Online Gaming Will Profit from Financial Crisis, Says Gameforge CEO | Business| Economy and finance news from a German perspective | DW | 07.02.2009
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Online Gaming Will Profit from Financial Crisis, Says Gameforge CEO

The founder of Gameforge explains why his online gaming company is profitting from the economic crisis and why it's tough to get a German start-up off the ground.

Rows of participants playing computer games at the Games Convention in Leipzig

The finance crisis won't keep people from the Internet, says Kersting

Klaas Kersting is the CEO and co-founder of Gameforge. He founded the online gaming company as a student in 2003 and was honored as Entrepreneur of the Year in 2008 by Ernst & Young. Gameforge offers around 12 games in over 50 languages with more than 65 million registered players. The company, which employs over 200 people, was awarded the "Red Herring 100 Europe" and selected as "Technology Pioneer 2009" by the World Economic Forum.

DW-WORLD: Why do start-ups have a much harder time in Germany than in some other countries?

Klaas Kersting: There are a couple of reasons. First, it's the market you start in. When you are a US start-up it's easy to get ventures funded, it's easy to get business development going and it's just easy to grow your company on your home turf where the market is already very big. There is one currency, one language, and one kind of cultural behavior and cultural understanding of what works and what doesn't. And that is totally different in Europe.

Secondly, it's about the mentality of the people. When you look at the typical German, he likes to work for a big company and the entrepreneurial spirit is a little smaller than in the US.

The economic crisis affects every sector of the global economy. How do you see the start-up sector faring in this situation?

It's all about having a start-up with a solid business model, probably even a proven business model to be able to attract a significant amount of venture capital. When you come with an idea for a start-up and say something like, 'we want to gain an audience and think about a business model later,' that worked pretty well a few years back, but now it probably wouldn't. Venture capital funds are very careful where they invest their money and they tend to invest where there is a near-future turnaround or business that is cash-flow-positive in the near future.

Unlike other game providers, your business model is not based on selling special consoles or games, but is a free service Internet. With this model, will you be able to profit from the economic crisis?

Definitely. Entertainment budgets in households are growing smaller and players still want to have fun, so our free service is a good solution. The Internet is a basic utility nowadays, it's like electricity or water. You don't cut down the costs there and so there is a platform that is practically in every household and rapidly growing in the emerging market even during this crisis.

But how do you make money if you don't charge for games or consoles?

We earn our money -- since we are a company, we have to -- by selling virtual items. For example, in a character based game you can buy a magic sword that is slightly better than the one you could buy with in-game currency only. It's about keeping the disadvantage very small and time limited, but still attractive enough for the player to spend a very small amount of money to get this item. It's about the balance between free-to-play and the paying players, because we need both in order for our business model to work.

Your company is active internationally. What are the differences between players in various countries?

There are definitely differences between the international cultures. For example, when we look at the Spanish players we can see the siesta in the middle of the day. We see that Germans don't tend to have Internet access during their work time as much as Americans do. In Germany, you see a clear usage peak during the breaks and in the US you don't.

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