Every game developer is about to make the strategic bet of a lifetime. You have to go mobile, as there are now a billion smartphones and tablets being sold a year. You either do it right or you mess it up. But how do you do it? I had the fortune to attend the Global Mobile Internet Conference this week and interview a number of CEOs and former CEOs. Naturally, I got many answers.
The folks doing it right are the teams at Supercell, which was valued at $3 billion in a recent deal with SoftBank, on the strength of its Hay Day and Clash of Clans mobile games. London’s King reportedly filed for a secret initial public offering at a $5 billion valuation, thanks to the success of Candy Crush Saga. And Japan’s GungHo Entertainment has struck gold with its Puzzle & Dragons game, which is generating more than $5 million a day. These are today’s mobile role models, said Robert Xiao, chief executive of online game publisher Perfect World, in an interview with GamesBeat. We’ll be talking a lot about these role models next week at the GamesBeat 2013 event on Oct. 29-30 in Redwood City, Calif., and I don’t think we’re going to come up with just one answer.
“ People wouldn’t have believed that could happen until they saw Clash of Clans,” Xiao said. “They wouldn’t believe it in the age of games making, say, $100,000 in revenue per month.”
Don Mattrick, chief executive of Zynga, also said in a conference call Thursday that he admired Supercell and King and that their success shows the “power of the category.” He said it energizes his team to know what is possible. But Zynga hasn’t had the same luck. Zynga has 14 million mobile daily active users and 16 million on the web. But a year ago, Zynga has 60 million DAUs. That’s why Zynga’s value is $2.8 billion, less than Supercell’s, even though Zynga has 2,200 employees versus 100 or so at Supercell. Zynga hasn’t done it right yet, but getting it right is part of Mattrick’s plan. That’s why he brought in Clive Downie, CEO of mobile gaming firm DeNA West, as the new No. 2 executive at Zynga.
But what’s going to work? Zynga already tried going global, with big bets in China, Japan, Taiwan, and other markets. It shut down a bunch of those efforts.
Meanwhile, Gamevil, a South Korean mobile game publisher recently went in the opposite direction of going global. It went local, by acquiring Com2us, another South Korean game publisher. That could be a very smart bet, since the mobile messaging network KakaoTalk has taken off in South Korea with more than 5 billion messages sent daily by more than 100 million users. Games on Kakao are starting to dominate the top ten list of the largest revenue Google Play games in the world. Gamevil is expanding in the rest of the world. But it just made a major bet on going even more local.
There are many ways to place bets. You could double-down on the console, or shift into online gaming, or go mobile first.
Xiao has more than 4,500 employees making fantasy online role-playing games. But he’s looking for the right way to take his company mobile. Perfect World has launched Return of the Condor Heroes, a 3D turn-based role-playing game. It’s doing very well. But he’s also trying to figure out the right way to go global and local.
“We believe we should invest ahead of the curve, and we’ve been doing that,” Xiao said. “We’re starting to see some return, and we’re going to invest more in hopes of a bigger return in the future.”
Asked if it pays off better to go worldwide with a network like Facebook, or to go local with something like Kakao, Xiao said, “To give you a simple answer: they’ll coexist. The populations they’re serving will be different. Or they’ll serve different needs for the same people. People sitting in front of the TV, in front of a PC, in front of a mobile device, they all have different needs. Different platforms and ways of entertainment will coexist…. Just because Kakao is here, that doesn’t mean Facebook will go away.”
John Riccitiello, former CEO of Electronic Arts and now a private investor, said that entertainment is glamorous, but it’s a hard business because everybody wants to be in it and it’s not easy to make money in it.
“It’s a really good time to be in the game business and you can make money in consoles, PCs, or mobile,” he said in an interview.
Riccitiello’s favorite path to success is to build brands that will last for decades. For him, Angry Birds is a relatively untested brand. He views Mario or FIFA Soccer as real game brands that have lasted for decades and generated billions of dollars.
As for SoftBank’s bet that Clash of Clans will be globally appealing? Riccitiello said, “There’s something to be said for that. But it has happened in movies, music, and books before. It hasn’t happened with Puzzle & Dragons,” which isn’t as strong in the U.S. FIFA has done it, and Mario. But few others have done it. Hay Day has also done well in multiple markets.
“There’s going to be a $5 billion intellectual property in mobile in the next few years if somebody cracks three or four major geos and sustains monetization for a year,” Riccitiello said.
Some executives in games have no love for the platform owners, who always take a 30 percent cut. But when you look at things from one level up above games, the view is different. Akira Morikawa, chief executive of Japan’s Line mobile messaging network, said in an interview with GamesBeat that he is quite happy that games have taken off on Line, which has quickly acquired 270 million users worldwide. But the more he thinks about the global market, the less he focuses on games.
“What we hope to attain is, using communication as a base, we want to become a global infrastructure, a global platform,” he said. “We’re continuing in the game business, and we plan to introduce e-commerce, but we’re not going to be a company that dedicates itself to those limited businesses. We want to provide many different things. But our focus is that we’re a communication-based platform company.”
Asked if there are global games that don’t need much localization, he said, “I’m afraid not. Most of our games, at least, are still very much Asian-oriented. Many game makers are still based in Asia or targeting the Asian market. However, later this year, many U.S. and European-based companies are coming in to our market, so they might shift that trend. But trends in games change very rapidly, so where and when and how you grab on can be difficult to judge. One prime example is Angry Birds. It was the game of the year when it arrived, but now I don’t know if it’s that popular anymore.”
Jens Begemann, chief executive of Berlin-based Wooga, doesn’t believe that the past of consoles is simply going to repeat itself in the mobile universe.
“If you look at the total revenue that a Clash of Clans has generated so far, it’s still probably smaller than Call of Duty, but it’s not so far away,” Begemann said in an interview. “One of these two markets is growing fast. One of these two business models is growing fast. You have to embrace the future. If you look backward too much, looking at what’s happened in the last 10 or 20 years, you won’t be successful in the next 10 years.”
Begemann has quietly been building up his mobile teams, prototyping lots of games, publishing a few, and getting behind the hits. That’s how his team came up with Jelly Splash, an admittedly Candy Crush-like game that has been downloaded more than 10 million times in just eight weeks. He’s betting on mobile, and he’s trying to go global, but he’s not taking risks on untested technologies like HTML5.
“We have seen games like our Diamond Dash become successful all over the world, except in Japan, Korea, and China,” he said. “And we’ve seen a lot of games that are only successful in east Asia. There’s still this chasm, if you want to call it. Japan, Korea, and China work differently. That’s something we’re watching very carefully.”
He added, “We design our games more for the rest of the world. We don’t design our games specifically with Korea or Japan in mind. But we look at everything. We have a very international company. More than 40 nationalities work for Wooga in the same office in Berlin. Every team is very international too. So they don’t create a game that’s just German or American or whatever. We create games that fit a global taste.”
Gabriel Leydon, CEO of Machine Zone, took one of the craziest mobile game bets of all. He raised venture money, put a team of 80 people to work for 18 months on a game called Game of War: Fire Age. They built a mobile messaging platform to enable quick communications. They also built a translation engine to enable people to talk to each other across language and territorial borders. And then they built a huge multiplayer strategy game on top of that.
So far, it’s paying off, as Game of War is No. 4 in the U.S. in the iOS App Store. If the game keeps monetizing as it has been, Leydon’s crazy plan won’t seem so crazy anymore. We’ll ask Leydon about his nutty strategy next week at GamesBeat 2013, and we hope you’ll join us.