Tuesday, December 6, 2011

Holding The Aces

Live online rummy proves a moneyspinner for this company.

Deepak Gullapalli had a feeling that the cards before him held his future. He liked playing rummy and many a time as a Master’s student in Middlesex University, London, Gullapalli and his friends unwound with a game in the evenings. They were also online gaming junkies. It didn’t take him long to put two and two together and end up with an idea for an online portal for rummy. So in 2005, Gullapalli quit his internship at a consultancy, and came to India to set up Ace2three.com, making it the first portal for rummy in India.
 
Today, with 600,000 registered users, the portal owned by Head Infotech expects to clock Rs 25 crore in revenues this year. “We have tried to create the same user experience online as one would find offline,” says Gullapalli. About 8,000-10,000 tournaments per day are played on the website with an average 15,000 players logging in. The stakes: cash prizes of up to Rs 15,000 per day.
 
Though the Hyderabad-based company has a posh address today, it started in a small 100 sq ft room on the terrace of Gullapalli’s Hyderabad residence, where he and his two software developer friends started their “small project.”
 
Starting Trouble

The initial plan was to sell the game on CDs, pitting players against the computer. But a game where one played against the computer was difficult because it involved use of sophisticated software. Also, Gullapalli realised that rummy is more fun when playing against live players. So the partners worked on an online version where players could play each other over a network.
 
The Ace2three team built a basic prototype for two players in 2006 that they later upgraded to a multiplayer game. But there were still no plans to go commercial. “We didn’t have a revenue model then as it was only a play-for-fun portal,” he says.
 
The three friends had invested Rs 30 lakh but the money was starting to dry up. So in 2007, they started a subscription model where for Rs 200 per month players could log in for a game. But it met with little success. The slow internet connections, frequent disconnections and the game itself crashing added to their woes, says Gullapalli.
 
A loan of Rs 30 lakh from investors at mol.com, solved their money problems in 2007. And two years later, they received a fresh injection of close to Rs 1 crore from an angel investor. This funding brought stability to the business.
 
Yet another fillip to the growth plans came from an investment of Rs 7 crore by Matrix Partners in 2010.
 
With this they moved their server to Chennai from the UK to reduce the lag time (the time taken by the server to respond to commands given on the computer), although costs increased by 50%. “From 50,000 users in 2009, we’ve been growing 20-30% month on month,” says Gullapalli.
 
To handle the growing user base, the company plans to add more servers to the six it has currently. The company can now handle up to 10,000 users simultaneously. In the next two years, the addition of more servers will allow up to 50,000 players to access games simultaneously.
 
About 70-80% of the users of Ace2three.com, play for fun, while a small percentage of them play for cash (between Rs 2,000 and Rs 5,000). Only 20% of the players take part in cash tournaments where the players have a prize pool, Ace2three charges a 10% fee—the site’s sole source of revenue. The tournaments can have a minimum of two and a maximum of 1,000 players. The lowest prize pool for a tournament is Rs 100.
 
All users are given an Ace2three virtual wallet and chips. They settle dues via credit cards or bank accounts. Unlike other online portals, the gaming site does not have any advertising revenues. “We don’t want the customer’s focus to be away from the website,” says Gullapalli.

On The Cards

Avnish Bajaj, CEO, Matrix Partners, believes the market for online gaming is huge. “Our research shows that almost 100 million have played rummy [offline],” he says. “Currently Ace2three has penetrated less than 5% of the market, so they have a huge market ahead of them. And for any nascent industry, 5-10% is good penetration,” he adds.

Though there are plenty of competitors like Games 24X7, rummy.com, zapak.com and ibibo, Ace2three is confident of growth.

To attract more users, the portal is planning to introduce more regional variants of rummy along with other games of skill like Bridge. With these new offerings, they hope to hit the 1.5 million registration mark by March 2012. Then, revenue will be Rs 50-60 crore by FY12-13.

In 2012, Ace2three intends to design games for Facebook and launch apps for the iPhone and Android. As they scale up, more challenges are bound to show, but the founders are confident that they are holding the right cards.
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