Neil Young’s path to the multibillion-dollar mobile social game market (interview)

Neil Young sold his San Francisco startup Ngmoco to Japan’s DeNA for $403 million in the fall of 2010. And that was just the beginning of Young and DeNA’s quest to create a multibillion-dollar mobile entertainment group, he told VentureBeat last year. DeNA, with $1.4 billion in revenues in the last year, has already cleared many hurdles on that path. Ngmoco has integrated its NG Core technology with DeNA’s Mobage social mobile gaming network to create a new platform for smartphone entertainment.

Mobage is organizing content around an “interest graph” — that is, grouping people by their interests. DeNA has succeeded in doing this in Japan, but a huge market awaits it if it can do the same in the U.S. and on a global stage. While the U.S. market still isn’t there yet, Young believes it will be, and he believes Ngmoco is still a huge part of that undertaking.

We caught up with Young, the CEO of Ngmoco and an executive officer at DeNA,  at the recent Game Developers Conference in San Francisco. Here’s an edited transcript of our interview with Young.

GamesBeat: How are you doing on the road to the mobile gaming bonanza?

Neil Young: It’s the same. We still believe that there’s a tremendous opportunity to create that future entertainment company. We think that building the leading global, social, mobile game platform company is the vital milestone that we’re going to have to pass through to get entrance to the pantheon of media companies.

At DeNA, we’re focused on doing that. 2011 was really about putting all the pieces of the puzzle in place to be able to do that. We talked about building something that’s cross-platform and cross-border, as two very critical pieces of the strategy. We now have games authored by teams in Japan that are coming to the west, and games authored by teams in the west coming to Japan. Pocket Frogs and Zombie Farm just released on the Japanese market.

We’ve released games on Android for a quite a while now, since the third quarter of last year, and we’ve just released our first iOS games, built on the ngCore framework. Those same games now live on two platforms, and those same games live in multiple regions. So that part of the strategy has now been implemented and done. We’ve got about 45 live titles on Mobage now, on smartphone. Over a thousand across Mobage in all title types.

2012 is about getting some of the first-party titles we’ve had in development out and live, bringing some more developers to the platform, and continuing to iterate on the learning and the knowledge so we can deliver the best platform possible. I think we’re ahead of our competition in terms of being live, having experience, having quality developers and games on the network. I feel pretty good about our prospects.

Gamesbeat: And the results so far, for the games that are up on Mobage?

Young: Pretty good. There was a period of time, I think, where it was easy for our competitors to take potshots at us, as we were really just going through the beta testing on these titles. They would talk about, “Wow, they’re only three-star-rated games,” or “Look, the downloads on the Android market are only 10,000.” We try to ignore that commentary, as annoying as it is, because the only venue you have to test these titles is really with real customers. At the point that we were ready to hit the go button on some of those titles, we did. I don’t think you can find a Mobage game that has a rating of less than 4 or 4.2 on any scale.

You take Tiny Tower, which is a game on Mobage, the Android market range is in the one million to five million downloads. Most of the games that we’ve released and promoted have hit the one to five million, or 500,000 to a million download mark. So I think in general, on Android, I think we’ve made pretty good progress. We’re operating a growing and scaling network now. We’re billing, we’re making money on virtual goods. We have great metrics in that regard. I feel pretty good.

We have learned a lot. And I think I try to remind the people inside our company, when sometimes you hit bumps in the road, you learn things. Our competitors have to go through those same learning curves as well. That’s why I feel pretty good about our position.

GamesBeat: Those titles are producing real money. When will that revenue look good compared to what DeNA makes in Japan?

Young: We’re a long way away from that. But that’s always been known. What’s happening in the U.S. now is analogous to what happened in Japan in the mid-2000s. You’ve got the primordial soup to build really big, at-scale media services. That’s what they call it in Japan: the media service industry. If you just look at some of the metrics, in Japan in the mid-2000s you had over 90 percent penetration of mobile into the population base. 3G penetrating over 40 percent. Low cost or flat price billing and devices that — yes, they could make telephone calls and send text messages — but they could also take photos and play games and listen to music and buy goods and services that would directly bill off your carrier bill or your credit card. From a human standpoint, that’s not very dissimilar to what’s happening here, and from a metric standpoint, it’s almost exactly the same as what’s happening here.

In the U.S. last year, we had 93 percent penetration of mobile into the population, 43 percent 3G penetration into that mobile population, and devices that do those same things. We think that those devices, the unique blend of usability and capability, regardless of the underlying technology that they have in them, will fuel the same type of growth. And just on a population basis, Japan is about one-tenth of the population of the developed western world.

You could make the argument that maybe western consumers are not quite as obsessive as Japanese consumers can be. But there’s a really big market to take advantage of this. So it’s a marathon. We’re very focused on winning the marathon.

GamesBeat: When you’re building things now, what takes most of your investment? The network itself…is it built out?

Young: Yeah, the network’s pretty built out. As the network scales there are more capital investments we have to make. We always roll our network over to the cloud, so we sort of operate a private cloud and then roll over to the more public cloud so we can handle peak capacity. If there’s ever a problem we can make sure that the service stays up. As a company, Ngmoco basically operates three business units in the west.

The first would be our first-party studios. We’re creating games that try to take full advantage of what we know about these platforms, what we know about customers, and the learning that we’ve been able to get as part of DeNA. So our own experience, combined with DeNA’s experience, that’s what first-party is about.

We have our third-party teams, which are dedicated to bringing developers to the Mobage platform and offering them the services they need to access audience and maximally monetize.

And then we have the platform itself, which is a blend of hardware and software, infrastructure and technology, that allows people to build titles that target a global audience across multiple platforms. So whether that’s the Mobage stack itself, which you can access through ngCore, or you can now access through a native software development kit (SDK), you can access through Unity, you can access through Unreal, or whether it’s actually using something like ngCore, that allows you to write once and deploy on multiple platforms and automatically get carriage across the network.

And then lastly, traffic management. We are developing the ability to acquire customers effectively, to make sure those customers are high-monetizing customers, and to be able to move them seamlessly around the network. These are all skills that we have and services that we offer to first-party and third-party studios.