In the small world of mobile gaming, Trip Hawkins looms large. Hawkins designed his own major in applied game theory at Harvard University, and in 1982 founded Electronic Arts Inc., which continues to dominate console- and computer-gaming spaces. He launched Digital Chocolate Inc., a pure-play mobile publisher, in 2003, and quickly became a highly visible evangelist for wireless gaming. And while Digital Chocolate has yet to break into the top tier of publishers in terms of revenue, the company continues to receive rave reviews for its library of casual, connected games. We spoke with the member of the Academy of Interactive Arts and Sciences Hall of Fame in advance of GDC Mobile this week in San Francisco.
Last year’s GDC Mobile was a sobering affair, with speaker after speaker bemoaning the industry’s failure to move beyond a niche market. What has changed in mobile gaming in the last year?
One thing that has been going on is the migration of carriers in the Western world in terms of their ability to handle client-server applications, to (bring to market) handsets that know how to correctly route data traffic. We don’t’ want that to be confusing for the customer, or for them to go to the wrong place. Another thing that is moving forward is advanced billing systems. Verizon, with BREW, and Sprint Nextel built it themselves a long time ago, but it’s only recently that AT&T and T-Mobile added subscription capabilities.
So why aren’t we seeing more growth in mobile gaming?
In the mobile space, you go to the deck, you download ringtones, games, whatever, it runs on the client and that’s the end of the story. We haven’t as an industry made that much use of the network other than delivery. Also, we’ve been historically relying on the customer to go to the deck to find things.
When you think about growing the industry and generating more revenue, you need to solve three problems: discovery, trial and monetization. In the old model, the customer had to find the deck, then find the product on their own, so discovery was going to be a challenge, was not going to happen all that often. Then, for the trial, they had to basically read one question of text and commit to pay. We shouldn’t have expected so much from that. And in terms of monetization, the history of mobile content is in one-time payments, not valuable content (that produces recurring revenues).
How do you ease the burden of discovery?
In the last six months, we started to do experiments on the Web. We put one of our games from our back catalog – “Tower Bloxx,” it was a big game for us in 2005/2006 – we put this game out as a free trial on the web (on Facebook and other sites). There was this somewhat hard-to-notice button, it didn’t even look like a button, that said “Mobile Bloxx.” We had over 200,000 people click that button. . We basically used some viral spread technology and we got tons of trials. Now that we’ve got a lot of the plumbing figured out, someone who goes through that on the Web and wants to buy on the WAP deck, we know how to go to a deep link directly to that carrier to deliver and pay for the actual product.
Many believe that Facebook and Second Life will continue to blur the lines between gaming and social networking. How do you see those two spaces coming together in mobile?
People are realizing that they’re too checked-out, and they’ve got lots of ways to kill time. People are looking for ways to check in. This is where we see the decline of Yahoo and the ascendancy of sites like Facebook.
What we want to do is build services that are a little bit more like a casual virtual world, like (Walt Disney’s) Club Penguin. It’s not so much about the technology, because that technology may in fact intimidate people. If you’re trying to bring people into interactive experiences, less is more. This is the key to why something like Facebook is so successful.
What we’ve found is that customers really want to use applications like that (Digital Chocolate’s AvaPeeps) to meet people, and meeting people is so valuable they will pay on a recurring basis. There are people who go to bars, go on blind dates, use match.com, but some of the traditional methods of meeting people are kind of humiliating. But with a mobile game, there’s plausible deniability. You can tell people you’re really just playing a game.
In your keynote address at last year’s show, you criticized the importance some publishers place on creating games based on licensed franchises. Is that message resonating?
I don’t think the correct answer for the industry is to focus on brands from other media sectors. I think that’s a strategy we’ve seen heavily used by some of the other mobile game companies, and it’s beginning to run out of gas. Several of the companies that are heavily (invested in) licenses are public – THQ, EA, Gameloft and Glu – and if you look at their numbers (from the third and fourth quarters of 2007), what you see is basically that strategy kind of burning out. . You can only shovel so much of that stuff and expect it to move the needle.
We are doing more licenses, though. We didn’t want to depend on that, because a lot of licenses were priced too high. Now that there’s been a lot of consolidation there are fewer bidders.
Ad-subsidized games seem to have gained traction in the last year, and a few months ago Digital Chocolate joined that effort, agreeing to distribute free games through Greystripe. Some of your competitors have slammed giving games away, though, claiming that it threatens the viable business model of paid gaming. Do you agree?
The industry’s better off if the public puts value on games; it’s better off if the public is trained to use the carrier deck. So that is an issue.
If I try to insert ads into a game the customer just paid for, it competes for the memory resources of the phone, it competes for network bandwidth and it competes for my attention when a customer is trying to play a game he paid for. I don’t think you can push that too hard.
But a network where games are free is just inevitably going to attract of grade-B games. It will be a bunch of old games, grade-B games that couldn’t make it in conventional channels. It’s just a question of whether or not that’s viable in the long run. Consumers are going to have to have a lot of ads presented to them to make it work. If it doesn’t scale it doesn’t really work, and it doesn’t scale until you see a lot of advertisers.
How much will the rise of off-deck activity impact mobile gaming?
There are a lot of things that make off-deck difficult. I think at the end of the day it’s really a merchandising question. You’re going to have a bunch of different retailers – or etailers – and they’re going to develop brands. Right now the strong brands are the carriers. There isn’t anybody who’s the equivalent of Amazon. And there are a lot of mouths to feed. There are development costs, you have to drive traffic, there are billing costs. . Frankly, most of the off-portal activity is around music. Music customer acquisition costs are very high, say, $20, so they can’t make money if they sell $5 or $10 worth of music to a customer that costs $20 to acquire. So they set up these subscription services.
How effective have those subscription services been?
I believe it’s a huge problem and it’s sort of a dirty secret in the industry. Basically you’ve got a lot of kids on PCs, they see things and if they’ve got a mobile phone they may be done enough to go for it. Now (the charges are) going to show up on their parents’ phone (bill) the next month. It takes two months before the consumer even notices, and it takes another month to figure out how to shut it off. That’s how they’re getting the value per customer up above $20. But what they’re really doing is destroying value. They’re crushing value.
What does the near future hold for mobile gaming?
It’s going to become more like the Internet, and we’re really focused on that right now. Just on the PC side we can do things to solve discovery and trial, and that leaves the question of monetization. You can let people try it free on the PC – it’s just frictionless to do that – and connect the dots for them to mobile.
