Preshow Q&A: Penny Arcade's Robert Khoo

Is it all fun and games at Penny Arcade HQ in Washington state? On the eve of the Penny Arcade Expo, we ask PA's biz guy for his perspective.

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Today webcomic superpower Penny Arcade opened the doors at the Penny Arcade Expo, an annual gaming convention held in Bellevue, Washington. Gamers that make the trip to this Seattle suburb for the three-day show can participate in tournaments in a range of areas, from RPGs to LAN and console gaming. They'll also have a chance to play prerelease titles and attend panel discussions with industry veterans--opportunities that are usually limited to industry-only events like E3.

In the week before the show, GameSpot caught up with Robert Khoo, Penny Arcade's business development guru, for an e-mail interview.

Khoo has helped Penny Arcade grow from a popular site, whose founders lived on donations, to a multimedia force that's been tapped by firms like Ubisoft to provide promotional materials for its games. It also has been covered in mainstream media outlets like the New York Times.

In our interview, he tells us how it all went down and shares some of the company's upcoming plans.

GameSpot: How long have you worked at Penny Arcade, and what did you do pre-PA?

Robert Khoo: Three years now. I used to work for a small early-stage technology consultancy. Most of the stuff I'd do revolved around market strategy--figuring out ways for foreign companies to break into the market, that sort of thing.

GS: In 15 words or less: What do you do at Penny Arcade?

RK: There are two sides to Penny Arcade: content and business. I run the business.

GS: Do you remember what prompted you to approach Gabe and Tycho? What was the "Eureka!" moment? What was your first meeting with Gabe and Tycho like? Your first impressions of them?

RK: One of my clients at the consultancy was a South Korean game developer working on a sports MMO. I was assigned the task of developing a US marketing strategy for the title, and was already a huge Penny Arcade fan. I was always a huge proponent to grassroots strategies and reaching the market influencers, so it just made sense to get a hold of the guys that I listened to. So I tried e-mailing them: no response. I tried e-mailing them again, only this time proposing free Chinese food.

Two days later I was eating chow mein trying to figure out what made these guys tick. I realized pretty quick they really didn't know what they were doing, business-wise, so I just picked their brains to the point where I realized, "Man these guys need help." I quickly concluded the meeting and went back to Korea for a few weeks.

On the flight back I remembered thinking how life was too short and how PA was a once-in-a-lifetime opportunity for me…if I could pitch it right. A week later I had a follow-up lunch with Gabe and Tycho and made them an offer they couldn't refuse. I plopped down a 40-page, five-year business plan for Penny Arcade and told them that if they gave me the green light, I'd quit my job and work for them for two months for free. If I couldn't pay for myself after that time, fine, fire me. No hard feelings. If I work out, even better. Again, that was three years ago.

GS: And have they ever told you about their first impressions of you?

RK: I think they thought I was smart. But then again, that's not saying much, as these are the same guys that accidentally sold Penny Arcade as well as their print rights without actually knowing they did.

GS: In other interviews, you've mentioned that one of the first things you did at Penny Arcade was to increase ad rates. What else did you do to increase revenue, and can you tell me how revenues have changed since you started working at Penny Arcade?

RK: Well I think something that's important to note is that Penny Arcade isn't just a comic strip. We've evolved into a media company--Gabe and Tycho create content that people in the gaming industry rely on to make informed decisions (much like our filthy competitor GameSpot!). So to an extent we follow the same revenue models other media outlets do. But I didn't say we're not a comic strip all together--we also have the ability to study the businesses of Garfield and Peanuts and the way they've leveraged those brands. We have merchandise; we syndicate the strip out and we've even just signed on with Dark Horse Comics to publish our books (the first one releases in December). We also just signed on with Sabertooth Games to create our first collectible card game battle box in their Universal Fighting System.

But ultimately the one Penny Arcade achievement that will eventually shine above everything else is the Penny Arcade Exposition. The inaugural show was in 2004; it got an overwhelming response, and it has the ability to be the first true consumer-level gaming show.

GS: How has PA's readership grown since the site went up? Are page views leveling off now, or are they still climbing?

RK: Readership is still growing at a good clip. :)

GS: How does the site revenue break down between ad sales, merchandise sales, and other revenue? What are those other types of revenue?

RK: I'll rank 'em for you. Ad sales is top dog, but won't always be. Merchandise takes second. Third is "creative services," which includes designing ad campaigns and marketing consulting. The rest is just a mishmash of syndication, speaking events, etc.

GS: Gabe and Tycho's strong opinions are part of the reason they're so popular, but that outspokenness can cut both ways. How do you deal with the possibility of alienating potential advertisers?

RK: Ha! This is an issue I have to deal with every day. The guys are brutally honest. They don't pull any punches ever, and yeah, it gets me in trouble with not only potential advertisers but current advertisers. We minimize the occurrence of these situations by only advertising games that we can stand behind, so there's no conflict of interest in what the guys say. So yes, we end up turning down about two times as many advertising dollars as we take in because of this, but we also maintain our credibility with our readers, which is paramount--a priority above all else.

GS: Any new ventures that you can talk about now? How about new charity initiatives to go with Child's Play?

RK: I've mentioned the new books, the new CCG and of course PAX, but there are some other things in the works. By the time people read this a new site design with some pretty innovative features should be launched. As far as Child's Play goes, in total we've raised nearly $700,000 in toys and cash, so we feel pretty good about what we're doing. We're probably going to start supporting some more independent programs this year--for instance, last year we contributed to a small start-up group led by Dr. Arun Mathews from Johns Hopkins called HOPE.

What they're doing is setting up networked Xboxes to see how community gaming affects the well-being of their child dialysis patients. Apparently there are these standardized tests to measure the "happiness" of patients (how often they ask for pain meds, how they feel at the end of each day, how often they feel depressed, that sort of thing), and the results so far have been very promising.

GS: Has your focus changed since you started working at Penny Arcade? If so, how?

RK: It's funny. I pulled out that original 40-page business plan the other day and we're 100 percent on track. The only thing I didn't anticipate was the Expo. :)

GS: Thanks, and see you at the show.

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