PlayFirst gets $16.5M and deal to distribute games on social networks

PlayFirst Inc. has raised another $16.5 million to help people goof off on computers, mobile devices and now social networks.

The San Francisco developer of casual games such as Diner Dash also announced a partnership with RockYou, a publisher of applications and widgets on the Web, for a joint initiative to distribute the game Wedding Dash, on social networking sites, beginning with Facebook Inc.The Wedding Dash game application will allow Facebook users to challenge friends in a game "to determine who can plan the ultimate wedding." Users on PC, Mac, mobile and handheld platforms have already downloaded the game 200 million times.

PlayFirst CEO and president John Welch said the partnership with RockYou should give his company a foothold in the popular social network and could greatly expand the reach of the company's casual game content.

"We want to bring our products out to our audience wherever they may be, and that audience is increasingly spending time on social networks such as Facebook," Welch said. "If you spend any time on there you'll see that there's a lot of room for improvement in the quality of the gaming experience on Facebook."

"We have a two-prong strategy when it comes to social networks," he continued. "[First] is to deploy the applications that we have in novel ways on the social networks using the APIs that are available and the second is to take our skill set and assets and create new experiences that are specifically for the social network environment."

Leading the Series C round is new investor DCM of Menlo Park, Calif., joined by returning investors Rustic Canyon Partners of Santa Monica, Calif., Trinity Ventures and Mayfield, both of Menlo Park. (Rustic Canyon Partners is an investor in The Deal LLC).

Founded in 2004, Playfirst now has $26.5 million in venture capital under its belt. The company's first round consisted of a $5 million from Trinity Ventures and Mayfield in September 2004, followed by a $5 million Series B led by Rustic Canyon in January 2006. San Mateo, Calif.-based RockYou has received an undisclosed amount of funding from Sequoia Capital, Partech International and Lightspeed Venture Partners.

PlayFirst now distributes its titles through more than 450 online game destinations such as Yahoo! Games, Shockwave, Boonty, Real Arcade and Macgametore.

The company had sales of $4.8 million in 2006 and saw revenue growth of more than 100% in 2007, Welch said. While not making any promises about 2008Õs top-line, Welch said the company is "very bullish" about its prospects since the new capital will allow it to "take the elements of the business that are really working and dive down into product development mode for nine to 12 months."

"The real theme of raising the capital is to accelerate our product development plans, both across our Web agenda including the [RockYou partnership] with deployment of apps into the social networks," Welch added, "as well as our game development both by internal head count, potentially starting studios in other parts of the country and maybe a small acquisition or two."

On the game development side, PlayFirst will expand on such features as micro-transactions and social networking elements that it incorporated into its recent hits like Diner Dash: Home Town Hero, Chocolatier, Wedding Dash and Dream Chronicles.

"We made a considered bet [with micro-transactions] on Diner Dash: Home Town Hero that we consider a resounding success," said Welch. "Today 50% of transactions driven on Diner Dash are below the $4.99 price point, we have very strong acceptance of users downloading content like additional levels and items to customize environment or avatar."

"Another use of the funding is to accelerate the build-out of those sorts of features in other games," Welch added. "When we look to the future we believe that micro-transactions are going to be important in driving consumer spending at smaller price points as well as layering ad-models that are more compelling than a banner ad or a video commercial."

While the hit-and-miss nature of the video game industry wasn't a very big draw for venture capitalists in the past, it's started to become a magnet for funding as sales reach $19 billion to $20 billion. The slice of the market that PlayFirst leads - casual and online games - is expected to reach $2.2 billion by 2012, according to analyst firm DFC Intelligence.

Other game developers to secure funding in the last 12 months include Brash Entertainment LLC and Realtime Worlds Ltd. Brash raised $400 million in a combination of equity and debt to develop games based on high profile Hollywood movie releases; and Realtime received $31 million from New Enterprise Associates to make multiplayer online video games.

Even more popular, though, have been startups that provide services for the video games. Live Gamer Inc. announced a $20 million Series B this week for a platform that will allow virtual-world gamers to buy and sell virtual property with real money. Earlier this year in-game advertising companies IGA Worldwide Inc. and Eyeblaster Inc. received $25 million and $30 million, respectively, in new funding. Orrick, Herrington & Sutcliffe LLP was counsel to the investor group; while Playfirst turned to Cooley Godward Kronish LLP.