Neon has raised $14 million in funding to build a direct-to-consumer digital store platform to give game companies more independence.
Investors include Thrive Capital, Renegade Partners, Griffin Gaming Partners, a16z Games, Max Levchin’s SciFi VC, and Ribbit Capital. San Francisco-based Neon plans to double its team in the coming months while accelerating investments in product and go-to-market efforts.
Neon’s team has deep fintech, gaming, and e-commerce expertise having built and scaled products at Affirm, Apple Pay, Blend, Meta, Supercell, Unity, Netflix, Roblox, Walmart, and more.
One reason for the popularity of direct-to-consumer digital stores is the 30% royalty that the platforms charge developers for every sale of a game or game item between Epic Games and Google Play and the Apple App Store. It’s a conflict over. In an interview with GamesBeat, Neon CEO Chris Faught said that by bypassing them and going to stores like those offered by Xsolla, Coda, Fastspring, and now Neon, those developers are paying a 5% commission. He said he could get by.
“We believe that all the regulatory actions and app store policy changes that have occurred since 2021 and are currently being rolled out represent a tipping point for the gaming industry,” Folt said. “For the first time since the early 80s, when the third-party developer industry itself was born, these changes are giving all game creators the opportunity to become their own brand. We can get out from behind the platforms and app stores and not only build direct relationships with players, but also sell directly to them.”
Founded in early 2022, Neon is a modern direct-to-consumer platform built for gaming. Neon’s mission is to accelerate the gaming industry’s transition to a more competitive, fair and open ecosystem by building fintech and commerce tools that help game makers become lasting brands. That’s it.
“When you combine this regulatory-driven opportunity with a number of other technology tailwinds, such as the push for cross-platform gaming, streaming, WebGL, AI, Web3 gaming advances, etc., all of this combined means that the industry will become more focused around platforms alone. A future centered around the people, developers, and players who create and play games, rather than the industry that created them,” Fort said. “It will be a fundamentally better and larger market because it will be more open, fairer and more competitive.”
When asked who the company is targeting, Folt said it’s targeting game studios with revenue between $100 million and $500 million.
What problem are you solving?
Neon helps game studios retain more revenue and build direct relationships with players by supplementing in-game (app store-based) monetization with unique D2C e-commerce channels .
Neon’s fully customizable web shop takes full advantage of e-commerce, ensuring the player movement between games and the web is seamless and conversion-optimized. Its API allows studios to port rich Liveops features and segmentation to the web store, providing players with a personalized, immersive, and consistent experience.
Additionally, as a “seller of record”, Neon handles all the complexities related to payments, taxes, fraud, currency exchange, and support across 45 markets, so players can buy whatever they want while studios can You can focus on what you love: creating the best. It’s a game to them, Folt said.
It won’t be an easy battle.
“The reality is that the future is not guaranteed, because ultimately what we’re talking about is changing consumer behavior,” Folt said. “We’re not just talking about Apple, Google, Xbox, Steam, PlayStation, etc., we’re talking about consumers who interact directly with Supercells and Scopelys all over the world.”
why neon is here
The App Store has been under constant regulatory scrutiny for the better part of the past decade for its restrictive, anti-competitive, and self-favoring practices.
In 2021, amidst the battle over developing alternatives, Apple reaffirmed its commitment to the developer community to allow anyone to have their own fee-free out-of-app monetization channel (which is why Neon ). In-app payment options and the ability for developers to link to monetization channels outside of their apps continue to be all the rage.
In addition to app store pressures, advancements in gaming technology such as streaming and WebGL are increasingly eroding the benefits and necessity of having dedicated gaming hardware/consoles, making the entire gaming industry a platform-agnostic world. continues to evolve towards.
On top of that, industry integration regulations (e.g. MSFT<>ATVI) are forcing hardware platform owners/operators (e.g. Xbox, Playstation) to allow cross-platform support for games. And Microsoft is considering putting its cloud gaming service on top of Google Play following the ruling in the Epic Games v. Google antitrust case.
Platforms are evolving their own strategies and business models to support cross-platform gaming. That means we’re focused on monetizing our unique IP as broadly as possible, rather than selling hardware or exclusive content. Faught believes all these tailwinds point to a future in which the gaming industry becomes less hardware and platform-centric and more developer- and player-centric.
neon details
Neon’s total purchase volume has increased 12x every quarter over the past year. That’s because the company’s partner network continues to earn anywhere from 10% to more than 35% of its total revenue through direct-to-consumer channels powered by Neon.
Neon currently partners with various mobile and PC studios and publishers around the world, including Metacore, Theorycraft, Space Ape Games, and PerBlue Entertainment.
Average D2C order value is rising. Neon’s partners see the average order value for webstore purchases powered by Neon to be two to four times higher than in-game purchases. Additionally, more than one-third of players who purchase from Neon-powered webstores make multiple purchases each month.
In one experiment, Neon Partners found that 20% of total purchases came from net new buyers (i.e., people who had never converted in-game) in a D2C store. Additionally, up to 45% of Neon’s monthly purchases are made with payment methods not supported by the app store.
Game developers can sell their games around the world and use their preferred payment methods without major compliance headaches or overhead, Folt said.
“This is a very difficult fintech problem to solve. We solve this problem by adopting what we can think of,” he said. “We manage fraud and data privacy requirements. We handle all post-purchase support for our players. So, again, developers don’t have to do these tasks themselves. But the real challenge is optimizing the performance of that solution.
Looking to the future
Regarding crypto trading, Fort said the potential of cryptocurrencies in international fund transfers is attractive. He doesn’t think it’s completely ready yet, but it could be in the not-too-distant future. Fort said crypto payments will move forward on the company’s roadmap as more consumers want to pay with crypto assets. However, it is currently unavailable.
“That’s not our starting point,” he said. “Players still use traditional payment methods. By expanding from debit and credit cards to payments such as PayPal and other local wallets, we are expanding the addressable market for developers.”
He said customers are drawn to D2C web shops because of the chance to own the relationship with the player. In that capacity, game developers can make offers on live service games and provide players with better promotions and deals, Folt said.
“We continue to invest quite heavily in our APIs to ensure that we can support all of these offers and provide the tools, compliance and analytics infrastructure,” Faught said.
The company helps developers understand where players come from, their purchasing behavior on the web, and build player profiles, allowing developers to understand gamers with solid analytics. Yes, he said.
It’s unclear how things will pan out, such as Microsoft’s plans to introduce its own store and cloud gaming services in addition to the Google Play Store. But Fat will be watching it closely.
