What’s Next For ZeptoLab?

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ZeptoLab, a Russian-British gaming company launched its new game “Pudding Monsters” today at Le Web, an annual Internet conference in Paris organized by Loic and Geraldine Le Meur. The company is hoping for a repeat of its hit game “Cut the Rope.” ZeptoLab is an example of how Europe is — for the first time — producing venture-backed category leaders across the digital space. Europe, which has long had strengths in B2B (think Business Objects, SAP, ARM, and Dassault Systems) is now home to top gaming developers such as Rovio, Mind Candy, King.com, Peak Games, Wooga, Gameforge, Bigpoint, and Big Fish Games.

ZeptoLab, which has raised no outside funding, has racked up 300 million downloads of Cut The Rope across all platforms. (The game runs on iOS, Android, Windows, RIM, Symbian, and LG’s proprietary OS as well as on PCs and Macs). The first iOS game to win a BAFTA Award, as well as an Apple Design Award, Cut The Rope features unique, physics-based gameplay that capitalizes on touch technology.

As the popularity of Cut The Rope’s little green monster Om Nom grows, the company has extended the franchise into toys, board games, clothing and online entertainment, with more brand extensions planned in the coming year. The company now has merchandise deals with Mattel, Hasbro and Burger King. In October ZeptoLab launched a Web-based animation series called “Om Nom Stories,” which is attracting more than 100,000 views per week. The episodes are available through an update to games on the iOS and Android platforms. Fans can watch shows directly through the app as they are released or on the ZeptoLab YouTube channel. The company has also signed a deal with Sony to develop a live television game show. CEO Misha Lyalin recently spoke to Informilo’s Jennifer L. Schenker about the company’s expansion into new areas and what’s next for ZeptoLab.

Q: One of the unique things about Cut The Rope is that it is physics-based gameplay. Do you view the game as an educational tool?

A: Cut The Rope is being used as an educational game in schools and it has even been used to teach skills to people who have had strokes. I can definitely see applications — we are working on some initiatives in that direction but we don’t really know yet what they might be.

Q: Can you talk about your existing revenue streams?

A: We make money the old fashioned way — we sell games for $1, we also offer in-app purchases — those have been growing significantly — we sell super powers and things like that, we also offer completely free games monetized through advertising. Merchandising and licensing are also bringing in a sizable proportion of our revenues. We started our merchandise licensing program a little over a year ago with some initial tests on the market with plush toys and novelty items and then established a licensing program in the U.S., Canada, the UK, and western European markets. We have been kind of spanning the world as we go along with everything from board games all the way to plush toys, backpacks, sleep wear, I can go on and on. We are signing more and more contracts. Some of them will work and some will not, such is life, we just move forward. We also have animation on YouTube and we signed with Sony to do a kiddie TV show. Expect a lot more. A lot more stuff is coming.

Q: Where do you see future growth coming from?

A: Look at the markets where handset and tablet penetration are still really low. We haven’t even started on those markets. There is still much, much more to do.

Q: Can you elaborate on the demographics of your user base?

A: About 40% are in Asia; most of the rest are in the U.S. and Europe. Our users include young children all the way to adults. Kids as young as three years old can play with no problem.

Q: What’s next for ZeptoLab?

A: The market is very much in a gold-rush state. Everybody is searching for the right model and as soon as someone finds something everyone rushes in. I think there is still huge potential in the market. The number of good games is still fairly limited even though there is a huge amount out there.
We will work on expanding and exploring existing IP from all sides, be it games, merchandise, etc, but an equally important part of our business is making new games. We now have a strong foundation to build further.

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