Two years ago, serial entrepreneur Kris Duggan was itching to start another company, following his success in founding Medsphere, a government open-source medical platform, and OzNetwork, an Internet media company.
Inspired by the popularity of social games like FarmVille and the Internet gamification trend, he left his position as vice president of sales for Socialtext, a developer of collaboration software for businesses, and began searching for a partner with web development skills. He soon met Wedge Martin, and less than two years later, they have a hit technology startup on their hands: Badgeville, which helps companies boost user engagement by gamifying their websites.
Menlo Park, Calif.-based Badgeville applies various elements of social games, such as challenges, points, badges and levels, to non-game business websites. Given the success of FarmVille and other social games, it's no wonder that companies want to make their brands' websites and mobile apps more engaging. Because the user's experience becomes fun and sometimes even addictive, companies often see an increase in Facebook "likes," customer product reviews and, most important of all, purchases.
Growth Spurt: Started in September 2010, Badgeville was initially funded with $300,000 from the founders' families. While testing the concept, Duggan and Martin got a lucky break. They were invited to participate in the startup launch competition TechCrunch Disrupt Startup Battlefield. Badgeville made it to the final round and won the Audience Choice Award.
The Badgeville website was launched during Disrupt, and in the first 30 days after the event, it attracted 20,000 visitors, overwhelming Duggan and Martin with hundreds of qualified business leads--more than they could handle. Martin was still working at IBM, but left the day of Badgeville's successful launch, realizing that he and Duggan really were on to something.
The company now has 50 employees and boasts more than 100 customers. It says revenue last year totaled between $5 million and $10 million and that it has raised $15 million in venture capital. Duggan declines to be more specific about revenue but notes that it grew 400 percent. "With our fast growth and customer traction, we are now on a clear path to profitability," he says.
Working with customers like Dell, Samsung and eBay, Badgeville says that on average, it helped increase social sharing by 200 percent, user-generated content by 50 percent, and conversion of users from nonpaid to paid status by 10 percent in 2011.
Samsung, for example, came to Badgeville hoping to increase the number of product reviews users post on its website. The companies combined forces to launch Samsung Nation, a social loyalty program that lets users earn badges for such activities as writing reviews and watching videos and compete for rewards. By using Badgeville's platform along with its own technologies, Samsung saw a 500% increase in customers' product reviews.
Why It's Worth Watching: Badgeville's platform sets it apart from other companies because it can be embedded into any company's website or app. That means Badgeville can typically promise lower costs because customers don't have to pay developers to create a customized solution.
While gamification is a hot trend, Badgeville doesn't face a lot of competition in the category--at least not yet. Copycats could start popping up, as more companies try to jump on the gamification bandwagon.
Why It Matters: As Badgeville grows, Duggan doesn't intend to stray from its strong customer focus. "We've been very focused on customer acquisition and delivering a product that customers want to buy," he says.
The company has based its decisions on market research. "We did it the old-fashioned way," Duggan says. "We picked up the phone, and we called [potential customers]. We asked them, 'If you had this product, would you buy it?'" The research helped Badgeville identify exactly what potential customers wanted and how much they were willing to pay.
Looking Ahead: Badgeville is investing in its customer support and marketing teams, as it continues to add clients. Duggan expects revenue to more than double this year and his staff to grow to 100 people in 2012, with most of the expansion in New York and Europe.
From a product standpoint, Badgeville's platform "is about 10% done," Duggan says. "If you think about all of the different levers you can pull to influence user behavior, we feel like we've started off with some really strong ones, but there are so many more... That's probably going to keep us busy for the next several years."
Tip to Stay Ahead of the Curve: Duggan recommends that business owners "consider how they can leverage gamification inside their businesses and how they can make their experiences with their audiences more social." That doesn't just mean using Facebook, he says. Companies "should think about how they can create communities, experiences and engagement that are going to drive results." He also encourages businesses to thoroughly understand gamification before trying it. "Gamification is not about adding games to your website," he says. "It's about identifying ways to drive behavior using techniques from games."