The period between 2012-2013 was a turning point for Indian online gaming industry in many ways.
It was in 2012 when gaming startups such as Nazara Technologies, Octro, Dream 11 and 99 Games were getting ready to raise their Series A and above funding. Being the first movers, these players already had a vision for the future of gaming in India. But the prevalent macro factors at the time, such as lower internet speeds and relatively slower smartphone adoption compared to now, were still a challenge. Naturally, investors were sceptical about a bet on gaming.
At the same time, the skill gaming vs gambling debate was also being played out between online gaming companies and the Indian legal system.
These entry barriers should have typically scared off new players too. But not Ankush Gera, who jumped into the deep end with his startup Junglee Games in January 2012.
“When you are in business for 6-8 years, you get time to mature your processes, hire a good team, and lay the groundwork for future scale. So we were up against companies who had this kind of leverage while we were just getting started. In fact, building a gaming studio was an alpha product for us,” Gera told Inc42.
Fast forward to 2019, with more than 20 Mn users in 7 countries, Junglee Games has doubled its revenue and headcount every year since its launch. It claims a Y-O-Y growth of 80% to 100%. In FY19-20, the company will see $600 Mn in entry fees on its platform. Junglee is targetting 40-50 Mn active users by the end of this financial year.
“Despite being a late entrant, we are the fastest ones to have a sizable market share on a shoestring budget. This speaks for how sustainable our business model is,” Gera added.
From Advertising To Gaming
Junglee Games had its origin in San Francisco, where Gera has been living for almost 25 years. Prior to founding Junglee Games, Gera ran a digital advertising agency — Monsoon — for almost 10 years which got acquired by Capital One in July 2015. The company boasted clients such as Yammer, Zazzle, TOMS, HP, among other Fortune 100 companies and primarily helped these brands launch their mobile experiences.
“It was at this point I realised that I can make one of my own products,” he added.
While the logical extension might have been an ecommerce, travel or SaaS business, but, Gera found himself to be just a common consumer there. Thus, he decided to follow his passion for gaming and started working on a side project, Junglee Games.
“I was first drawn to games like poker, rummy, sports tournament in the offline world during my college days, not as a fun activity but a way to challenge my mind. Online gaming came in around the 2000s and after selling Monsoon, I couldn’t stop myself from following my love to challenge myself,” Gera said.
Once a proof of concept was ready and piloted in San Francisco, Gera launched Junglee Games in India in August 2012.
In 2015, the Supreme Court cleared the guidelines for gaming and legalised skill-based real money gaming in India.
Gera noted that the ruling gave his company more clarity to go ahead and achieve goals. Gera talked with pride about his team and partners which includes former executives from Monsoon, among a total of about 200 employees. He believes that the most challenging part of starting up is to align the leadership team and that it can take a startup its whole life setting this foundation, but once it’s done, the magic happens.
“It’s almost like a marriage. We lost our last company twice and were on the back foot every time. Situations like these can either split your partner or make you stronger. We got the latter, in our case with Junglee Games,” he added.
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Games of Skill Rake In The Moolah
Junglee has so far launched four games in categories such as fantasy sports (Howzat), social (Eatme.io, Junglee Teenpatti) and skill (JungleeRummy). Gera admitted that while they are able to monetise from all avenues, 90% of the revenue comes from skill-based games. This is revenue from daily tournaments hosted on the Junglee platform, where users play for small service fees and earn cash prizes as rewards for winning.
A “game of skill” is one where the element of chance cannot be entirely ruled out, but it is the element of skill on the part of the participants that play a dominant role in determining the outcome of the game.
While casino and sports gambling is banned in many parts of India, Section 12 of the Public Gambling Act exempts games of skill from the penal provisions against gambling. Apart from the top-notch players, others active in this segment are Funnearn, Ace2Three, RummyCircle, Zynga, Innopark India (Classic Rummy), Loco by PocketAces, MPL, Skill4fun and BrainBaazi among others.
When asked what works best in the Indian market among models such as freemium, ad-based or micro-transactions, Gera said that it all depends on the nature of the game and whether it falls in the social gaming or games of skill genre.
Freemium is yet to catch up in India. But I’ll be really surprised if it doesn’t catch up soon.
The three key segments of online gaming are – real money games (RMG), mobile-centric/casual games and e-sports. Within the RMG genre, you will find classification such as rummy, poker, daily fantasy sports and quizzing. While single player, downloadable and casual games such as Ludo or Subway Surfer are pretty much ad-based, social games such as Farmville or PUBG will be more inclined towards micro-transactions.
A recent study by KPMG also suggested that mobile gaming is dominating the online gaming segment. Among different genres, puzzle games, which are considered games of skill, are attracting the most attention among both casual and heavy gamers. But the micro-transaction or freemium model is still only a fraction of all the revenue in online gaming in India.
“From all of Google Play, take every single game, add up revenue of every single game [in India], but still, it will be a lot less than what one successful game makes in the US. The entire ecosystem is about $100 Mn a year; Candy Crush makes more than that in a month,” — Ankush Gera, Junglee Games
Being challenged by companies having more than $100 Mn capital, double or triple the team size and significant investor backup, Junglee has been up against some big competition.
“No matter how much we grew, we didn’t relax. The last 8-9 months were the hardest as compared to the last 6-7 years, and we have grown the most in this period. But most challenging was being a late entrant and being seen as the new kid on the block,” he added.
Deep Idea Funnel, Open Culture, And More
One crucial factor in the success of Junglee Games is retaining existing users and increasing the sales funnel by converting interested users into onboarded or paying users. An important role here is played by the company’s vision, its process of funnelling ideas as well as the work culture.
The company works on the simple principle that competition forces people to make a better product.
Unlike its competitors which are sitting on a pile of $100 Mn – $200 Mn investment, Junglee is still a seed funded company. “We were already a late entrant, so instead of focusing our energies on raising money, we decided to focus on building our brand organically.”
Instead of running expensive large campaigns, the company started signing partnership agreements and forming tie-ups with companies for growth hacking. In April 2019, Junglee partnered with creative agency INFLUX for its rebranding and adding a logo for its game of skill genre.
Talking about the culture, Gera said that they believe in an open work culture where anyone can share ideas without getting under the hierarchy burden. Any idea which can be backed up some data is put to test, thereby encouraging the new team members to work towards innovation from day one.
Also, an extensive process is followed to funnel these ideas before making it into the final product. “At a given point, 1-4 goals are decided for each executive and team members’ personal goals, as well as available resources, are aligned to these goals–each team member then picks 1-2 KPI’s for each goal to fulfil,” he explained.
For instance, the goal is to improve new user onboarding on a running game. First, both the existing and new employees start playing the game and join the existing virtual teams on the gaming platform. The hypothesis followed here is that for every 100 players, you will first get 10 returning players and then this number will gradually increase.
The results are then discussed with the people from business intelligence and marketing teams. It is then shared with the data science team, which not only assess the technical aspects of the game but also takes the help of a neuroscientist for doing the sentimental analysis of the game, Gera explained.
The neuroscientist guides the development and design team on various elements such as button colours, fonts and styles which are more likely to attract interest from users. “Even messages like ‘Sorry, you lost the game’ are carefully framed by the data science team. I don’t know any competitor that’s doing that,” he added.
Increasing Investor Interest In Online Gaming In India
With the industry performing well and the success of companies such as Junglee, Dream11 and Nazara, investors are not reluctant to bet. Have a look at these numbers:
- In FY19, the industry generated revenue between $500 Mn – $1 Bn, for a total of $200 Mn funds raised
- The total entry fees across esports and skill gaming are closer to $10 Bn
- From a handful of players in the 2000’s, India has more than 300 online gaming companies at present
- From 20 Mn gamers in 2010, India reached 250 Mn gamers in 2018
- More than 80 gaming companies have their headquarters in Delhi/ NCR and Bengaluru each. (analysed from CrunchBase data)
- Only 10% of companies are at a late stage, while approx 18.5% of companies are at the seed stage. This shows that there lies a large scope of growth in the Indian online gaming industry. (analysed from CrunchBase data)
The investor interest in the Indian skill gaming industry is largely due to the fact that it’s growing at a 100% YoY, at a fairly large scale. In the last 5-6 years, the skill gaming industry has grown from an industry worth $20 Mn to an industry worth $500 Mn. And most of that revenue is driven largely by two games of skill genres — rummy and fantasy games — run by a handful of operators.
According to a 2018 report by Deloitte, the calculated CAGR for the last 3 years for card-based games on the basis of change in revenue is 67.58%, generating a total revenue of about INR 730 Cr in 2016-17. Fantasy games of skill have grown by 199.69% generating a total revenue of about INR 67 Cr in 2016-17.
New Era Of Online Gaming In India
If the period from 2013 to 2018 was all about strengthening the roots, creating a positioning, and reaching users, the next few years will see the online gaming market entering a new era.
Now, there is no dearth of mobile data or cheap smartphones, and digital payments adoption has also grown. Over the last two years, the number of internet subscribers has grown from 368 Mn in September 2016 to 560 Mn in September 2018. Overall, the Indian gaming industry is projected to become a $1 Bn market by 2020 with 700 Mn mobile users.
India’s large youth population, its rising GDP and per capita income overall, and the increasing disposable income among the core target audience for gaming companies (18-34), mean there’s a big market for gaming startups. When you consider that most of these games are built for mobile, then India is well placed to capitalise on the growth thanks to rising number of smartphone subscribers.
The Indian online gaming market is far from saturation. There’s a lot of room for large players looking to capitalise on this opportunity. Players like BookMyShow, Paytm have already shown their inclination here. Gamification is already an area of innovation among education and edtech startups, so there’s familiarity with the concept of games improving skills or teaching something. .
And there are signs that the market will change dramatically in the future. With uncertainty about the future of freemium or pay-to-play model for non-skill based games, those who have invested heavily in that model, are likely to be part of an M&A wave in the gaming market. So far, IndiaGames is the only company which received a $80 Mn-$100 Mn exit in 2011 with its acquisition by Disney. Nazara is planning for an IPO, but still, the road is long.
Overall, the online gaming industry that was pegged at INR 2,000 Cr in FY14 grew 2x to reach INR 4,400 Cr in FY18. The revenue expected to clip at 22% CAGR from FY18-FY23 to touch INR 11,900 Cr, a KPMG report said.
Despite all that growth, among all the genres, skill-gaming is by far the most successful in terms of monetisation. “I think if you look at the top two or three operators — us and some of the ones that actually do have had success in social games — they’re all trying to make a jump to games of skill because of the flat growth,” Gera said, about the lack of revenue in other games.
Gera believes that only a handful of companies have been able to hit the global level, because of the flat growth in non-ad revenue. However, there are now more than 300 operators in the gaming startup space. “Thus, in the long run, the consolidation is inevitable. It’s more like an iceberg and we are at the tip of it.”