Playspan: Leading Innovation in the Global Payment Industry
Date: Friday , December 31, 2010
The headquarters of Santa Clara based PlaySpan is bustling with activity and everyone including the CEO of the company, Karl Mehta seems to be on their toes. And why not? Within four years of its humble beginning in 2007, the company has raised three rounds of venture funding from leading investors in the valley and large mobile operators, the latest being in August 2010 for $18 million. And today it is on its way to disrupt the 50 year old global payment industry with its payment platform — UltimatePay™. With this the company is also in the path of revolutionizing the e-commerce industry by leveraging both online/mobile gaming and social networks on its platform.
Today, with over 28 million users globally (growing at over 100 percent annual rate) and hundreds of millions of audience across its merchant networks, PlaySpan has empowered merchants and consumers across 180 countries with over 90 different payment options with multi-channel devices. Its clientele varies from small businesses to globally recognized brands including Facebook, Warner Bros., Nexon, Perfect World, Hello Kitty Online, Disney, Adobe, Revision3 and Nickelodeon to name a few.
The Technology Gap in Payments
The company originally started with a simple idea to provide an easy to use single-account of virtual currency based on aggregation of multiple in-game accounts and currencies. The idea caught on especially with younger users who needed one account that they can be funded by their parents and can be used at multiple games. The lack of a secured wallet or a digital vault that enables an in-app/ in-game purchase that works fast and across all profiles/ avatars was simply not available from any existing payment providers. Upon further research, they found out that game developers were struggling to keep users engaged and complete a purchase without friction, but the chargebacks associated with digital goods and existing out-of-game ecommerce flows were some of the biggest technical challenges. These pain-points were big enough to convert the idea into a real solution and PlaySpan was founded as a platform where developers and users could enable a secured in-app payment. But eventually, Mehta saw a much bigger opportunity envisioning that this solution will be needed for all digital content or physical goods and across all devices.
“The entire digital space has been undergoing a remarkable change in the past few years. There has been a significant increase in the consumption of interactive media like online/ mobile games and social networking. With digital content going cross-platform across open web to social web to mobile devices, console and web TV now, there has been tremendous interest amongst developers, publishers and merchants to sell digital goods,” says Mehta.
From social network biggie Facebook to online gaming publishers like Zynga, all have ventured into digital goods space by offering Facebook Credits, Game Cash, Game coins, and other online accessories for one’s virtual gaming profile. Players today are wiling to pay for virtual currencies to buy virtual goods. But these goods cost as low as 25 cents to 99 cents. Since, traditional payment gateways like credit card charge anywhere between 3-4 percent access fee per transaction which are cost prohibitive for a sub $2 transaction, and lacks the in-app, cross-platform portable wallet/ profile capabilities that is needed by both consumers and merchants. Hence, it is this gap PlaySpan hoped to bridge by developing a next-generation payment platform.
Developing a Disruptive Product
So how does PlaySpan make this happen? The company’s payment infrastructure has two sides to it. Firstly it offers a wallet infrastructure, a next gen PayPal type platform where both consumers have in-app access to accounts in virtual currency and merchants have easy to integrate SaaS based monetization platform to monetize their mobile or online sites across multi-channel. With one click, this virtual currency can be spent on various content across multiple devices. Since the wallet is also portable, it is placed right with an application/content so that the user need not navigate away from the web page she is in. “Usually while making an online transaction, users gets diverted to a new webpage by the payment gateway thereby causing a disconnect in the users mind. We have observed that since lots of these purchases are impulsive, this disjoint in usage tends to make the user re-evaluate one’s decision. This could lead to a loss of revenue. Our UltimatePay lightbox technology was designed to ensure that a gamer/user does not have to navigate away from the app and complete the entire transaction within the application,” explains Mehta.
Secondly, it took the complexity of managing payment for enterprises/merchants by creating a monetization platform known as MaaS (monetization as a service™) platform, with all the components of both online and mobile payment solution that a merchant needs in an out of the box PCI compliant hosted infrastructure. Be it a startup or a billion dollar enterprise, any one can use this Application Programming Interface (API) based payment platform and transact across million users globally. The service shows that the software-as-a-service trend — which started with enterprise companies such as Salesforce.com — can be extended to the business of providing services for online games.
The greatest feat amongst PlaySpan many technological achievements is the speed at which PlaySpan has built and emerged as a global leader in a complex industry. For years, several large payment companies have been spending billions of dollars to build this infrastructure internally but PlaySpan built the platform over the past four years with an agile culture and proven engineering teams working in 24 hour cycle (US/India plus integrating two payment companies it had acquired over the past three years. Mehta made bold moves to follow an aggressive M&A strategy to build out the platform, team and market traction rapidly, to maintain its first mover advantage against establish players.
Today, apart from traditional payment gateways, PlaySpan’s biggest competitors are the internal engineering teams at large merchants.
UltimatePay has gained considerable traction as users in 180 countries use it to pay for their virtual goods in games. The company also brings services such as fraud prevention, merchandising, and promotion to game companies, helping them to optimize more Conversion (Paid Users) and ARPU (Average Revenue Per user) out of their games.
But this success, though quick, was not an easy one for Playspan. About four years ago, there was almost no interest in the platform. “Being a startup, the greatest challenge for us was we were entering a market that no one had treaded. There was no company that previously attempted to create a platform like this, thus we did not have any model we could emulate,” explains Mehta. The 50 year old traditional payment industry too has been secretive about its operations and to break their business model with micropayment platform was a challenging task. Along with this, also came the challenge of being accepted in the market by both the consumers and merchants. For Playspan it was a typical ‘chicken and egg cycle’. But with persistence, the company continuously worked in close quarters with both customers and merchants; evangelizing them about their product and also improving it with their feedback. “We have built a great team and more importantly a company culture that works on each and every feedback we get from our users in a super-iterative mode to respond in 24 hour cycle with a new release,” he adds.
With the success of virtual goods and micro-transactions in Asia and with the impact of the recession on U.S. gamers, the virtual goods business has skyrocketed. Today, PlaySpan has bagged over 28 million wallet accounts as against PayPal’s 80 million accounts that it bagged in a decade; and enjoys 1000 plus developers and 2-3 million transactions a day.
Despite the company’s quick run to the top echelon in payment industry, Mehta feels, the real opportunity for the company lies in the next few years. The digital space is an ever changing one. The gaming industry especially has journeyed from open browser to portable and connected devices like smart phones and Internet TV and consoles like Xbox, PlayStation and Wii; opening up an entire new arena. The challenge lies in anticipating the market need before even the users themselves realize it. “With consumers shifting across platform, we too have continuously evolved our wallet platform both in terms of its in-app capability and portability. Also the payment industry is the most targeted sector in cyber space. Thus the challenge is also to continuously evolve our platform’s security threshold,” says Mehta.
To conquer this continuous challenge of anticipating and evolving with market demands while keeping user confidence intact, the company has invested heavily in the technology and compliances (PCI Level 1 and SAS-70 certifications). The company prides in the fact that it has the latest and best state of the security processes in place. Also, to gain a leadership edge, it has recruited the best of minds in the payment industry. Its management at present is filled with technology team who earlier worked with PayPal, Visa, Oracle, Yodlee, Nextag, and others. The company also has a strong team of 135+ across its two offices in the U.S. and one in Mumbai, India.
The Present and the Future
Today, apart from its monetization platform PlaySpan has several capabilities layered on top of each other in a “multi-layer architecture”. It provides merchants with one-stop service when it comes to introducing their own virtual currency, subscriptions and microtransactions. The company has prospered as publishers flock to the free-to-play business model, where users can play games for free but pay real money for virtual goods such as better weapons. PlaySpan provides virtual currency and virtual goods platform, offloading the task of creating this infrastructure from game developers. It also provides the UltimatePay payment system that allows companies to offer a fast, in-app and secured transaction system. And it sells Ultimate Game Card gift cards at 50,000+ retailers so that users who don’t have credit cards can pay cash for the cards at stores and then enter a code to get virtual currency in a game.
“Also, executives at our merchant partners can use PlaySpan to tune their sites in real time, figuring out how to raise average revenues from paying users and get more non-paying customers to pay. How? A one-percent increase in conversion of non-paying customers to paying customers can result in a 25 percent increase in revenue. Similarly, reducing the rate of credit card fraud can yield big profits,” explains Mehta.
What is different now is that game publishers should be able to implement features such as a virtual goods store, a payment system that works around the world, anti-fraud systems, and other features that online games need in just a matter of days. PlaySpan doesn’t have to babysit the customers as they implement it manually over a period of weeks. Rather, the process is automatic. Customers can login to a web service and just get it all done. CEOs and game designers alike can use the dashboard to see how their games or videos are doing at any given moment.
Millions of gamers are using the Ultimate Game Card and PlaySpan’s own PlaySpan.com marketplace. Revenues have grown more than 100 percent a year in the past three years with 50 percent from U.S., 25 percent Asia and the rest from Europe, Middle East and South America. Keeping up with its business expansion, the company has made two acquisitions till date, adding to its technological prowess and has raised a total of $43 million in three rounds of funding. Its investors today include Easton Capital, Menlo Ventures, STIC Investments, Novel TMT Ventures, Vodafone and SoftBank.
Karl believes that the global payment industry is up for a whirlwind transformation in the next three years and this will be a crucial time for every player, especially PlaySpan.
With the advent of NFC, the physical plastic card is expected to become obsolete; the mobile will be the new wallet. It is no wonder that Vodafone and Softbank, recently joined the company’s investment round.
Also TV is going to become the next big internet device. This opens up a lot more opportunity for content developers and aggregators, in return shaping up the e-commerce industry. Hence, it is no surprise that all major credit card companies, large mobile operators and Internet giants like Google, Adobe, Apple, and , Facebook are trying to grab a piece of this pie.
But what keeps Mehta optimistic about this situation is its first mover advantage. “To develop a robust payment platform takes a minimum of three years in a super-agile environment and we are already three years ahead of the new entrants,” explains Mehta. In short, he is looking to continue to lead the ‘monetization platform’ category that he created in the payment industry.