for 2009 over 2008. However, the company is looking for a round B to fund it to profitability before the end of 2010. It expects to close its next round of funding ($7 million) in the fourth quarter of this year.

Suggested reading:
*Deal Radar 2009: socialDeck
*Secret Recipe for an iPhone App
*Building the Electronic Arts of Casual Gaming: PlayFirst CEO John Welch

This segment is a part in the series : Deal Radar 2009