Some of the best business ideas come at the crossroads of seemingly unrelated trends. San Francisco-based Outspark believes it has one, by joining the growing online gaming market with some of the best, interactive Web 2.0 features that are all the rage today.
The startup is creating what it calls a “virtual playground,” accessible through its web site. Users interact with one another while playing casual video games and develop online personalities that remain with their characters.
Outspark staffers actively participate in games, inserting a monster here or treasure there depending on the circumstances. A few days before Christmas, players were treated to an online party that included a costume contest and a juice bar.
"Online gaming has become one of the most important new cultural phenomena in Asia, and we believe that PC-based online games will find a huge market here in North America as well," said Tencent executive David Wallerstein in a statement.
Outspark on Thursday announced that it secured $11 million in a second round of funding led by the Chinese tech company Tencent and two Silicon Valley venture firms, Altos Ventures and DCM. The game publisher officially launched in October, following a $4 million first round of funding.
While Outspark’s aim to link gaming with interactive features might seem a clear winner, the startup’s model for generating revenue leaves room for debate. It is importing an approach used successfully in Korea and other Asian countries in which players play for free but are given the opportunity to buy “virtual items”—such as special armor or clothing for game characters.
This is an unproven approach in North America, where game publishers have traditionally made money through advertising, subscriptions, or digital distribution, according to a report by DFC Intelligence.
The research firm found that even though online gaming is expected to grow—from $3.4 billion worldwide in 2005 to $13 billion in 2011—the space is so fragmented that “many companies will struggle to become profitable.”
By limiting its earnings to sales of virtual items, Outspark might find the ride a bumpy one.
Still, the company attracted 1 million registered users in less than five months. And with an office in Seoul, Korea, Outspark hopes to tap into the much-lauded game developer pool in the country. Both its current games, Fiesta and Secret of the Solstic, are licensed from Korean developers.
Altos Venture general partner Han Kim said Outspark will continue to source games from Korea and then “localize” them for the North American market.
“Outspark has the rare combination to understand the American market and have the trust and respect of the Korean developers,” he said.