SAN FRANCISCO — The mobile-gaming gold rush is over, according to one of the people responsible for it. But he says the industry can reestablish a stronger, more sustainable model by looking to the East.
Mobile-gaming investment is in “a little bit of a hangover” right now, according to Rick Thompson of Signia Venture Partners. Thompson is one of gaming’s mega-investors, and he has generated nearly $5 billion backing and selling game startups. During a talk at GamesBeat 2014 in San Francisco, he says that Wall Street is spooked due to companies such as Zynga and King having rough initial public offerings — both debuted to great anticipation only to nosedive afterward.
“The Zynga model is busted,” said Thompson. “It doesn’t work, and people are skeptical [of the entire market now].”
Zynga and King both relied heavily on one or two hit games, and both have failed to re-create that success with subsequent releases. Many investors feel burned by those marquee gaming IPOs, and that public-market skittishness has led to fewer private firms putting capital into startups.
Things aren’t hopeless, according to Thompson. He says that China has a model that works.
“[To get money flowing again], it’s gonna take mobile-game developers and publishers proving they can make money consistently,” he said. “The Chinese companies have figured that out, and no doubt we’ll figure it out.”
The VC partner points out that Chinese developers have an advantage. They have access to more money, and those investors have never lost faith due to a Zynga-style collapse. But he says that they’ve nurtured that environment by focusing on what matters, echoing the words from a major player in Asia said earlier today at GamesBeat 2014.
“We’re years behind China in terms of free-to-play,” said Thompson. “They put engagement and fun first. That’s what we want to see rub off on [the game developers we work with].”
Instead of putting fun first, Western developers focused too heavily on analytics. That led to developers neglecting actual players.
“Despite that, we should approach China’s level of growth if we focus on quality,” said Thompson.