Stationed in a quiet street off of Hackescher Markt, you can find the headquarters of the Hitfox Group, an incubator led by serial entrepreneurs Jan Beckers, Dr. Hanno Fichtner, and Tim Koschella. Among the HitFox success stories is the games distribution company ad2games. ad2games was acquired by HitFox in 2012 with a staff of five and now employs over 60 employees in Berlin and San Francisco.
Put simply, “ad2games helps advertisers which produce games, such as Nexon, InnoGames and Gameforge, find the right players and users for their games,” says ad2games CEO Albert Schwarzmeier. Its core business is in free-to-play games, or games in which players are granted access to a large portion of the games without having to pay – but don’t be fooled by “free”. ad2games’ business is big business. Onlines games played on PCs generated $21 billion in revenue in 2013, as reported by Newszoo.
Schwarzmeier explains free-to-play and the ad2games business model using the example of Big Farm, a popular farming simulation social network game: “How the free-to-play gaming world works is that the advertisers look for users and players for their game who like the game, play it and, therefore, to a certain probability, monetize it by buying in-game items. Let’s say, for example, in a game like Big Farm, players are buying a high-end plow to take care of their farming. The users have the opportunity to not only buy the machine but to earn it themselves by just putting in energy, excitement and time. Therefore, when looking at how our business works, it is important to pay close attention to the quality of players we deliver to the game publishers (advertisers) making sure the potential players can have a certain interest and excitement for the game. It doesn’t work out if we are delivering a user to a social game like Big Farm when he or she is actually a core gamer and prefers MMO (massively multiplayer online game) games.”
ad2games works with game developers such as Goodgame Studios, Upjers, and wargaming.net. It claims over 2,500 publishing partners (media partners, blogs, etc.), where it places advertising for the game developers.
A Focused Strategy For Success
When asked about competition, Schwarzmeier claims that it’s difficult to judge. His argues that ad2games is the only player in the market who is concentrating solely on games and only on online – not on mobile.
Berlin-based GameGenetics is a games distributor for both free-to-play online and mobile games. When asked what the primary focus for company will be in terms of new developments, the GameGenetics CEO Alexander Piutti cited mobile gaming. U.S. player CPMStar also has mobile as a part of its product offerings. Both companies are going after the impressive growth of the mobile gaming market which was valued at $2.8 billion in 2013, according to MarketWatch.
Considering this hype, we asked Schwarzmeier if mobile would be in the future for ad2games. He responded that the company’s focus on online – together with its team of industry experts – is one of its competitive advantages and what makes the ad2games “really successful”. This strategy seems to be paying off for ad2games, which reports a growth in revenues of 650% since the acquisition of the company.
Berlin As A Gaming Industry Hub
“I would say that Berlin is definitely the hub for the gaming industry in Europe,” says Schwarzmeier. Indeed, ad2games has new Berlin neighbors from the gaming scene including Kabam, King, and Aeria Games, who have recently opened up offices here. On its website, Kabam writes, our Berlin office “gives us obvious strategic advantages for partnering with both European game developer and distribution centers.” King, the game developer behind the famed Candy Crush, calls Berlin one of Europe’s leading creative hubs.
Answering the question on why Berlin, Schwarzmeier explains that “gaming attracts international people, but it is also the attractiveness of Berlin that makes it easier for us to bring talented people here compared to other European capitals.” Despite the creativity and lifestyle of Berlin, however, Schwarzmeier maintains that it is still not easy for German startups to gain access to capital compared to in the U.S. or France, which is a clear competitive disadvantage for not only the gaming scene in Berlin but for startups in general.
The Future For ad2games and HitFox
2014 represents an expansion for ad2games from being a games distribution company to an ad tech company. Schwarzmeier reveals that new products will be introduced to attract more and higher quality players for its advertisers: “At the moment, we are developing technologies like Predictive Behavioral Targeting and fully automated Lifetime Value Optimization, which are unique products in the market.”
HitFox has also announced that it is planning on adding two to four more ventures to its portfolio this year. Though specific details are not yet confirmed, the ventures will be in the areas of big data and advertising, and will not have a sole focus on gaming which has been the case for all HitFox ventures so far. This is no doubt good new for ad2games, which also works with its sister companies where there are clear synergies. Until then, we will be staying tuned for further details on what will come from the HitFox incubator next.