The future of mobile

While waiting for Nix Nolledo, president and chairman of technology company Xurpas, I begin to wonder how these young technopreneurs were able to figure it out.

Xurpas is currently the leading casual games company in the Philippines and their games are played by over two million players per month. It is also building the largest sticker store in the country. Mobile subscribers do buy stickers. I should know. My Viber friends spend money getting the latest stickers.

Xurpas also has a complete portfolio of mobile content which includes social, music, messaging, and information.  In fact, the company has over 200 products for every mobile consumer need and budget.

According to its website, the company creates digital products for the mobile consumer. Less than 10 million Filipinos have credit cards. But over 100 million mobile subscribers carry a mobile wallet which carries airtime credits.

What the heck are casual games, if I may ask?

Then he arrived. Nico Jose “Nix” Nolledo didn’t look like your typical technopreneur. He looked more like the manager of a big fastfood company.

He used to be the manager of a branch of one of the leading fastfood companies. That is after he earned his Bachelor of Science in Management degree from Ateneo de Manila. He had the managerial skills, but lacked the technical knowhow. But he knew guys who knew techie stuff. Together with his brother, Nix created the first local stand-alone online message board, PinoyExchange.com which is an online site where Filipinos from around the world can strike up conversations under the sun.

iAyala later acquired PinoyExchange but kept Nix onboard. It was at that time that he would meet and work with his two future partners at Xurpas, Andy (Fernando Jude Garcia) who is the chief technology officer (VP for technology), and Raymond (Raymond Gerard Racaza) who is the vice president for operations.

From PinoyExchange, he asked iAyala management to move him to WNet, which is actually a desk away. WNet was into consumer enterprise, and Nix knew that was the way to go.

Nix, Andy, and Raymond left the Ayala group in 2001 to form Xurpas. Andy and Raymond would provide the technical knowhow. Andy has a BS Applied Physics degree from UP Diliman and was a software developer at iAyala. He is currently the chief engineer responsible for Xurpas’ software architecture and systems integration. Raymond holds a BS Computer Science major in IT from De La Salle University and was part of the original development team of iAyala that built the first WAP site in the Philippines. Nix had the managerial knowhow.

Nix knew somebody at Zed, a Finnish company that was supplying ringtones and picture messages to Smart. They would build particular content for Zed, which became their first customer.

They got their first big break locally when in 2003, they ran a promo with Jollibee and Coke, named BeeHottah. Xurpas actually built the mechanism for the Jollibee promo which allowed customers to text a particular number to participate. Xurpas was also behind other successful promos like Gentxt and Petron Tank Up and Text.

So the next time you encounter a promo, which directs you to text a particular four-digit number for your answer, name, address, and other personal data, then probably Xurpas is behind it.

Make no mistake. Companies like Xurpas and guys like Nix have nothing to do with the “spam” that you receive on your mobile phone. Xurpas provides the product to the telcos. It registers the promos that it develops for its other customers with the DTI and these promos use four-digit codes.  “Spam” as well as scam messages usually do not use four-digit codes, but usually 10-digit mobile numbers. But this is not saying that all messages or promos coming from 10-digit numbers are “spam” or scam.

At present, about 82 percent of Xurpas’ business comes from consumer products, and the rest from enterprise (they provide platform solutions to telcos, but they are not allowed by their telco partners to divulge the particular product developed). And of the 82 percent, about 42 percent of revenues comes from casual games.

What the heck again are casual games?

Nix explains casual games by distinguishing them from hard-core games, like RPGs (role playing games), massively multi-player online role-playing games or MMORPG, which are more complex. Casual games are typically characterized by their simple rules and lack of commitment required in contrast to more complex hard-core games. They can be played in short sessions.

Casualgamesrevolution.com reveals that a panel of industry professionals has defined casual games as those that are “played in under an hour, set up and taught in under 10 minutes, and requires some light strategic thought. They can be enjoyed by anyone from older children to adults.” Farmville (developed by Zynga) and  Bejeweled (by PopCap Games) would be some of the best-selling casual games of the decade.

Xurpas develops for and has sold a lot of casual games to Smart Communications and Globe Telecom, which the two telcos sell to their subscribers who use their load to pay for playing the game for a certain period of time.

But how big is the market for casual games?

“It is estimated that more than 200 million people worldwide play casual games via the Internet. In 2010, the worldwide connected casual games industry had revenues of nearly $6 billion on mobile, iPhone, social networks, PC, Mac, and Xbox platforms. Over 400 casual games are developed and launched on major web portals, thousands of iPhone and Google Android, and thousands of social games are launched every year. Typically, the Top 20 games each year generate the majority of the revenues.” (http://www.casualgamesassociation.org/news.php#casualgames2).

Locally, the Game Developer Association of the Philippines says there are no available data as to the size of the industry, or of the revenues generated because there are no third party sources who put these figures together.

As more and more mobile phone subscribers use smartphones and utilize their phone for services other than for calling and texting, this means more opportunities for Xurpas.

This is the reason why the company plans to raise about P1.44 billion through an initial public offering tentatively scheduled anytime before the end of the year. Xurpas plans to offer around 34.3 million primary shares, representing 20 percent of total outstanding shares. Proceeds from the IPO would be used for domestic and regional expansions and acquisitions.

From 2011 to 2013, Xurpas said it was able to achieve a 75 percent growth in terms of revenues. For this year, the company believes that its online casual games business which has operating margins in excess of 70 percent would continue to be the company’s biggest money maker. As of end-June, revenues were already at P189 million and net income at P105 million

Nix reveals that part of the proceeds would be used to increase the points of distribution. “While we already have 110 million branches in the Philippines (referring to the 110 million mobile phones), we want to expand overseas,” he said.

He also disclosed that they plan to acquire other software developers and are in fact in talks with a number of them.

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