Source - Reuters
Electronic Arts announced last night that they have bought gaming website Pogo.com in a deal worth $42m. Pogo.com is probably better known for its past life as gaming service provider TEN, who helped form the Professional Gamers League before abandoning the notoriously fickle hardcore gaming market to concentrate on mainstream webgames such as card and board games. Pogo.com boasts 17 million registered members and is apparently the stickiest site on the net, with users spending an average of three hours on the site each month, but if none of those people are paying you then all the users in the world won't do you any good.
The recent collapse in the online advertising market seems to have sunk Pogo, who relied heavily on advertising revenue to subsidise their service and cash prizes for players. Earlier this year a $150m deal with Excite@Home fell through, and this weekend EA picked up the ailing site for some loose change it found down the back of the sofa. The deal is a risky one though - with the current state of the online advertising market the 800,000,000 ad views a month which Pogo claims to get aren't going to earn anything like the $25 per thousand which one rather optimistic analyst said would make the deal pay for itself. Unlike Pogo though, EA.com relies on a mixture of advertising revenue and subscription fees, but they will need to convince upwards of 600,000 Pogo users to subscribe to their service to meet their target of breaking even by next spring.
"Pogo's content and traffic allow for a great revenue line from advertising and is very compatible with EA's plan to convert players into subscription revenue", according to EA's Jeff Brown, but just how many of those 17 million users were actually active, how many will switch over to EA.com and how many will want to pay for monthly access to premium titles remains to be seen. Certainly EA.com is in need of a boost though, as rumours suggest that the project has swallowed a huge quantity of cash, including financial penalties inflicted by AOL (who use EA.com games on their own online games channel) as a result of the project running behind schedule.