Mochi joins an increasingly crowded and competitive market for virtual currency solutions to monetize online games, with Facebook’s own system soon to come. (And in all likelihood, a standards war among competing virtual currencies soon to follow.) With 100 million monthly unique users across its network, however, Mochi immediately becomes one of its lead players. I’m watching this space closely, because as I noted in my GigaOM Pro analysis of virtual worlds (subscription required), monetization of virtual currency is one of the market’s biggest opportunities. Unsurprisingly, while Mochi currently has no virtual worlds in its network, in a phone call earlier today, Mochi’s Jameson Hsu told me to expect MMO partnership announcements soon.

Image credit: Mochi/Ninjakiwi.</em

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Update: “The most common theme that can be seen in the [most popular] games is that they are very simple to play and amenable to almost any demographic,” company founder Jameson Hsu told me by e-mail. “Most of the games have simple control mechanisms and can be confined to just the mouse.” Hsu won’t say how much each of these titles makes from advertising, but claims that the top developers on their network typically earn four to five figures a year month in ad revenue. (Mochi emailed us to say they misspoke, so we’ve updated the figure accordingly.)

What’s the secret to their success? “First of all, these games are simply fun,” Hsu said. Beyond that, Hsu says games that are quick to hook users do well, as are games that do so in new, original ways. While Mochi sees a lot of knock-offs of popular games, “when something unique comes out, it tends to strike a chord with people looking for something new,” he said.

The list of top 10 games is below.

1. Bloons, created by Ninja Kiwi. A monkey and some darts versus an army of balloons.
2. Hotel Online, created by Realore Studios. Hotel management action game: keep your guests happy with room service, coffee, etc. or lose popularity.
3. Bubble Struggle 2, created by Krešimir Cvitanović. Can one heroic piglet with a speargun defeat waves of falling balls?
4. Papa’s Pizzeria, created by Flipline Studios. Baking action: make money by cooking your pies on time with the right ingredients.
5. Fancy Pants Adventures 2, created by Borne Games. Cool platformer action with appealing visuals and stick-drawing animation — and my personal favorite from this list.
6. Tower Bloxx, created by Digital Chocolate. Another fave: construct a city of skyscrapers by dropping ready-made floors from cranes, but beware wobbly towers.
7. Cube Crash, created by Ocean Breeze Games. Score points by scooping up connecting rows of like-colored cubes.
8. Bricks Breaking, created by Novel Games, distributed by MindJolt Games. Near identical to Cube Crash (above), just less visually attractive.
9. Paris Oh Paris, created by Shaun’s Flights. Possibly NSFW (and definitely cheesy), toss greasy food at the famously annoying, underfed celebrity.
10. Stunt Dirt Bike, created by YouGame.com. Jump cars and other obstacles with your dirt bike in this 2-D side-scrolling game.

Mochi Media, by the way, is spearheading a Flash Gaming Summit industry conference next Spring, which includes “The Mochis,” an awards show that’ll select the year’s best games. Which titles would you nominate?

Image credit: DigitalChocolate.com.

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Have Confidence In Casual Gaming’s Inherent Appeal To Advertisers

David Scott, co-founder of Casual Collective (profiled on GigaOM here), said November was actually a strong month for them, advertising-wise. “From our point of view it would seem that the in-game advertising has been kicked up a notch,” Scott wrote me. He speculated that advertisers were getting more ROI for full video/interactive ads embedded in Flash games than in traditional media.

Jameson Hsu, “Chief Mochi” of gaming ad network Mochi Media, seemed to concur: “The optimism around games being recession-proof not only applies to retail, but also holds true for advertisers marketing to gamers,” Hsu said via email. “Gaming audiences have diversified beyond the 18-24-year-old male and it’s making for an attractive sector to market to.”

Jim Greer, CEO of user-created game platform Kongregate, expressed confidence that core advertisers, like game publishers and movie studios, would stick with them. “[K]nock on wood,” he said, “it doesn’t look like the ad slowdown is going to hit us as hard as I feared.”

Diversify Revenue Streams Beyond Advertising

When Steve Hoffman, CEO of RocketOn Inc., originally told me about his casual web-powered MMO last August, advertising was a major part of their revenue.

That focus has since changed somewhat for Hoffman, who was also a CEO in the dot-com bust era, and likens the current climate to the film “Groundhog Day.” “With ad revenue shrinking to a trickle, even before our thirsty startup has had a chance to get a mouthful, we’re relying on virtual goods sales to keep us from starving,” Hoffman said in our most recent exchange. “Fortunately, we’re a virtual world, and we can grow our own goods, so if all goes well, our children will be fed.” Casual Collective is using its virtual goods as a revenue source (users can buy “Casual Credits” for system upgrades) as well, and Kongregate recently added support for microtransactions and virtual items to its game platform.

As a social game startup with a heavy presence on free social networks like Facebook and MySpace, advertising has been a major revenue source for Zynga, but that, too, is changing. “[O]ver the past 6 months,” founder and CEO Mark Pincus said via email, “we have de-emphasized the ad component of our business model so we are relatively less affected than others.” They’ve incorporated user pay elements into games like their cross-platform version of Texas Hold ‘Em, for example. He said his company is still cash-flow positive, and is “cautiously optimistic about the near future.”

Have Faith In the Value Proposition of Casual Web Gaming — and Your Startup

The Casual Collective’s Scott thinks the recession could actually benefit the Flash casual gaming industry. Instead of spending $20-$50 on PC and console games, he argued, many consumers will gravitate to free web games — especially because they don’t need to upgrade their computer to play them.

Jim Greer echoes that theme while also emphasizing that the user-created nature of Kongregate’s games help the Jeff Bezos-funded startup stay small and by extension, its costs low. “[W]e don’t need a huge staff — we’re currently at 21 employees. That means that even if our revenue dropped to $0, we have 18 months worth of cash in the bank.” But he’s confident that their passionate user base of gamers, who reportedly play on the site a total of 10 million hours monthly, will keep them solvent. “If that kind of engagement can’t support a company of 21 people,” he concluded, “something is very wrong with the world.”

One can only hope. We’ll check back in the spring, to see if these startups have survived.

Image credit: Flash game “Intrusion” on Kongregate.

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Emily Greer, co-founder of Flash game portal Kongregate, remains skeptical as to just how significant advertising revenue could become — at least for the average developer. She points out that for the vast majority of web-based game developers, sponsorships alone comprise 50-70 percent of any income they earn; these days, a good game can net between $1,000 and $3,000 in sponsorships and a great game — something like Desktop Tower Defense — can take in as much as $20,000. By contrast, only one or two developers within the Kongregate community earn $1,000-$2,000 a month from ads; some five to 10 of them earn roughly $500 while between 40 and 50 take in a mere $100 each month. And that’s out of a community of about 2,500 developers. She does, however, admit that those numbers are on the rise.

Mochi Media was unable to divulge any hard statistics, but given the viral nature of their advertising — ads are embedded into the game and thus earn the developer revenue no matter where the game spreads — I’d expect even higher numbers. And Chen notes that advertising revenue actually comprises the bulk of the revenue that the top games earn.

But what does this mean in terms of profit? Most web-based games are still being made by enthusiasts; their investments aren’t money, but time. Mochi Media CEO Jameson Hsu tells me that most games, and some of the best ones out there, are made by a single hobbyist, working less than full-time over a course of about four months. So if you assume a base pay of about $80,000 a year, that would mean that for one of these average developers, it would “cost” about $3,000 to make a game. In other words, a few months of good ad revenue, sponsorships, and contests winnings could easily make an indie game profitable. Greer says that dozens have already quit their day jobs to pursue web game development as a full-time career. Mildly worrisome, however, is the fact that startups are being created with the sole purpose of churning out new web games as fast as possible — sometimes at the astonishing rate of a new game every week.

What if these new revenue streams, by making what many developers consider an art form actually profitable, usher in a flood of sub-par web games as businesses tried to milk this new cash cow? Here’s hoping that quality – not quantity – will remain the ultimate determining factor of a developer’s profit.

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Google has roped in game developers and publishers including Konami, Playfish, Zynga, Demand Media, and games network Mochi Media. They have also signed on beta advertisers such as Esurance, Sprint, and Sony Pictures. Essentially this new program would allow social games and flash-based web games to have video, text and image ads integrated into them.

AdSense for Games delivers video ads based on intended placements, as well as image or text ads based on contextual targeting with keywords and tags supplied by developers and publishers. Advertisers are charged on a cost-per-impression or cost-per-click basis, and ad revenue is split between Google and game developers or publishers.

Google, using comScore estimates, in a press release said that every week, more than 25 percent of Internet users worldwide play online games, which amounts to more than 200 million people. This number is growing at a rate of almost 17 percent each year. The casual gaming business has been on an upswing for some time now, and with AdSense for Games, you can bet many more people are going to try their hand at social and web games.

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After the bankruptcy of Bolt.com last year, Gould said he was looking for his next opportunity. He’d noted an advertiser rush to gaming sites while at Bolt, and decided that should be his next endeavor. New York-based Gamers Media reaches 20 million uniques and has about 40 properties on which it can place ads, and it has signed a partnership with Adify to build out its publisher network. So far, Gamers Media is profitable, but Gould said he doesn’t disclose revenue.

He did say the CPMs on his site range from $10 to $20 for brand advertising, with tactics such as page takeovers and custom-built “advergames” netting a higher CPM. The site shares an average of 50 percent of its revenue with publishers that range from Big Fish Games to Lycos’ Gamesville property. I love that the company is making money, and is profitable, but the value of Gamers Media is only as good as its publishers. It needs to corner the market fast — or score some exclusive arrangements with big publishers — in order to compete.

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Download the show in quicktime, windows media or Xvid formats. There is an HD download available as well.

Related posts:

* Casual games worth $2.25 billion. But where are they going?
* How Casual Games can become money machines.
* Inside the YouTube of Games, Kongregate

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