With anti-Zynga strategy, Kabam raises $30M for social games

The social gaming Gold Rush continues, and not all of the money is flowing into the pockets of Zynga, the biggest social game company on Facebook. Kabam, which has built its business in a very un-Zynga way, is announcing today it has raised $30 million in a third round of funding to develop social games and make acquisitions.

Kabam makes massively multiplayer strategy games for hardcore gamers who play on Facebook. Altogether, Kabam has 7.4 million monthly active users on Facebook. That’s not huge compared to Zynga’s 299 million users, but it’s a big number considering the fact that most people believe hardcore audiences don’t exist on Facebook.

The company’s ability to raise a big round from investors such as Redpoint Ventures and Intel Capital shows that social gaming is still hot as a start-up investment, even though many of its biggest winners, such as Zynga, are consolidating their hold on the market. But now the investments are moving into market niches where there is less competition from the big players.

“Our vision is to create massively multiplayer social games,” said Kevin Chou (pictured above and right), co-founder and chief executive of Kabam, in an interview. “We cater to hardcore gamers who are trying out Facebook and want to play games with their friends on it. This funding round is a validation of our strategy to stand out.”

Redwood City, Calif.-based Kabam has grown to 250 employees by focusing on the hardcore niche for strategy game fans. Its top game is Kingdoms of Camelot (pictured below), an Arthurian legend game where you build a medieval fortress and an army. You marshal your forces, launch alliances with other players, and then go to war. Thousands of players can be involved in epic alliance battles. It’s a lot like a real-time strategy game on the PC, but it moves slower and the graphics aren’t as outstanding. That’s a basic limitation of Facebook’s platform.

Still, the game has 7.3 million monthly active users on Facebook, and Kabam has created a number of similar strategy games, including Dragons of Atlantis and Glory of Rome. The games have high engagement, where players can fight each other for hours at a time. Kabam competes with other game companies that target hardcore players, such as Electronic Arts or Blizzard Entertainment. Chou believes that his company has an edge because the games are free-to-play, where users start playing for free and pay real money in small amounts for virtual goods.

Chou said that the company has invested heavily in technology and art work to make its game a high-quality experience, even for those who are used to a full gamer PC experience. Chou believes that “synchronous games,” where players battle each other at the same time, will become more popular over time and will be more appealing than the casual, short-duration, asynchronous games that rivals such as Zynga make. With games such as Kingdoms of Camelot, it’s not easy to calculate outcomes that affect thousands of players in a split-second.

The cost of investing in these kinds of immersive games is growing above $1 million per title, Chou said. That kind of spending is still far less than the $10 million-plus budgets for console game development, but it’s also far above the investments companies used to make in Facebook games just a couple of years ago. That’s one reason Kabam has raised so much money and has hired veterans such as former Electronic Arts game creator Andrew Sheppard.

Chou, who started playing games such as Nintendo’s Legend of Zelda when he was 12, is a natural to lead the company. Chou said the company, started in 2006 as Watercooler Games, focused on making a social network. Then the company pivoted again into making sports fan pages on Facebook. The company pivoted yet again into social games a couple of years ago. But the focus was on the hardcore games that companies such as Zynga tried out but decided were not a good fit for Facebook’s users. Full told, the company has raised $39.5 million from backers that also include Betfair.

Kabam acquired WonderHill in October. Back in early 2010, Kabam had just 20 employees. Then its Kingdoms of Camelot game took off. Now it has studios in San Francisco, China, and Germany in addition to Redwood City. The company is actively hiring, and Chou says he’s proud that the company’s four founders — Chou, Michael Li, Wayne Chan, and Holly Liu — are still with Kabam.

Chou said the company has a number of new games scheduled for launch early this year. He said the latest funding round was over-subscribed and more investors wanted to get into it.