Social network hi5 has hired a pioneer in the video game industry to kick its social gaming strategy into high gear. It remains to be seen if hi5 truly realizes what it’s getting in the hiring of Alex St. John.
St. John, founder of online game firm Wild Tangent and a former Microsoft games evangelist, will serve as president and chief technology officer at hi5. He will be responsible for its product development, technology, network operations and audience acquisition.
It might seem laughable that a mid-tier social network such as hi5 wants to become a leader in games. But St. John has changed the course of the game industry a couple of times in his career.
As a social network, hi5 has 60 million unique monthly users, most of them outside the U.S. But it looks like an also-ran next to Facebook, which has more than 325 million users, and hi5 has moved into games partly due to its struggle to remain relevant.
St. John acknowledged in an interview that hi5 needs to prove it can be more competitive in the social gaming market against the likes of Facebook and its game publishers like Zynga. But he said that the social gaming market isn’t locked up; rather, he said, it is just beginning.
That’s probably true. But I was surprised St. John didn’t just start his own company. He left his previous startup, Wild Tangent, more than a year ago, and he left its board in March. He grew Wild Tangent into one of the biggest privately-owned gaming sites. But St. John said he doesn’t want to try that again because in today’s market it will be easier to use the large audience and platform of hi5 to grow a social games and entertainment business.
St. John will report to Bill Gossman, chief executive of hi5. Gossman said that adding a visionary like St. John to the team will help hi5 continue its evolution into a social entertainment platform.
St. John was a hard-charging games evangelist for Microsoft and was co-creator of DirectX, the game platform that enabled the creation of a huge games business on personal computers running Windows. Before DirectX, Microsoft’s presence in video games was pretty much a joke; but DirectX also led directly to the launch of Microsoft’s Xbox business. St. John had a reputation for playing hardball and was nicknamed “the beast,” partly because he weighed more than 300 pounds back then (he’s lighter now) and wandered the halls of Microsoft with a long beard and a fake battle axe.
I wrote about his role in the rise of Microsoft’s gaming business in my book, Opening the Xbox. It’s no exaggeration to say that the industry wouldn’t be what it is today were it not for St. John. Indeed, he managed to revive the fortunes of the PC industry just as 3-D graphics came of age in the 1990s. But Microsoft didn’t truly appreciate St. John’s renegade tactics. He got himself fired with one of the funniest non-apology apology/resignation letters in corporate history, as recorded in the book Renegades of the Empire by Michael Drummond.
He founded Wild Tangent in 1998. The company raised a huge amount of money — $132 million — from a variety of typically game-leary venture capitalists. Wild Tangent went through several business plans as online games took off. It ultimately became a huge distributor of casual online games and pioneered a virtual goods business model based on a virtual currency dubbed Wild Coins. Many other companies followed in Wild Tangent’s footsteps, and St. John brashly predicted that web-based game businesses such as his would hasten the death of game consoles.
That hasn’t quite happened, though growth in the console business stagnated this year. Meanwhile, social games have taken off like wildfire. While still at Wild Tangent, St. John saw the rise of social games on platforms such as Facebook. But he said he didn’t believe that was a business that Wild Tangent could jump into at the time, since it was doing so well with its mainstay online game portal business.
He left the companyfor personal reasons a year ago and said he is now ready to return to work. He said he has legal permission from Wild Tangent to join hi5.
Looking around the market, St. John said that Zynga is very successful, but is still very dependent on Facebook for its success. He thinks that Facebook is in the midst of making changes that will shift profits in social games back from Zynga to Facebook. He isn’t surprised that Zynga’s reaction has been to create its own web site for the Farmville game, which has more than 65 million active monthly users on Facebook. He said that game companies that control their own social networks, such as hi5, will be in much better shape to control their own destinies.
While Facebook is the strongest player in social networks, St. John said it is a “fantasy” that it will be the only network with a great business in games. He thinks that social games today are still a lackluster experience — that they feel like little more than “meta games” that whet the appetite but have very little deep content to keep users hooked.
St. John said that hi5, founded in 2003 and one of the top 20 web sites in the world, has done well with its shift into games that started a year ago. It has another gaming veteran, Andrew Sheppard, who will report to St. John. The company launched a bunch of games this spring, including its hit games Spirehold and Organized Crime. St. John said he plans to accelerate hi5’s transition into social gaming and entertainment.
He is coy about saying what he will do exactly, but he believes that hi5 has to create its own original games in order to be successful.
“Chasing the crowd is not an interesting strategy,” he said. “I would like to do something highly differentiated. I intend to have a very aggressive content strategy. I hope to surprise folks. The social game party started without me. But hi5 is the best positioned to jump into the middle of the party.”