Skillz enters beta with an Android gaming platform that let players compete for real money

For those tired of competing just for points and virtual currency in mobile games, a new startup, Skillz, is about to ramp things up with its new platform for adding real-money tournaments to Android games.

Developers add Skillz as the multiplayer element of their mobile games. Players then sign up for a Skillz account that works across all compatible games, using in-app purchases to add money or virtual currency.

At launch, Skillz has been integrated into 10 games:

• GnarBike Trials
• Bubble Explode
• Big Sport Fishing 3D Lite
• SushiChop
• Mini Golf Star: Putt Putt Game
• International Boxing Champions
• Bubble Shooter
• Apache Strike: Multiplayer Fun
• King of Defense
• 3D Cave Runner

Not just any game is compatible with Skillz, though, as it falls under of US laws pertaining to games of skill. Real-money games of chance would fall under stricter gambling laws.

Skillz CEO and co-founder Andrew Paradise said that the real-money side of the platform will start out as fully legal in 36 states around the US, covering 75 percentof the population. Some of the remaining 14 states have full bans on cash prizes for games of skill, but others will allow some versions of Skillz’s tournaments.

Users logging in from authorized zones can add cash to their accounts via Visa card or PayPal. When they’re ready to withdraw their money, Skillz will mail them a check. Accounts will be limited to players that are 18 and up.

In order to abide by US law, Skillz has developed a technology to calculate whether a game is won by skill or chance using sample matches. Paradise said the process is 99.9 percent accurate with 10,000 results.

As you can imagine, adding a real-money multiplayer element to a game dramatically increases its stickiness. According to Paradise, games that tested the Skillz platform saw their retention rate increase from 4 percent to 18 percent.

The startup takes about 10 percent of the entry fees, though it depends on specific prize structure for the game. It splits half of all cash entry fees with developer partners, and publishers also get to keep the incremental ad views and in-app purchases.

With money involved, cheating becomes more of a serious concern, but Skillz has put several anti-fraud systems in place. While the company wouldn’t talk specifics, it did mention techniques like honeypots, regular heart beating, tech and binary verification. Users caught cheating will be banned across the entire Skillz network.

For now, Skillz is Android only. The startup is interested in bringing the platform to iOS, but Apple’s terms of service currently forbid it. The company raised a $1.3 million seed round while in stealth mode as Lookout Gaming last fall.

The persistent gap between advertising revenue on mobile devices and PCs has led other companies to also look into real-money prizes. For instance, Zynga has been experimenting with real-money games in the UK and is interested in bringing them to the US.

Skillz is shaping up to be a fascinating development in the mobile space. It has the potential to make games even more addictive, and it could definitely lighten a few wallets along the way. However, Paradise defended the real-money system as actually improving the user experience.

“Unlike in-game ads and in-app purchasing, it doesn’t reduce retention and engagement, it actually increases,” he said.

In many ways, this is like a casual esports ecosystem.

“The best users on each game will have the opportunity to make a pretty sizable amount of money, especially on popular games,” he suggested. “We’re going to be enabling that amateur feeder system for video games.”

Additionally, Skillz isn’t just for casual games. The company expects to eventually power games that could be classified as either hardcore or mid-core.

Professional esports have become increasingly mainstream with popular titles like Starcraft II, Call of Duty and League of Legends. Last month, Major League Gaming saw 2.6 million online viewers during its first offline weekend tournament of the year.

While the casual and mobile focus for real-money tournaments is relatively new, Paradise pointed out that games of skill have been around for over a hundred years. He cited playing chess for money in the park, or even the New York marathon as examples of cash prize skill-based games.

Underneath my personal fear that I’ll get sucked into cash tournaments for a mobile game, I’m excited for this development. Real money prizes literally raise the stakes for tournaments, but the added competition should make the right games even more fun.

Image credit: iStockphoto