TradeMe founder Sam Morgan has led a $2.5 million investment round in the Auckland-based social game company SmallWorlds.

Morgan says the company is well positioned for further growth. "Online businesses like this are hugely scalable and can grow incredibly quickly while maintaining high margins," he said in a statement.

"Gaming is a huge export opportunity for New Zealand, occupying the sweetspot between technology and creativity," said Morgan. He sees a parallel between SmallWorlds and the internationally successful Weta Digital, which, he said, also combines the two elements.  SmallWorlds is New Zealand's largest such 'social gaming' company, with 6.5 million registered players of its browser-based game. Players can choose to buy virtual goods to customise their character and spaces and participate in web-based activities and games with online acquaintances.  SmallWorlds co-founder Mitch Olson said while the game is free to play, the scale achieved with social networking audiences means only a small percentage of players need to purchase content and virtual goods to generate revenue.  The investment will fuel SmallWorlds' expansion in the social gaming sector, with the company aiming to be a $100 million export earner by 2013. Games on social networks, such as Facebook, earned over US$1 billion last year; that figure is expected to rise to US$5 billion by 2015.  Morgan has recently been appointed to the SmallWorlds board, along with Jade Software CEO Craig Richardson and US tech investor Payman Pouladdej.

About social gaming:

• Games are the fastest growing entertainment sector globally, surpassing music and movies in revenue. 
• 53% of Facebook members over 18 have played a social game, according to Lightspeed Research. 
• US$7.1 billion was spent on virtual goods across all platforms globally in 2010, according to estimates by market research agency In-Stat. 
• Zynga, the company responsible for the Facebook game Farmvill, is valued between US$7 billion and $9 billion.