The King Of Online Chess

Hi, today we're exploring: How Chess.com built an online chess empire. Hello and happy Sunday! Today we’re exploring the rise of Chess.com, which made all of the right moves during the pandemic-fueled boom of the game to become the king of online chess, with revenues north of $100M. [Read this on the web instead]( In October 2020, Netflix released The Queen’s Gambit, a coming-of-age drama about a (fictional) young chess prodigy who overcomes her upbringing, gender stereotypes, and alcohol dependency to conquer the high-stakes world of chess. The show quickly stormed to the top of the streaming charts… and, while the game itself was but a narrative pawn to advance the story, its success threw fuel on the fire of a global chess boom, as hordes of lockdown-weary, entertainment-starved people turned to one of the world’s oldest games. And, at the center of it all, was Chess.com — a company that’s made all of the right moves, creating an online chess empire that makes hundreds of millions of dollars each year. Open file When founders Erik Allebest and Jay Severson bought the Chess.com [domain]( for $55K in 2005, they envisaged it as a forum for enthusiasts. However, unprecedented demand for online gameplay led to the pair developing their own technology for a chess portal, launching an [early version]( of the subscriber-based site in 2007. Since then, the website has gone from strength to strength, with data provided to Chartr by digital intelligence platform [Similarweb]( revealing that traffic to the site has soared. The chess.com fortress Apart from having the most valuable internet chess real estate possible in the form of its eponymous, search-engine-optimized site, Chess.com has made a series of strategic acquisitions that have helped it move towards an online chess [monopoly](. It bought rival sites ChessPark in 2009, ChessVibes in 2013, and, most recently, PlayMagnus, named after the Norwegian world champion, for ~$83M in 2022. The company’s also catered to the growing world of streamers — yes, every day, thousands tune in to watch people play chess — which has made personalities like Levy "GothamChess" Rozman (5M YouTube subscribers) and Hikaru Nakamura (2.3M YouTube subscribers) into chess celebrities… and raised the stakes for high-profile playoffs. In 2020, the site secured the [broadcasting rights]( to the World Chess Championship, and it held the first-ever Champions Chess Tour in 2023, an online fast chess tournament with a record $2M prize pool. Last year, Chess.com reported that some 12.5B [games were played]( on the platform — or, roughly 35M games per day — while rival website Lichess, which is free for all users, notched just 1 billion games [played](. Indeed, it seems that having the first word in the sport pays off; for example, when The Queen’s Gambit came out, Chess.com was ready with a series of ‘Beth Harmon’ bots for people to play [against](. Chess is big business Perhaps unsurprisingly, there hasn’t historically been a lot of money in chess, and many of the world’s ~2,000 grandmasters, the game’s highest official rank, lead relatively unglamorous lives. Like other individual pursuits, chess does not spread riches particularly widely, as prize money is often only a supplemental source of income to many players' main meal ticket: teaching the game, with the best players often charging upwards of $100 per hour [for lessons](. But even the earnings of superstars at the very top of the game, who dominate the prize pots and sponsorship opportunities that their success affords them, pale in comparison to what Chess.com is raking in. Chess.com runs a freemium model: there are ads on the free service, while premium subscribers get an ad-free experience, as well as access to unlimited lessons, puzzles, and analysis tools. But, how many of its users actually pay? To answer that requires some digging. In February, the [20VC podcast]( reported that the company had 150M members while doing $100M+ in revenue. Based on that, and a reasonable range of monthly revenues per customer (which is hard to guess precisely because of different membership tiers), it seems likely that just 1-1.5% of users pay-to-play. But, if that conversion is a little bit higher — and many freemium businesses operate between 2-5% conversion — then Chess.com could easily be a $200M+ business. Indeed, if only 1 in 40 users (2.5%) went premium at $5 a month, that would create $225M in annual revenue solely from premium memberships. With advertising to consider as well, odds are that the $100M figure quoted is probably conservative. Checkered past Dating back as far as 10th century Baghdad, the rise of chess over time has been anything but black-and-white… and, even in the modern era, its growing popularity has hardly had a smooth ascent, riding a few distinct booms where the game has captured the public’s imagination. Knights of the Square Table When 13-year-old American prodigy Bobby Fischer beat International Master Donald Byrne in 1956 (now known as ‘The Game of the Century’), it kickstarted a chess-mania that only peaked when Fischer won the World Championship 16 years later — a period of time when [US Chess Federation]( memberships skyrocketed. The game’s cultural significance was further cemented by its association with military tactics, which made it startlingly relevant during the Cold War, as the psychological gambits of the [international stalemate]( were mirrored by tense matches between Fischer and Soviet grandmasters. However, as technology flourished, opponents began to look less politically and more corporeally different when programmers realized that the defined, near-infinite possibilities of chess moves were a perfect fit for binary-coded CPUs — giving rise to one of the most famous incidents of man against machine: Kasparov vs. Deep Blue. Indeed, when Garry Kasparov, one of the greatest players of all time, conceded victory to an IBM supercomputer after a pair of 6-game matches in ‘96 and ‘97, it redefined the game for the millennium to come. False moves Now, 27 years on from that pivotal moment, chess engines are so advanced that not only do they crush every grandmaster alive, but they often play moves that humans struggle to even interpret (great video [here]( showing Levy Rozman taking on a 3500+ Elo-rated chess engine). And, unlike Deep Blue, which ran on two 2-meter-tall computer towers, modern engines can run on just a smartphone. However, these developments have also exacerbated players’ means of cheating — a problem that’s plagued the chess community for years. There was the infamous [‘Toiletgate’]( at the 2006 World Championship, and, in 2022, when world No. 1 Magnus Carlsen was beaten by up-and-coming online star Hans Niemann, some wild [accusations]( caused considerable… well, buzz, even inspiring an upcoming [A24 movie](. Although Niemann’s ensuing lawsuit was eventually settled, cheating in chess remains an endless game of cat and mouse, particularly for online platforms. After all, anyone with two devices can instantly get help from a near-unbeatable chess master… and many do. According to Chess.com, the site bans ~90,000 players every month for [cheating]( using algorithms to detect when a series of moves might be suspicious. Check, please As a puzzle, the mystery of chess is gone, solved by computers thanks to the brute force of calculation. But, far from destroying the game, chess is still thriving… which may offer some small glimmer of hope against a backdrop of a growing number of pursuits being threatened by AI. [Read this on the web instead]( Thanks for stopping by! Have some [feedback](mailto:daily@chartr.co?subject=Feedback&body=Hi%2C%0A%0AI%20like%20the%20newsletters%2C%20but%20I%20had%20a%20thought%20for%20you...) or want to [sponsor]( newsletter](mailto:james@sherwoodmedia.com?subject=Chartr%20NL%20Sponsorship%20Enquiry%20)? Not a subscriber? Sign up for free below. [Subscribe]( Copyright © 2024 CHARTR LIMITED, All rights reserved. You are receiving this email because you opted in via our website. Our mailing address is: CHARTR LIMITED 231 Vauxhall Bridge RoadLondon, SW1V 1AD United Kingdom [Add us to your address book]( Don't want charts in your inbox anymore? Break our hearts and [unsubscribe](. [Privacy Policy](