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Exclusive: The Story of MMOGA’S Virtual Currency and its Real $300M Exit

33-year-old founder sold the online portal to the Chinese without saying a word

(Image: Warkentien2 / Wikimedia Commons / CC BY-SA 4.0)

(Image: Warkentien2 / Wikimedia Commons / CC BY-SA 4.0)

It is one of the largest exits ever in the German online industry: MMOGA, an online trading platform specialized in trading virtual goods and activation codes for online games, sold by its German founder to a Chinese company for a cool €300 million. Yet, all across Germany the record-breaking deal didn’t make a ripple let alone a splash. Online Marketing Rockstars spoke to the platform’s former head of marketing to learn more about MMOGA’s business model—and to unearth more details on the spectacular and secretive deal.

When a Chinese company buys out a German online marketplace for a massive sum of money, you would expect it to make waves in local media channels. That Germany’s major news outlets did not pick up the MMOGA.de deal, however, is hardly a coincidence—it was never communicated to the press.

MMOGA Ltd. owns the MMOGA.de domain and has its headquarters in Hong Kong. However, according to denic.de, the contact partner for all administrative issues is located in the Bavarian city of Aschaffenburg. But if you run a Google search for MMOGA.de’s technical administrator in conjunction with the official company name, you find numerous reports appearing on Chinese websites. As our Mandarin is still a work-in-progress, we used Google Translate to glean that a Chinese company did indeed purchase MMOGA Ltd. And after digging a bit further, we found a Reuters’ blurb from July 2015 stating that Kee Ever Bright Decorative Technology Co Ltd (KEBDT) bought 100 percent of MMOGA shares for 2.1 billion Renminbi Yuan, which at the time of the deal was worth €306 million.

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Additional reports on the deal provide some key indicators on how big MMOGA really was. They state that the platform had 3.88 million registered users, which would make it one of the largest gaming platforms in Europe; its balance sheet totaled €90 million and had net assets of €56.4 million. Furthermore, the reports talk about a target agreement that the company must achieve an annual growth of at least 43 percent. Initially, KEBDT paid €130 million and the subsequent €170 million will not become due unless MMOGA meets some lofty profit targets. Net profit for 2015 had to eclipse €27.6 million, for 2016 that figure rose to nearly €40 million and will rise yet again to €56.4 million for 2017. Only if each of these targets are met, does the total €300 million purchase price become due. There is a 114-page pdf-document in Mandarin, appearing to be a prepared stock market report that also contains these figures. Angermann M&A International AG was involved in the deal as a consultant and confirmed to OMR that MMOGA has been sold to the Chinese.

MMOGA’S BUSINESS MODEL

MMOGA.de, the main object of the deal, has been online since late 2005. According to Wayback Machine the imprint in 2005 listed the now 33-year old founder from Aschaffenburg. Beginning March 9, 2007, internet archives show MMOGA Ltd with its HQ in Hong Kong, but the founder’s name is removed from the site shortly thereafter. This is apparently the moment where he decides to take his place firmly in the background, avoiding publicity and public attention. This became even more evident when, in the course of our research, we received a letter from his attorney. We are therefore refraining from stating the name of the founder, even though it explicitly appears in several of the sources linked. Current MMOGA management, too, has denied requests by OMR for an interview.

The initial business model focused on providing virtual goods for online computer games. Customers could purchase, for example, in-game currencies for MMORPGs (Massively Multiplayer Online Role-Playing Game, i.e. online role-playing games) like World of Warcraft (WoW), Everquest 2 or Guild Wars, level services for avatars (third parties play your character for you so that you can level up) or even entire existing accounts. Today, MMOGA provides services for roughly 50 games, including the ever-popular FIFA soccer game by EA Sports. After launch, game licenses provide a second significant revenue stream. Keys used to activate online games are presumably purchased abroad (primarily outside of Europe) at a fraction of the cost before being sold back to Europe at a lucrative margin.

Michael Singer estimates that MMOGA Ltd’s current revenue is nearly evenly split on both models. As marketing head from 2009 to 2011, Singer does have significant insight into the company and began working with MMOGA as a freelancer as far back as 2006. “At first, we generated nearly 80% of our revenue through sales of in-game items,” Singer told OMR in a recent interview. He said that he and the founder were both gamers, met playing WoW and that he was “already active early on in SEO forums. We saw just how long it was taking to reach certain milestones in the game and immediately recognized the demand for currency and level services.”

When Singer started at MMOGA, the site had a bad rap and was not viewed as trustworthy. “Our imprint had already listed an address in Hong Kong, which had a negative external impact, also because no one was really working on developing the brand,” he recalls. But he emphasized that MMOGA was never a shell company and that there always was a set team in China—and still is today.

China’s “gold farming” boom and the rise of extreme professionalization

When Michael Singer talks about the international trade of in-game currency that takes place on MMOGA.de today, he explicitly uses the word brokering. The operators never had the currency or other virtual goods themselves, but rather merely created a platform for the actual traders, most of whom are Chinese. “The entire sector has now become extremely professionalized. In my time, there were already numerous Chinese companies, so-called ‘farms,’ where 50 to 100 people played WoW around the clock,” Singer says. “In those cases, we acted as a service broker for Chinese companies. We also did that for tax purposes. Due to the fact that customers pay sellers in China, who also set the prices, and we merely receive a sales commission, we are not required to pay sales tax.”

So stellt MMOGA den Vermittlungsablauf von virtuellen Gütern wie Gold auf MMOGA.de dar (Screenshot: MMOGA.de)

This is how MMOGA illustrates the brokering transactions for virtual goods, like currency, on MMOGA.de. (Screenshot: MMOGA.de )

Gold farming first became well-known outside gaming circles after the massive success of WoW (US release in November 2004). Soon after, the synonym “China Farmer” came into use by the community, but there have been people and companies providing currency for other games for much longer. Beginning in 2000, for example, brothers Daniel, David and Dan-Micha Schikor worked in shifts playing another Blizzard title, Diablo 2, to amass and then sell gold and other in-game content. In 2005, the brothers added WoW to their “farm,” before launching randyrun.de in 2007. The project is still up and running under the same name and, according to Bundesanzeiger (Federal Register of Germany), continues to be lucrative. Randyrun GmbH declined to comment to OMR on the matter, other than saying that they had heard of the deal, but reiterated that they had no knowledge of the identity of the founder and are not in contact with competitors.

“MMOGA and Randyrun were bitter rivals for a long time. Randyrun launched much earlier and correspondingly was market leader,” says Singer. He says that that changed shortly after joining MMOGA. He says that MMOGA.de is now the market leader in the German-speaking market by a considerable margin—but that didn’t stop him from switching sides in 2011. “They knew that I was leaving MMOGA, because I had finished all of my projects there. More or less, they wanted me to do the exact same thing for them.” Singer was interim managing director for Randyrun GmbH until 2012.” In his time there, he overhauled company structures, especially in marketing. And says he did so successfully. “There was a significant increase, but MMOGA grew at such a rate that it was impossible to catch them.”

Marketing for a currency vendor—How MMOGA.de got so big

If you examine the key figures on MMOGA.de, even comparing them directly to randyrun.de, it becomes evident how powerful the portal is. According to estimates by analytics tool SimilarWeb, the site generates an average of well over 2 million visits per month, while randyrun.de has trouble reaching 100,000. Moreover, the international MMOGA sites, .es in Spain, .fr in France, .com in the USA and .co.uk in England currently generate a total of 500,000 monthly visits. Data obtained from the Sistrix Toolbox, a site providing data on a portal’s visibility in search engines, confirmed the figures. While MMOGA.de was ranked for 15,176 keywords with a visibility index score of 1.78 (landing in the top-10 for 1,436 keywords and nabbing the top spot for very general keywords like “spiele online kaufen” (Engl. buy games online), “game key” and “games kaufen” (Engl. buy games), randyrun.de is only ranked for 4,261 keywords (490 in the top 10) with a visibility index of 0.4448. The MMOGA eBay account that was launched in April 2007 has received nearly 500,000 user ratings—99.7% of which are positive.

Traffic-Schätzungen zu MMOGA.de, randyrun.de und zalando.de im Vergleich. (Quelle: SimilarWeb).

Estimates for the past year on traffic from Germany for MMOGA.de, randyrun.de and zalando.de (Source: SimilarWeb).

Singer says the foundation for success, and in turn for the lucrative buyout, was established in the very beginning. “While I was at MMOGA, SEO played an extremely important role. We of course also tested standard display ads, but they weren’t as successful. With AdWords we displayed below-average performance. At some point, Google kicked us out. To this day, I don’t have a clue why.” This, however, led to an increase in relevance for SEO and traffic generated by type-ins. “We logged an intermittent monthly search volume of 500,000 in Germany for MMOGA alone,” he says. Searchmetrics, a Berlin-based SEO tool, puts the current search volume at 310,000 queries a month and Google AdWords has the number of monthly queries at 823,000.

Direct sponsoring by game sites, forums and blogs also played an additional, significant role in the success of MMOGA’s marketing campaigns, according to Singer. “We looked around to see where our clients were. The answer was not on larger sites, like gamestar.de, but rather smaller ones with a more specialized target group, e.g. wowszene.de, wow-forum.de or hordeguides.de. Believe it or not, those are the sites that drew a significant amount of traffic.” He says that MMOGA would take over entire sites exclusively to boost brand awareness, while also ensuring the financial survival of the respective publishers. Furthermore, Singer says he implemented the fundamentals for the company’s social media strategy and established first contact to today’s influencers.

MMOGA as an affiliate network

MMOGA also recognized the importance of affiliate marketing early on. Just a quick glance at the YouTube and Twitch accounts of Germany’s biggest “Let’s Players” (i.e. gamers who either play, comment and test various PC and console games or upload videos of them doing so after the fact) point to a successful marketing strategy and attest to MMOGA’s market power. For example PietSmiet PietSmiet (> 2 million subscribers), Elotrix (> 1.2 million subscribers), MontanaBlack (> 890,000 subscribers) and many others embedded MMOGA.de in their respective YouTube channels and thus act as an affiliate for the gold and key shop.

Singer says MMOGA did not always have their own affiliate system. “Initially, we were integrated with Zanox, Tradedoubler, Superclix, Affilinet, Commission Junction (now known as Conversant), etc. At some point, we created our in-house system.” One agency in Aschaffenburg was in charge of establishing the affiliate system, who is also named directly in the aforementioned Chinese stock market report and advertises itself on its website as a specialist for the “development of your partner program and total maintenance of your programs.”

In a video on MMOGA.de explaining the partner program, the off-camera speaker describes the site as the “European market leader in the digital and virtual goods sector.” According to its statements, MMOGA pays the highest commission in the industry, 10% for digital goods, like keys, and 15% for virtual goods, like coins and gold. Singer also says that influential YouTubers are also offered individual lucrative deals. These could be lump sums or a mix of commission and flat, monthly fees.

The well-designed marketing strategy may very well be the primary reason that MMOGA was not only able to outperform Randyrun in Germany, but also prevail against growing global competitors like g2a.com and kinguin.com. The Samwer brothers, big-time German internet players, entered the virtual goods market, launching Gamegoods in 2006. After an initial period of success, they pulled the plug in 2008. According to denic.de, the gamegoods.de domain is now in the hands of Blizzard Entertainment, the makers of World of Warcraft.

Additional projects by founder from Aschaffenburg

MMOGA is by no means the Founder’s only project. For a long time, his portfolio included the online-gold.de domain, first as a product of MMOGA Ltd, then, according to Wayback Machine, as a product of Game Accounts Ltd beginning in February 2009—which is how the imprint lists it today. But the Denic database says the domain has been back in the hands of MMOGA Ltd since at least November 4, 2015, suggesting it was a part of the deal.

Same goes for the game-accounts.de domain. Both sites offer, just like MMOGA.de, in-game content, such as currency, as well as licenses and keys, but have yet to reach the same heights according to traffic data on SimilarWeb. The commercial register states that the Founder continues to be the sole shareholder of AMA Media GmbH, the business purpose of which is “the management of proprietary assets and investing in corporations, especially those in the new media sector.”

Furthermore, the commercial register lists the MMOGA Founder as sole shareholder of Gamesrocket GmbH, also from Aschaffenburg. Today, Singer says that company is the project he last worked for, before switching to randyrun.de. “Gamesrocket.de is a download platform for downloads and therefore has an entirely different business model than MMOGA. We wanted to do the same thing Deutsche Telekom did with Gamesload, before the service was shut down in May 2014. I believe the company is still successful.” Singer says the download market is very specialized, that three big, international platforms, Steam, Origin by Electronic Arts and the Uplay Shop by Ubisoft control the market. “There is no way I would advise anyone to enter that market.” As Gamesrocket GmbH is also listed in the Chinese report, it is unclear if the company was or was supposed to be part of the deal.

Traffic-Schätzungen zu MMOGA.de, randyrun.de und zalando.de im Vergleich. (Quelle: SimilarWeb).

By embedding links such as these, Youtubers act as affiliates for MMOGA.de. (Source: Elotrix’s YouTube channel).

Selling in-game currency and keys in a legal gray area

One can only speculate as to why exactly companies selling currency and keys, such as MMOGA, have their headquarters in Hong Kong. Suppliers, like MMOGA, acted for a long time in a legal gray area. Singer says the legal situation behind selling in-game content, like currency, depends on the business model of the individual publisher. “If you sell gold for a game like World of Warcraft, you are not infringing upon the title’s business model, as it is a pay-to-play title. In such cases, players must pay a monthly fee to play. That purchasing such content is still in breach of the general terms and conditions and that doing so is cause to block an account, is another matter entirely.”

The practice becomes questionable when it is offered for free-to-play titles, which do not require a monthly fee and which generate revenue through exactly the same practice. “We had a similar situation, where a free-to-play publisher was quite uncomfortable with what we were doing. We immediately removed the title from our portfolio,” Singer says, unable to hide his incredulity at a majority of publishers. “The demand is there. Why don’t publishers offer their own content in exchange for money? It would be an additional opportunity for monetization,” he says. “It’s because of their own failure,” he adds, “that platforms like MMOGA have enjoyed so much success for so long.”

The gaming industry is gearing up for a fight

When it comes to purchasing used keys and licenses, the legal situation is completely different. In March 2014, the Berlin Superior Court ruled that key selling amounted to copyright infringement. Key selling remained illegal until the Federal Supreme Court ruled that license keys could be sold, as long as the original purchaser did not make use of their copy before resale. Examining and proving individual case figures to be quite complex and costly. Therefore, key selling remains in a legal gray area despite the most recent ruling. Game publishers may be of another opinion. Electronic Arts, Microsoft, Ubisoft and Konami declined OMR’s requests for comment.

The German Games Industry Association has taken an opposite position on the matter. Managing Director Dr. Maximilian Schenk says that “so-called key selling very oftentimes takes place in a very dark gray area at the very least. Frequently, a variety of legal transgressions are evident, infringement upon the rights of the creators, breaches of child protection laws and tax evasion. Dr. Schenk goes on to say that “the true company operators frequently take advantage of the anonymization opportunities the Internet offers and conceal their identities. Users of such platforms should be aware of the fact that their purchase is rarely secure, not to mention the lack of support from game developers.”

Who actually bought MMOGA?

While the legality of the practice remains, at least in theory, very gray and the relationship with publishers quite frigid, the purchase price was quite the eye-opener. But who snatched up MMOGA Ltd? According to the English website, the company is called Kee Ever Bright Decorative Technology Co Ltd (KEBDT), a publicly traded Chinese company that in the past was primarily active as a manufacturer of plastic parts, metal badges and electric switches.

Although the company website does not mention the deal or the subsequent restructuring, a report states that the company intends to completely restructure the business model and reposition itself as an eCommerce and gaming platform with the intention of building a media conglomerate in the long term. The Shenzhen stock exchange appears to approve of the MMOGA deal as shortly afterwards KEBDT shares surged; its market capitalization currently lies at approximately 9.4 billion Chinese Renminbi Yuan, roughly €1.27 billion.

Traffic-Schätzungen zu MMOGA.de, randyrun.de und zalando.de im Vergleich. (Quelle: SimilarWeb).

Visibility indices for MMOGA.de and randyrush.de in direct comparison. (Source: Sistrix).

Singer says that he learned of the deal from Chinese and English-language media, but was not surprised to hear it. He also considers the profit and growth targets stated in several of the news reports to be completely realistic. “When I was there, there were plans for an exit. There were plenty of eight-figure offers, but they weren’t high enough.”

Angermann, the German subsidiary of M&A International Inc., provided support on the actual transaction itself, and in the past was involved in deals for Appnexus, Tripadvisor, Deloitte and the Publicis Groupe. According to the “Deal Report 2015,” “Angermann M&A International AG assisted MMOGA, Ltd. with the transaction as its exclusive M&A consultant and advised it in connection with the sale of its company.” Angermann declined our request for additional information. Who profited from the deal and to what degree and if the founder was the sole stockholder of MMOGA Ltd. remains unclear.

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