Here’s some good news in a particularly troubled time for Internet startups, and it’s especially piquant for anyone who’s been following the rise (and challenges) of social gaming: Offerpal Media is announcing today that it has secured $15 million in Series B funding led by D. E. Shaw Ventures. (InterWest Partners and North Bridge Venture Partners, original investors in the Fremont-based company, also participated.)
That’s a lot of money to invest during a notably down market, but after a phone conversation with Offerpal CEO Anu Shukla, I can see why. The company was profitable four months after its October 2007 launch, according to Shukla, and the company says it continues to generate $30-40 million in monthly annual revenue according to Shukla.
What will surprise many is how it makes that money: by linking real world marketing offers with virtual currency from hundreds of popular social games running on Facebook, MySpace, etc. Say you want some extra “FFS Coins” to spend in the Friends For Sale Facebook app. You can buy Coins for real cash — or you can complete a transaction with one of Offerpal’s advertising partners. Sign up for a Netflix account, for example, and get millions of virtual FFS Coins as a bonus. Netflix gets new customers, pays Offerpal for each successful acquisition, and Offerpal sends a cut of the revenue back to Friends For Sale developers.
According to Shukla’s data, an astounding number of people are buying into the idea: OfferPal currently hosts 2,000 offers for its social network/destination site clients, and tracks 2.5 million total transactions per month. The offer clickthrough rate ranges between 10 percent and 50 percent, and while 60-70 percent of the offers require a credit card, about half the people who click on those complete the transaction. (That’s about 8-10 percent of users total.) Those are impressive results — especially compared to traditional web ads — with impressive rewards for Offerpal partners. One social app (Anu won’t say which one) grosses as much as $3.5 million dollars per month via Offerpal.
This funding news should also come as good news to the social gaming niche, which is still laboring to find reliable revenue streams — especially during this lean period when VCs are scaling back their investments. The funding round will help expand Offerpal’s platform to the iPhone and other mobile devices, internationalize the service into Asia and Europe, and boost sales and marketing efforts in the U.S. — including hiring 50 new employees. So an expanding revenue solution for people in the social gaming space, and just as great, more jobs for them, too.