SACRAMENTO, Calif. —
Just over three years ago, online game developer Klicknation was born in tiny Sacramento offices, when University of California-Davis business graduate Mark Otero took profits from his popular Mochi Yogurt shop to launch the startup.
KlickNation has since grown to nearly 70 employees, moved into new, expanded digs; opened a development office in San Francisco, and is pulling in millions of dollars in revenue.
And that may be just the beginning. Last month, KlickNation reports, it signed a multi-year, multimillion-dollar deal with NBC Universal to design online games for its newly created Syfy Games division.
The deal between the media conglomerate and the small Sacramento firm shows how the market for games on social media platforms is exploding, and how game developers in different parts of the country — not just in Silicon Valley — are getting in on the act.
“We’re taking money from New York and moving it to Sacramento,” Otero said. “It’s another example of a local startup creating jobs — good jobs — in Sacramento.” The company has nearly doubled its workforce in the past six months, and is still hiring.
Otero wouldn’t release the specific dollar amount of the contract, nor the privately held company’s sales or profits. A call to Syfy’s New York office wasn’t returned.
Otero said the deal with the media giant would give KlickNation not only more money for expansion, but a larger potential audience for its games, which are targeted at hard-core, mostly male gamers.
As part of its new contract, KlickNation late this year will launch a new combat game called “Age of Immortals.” Based on Greek mythology, it features demigods returning to their Olympian home to battle a great evil.
The game will debut on Facebook. But if it succeeds, who knows? With such a large backer, possibilities could even include spinoff TV shows or movies.
Already, nearly 1.3 million users a month play KlickNation games, which include such titles as “Six Gun Galaxy,” “Superhero City” and its most popular game — “Age of Champions” — on Facebook and mobile devices, according to applications traffic tracker AppData.
“We continue to focus on the core gamer, the strategy role player,” Otero said. “They take their games very seriously. Coincidentally, they pull out their wallets.”
A clientele like that was enough to catch the attention of one of the entertainment giants scouring the market for new social media products. They’re trying to gain position in what has suddenly become a multibillion-dollar industry, one that is eroding the profits of traditional video game producers.
“It’s amazing how quickly things have changed,” said Charles Hudson, a San Francisco-based gaming analyst and social entrepreneur. “Now, 200 million people are playing games on Facebook. Games are built and adapted specifically for the platform.”
In KlickNation’s case, emails late last year turned to preliminary talks and an invitation from NBC Universal officials to craft a game proposal.
Ken Walton, the firm’s chief operating officer and a co-founder, said NBC moved fast. “They definitely have buy-in from their side. Syfy is trying to run like a startup. They have the same energy.”
Other companies making deals include ESPN, video game giant Electronic Arts, with its lucrative Madden Football franchise, and now NBC Universal.
San Francisco-based venture capitalist Timothy Chang was involved in some of last year’s biggest acquisitions, including a massive $763 million deal in which Disney scooped up social game developer Playdom.
He said big companies are looking for social media games to tie into their existing products. “EA, Disney — they want to build social games around other brands they own,” Chang said.
The power of the emerging social media market became evident on Thursday, when Nintendo shed 20 percent of its stock value after saying slow sales of its hand-held 3DS gaming device had caused profits to plunge. Analysts said the gaming titan had been hurt by the migration of casual gamers to social media, where applications and games are often free or cost less than a dollar.
KlickNation first attracted attention in 2008 with an online application called “Kiss,” which allows users to send photos and electronic “kisses” and communicate online. The subscription-based app was popular (”It was huge, a monster,” Otero says now), but made no money.
“We were bootstrapped, gasping for air. It was pretty dire,” Otero said.
Social and mobile games turned the business around. While KlickNation’s games are free, it charges for equipment and add-ons, like special shields and bracelets. It’s a model similar to that employed by Zynga, maker of “FarmVille” and other popular games.
In this new, portable gaming world, the frontier isn’t in one place. Developers are building applications in many cities, including the Bay Area, Austin, Texas, and here in Sacramento. KlickNation may be the biggest player in Sacramento’s social gaming space, but there are other developers, too: firms like Rocket Games and Roseville’s 5th Planet Games.
Otero says Sacramento is a fine place for his firm. He ticks off some reasons, including proximity to the University of California-Davis and Sacramento State, and a relatively untapped talent pool of designers, artists and programmers.
“These are hardworking, creative, smart people,” Otero said. “Look at ’Six Gun Galaxy.’ It’s built in Sacramento by Sacramento talent. It’s here.”