Storm8 chief executive Perry Tam

The crazy competition of the mobile gaming market can make a chief executive panic. Huge brands like Disney are invading the market. Mobile messaging services are creating kings in the Asian gaming market. The odds of people finding your game in the app stores are getting worse as more titles flood the market, and it isn’t easy to predict what will make gamers go nuts.

But Perry Tam is staying calm. The chief executive of Redwood City, Calif.-based social mobile game publisher Storm8 has grown his company organically. Founded in 2009 by Tam and other former Facebook employees, Storm8 has had more than 400 million downloads to date, and it boasts more than 10 million players who come back to its games every day on iOS and Android. Its titles are home-grown social casual games such as Pet Shop Story, iMobsters, and Slots.

Today, the company is launching a new title called Fruit Blast Mania, a social arcade game with a tile-matching gameplay mechanic. From the company’s TeamLava studio, Fruit Blast Mania is typical of Storm8. It’s not particularly creative, as it is a mashup of some familiar titles. But it is completely homegrown and aimed at getting casual players to engage with it in a deep way. The title has hundreds of levels where players burst fruit clusters with their fingers. How does the company pump these titles out and compete with huge rivals?

We caught up with Tam last week at our Mobile Summit event in Sausalito, Calif. Here’s an edited transcription of our interview.

GamesBeat: Did you get any general impressions from the Game Developers Conference, like a high-level view of what’s happening?

Perry Tam: I spent most of my time in meetings, so I didn’t spend much time getting to look at other people’s sessions, but I’ll certainly do that at the Vault when they publish the talks. I talked about how we bootstrapped the company from zero to 10 million daily active users, and our perspective on mobile gaming in general. The message was well-received, I think. People seem to be excited about mobile gaming.

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GamesBeat: It’s interesting how you got there organically, or at least relatively organically. A lot more of that’s happening through acquisition or fundraising. It’s becoming a more complex business. It’s a lot harder to do it the way you guys did. Do you still feel like organic is the way to go, even if you’re starting out today?

Tam: As a growing company, we constantly assess our opportunities. We have been growing the company organically over the past four years, and I think that’s certainly a good way to do it. When we started we had this mindset of building a sustainable business. That’s what we’ve done, and mainly by finding good ways to invest our time and energy. We built up our own mobile network. That’s the core of the company. We’re always finding ways to bring people in the network.

But we always assess our options. There are many ways to grow a company. Different companies find different methods based on their culture and their strategy. For us, organic growth is a viable method, even now.

GamesBeat: How do you describe the environment as far as the pace of change now? How do you absorb some of these things that are happening? Like, supposedly Supercell is bringing money in through this $800 million valuation. Gung Ho, with Puzzle & Dragons, just got money from Softbank. Those guys seem to be getting that money because they’re the leaders of the day. How do you assess that?

Tam: First of all, all that is really good news. It’s good news for those companies and good news for the general market. It boils down to, what those numbers really say is that mobile gaming is a viable business. Those two companies are very successful. You might even call them outliers, but the fact that they can achieve that has set a high bar for the industry.

In 2011 we announced that we could make more than $1 million in revenue in a single day. That set the bar for everyone. Now there’s a new high mark. That’s great for everyone. Going back to where Storm8 fits into this whole picture, we believe that this is a huge business. We believed that four years ago and we believe it today. We want to build the biggest social gaming network on mobile. The way we did that is through games.

Having this sustainable model is very important to us. We don’t want to be a one-hit wonder. We have games in five different genres. We’re branching out and expanding our network. Again, that goes to the core of the company, building up this mobile social network. We do it by making different types of games, because the market is big enough that many different people want to come in and play games. You need a very wide spectrum in your portfolio.

Fruit Blast ManiaGamesBeat: You have the good fortune now of having teams that have done this a long time. How do those teams operate these days? Does a 10-person team work for a year now to do a game for you, or do you tend to reassign people a lot and have them start new things?

Tam: Working at Storm8 is like working in a big family. You don’t really get assigned to just one thing. People wear multiple hats. We have a platform mentality, where over the years we’ve built a lot of good technology within the company. We’ve built multiple engines that allow us to create games more rapidly. We’ve built up an analytics layer for ourselves that let us do A/B testing and optimization in real time. We also spend time on building up a better process for creating mobile games, from conception to submitting the app to getting the app to our users.

When someone comes to Storm8 to work on a game, they’re also working on all of those layers – the platform layers, the process layers – so they can contribute not just to one game, but to work that might be touching multiple genres or multiple games. That’s how we structure the company and the teams. Nobody’s stuck working on one game or one type of game.

GamesBeat: Are you relying on third parties now for anything, or are you building most things yourselves? What do you think of some of these external things, like Unity or even the Unreal engine?

Tam: When we started early in 2009, there weren’t that many tools to leverage. We ended up building a lot of technology in-house. Unity and Unreal are definitely great technologies for the mobile community. I wish we’d had something like that back in 2009. It would have cut a lot of time out of development. But the good thing about not having them at the beginning, it forced us to look into building our own stuff, and so we have a bit more leverage over our own destiny. We don’t need to wait for someone to work on the engine in order for us to do something. We can just go in and do it ourselves. So there are pluses and minuses in both cases.

GamesBeat: Have you guys looked heavily into 3D? Do you think 3D is going to be more important than 2D at some point?

Tam: It’s more that you have to look at the game holistically. You can’t just say, “3D is better than 2D” or vice versa. It has to do with what the game is about, what audience you’re talking to, and what fits into your game design.

GamesBeat: It always seems like scarier and scarier competitors are coming into the space. EA’s doing things like Real Racing and The Simpsons. They’ve been there all along, but there are more people flexing bigger muscles. How do you stay ahead of them?

Tam: It’s funny that you bring it up, because I mentioned this in my talk. When we started, we were a relatively small team. Smartphones weren’t well-known. People didn’t know that the smartphone ecosystem would get that big. In 2010 and 2011, we saw a lot of big successes on mobile. Rovio had Angry Birds. You had billions of actions in ngmoco’s games. They got a lot of traction and drew in a lot of big players, including VCs and the big publishers. There was something like $3 billion worth of acquisitions around that time. The bar for competition started rising and kept rising. We got more sophisticated people coming into the market.

That’s okay for us. When we reach back to our roots and think about what we’re trying to achieve, it reminds us that we’re trying to win in mobile. That’s how we became as big as we are today. To answer your question as far as how we stay ahead of the game, how we compete with all these sophisticated competitors, I explained in my talk that there are three keys to mobile success. First, time to market is very important. Mobile is very fast. Limit your development cycle. Make sure it’s quick. It goes back to how we perfect our processes for delivering games, from conception to launch.

Second is building a network. It’s important to aim for being more than a one-hit wonder. When we enter into a genre, we aim for multiple games in that genre and multiple successes. We don’t just want that one game. You build a network based on that. If you think of how to make multiple games, that builds up the user base that you can leverage.

The last thing is being bold. There’s a lot of opportunity in the mobile space. It’s relatively new. The smartphone has only been around four years at the most. There are lots of new innovations that you can discover and test. We’ve tried many new things over the years. We were among the first to get into the iOS the first getting into Android and Amazon. We were a launch partner with Facebook on the mobile web initiative. We were a launch partner with Apple on the Game Center. Some of those innovations work and some of them don’t, but when they work you have the early mover advantage. Those three keys are very important for anyone to be successful in mobile.

Fruit Blast Mania game playGamesBeat: 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.

Fruit Blast Mania actionGamesBeat: 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.

GamesBeat: Is there something about the charts that you would say is instructive now as to what defines success on the charts? If you get to number one and you last there for two weeks, but then it starts going down, is that a big disappointment? Would you rather have 10 games in the top 100?

Tam: That’s a very good question. You have to look at it through the lens of what game you are producing. Some games have longer or shorter shelf lives. Some games can draw a lot of users in a short time, but can’t retain them. Some games draw a very small set of users, but they can keep them for a long time and monetize that way. It goes back to what your strategy is – what games you want to make and what goals you have for them. There’s not one clear answer, like, “If you hit this many weeks and stay in this range you’re successful.”

Also, it has to do with how much money you invest into it. If you invest a lot of money, even if it stays there for a whole year, you might still lose money. If you invest very little money and it stays there for a short time, you might still be in the game. It depends on your initiative, your strategy, and what kind of purpose you’re trying to pursue.

Over the years, you can see that there are certain apps that can stay for a long time. We’ve produced many of those. iMobsters and the World War II games that we produced in 2009 were on the top 100 grossing list in 2012, even three years later. That’s amazing, when you think about it. That’s tens of millions of dollars worth of franchise. It’s important to realize that you can do that on mobile. It’s possible to create a very long-lasting franchise.

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GamesBeat: Blizzard gave a talk at DICE a while ago about all the games they cancelled, that they never announced. There were many duds. Everybody’s going, “Oh, that’s why they do a StarCraft every 12 years.” They’re very hard on themselves. But I’m not sure how it works in mobile, whether that would be impractical.

Tam: We have our own fair share of games that we kill or games that launch and we decide shortly after that we’re not going to spend more resources on them. At the same time, we’ve done a good job at, one, spotting the opportunity, and two, once we realize that it’s not going anywhere, then we kill it off and move on to the next thing. We’re making free-to-play games. We’re making games as a service, not something where you ship it and you’re done. That allows us to do something relatively quickly, test the waters, have people try it out, and then if we don’t see enough traction we can move on. If we see a lot of traction we can double down on it.

GamesBeat: It seems like a lot of things that are successful these days, even in mobile, are where they have a community. In Clash of Clans, it’s your clan. You feel like it’s your community and that’s why you keep going back to it. You think of Blizzard and Valve in the PC and console space. They’ve built the most loyal communities over time.

Tam: Community within games is a known thing. That’s been proven for a long time. More important, what we find now, is the social aspect of gaming. Maybe you call it community, but generally I call it the social aspects. We find that a socially connected user within our games is seven times more likely to spend and three times more likely to come back to our game than a non-socially connected user. That may speak to the community that you’re talking about, but it also speaks to having a good understanding of how social can impact games. People are starting to understand that.