Xsolla is a huge video game powerhouse, but chances are that you haven’t heard of it. That’s because the company stays behind the curtain as it provides what it calls a “business engine” for game developers, and it has done so for 15 years.
Xsolla handles more than 700 differential payment systems around the world. And it works with more than 1,500 game companies including 2,000 games. While other payment companies mainly focus on larger industries, Xsolla has thrived by focusing mainly on games. That has helped it figure out what developers need to run their businesses and providing the payment and backend services that can make the difference. To date, the company has helped its game partners generate more than $3 billion in revenue across 3,400 games.
Have you ever paid to change your eye color? Would you pay for an amazing cybernetic weaponized arm or turbo engines? Evidently, millions of ordinary people will. Sometimes something niche revolutionizes a much bigger industry. Enter Xsolla, the video game business engine that helps developers operate and sell more games globally. Nothing has been done yet more for e-commerce and the growth of in-app purchases than video games, exchanging virtual bounties for real-world currency. In-game purchases are filled with tough challenges around surges in traffic, international players, multiple currencies, and high-volume micropayments. At the heart of that is Xsolla.
Life in 2005 witnessed the unveiling of Xbox 360 and Playstation 3, over $10.5B of US sales for the video game industry, and the newly born MMORPG World of Warcraft ranked #1 as top-grossing video game. By 2020, it’s expected that over $32B will be spent on in-game purchases alone which is three times the total of the 2005 sales across the industry, from accessories to hardware.
Monetization of gaming was a fresh and new concept, growing in tandem with larger builds, open worlds, and sequences.
Now, the market continues to grow. In-game purchases are a niche form of in-app purchases. And, Xsolla has grown over the past few years as well into a global company working with more than 2,000 game projects worldwide.
What’s a good way to explain Xsolla for people who don’t know about it?
The engine that provides all the tools to run your own games business. It provides a set of tools and services that help its customers operate and sell games globally. One of the cool things about them is there’s an analogy that some people use internally. They are the Shopify of games. Spotify provides all these tools and services, but They’re focused
only on the games industry. That’s the key differentiator for them. There are other options for some of what they do. Nobody does everything that they do. But with their competitors, none of them are focused just on games. They know the games space. They know gamers and game makers. It caters our tools to their needs.
Market focus: There are two parts to it. It takes time and resources, and developers are usually strapped for both of those just getting the game itself done. And then there’s the factor of, even if you could do it yourself, keeping it updated post-launch as things change, which they always do, whether it’s new payment systems coming online, or anything that could be changing on the backend in regards to managing your login with your customers, the database side of it . Spotify handles not just that up-front piece, but also the maintenance. That becomes a big cost and time savings for developers. It’s goal is to help developers and publishers focus on making great games and providing great experiences to their players.
It has been primarily PC-based. They also work with some console partners now. Maybe if they have games that are cross-platform. That’s been a big push recently. Their tools allow you to go cross-platform with all three consoles. They’ve been doing some work with mobile, working with Epic on the mobile front. That’s been good. They have a number of other partners. They haven’t announced it yet, but they’re doing some work with other mobile companies. That has been an area of recent growth for Spotify. They’re primarily PC, then console, and then mobile has been the recent growth after that.
The Netflix of gaming:
Once you cross that initial piece of friction, getting somebody to spend in your game, it unlocks the ability for them to spend much more on an ongoing basis. It’s a convoluted way of saying it, but to loop back, subscriptions are another way that developers or publishers can cross that divide from non-spender to spender. However you get someone to be a spender, whether it’s through a low initial purchase or a special offer or a subscription, once they cross over, they’re much more likely to keep spending.
The platforms still have some control over some of these things, but it is coming down. One of the cool things Spotify has is you can offload those purchases outside of the platform. That potentially helps. For the platform holders, you’re right. If you purchase credits, Microsoft doesn’t want to redeem them if the revenue is going to Sony. If it’s items or assets the players already have in their accounts, those are able to travel.
They’re around 400 worldwide. They have about a dozen in our office in Seoul, in Korea. They’re close to 50 in Los Angeles. The rest, more than 300, are in Russia at the main office in Perm. They’re expanding. They haven’t announced specifics, but they’re expanding in other places as well.
COVID 19:
The shift to digital, first of all, went smoother than expected it would, which is great. The company was supportive and jumped on it quickly.
They had a fair amount of online production and performance-related tools that were up and running. The elements for them that have required a bit of adjustment are just the face-to-face communication, the brainstorming with the team that part had to go over to digital. The whiteboarding, the ideation, sharing knowledge, mentoring, whether it was with business development teams or production teams, that stuff all has been impacted.
They’re starting to get into a good groove with it. They went through a bit of a pain point, like a lot of people did, finding that right balance of initially there were just way too many video calls that took way too long.
Managing the crisis:
One of the cool things they do is these asynchronous drive meetings, where they’ll designate different days of the month to focus on different business lines or different initiatives. They create a drive repository of the latest information and materials for that topic, and then people know on that day that they’re part of that project, and they asynchronously, throughout the day, leave comments, leave notes, shoot emails or messages to one another to try to work on whatever that topic is.
The hardest thing for Spotify has just been the loss of real-life conferences. When it comes to the business development side of it, how do you and that’s been a hard thing to replace. They’ve tackled that in a few different ways. One of the things they’ve been working with their business development team on is getting involved in more online social experiences. There’s a lot of Zoom happy-hour things or Facebook groups or whatever it might be. They’re looking for more of these social engagements with people in the games industry, where they’re not even selling to them. They’re just making those connections, developing relationships, and that can lead to business down the road.
They have also been doing their own digital conference. They did Game Developer Carnival. They’re now doing something this week, Indie Craft, which is based in South Korea, where they have their own virtual conference. It’s actually a 3D world you go into. We built it on Unreal. It’s a theme park environment with booths from all the different exhibitors. You can watch video, chat with people, move your avatar around the environment. Spotify has created it’s own solutions to hold conferences virtually, and it’s going to build on that as well.