Android-Focused PapayaMobile Picks Up $18 Million From Keytone, DCM

Mobile-social gaming network PapayaMobile has picked up $18 million in a second round of venture funding from Keytone Ventures and DCM. The timing of the announcement is interesting as it comes just a few days after another similar company, OpenFeint, was picked up by Japan’s GREE for $104 million.

PapayaMobile’s SDKs let developers add social features to their games like leaderboards, chat rooms and notifications. The company also has an SDK for offer walls where users who don’t want to pay for virtual currency can download other apps to get it for free instead. Both of these ideally should either help make games stickier as users find friends or make it easier for developers to monetize their apps — a considerably more difficult problem on Android because the payments infrastructure simply isn’t quite as good as iOS’ yet.

PapayaMobile has signed up 350 applications and says it reaches 15 million registered users since launching less than a year ago. (For comparison’s sake, OpenFeint was much larger at the time of its sale last week with more than 5,000 applications and 75 million registered users in its network. When ngmoco:) sold for $403 million to Japan’s DeNA last fall, its Plus+ network had 12 million registered users and 119 titles.) PapayaMobile was founded by Si Shen, who was a product manager at Google for nearly four years. She recently shared some thoughts on how location is changing social gaming in Asia on our sister site Inside Social Games.

PapayaMobile said they’ll use the money to expand the network’s footprint among developers. The reason it picked Asian VC firms over Silicon Valley-based ones is that it will help the company focus on the Chinese market, which has swung to Android with low-end handset makers churning out millions of devices.

“The team has great relationships with local handset makers in China and carriers, which will benefit our progress in China significantly,” Paul Chen, PapayaMobile’s director of business development, tells us.

PapayaMobile’s newest investor Keytone spun off from Kleiner Perkins China in 2009 and has investments in related companies like Borqs, a company that builds custom Android-based software for carriers. DCM has the background in gaming, with investments in Chinese social network RenRen, social gaming company RockYou and PlayFirst, a mobile and PC game developer. It also recently unveiled a $100 million Android-focused A-fund. Joe Zhou, who has invested in massive multiplayer gaming company Shanda, joins PapayaMobile’s board.

Chen insisted that the round isn’t simply a bet that another strategic acquirer — notably a China-based one — will turn around and buy PapayaMobile.

“The market for social gaming platforms is hot and each party is picking the right solution for themselves,” he said. “But PapayaMobile has a different strategy in addressing growth. We have the vision to be the largest mobile social gaming network and we will try to remain as independent and as neutral as possible.”

As an Android-focused mobile gaming network, PapayaMobile’s revenue opportunities are simultaneously more challenging and promising on Google’s platform. There are formidable fragmentation issues in building software that works across a myriad number of devices — especially in the Chinese market where there are Android-based phones that are not certified as compatible by Google.

However, Google does not enforce the use of its payment methods across the entire ecosystem unlike iOS. That means that a mobile-social gaming network could conceivably offer its own payment infrastructure. PapayaMobile said it is profitable and generates income through revenue share agreements around its virtual currency, in-app billing solutions and its offer walls.

Naturally, PapayaMobile didn’t release figures, but again for comparison’s sake, when rival OpenFeint sold to GREE last week, the announcement to shareholders revealed the the company had a $6.6 million net loss last year and net sales of $282,500. It had a bigger footprint on iOS, where Apple controls payments and crowds the company out of potential payment revenue.

“Not all social networks are able to monetize off their user base,” Chen said. “A user base that does not monetize provides little value to developers who wish to access social gaming networks to increase revenues.”

Also unlike Apple, Google hasn’t cracked down on apps with offer walls — which allow users who don’t want to pay for virtual currency to get it for free by downloading other developer’s apps. Developers advertise on these offer walls and pay for enough downloads to break into the top of the charts and guarantee visibility. Because there are multiple Android app stores, not to mention several in China, it would be impossible for Google to forbid the practice. That said, offers don’t tend to work as well in Google’s official Android Market, since the rankings factor in more than downloads.

Chen argued, “We are the only social gaming network in mobile that couples a social network, along with an Offer Wall solution. The combination of those two products provides a very compelling monetization solution.”