VentureBeat

PlayFirst, the publisher of the popular online game, Diner Dash, has raised an eye-opening $16.5 million in its third round of financing.

The company stands out because it’s one of the first mainstream American online game publishers to embed micro-transactions, small payments for access to new game content, into its game. The marquee title, Diner Dash: Hometown Hero involves controlling a waitress who runs around a restaurant trying to keep her customers happy. PlayFirst offers one playable restaurant and a standard avatar for free, but to soup up your avatar or get access to new restaurants, you pay small bits of cash.

Until Hometown Hero, the only way to play Diner Dash games was to drop $20.

The company is also announcing a partnership with widget-maker RockYou, to distribute one of PlayFirst’s games on Facebook.

The micro-transactions move has paid off: The company says it has doubled its revenues since 2006 and that Hometown Hero is on track to outsell its predecessors by a significant margin. The forums are more active, and 50 percent of the transactions involving the game are micro-transactions of $5 and under.

With this investment, the company intends to accelerate development of new games, extend its reach into consoles like Nintendo DS and Xbox360, and expand into international markets, especially those in Asia. The partnership with RockYou gives the company access to the so-called “social graph,” but the implications of this aren’t clear, and even PlayFirst says it is not exactly sure where this will lead.

However, PlayFirst says it will be releasing a steady stream of apps each quarter, starting with simple game widgets and expanding into richer content, but declined to offer details.

DCM led the investment, and previous investors Mayfield Fund, Trinity Ventures, and Rustic Canyon Partners participated in the round. The company has now raised a total of $26.5 million.

Tired of paying cash up front in order to play the most popular casual games?

Now, game publisher, PlayFirst, lets you make “micropayments” to progress through a game.

In the San Francisco company’s latest game, Diner Dash: Hometown Hero (which is the fourth in the Diner Dash series), you create an avatar, customize it to your liking, and act as a waitress and host, making customers happy in restaurant settings that get increasingly hectic to manage. This is more addictive than it sounds, and you can play with or against friends and strangers. The catch? To give your avatar the “coolest” clothes, upgrade your restaurant’s décor, and access new levels of the game, you have to pay small amounts of money, ranging from to a few cents to a few dollars.

This model is known as “microstransactions.” Microtransactions in online games are not new. Casual gaming site Pogo has toyed with them for social networking features, but PlayFirst is one of the first companies to integrate them with a mainstream casual game. This move takes micropayments beyond massively multiplayer online role playing games, which are more complex games that feature hundreds or thousands of people playing in a large virtual world at the same time. Diner Dash: Homeland Hero is a simpler game, intended to play online with a small handful of people.

Using microtransactions, PlayFirst can rope in and extract revenue from the mass of casual gamers who balk at the $20 price point, and extract even more from those who are willing to buy the game. Also, unlike the paid downloadable “story” version of the game, which has a central character named Flo and a series of levels to win, the online experience, with its focus on multi-player, is open-ended, allowing PlayFirst to continually add content and keep the revenue flowing into its bank accounts and out of yours.