As Apple and Google continue to battle with regulators and publishers over whether their app stores are monopolistic, a startup called Appcharge has raised some funding to build an alternative for game developers who want a different avenue for monetization.
Appcharge sees itself as a kind of “Shopify” for gaming — a platform for publishers to build their own sites for selling gaming currencies and other virtual goods directly to consumers. Now it has raised $26 million on a $100 million valuation to expand.
The round is being led by Nordic VC Creandum — a major, early investor in Spotify, which has been openly critical of app stores and has been influential in how regulators have gone after Apple specifically. Mobile games behemoth Supercell, gaming VC Bitkraft Ventures, Moneta Ventures, and previous backers Play Ventures and Glilot Capital are also participating, alongside angel investors.
Appcharge’s CEO and founder Maor Sason would not comment on whether Supercell is among its customers. Its customers number in the “tens” and amount to Appcharge processing about $200 million annually in purchases. Supercell does have an online store for buying currencies, however, so make of that what you will.
Sason said he was motivated to start Tel Aviv-based Appcharge when still working at his previous startup, Appush, a mobile gaming ads startup that he co-founded and led as a bootstrapped business before selling it to systems integrator Magic for $25 million.
Sason was working closely with game publishers, and the Epic suit against Apple was the talk of his networks. The ad that the gaming giant created in 2020, ironically referencing Apple’s iconic 1984 Mac commercial, was a bold move that felt like a line in the sand to him. But, he thought to himself, it was unlikely that waging costly legal battles would be the only route that developers would take.
“It was clear to me that developers needed to own their users again,” Sason said. “We understood the need, and we saw that there was nothing out there.” He started Appcharge in 2022, the same year he sold his previous startup.
Appcharge’s core technology is part of the “headless” commerce trend. Platforms in this category provide tools to companies to develop their own e-commerce websites with more customization options than you might get in an ordinary website building platform, and with more tricky commerce tools worked out as a set of APIs.
Appcharge has built its own headless solution with gaming business models in mind. It provides technology to help link gaming accounts between apps (games) with the stores run by the publishers themselves. It also offers analytics around pricing and purchasing activity, which Sason said would have more machine learning underpinning it in the coming months.
Most interestingly, it takes on some of the work that platforms like Apple and Google do across their app stores, acting as the “merchant of record” for games publishers. It sets up fraud prevention as well as merchant accounts in countries where games publishers have customer bases, creating local entities with tax registration and payment facilities, with sales tax and other fees automatically integrated.
Despite Sason’s previous work, Appcharge does not work in the mobile ads space. There are no data pulls that could be used for that and there are no plans to work on them, nor to sell information to third parties for that purpose, he said.
There are other competitors beyond Apple and Google in the quest for monetization around in-game purchases. Some of the biggest publishers battling against Apple and Google have leaned into signals from regulators and have started to invest in their own app stores to handle direct relationships with users. Epic, for one, now has app stores for iOS and Android, as well as for PC and consoles.
There is some logic to this. The crux of the issue for companies like Spotify is that forcing users to leave app experiences to buy things, put simply, just has more friction and is less likely to result in sales conversions. Indeed, Appcharge may have facilitated $200 million in gross takings through its commerce platform, but this is just a drop in the bucket of the $107 billion that was spent on mobile games last year.
Appcharge does not provide a bridge into that in-app experience. There are no deep links from one place to the other, and no signposts at all, Sason said. Instead, he said that traffic comes by word of mouth: newsletters, forums, and other places where people talk about games. Is relying on community forums a scalable opportunity for Appcharge? That remains to be seen, but it’s definitely one that has proven to be huge, if Discord is anything to go by.
In the meantime, the store is positioned to complement those other efforts.
“Appcharge [sees] a whole end-to-end solution for D2C,” Sason said. “We envision a future [where] users would come through various channels. APK apps installed through third-party stores (e.g., Epic Games) is one of those channels.”
The funding is notable for coming at a time when gaming startups have been finding it harder to close rounds as market growth remains sluggish. The number of deals in the last quarter was down 14% on the quarter before, early-stage deals are at their lowest point in five years, and the overall market for gaming has only grown around 2% in the last year, according to a report from Konvoy Ventures.
“In April 2021, Apple introduced the App Tracking Transparency framework on iOS 14.5, which allows users to opt out from being tracked by advertisers on mobile. This has made it significantly harder and more expensive for apps to reach the right users,” writes Carl Fritjofsson, general partner, Creandum, in a blog post about the investment. “This also coincides with the growing efforts of browsers to block third-party cookies, all of which serves to make marketing attribution harder and more expensive. Higher Customer Acquisition Costs (CAC) mean less profitability for game developers. And with more maneuverability around the app stores, a solution may be in sight.”
