Small social gaming company teardown: meet Drimmy

Even though Zynga is definitely a bubble, there are many successful social gaming companies out there. Most of them were pioneers in the area. This success lead to rapid creation of the followers: entrepreneurs and investors rushed to clone the winners. It is therefore interesting to see if these latecomers can be successful. I picked a company named Drimmi, which is a classical case of entering the market after all the land grabbing occurred.

Drimmi was founded by Nikita Sherman in late 2009, who previously was:

– a top manager at Begun (one of the top Russian online ad network);

– a producer of online games in Mail.ru (yes, that Mail.ru, which later merged with DST and became Mail.ru Group that owns chunks of Facebook, Groupon, Zynga);

– a president of Mamba (top Russian online dating system);

– a president of Odnoklassniki.ru.

In other words, this is probably as high as you can get in the Russian online business. No wonder that ABRT Venture Fund and Mangrove Capital Partners easily gave Mr. Sherman $4m to create a social gaming company. Let’s tale a closer look at the result.

Currently, Drimmi employes at least 50 people, roughly half of them residing in Moscow and the other half in other cities. Assuming average expenses of $3500 per person per month ($1700 – salary, about $800 taxes, about $1000 office expenses and overhead) this gives a burn rate of $175k per month.

How profitable is Drimmi? Their most successful games are:

– Fishing place

– Poker quest

Estimated DAU of these games is about 300,000. A typical DAU/MAU ratio is 20%. It is higher for newer games and it falls down as the game grows older. Thus it is reasonable to estimate Drimmi’s MAU at 1,500,000.

A typical conversion rate to paying users is 1.5% with average monthly spend at $5.5. These figures are known for US social gaming market, therefore they must be lower for Russian market. However, let’s take these as I don’t have any better. A simple calculation gives $123,650 per month of gross sales. This is before social networks take their cut, and they are not shy: 50% for VKontakte and Odnoklassniki, and 30% for Moi Mir. Drimmi has fewer than 10% of their MAU in Moi Mir, so we can safely enough use 50% as the number. This gives roughly $64k as monthly revenue of Drimmi.

The real figures may differ, e.g. the conversion rate can be higher, and average monthly spend is likely to be lower, but the final number seems to be accurate. This lands the company into negative cash flow of $110k per month. However, the revenue will grow eventually, while the expenses can be controlled to stay the same. The current growth rate of Drimmi’s MAU is about 10% per month. This is a good growth. If it can be sustained, it will move the company from negative territory in about a year. Overall, it will take the company 2 years to break even (one year has passed and another is ahead). This is considered to be a great achievement among venture capitalists.

Disclaimer: I have no any relation to Drimmi and haven’t received any inside information from anyone in the company. If you want to provide more accurate details, you are welcome to do so. I will update this post accordingly.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: