GameStop Smartly Snaps Up Social-Gaming Upstart Kongregate
Just last week, GameStop (GME) CEO Paul Raines said he wanted turn the company's Web site into a gaming platform. Turns out he meant right now -- this week, the company bought online social-gaming site Kongregate. This savvy move puts GameStop right where it needs to be, with its finger on the pulse of its hardcore gamer audience, and gives it an instant crowd for gaming on its own site.
Kongregate was a smart buy in part because it's a startup and was likely very affordable (the purchase price wasn't announced). Some of the bigger platforms would have come with a huge price tag, such as Zynga, which recently got a $1 billion valuation when Facebook bought a stake. By contrast, Kongregate is still wearing a "beta" tag.
But it's home to more than 31,000 games visited by 10 million gamers a month. A large community of game developers post their games to the site and share in revenue generated from ads and from purchases some gamers make to buy virtual items for their games. In other words, these two companies' target audiences are basically identical.
GameStop can only screw this up if they reduce developers' revenue cut and drive them away, or they find a way to piss off gamers. They'll need to do some reassuring to keep Kongregate's audience happy -- some gamers were grousing about the deal on their forums. While there was positive feedback for the idea that the GameStop alliance could mean more money for gamers, others decried it as a sellout. "Damn you Gamestop... I'm taking my business to Amazon," wrote commenter Jnr Johnson on the gamer blog Destructoid. "What if they make Kongregate charge for once free games!" GameStop will need to allay these fears to keep the gamers on board, which shouldn't be too hard -- dangle a few exclusive games at them and they'll keep whiling away their time on Kongregate with a smile on their faces.
Meanwhile, the possibilities for using Kongregate to build GameStop's business are many:
- GameStop is getting its PowerUp frequent-shopper rewards program going, and Kongregate can provide goodies to hand out to participants. For instance, a chance to play a new game pre-release doesn't cost anything, but is highly prized by gamers.
- In-store appearances by popular game developers could be a huge crowd draw.
- Hook up a few terminals in your store and hold a tournament for some of the most popular Kongregate games!
- Hold a contest on Kongregate that's only for PowerUp members.
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