I recently decided to redirect my career to the enterprise cloud after many years in the game business. Games are fun, but the business of games sucks. I reflect on 18 years in the games business and share my perspective where its going and why I decided to focus my career in a new direction.

I got into the games business in 1996 when I founded B2B content distribution network Gigex. We discovered an opportunity in the growing PC game business and were the first company to build a vertical Software-as-a-Service CDN service to distribute game demo downloads as a marketing tool. Over the next 10 years, we launched over 275 PC game demos, console trailers, and marketing campaigns for the top game publishers, providing them aggregated user data from all over the Web that they valued as prerelease demand forecast. The business grew, and we pivoted in 2001 and became GameDaily.com, an ad-supported content business with downloads as part of it. Many people remember the daily B2B GameDaily newsletter arriving in their inbox and the GameDaily consumer review site that pioneered focus on the mainstream gamer. We published a family game guide written by moms for moms. TimeWarner AOL acquired the company in 2006, and I left the end of 2007. The big lesson from the Gigex and GameDaily years was the data we collected was the key to our value to our publisher and advertiser clients.

I always enjoyed the games world – the interesting and passionate people, the unlimited creativity and exciting new products and business models.  After leaving GameDaily/AOL, I helped start another media company, IndustryGamers, now part of GamesIndustry International, and a strategic consultancy, Worlds and Games, where we built, marketed, and advised many MMO, web, mobile and F2P games. Some were big hits. Most were not. After spending a lot of time working on many diverse projects, I realized I wanted a change.

I decided to transition to the rapidly growing world of enterprise cloud services and recently joined Oracle’s new Marketing Cloud division (a roll-up of four recent acquisitions), where I’m in charge of go-to-market strategy for market verticals of retail, publishing, CPG, and travel. The colleague that recruited me enticed me by saying “we’re a billion-dollar startup” and “everyone here is an adult.” Both things sounded very compelling.

I saw an opportunity to get in on a megatrend — the migration of key enterprise functions to the cloud — and make a big impact by driving essential core marketing products that large clients use. I enjoy helping build successful businesses, and Oracle Marketing Cloud is a lean startup within the huge sales and support infrastructure of Oracle. The individual businesses are all successful and demand for the suite is growing quickly. If I am successful, our team will rapidly grow the products’ adoption and revenues. It’s a big challenge and I want to make a lasting impact. GameDaily’s acquisition was great, but a few years later AOL shut down, and it disappeared into the fog of the past. Other startups I’ve worked with have chugged along, run out of gas or failed and disappeared.  I wanted to have my next step be lasting legacy to hard work, talent and achievement and that has gotten very hard in the games business.  Making a change to a new market entails personal risk, as I don’t have an established brand, deep connections or years of operational experience in enterprise cloud. Starting with a clean slate is both scary and refreshing.  I’m excited and welcome the challenge to help drive marketing and business success across many of the world’s premier brands.

Why I don’t like the business of games

Games are fun, but the business of games sucks. I believe only a few “monopoly style” business can thrive in today’s world and that the rest are undifferentiated, venture-bubble driven, or too commoditized to build and sustain long-term success. I thought about the critical elements I needed to see a business succeed. Where could I have an unfair advantage leveraging my years of business, marketing, sales, and company-building experience to build a new successful company? How could I either help build an existing business or start a new one where my invested capital of time and money offered an upside opportunity that outweighed the risks? I believe you need an unfair, massive advantage, best summarized in PayPal cofounder Peter Thiel’s new book and his “Monopoly” argument

Monopolists can afford to think about things other than making money; non-monopolists can’t. In perfect competition, a business is so focused on today’s margins that it can’t possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.

Getting to a monopoly, then, is a matter of inventing something 10x better than any peer product, or discovering an entirely new category.

In the game business, I see a few companies with monopoly-like characteristics to grow their businesses — EA, Twitch, Facebook, and Google. EA has massive physical and digital distribution, core licenses, and monopoly franchises that competitors can’t copy — how did all those generic soccer or football games fair against FIFA or Madden? Twitch masterfully built livestreaming into both next-gen consoles and their domination in the live gameplay video vertical is an almost total monopoly. Facebook and Google are obvious dominant audience distribution channels that game companies must engage with as advertisers or partners on some level.

I looked at the game business over the past few years and saw several troubling trends:

  1. Failure rates of 90 percent for new F2P web, mobile and console games.
  2. Many rock-star, talented, experienced founders failed because they couldn’t build a new brand, get monetization right, build traffic, platform adoption or get enough people to pay for a free service. In other words, they failed to leverage their talent, content and experience for a massive advantage.
  3. Superstars like Blizzard, with unlimited resources, failed to figure out how to follow World of Warcraft with a new great game. It canceled Titan, throwing in the towel after seven years – if that company can’t figure it out, then something is very wrong
  4. The “Flappy Bird” factor: How does one guy in his apartment come out of nowhere to outcompete Kabam, DeNA and Zynga on the charts?
  5. No new game content or service companies that have IPOed in the last 4 years have have succeeded in public markets.
  6. Over-reliance of ad, monetization and app promotion services. This “shell game” marketplace is oversaturated with too many copycats and shady networks that are one decision away from being shut down by Apple, Facebook, or another platform. This hurts the market as customers can’t trust their partner’s business practices or longevity.
  7. Dude, can you give me free advice? Enough said.
  8. Too many business people in game companies are immature “gunslingers,” with unsustainable promises and practices that hurt customers and other business actors. I’ve experienced integrity, honesty, and financial issues that ruins the fun of working hard in games.

My conclusion is that despite my knowledge, experience, the odds of success and ROI in today’s game business were dramatically against me, so I chose to take my talent to world of enterprise cloud.

This is how I see the current situation in today’s games market.

  1. Winners will be large publishers with big franchises — FIFA, Call of Duty. It will be continue to be challenging to build new mobile franchises with sustained traction.
  2. Outlier black swans: Games like Angry Birds or Clash of Clans have become big hits. Mobile is super exciting and new content will break through. Predicting new winners is incredibly hard.
  3. The 90 percent failure numbers means the business of games is a bad bet, and the odds are getting longer.  For example, many people (including me) were totally wrong in hailing Android consoles like Ouya as the next great opportunity to transform the business.
  4. Games today are not a fit for senior exec talent, except at large established publishers.
  5. The best bet is “bootstrap hail-mary”, where a lean team makes a cool game and throws the ball deep down field to see if it hits and then scale from there. If the founders have staying power and patience, they may find success in this model. There are several of these companies in the wings and it’ll be interesting to see how they do. (See point 2)
  6. There will be massive consolidation of the monetization networks or rule changes from the key platform owners that will change the way the business works.

I hope my former games colleagues continue to have fun and innovate. That’s why most people got into the business. I hope the market models mature to allow new companies pathways to growth. It’s been fun, and maybe one day I’d consider a return to games to help run a great company. But for now, I’m enjoying growing businesses in the cloud.

Mark Friedler is a media executive, serial entrepreneur, startup adviser and consultant. He was the founder and CEO of Gigex and GameDaily. He’s currently the senior director of vertical markets at Oracle Marketing Cloud.