How Space Ape aims to become one of the big hairy brutes of mobile gaming (interview)

Above: Rival Kingdoms

Image Credit: Space Ape

GamesBeat: I talked to Jens Begemann at Wooga this week. They launched their new hidden-object game, Agent Alice. They made that with 80 people. What they figured out is that the only way you last in that genre is to issue new content, so they’re doing a new episode every week. That’s why they needed so many people. He said you needed to bet big in that particular genre or not participate at all.

Earner: I don’t think Criminal Case has 80 people. If Criminal Case is running with 20 and doing better, I beg to differ. I mean, content furnaces are an important thing. One of the beautiful things about a game like Candy Crush or Samurai Siege is that they operate themselves. What happens in the case of Samurai Siege is that the alliances create content for one another. Because it’s a community game and there’s drama among players, that’s content.

In the case of King, it’s a content furnace, but the content is dirt cheap. You add a level. That’s easy. They have wonderful game design, but nonetheless, it’s easy. I would not want to be in a position where I had to do a heavy content furnace and the content was beautiful illustrations. It starts eroding the margins on the business. But it’s an interesting genre.

I’m curious what you’re seeing on user acquisition. What we’re seeing is, you turn the TV on Thursday night now in the U.S. and it’s all mobile game ads.

GamesBeat: I talked to the makers of a game that did reasonably well this year. The first thing they did from August to November was TV campaigns. They said that the numbers are looking so awful on mobile user acquisition that TV looked better by comparison. That surprised me. We used to think of TV ads as crazy, right?

Earner: We’re running an experiment in February on this topic. We have no internal data, but we will in February. We’re going to spend a couple hundred thousand dollars to test out the impact in Rival Kingdoms.

What I’m hearing from everybody, particularly on the mid-core side, is that CPIs are starting to push eight, depending on the market. A well-timed, quality TV campaign can drop those CPIs to two. If you can pay less to both produce and then deploy those TV ads, then a six-dollar delta per user over a few million users starts to make sense.

You’re also seeing those video assets become increasingly relevant for Tapjoy and the like. Twitter and YouTube have major game-space TV advertising platforms launching this year. One nice benefit to this trend toward video is that video is going to naturally reward games with higher productive values. Unless you’re Game of War and you can afford Kate Upton, it’s going to be hard to make your low-production-value 2D look and feel into a good TV ad. On the other hand, if you have beautiful graphics like Rival Kingdoms, you can go a lot further.

The big trend, though, the macro trend around that: user acquisition costs are too high because there’s too many players. Either you’re going to have to have a significant marketing budget, which means venture funding, or you’re going to have to use IP, which Kabam is doing effectively, or you’re going to have to innovate and find a genre that’s so fresh that the costs are low. We think there’s going to be massive consolidation.

We feel like we’re in a good position. We’ve deployed a couple of those strategies and I think they’ll play out over the next six months. Also, we’ve raised a lot of money, so we can afford to stay up.

GamesBeat: There’s some opportunity right now to reach these YouTube influencers.

Earner: We work with them. One thing we’ve done from the get-go is community evangelism. In Rival Kingdoms we have somewhere in the neighborhood of 150 of the most influential players in each of the genres adjacent to ours — real-time strategy, turn-based strategy. They include YouTube video-makers like Destroyer, guys like Flammy. These guys each have tens of thousands to several hundred thousand YouTube followers.

The odd thing for me is why this hasn’t moved over to Twitch. I guess it’s because the integration is more difficult, or because of the more casual nature of our players, but it’s stayed on YouTube. It’s huge. We’re all about these guys. We have VIP programs. We get them into the beta. Everything we can, not just to get them to talk about the game, but to get them in early enough that we have their help in making the game better. If you get them in your beta very early, you can steer the design of your game around what players want. They tend to be the best barometers for that, because they talk to so many people.

Above: Rival Kingdoms

Image Credit: Space Ape

A danger of the free-to-play business model is that it normalizes us around making games that have long retention versus making fun games. In the long haul, Space Ape is going to be successful by doing a bit of both.

We’ve brought on an additional investor in the fundraise. We just didn’t close it until earlier this year. We’ve partnered with Sega Networks. It’s a small investment, but by having them invest in us and make a strategic distribution relationship in Japan, we’ll have Sega Networks help promote Rival Kingdoms in Japan. If that works well, I think there’s more room to go for that.

One of the trends we’re seeing is a big crossover between east and west. 15 percent of our players and about 30 percent of our revenue is in Japan. It’s our second-largest market. It’s crazy. The day 30 retention in Japan is better than the day seven retention anywhere else. We’re pretty excited.

GamesBeat: Peter Molyneux mentioned this problem with iOS, in that you have to have the same version worldwide. I was wondering about Asia, where the attitudes are so different about monetization. It seems like you could almost do a different game for that region. In China it seems like it’s OK to turn it into a pay-to-win game, whereas in the West it’s not. I wonder if that’s a problem.

Earner: It is a problem, and it’s a little easier to run two binaries on Android. Android in Asia is larger than Android in the West. You could, in theory — some people do this — have multiple binaries. Even further, though, even on a single binary you can do a lot of culturalization work within your client.

With Samurai Siege we spent four months preparing that game for Japan. We didn’t just localize it. We built the script from the ground up. We traded out a lot of the top-level marketing assets. It’s still fundamentally Samurai Siege, 95 percent the same, but five percent is different, and it’s worked for us.

Some other genres, as you say — I think of a Venn diagram, with the west and the east. Most games for the east aren’t going to cross over and vice versa, but for the blockbuster genres, there is room. Too often people just don’t put the time into it. They hire some localization shop to translate it and that’s it. It’s one of the reasons why we brought Sega on board. They can help us make the game perfect for Japan.

One of the things that Tencent offers up to folks a lot of times is they’ll publish your game in China if you commit to making significant changes to the art style, or allow them to make those changes. A great example of that is Blizzard. Blizzard’s Chinese art style is a bit different than Blizzard’s Western art style. As much as people say that the same Blizzard game can work worldwide, the reality is that they’re tweaking it in China to make that happen.

GamesBeat: Plants Vs. Zombies did the same.

Earner: Exactly. I sort of see Peter’s point. But for big blockbuster games, people are already making those tweaks and getting away with it on a single binary. Or you work with Tencent. Effectively when you work with Tencent it’s a separate game. It’s exactly what you described.

We always heard that Samurai Siege wouldn’t do well in Japan. It’s a western spoof on samurai, it’s a realtime strategy game, and so on. Yet it turned out to be our best-performing market. The only problem is that it’s not as big as the U.S. by population. There’s a lot of common overlap between Japan and the U.S. China is harder, especially because of the distribution problems. You don’t just go live in China. You have to go live on 50 different networks.

GamesBeat: How did you do that?

Earner: We’ve only been marginally successful in China. For Samurai Siege we used Apple. We localized the game very carefully. We turned it on in the App Store in China about four months ago. It did okay for us. What we found is that we had good stats on a small number of players — big by any standard other than the U.S., but still small for China. What we suffered from was a problem with the firewall. We had a lot of people getting disconnected because we hold the handshake open between client and server longer than many others. For Rival Kingdoms we’ve fixed that.

We’re going to run another experiment, but I think long-term if we’re going to be successful in China, we’re either going to set up a wholly-owned foreign entity in China where we can put our servers, or we’re going to partner with somebody. It’s very difficult in China – the firewall issues, the design issues. Ultimately our success will be on the back of a partnership, I think. A lot of people are doing that. Some are more obvious about it and some less. Supercell’s working with Kunlun to solve all these problems. iDreamSky and Yodo1 have good setups. Tencent, obviously. Yodo’s a pretty good shop. I’m impressed with what they do.

Above: Rival Kingdoms

Image Credit: Space Ape

GamesBeat: It’s a complicated market.

Earner: Yeah, but it’s a fun one. A lot of the opportunities do exist in the emerging markets. Southeast Asia, we have millions of players there. We’re top-10 grossing in five big southeast Asian countries. Indonesia, Malaysia, Philippines, Thailand. Today we have hardly any money from them, but there’s an emerging middle class in Indonesia that’s significant. The only thing missing from the ecosystem is a viable billing method integrated with Android and iOS. You know both of them are working on it.

Apple showed its first signs of adapting to payment methods in China. They did carrier billing integration with one of the big providers out there. They also introduced a tiny price point. It’s like 99 RMB, less than 20 cents. Everyone is focused on figuring out how to unlock the potential in the GDP of these countries. Nobody talks about India. A billion people there, why aren’t they playing games? There’s a ton of opportunity. It’s confusing, but for the companies that can figure it out it’s a huge opportunity.

At the end of the day what’s working best — there’s two models. In one, I have a team and they make a game like Brave Frontier. I set up a team in Berlin, a team in Singapore, a team somewhere or another, and these guys remake the game. Each team of 20 or 30 operates for their locale. It’s working. Then you have another model, the King or Supercell model, and the Space Ape model as well. I have a really small team and I make a really great game. I do some culturalization, but I’ve thought about that stuff enough up front that the game already kind of works everywhere. I’m curious to see, over the next two years, which model is the most successful, but if you had to judge today it’s the latter.

GamesBeat: Could you talk more about the London gaming scene? How has it coalesced here?

Earner: To summarize, I think it’s the Goldilocks zone of gaming. Much bigger, you get San Francisco. The market overheats. Software engineers only stick around for 14 months. Salaries double. Retention halves. Venture capital markets are more focused on platforms that can become monopolies. That’s their focus today.

Much smaller and it’s hard to get the critical mass. The world has shown you can build the best studio in Helsinki, but it’s tough to get over 100 heads. You have some long-term problems. Historically that played out with Nokia. As a result, you don’t see massive companies coming out of these places.

GamesBeat: Supercell complains that half their hires now have to come from outside the country.

Earner: Right. London is just right. You see a lot of billion-dollar companies emerging in Europe from London, be it Playfish or Mind Candy or NaturalMotion. To say nothing of non-gaming companies. You can build a great team of several hundred people here, as King has shown with its London studios. You can retain them for years, long enough to master the art of making a game.

London is a destination. We have, of our 70 employees, 22 nations, but we didn’t important any of them. They arrive in London from Poland, from the U.S., from Canada, from China. We have a guy from Burma. Once they’re here we find them. It’s a natural magnet for global talent, much in the way that San Francisco is, but it pulls from a broader swathe of people. It’s the only city I’ve been in that’s more international than New York. 35 percent of central London is British. 65 percent is from somewhere else. This conversation, between two Americans? Totally typical.

Another thing is what we call the Playfish mafia. It’s a bit like the Paypal mafia on a smaller scale. Playfish grew up very quickly to 300 people and imploded very quickly as well. As a result, a bunch of people in London discovered something that previously folks in gaming here didn’t know, which is that it’s a tremendously lucrative financial opportunity. Equity matters. All of our earliest employees have significant amounts of equity and all of our employees are under an equity program. We try to run Space Ape a lot more like a San Francisco company in terms of perks and ownership.

Most important, a bunch of people out there are starting their own game companies because of that experience. They’ve done quite well at it. What Playhubs is trying to do as a final step is to bring this community together and have everyone share the way you see in Helsinki. That’s their goal.

GamesBeat: It seems like the region is doing so well that it doesn’t necessarily need Playhubs or some other game accelerator. It’s accelerating all by itself.

Earner: Fair enough. For me, I agree. I don’t need one. On the other hand, if you’re two guys starting a company, that can be terrifying. One thing that Finland has, as I understand it, is a lot of government support. One thing that California has is incubators. London now has an incubator scene as well — Tech City and so on — but nothing focused on games. It’s an interesting experiment. For what it’s worth, I know some good guys who have already moved in. But we’ll see.

It all spells success for London. We feel like we can build and maintain a strong team here. One thing we didn’t talk about that I think is worth noting is finance. That’s always key to starting a healthy startup ecosystem. London has a lot of good venture that is interested in gaming. You have the biggies already here — Excel, Index, Greylock is moving here. Google Ventures, about six months ago, announced a $100 million fund to set up a couple of folks.

You have a good scene of what you call tier one VCs. But you also have a vibrant scene of seed investors — Connect Ventures, a bunch of others. It makes it a lot easier to raise money around gaming. They’re less focused in London around these natural monopoly platforms. Those platforms are going to set up in San Francisco. As much as gaming gets a bad rap in San Francisco for being content-based, it is content-based.

If you look at the returns on it, in my view there are two businesses you should be in in tech: build that natural monopoly or build a gaming company. Everyone in between has no way of making money, other than selling advertisements. They eventually return to zero. Gaming, we could be a $20 million company in a year and a half. You can be a billion-dollar company if you play your cards right. Several billion dollars worth of exits in the last two years. London’s a great place to do it.

Above: Rival Kingdoms characters

Image Credit: Space Ape