GamesBeat: Do you feel like you’ve upped the quality effort? I imagine that comes from making teams bigger.
Tam: It’s a little of both. Making the team bigger, using more advanced technology, and then also spending more time. When we first started, we made nine games in nine months. At the end of the year we had nine of the top 10 RPG games on iOS. But now, it takes us more than a month to make a game, as you can imagine. The teams are much bigger. We used to have less than 10 people on a game. Now the whole company is more than 200 people working on multiple projects at the same time. So it’s making the investment of people and time, as well as the technology we’ve built up over the years. But we can still keep our teams to a reasonable size.
GamesBeat: It seems like a fair amount of companies hit it big with one game, and then there’s a rumor of funding or acquisition. That follows through based on whether or not they can keep that going. Does this make sense to you, as far as the companies are being chased by the money?
Something about it doesn’t seem right. There’s a gold rush mentality – if you don’t catch something while it’s hot, the opportunity disappears. I’m having trouble getting high enough to see what’s going on here and whether it makes sense or doesn’t make sense. Your view?
Tam: I can’t speak for other people, but from an investor’s point of view, it comes down to what your hypothesis might be with the team you’re investing in. Are you investing in one game? Are you investing in a company? Are you investing in a team? Are you investing in a user base? So it depends on what you’re betting on.
Our company is all about building a sustainable business. We’ve never raised any funding. Part of what I was sharing with my audience at GDC is that there are reasons you might want to bring in VC, and there are reasons why you might want to stay self-funded. For us, we never needed the money to expand. We were profitable from the beginning and we’ve built our own war chest to keep on growing. It’s a very clean cap table. It’s just the founders and the employees. That makes things much simpler. Not many companies are in our situation, though, so it’s hard for me to comment on other people.
GamesBeat: I suppose you guys have been more steady, too. It seems like the companies that face more challenges are the ones that go through a curve of some kind. Something gets hot, it takes off, and then declines. They’re constantly trying to make their new games take off in turn. You guys haven’t had that roller coaster effect.
Tam: I go back to how we built the company. We never aimed to be a one-hit wonder. We only looked at things we could build multiple successes around. That allowed us to diversify our portfolio into five different genres. There’s no one game that makes the lion’s share of our DAU or anything else. We have 40 games that are all very well-balanced. That goes back to your point. We try to build this into something sustainable so we stay off that roller coaster. We don’t want to get to a point where we can only go down from there. We’ve had good growth in these four years and we project more growth going forward.
GamesBeat: Have any things gone differently in 2012 and 2013? Last year there was a lot of talk about user acquisition costs going up. Is that same discussion going on now? Fiksu was saying that costs went down in the first quarter. What’s your view on user acquisition right now?
Tam: Every year, like you said, during the holidays there’s a spike in spending and a spike in costs. That makes sense to us. We do see that the cost of user acquisition isn’t as crazy as it was maybe six or nine months back, but it’s still a significant amount.
I would always urge anyone who creates anything on mobile today to pay attention to marketing costs, to budget that as part of initial costs and ongoing costs. That’s important. Don’t just build something great, but also think about how you market something great. At Storm8 we have the network we can leverage to promote new games to our customers. We know what type of games they like to play. If they like to play a more casual game, then the next time around when we have a casual game we can put it in front of them and they’ll be willing to try it. That’s a strong advantage we have over our competitors who don’t have that network. It significantly lowers our acquisition costs.
What we also find is that users who play multiple games within our network are three times as likely to stay with us as someone who only plays one game. That’s an astonishing success. Not only does it lower our costs, but it also increases the value of each user.
GamesBeat: The capability to target these folks and do better things with them, are you satisfied with your ability to do that at this point? Is it something you wish you could do better?
Tam: One of the opportunities in the mobile space right now is app discovery. By some reports, there are 800,000 apps out there, but only 80 of them made more than $1 million in the fourth quarter of 2012. That’s astonishing. 0.01 percent of apps are doing more than $1 million in a quarter, a very small percentage. Solving the app discovery problem is something that everyone would be happy about. It’s a challenge for a lot of app developers, but it’s an opportunity for all of us. The first one to come to market with a compelling solution will have something very valuable.
GamesBeat: How many games are you guys launching soon? Are you increasing your rate of launches or reducing it?
Tam: This year we’ll launch about the same number of games as last year. We’re on par, or maybe slightly over it. It’s not the amount of games you launch, though. It’s how you become part of that 0.01 percent. We’ve proven that we’re able to climb up the ladder. That’s what we’re about in 2013. It’s not about launching more. It’s about timely, quality, contacts-related apps.