Above: Sagi Schliesser has turned Tab Tale into the leading kids game company in the world.
GamesBeat: We have a boom going on, with games expanding worldwide like never before. There are opportunities in VR and AR. There are so many platforms to build for. But game investments in the first nine months of this year are down 35 percent from a year ago. It seems like a big disconnect.
Levy-Weiss: There is a big disconnect, in both the public and private markets. You see it in the public markets. It’s funny that games companies end up being created in multiples of movie companies, despite the fact they’re both in the content business. But games companies have a lot of technological skill, technological assets. Investors don’t understand that very well.
With time, I hope that there will be more companies that go public and show they can sustain their positions over time and become good investments. But for the time being the public markets are very afraid of games companies.
GamesBeat: Where do you see your room to maneuver in the near future? What gets you excited about what you can do and where you’re headed.
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Frankel: Just to refer back to what he said, there’s a lot of growth still happening in Asia. We’re talking to Asian game companies that are doing well and we’re trying to learn from them as much as we can.
We’re also dealing with the challenge of discovery for games. You need to find ways to bring players to your games, because there’s not enough viral growth. The cost of bringing in those users is getting more and more expensive. We’re looking at ways to deal with this challenge through licensing, which is something that’s been very interesting. We’re also looking at new genres where we haven’t yet developed expertise. We’re trying to build that talent in-house or source it elsewhere to help us.
Schliesser: We have two major areas of business right now. One is the children’s business. It took us almost five years to be number one in what we’re doing. We’re the number one publisher for kids. There, we’re trying to build IP around that. Just being a game publisher is nice, but if you really want to be successful, you need to leverage the success of your games and build something new out of it. We’re doing animation series and building other kinds of content.
As many investors and other people have said, the market usually goes where the devices are. If kids are consuming content on their tablets or their iPhones, they’re going to be consuming content through YouTube. They’re going to be into animation. They’re going to come together virally. They’re going to congregate in one place and not go to other places.
With our kids’ titles, we’ve achieved substantial growth. With the Crazy Labs brand, we’re trying to expand toward mid-core games and big lifestyle simulation games. There we’re just ramping up. We have around four titles in soft launch. We’ll be learning next year how to master all the elements and build that into a more mature business. We’re confident that we have great technology that will enable us to scale up.
Above: TabTale makes games for kids.
GamesBeat: Do we have a user acquisition crisis right now? How should game companies deal with that?
Frankel: We’re looking at the issue in two ways. One, we’re looking at some interesting sources of existing big audiences on mobile platforms that aren’t very widely available. We’re looking at ways to collaborate with those entities and grow our audience through them.
Obviously we’re also putting a lot of emphasis on the growth we have. Right now we have more than 50 people in the company working on user acquisition full time. This is a very important department when it comes to growing the company.
Schliesser: We grew very gradually in the kids’ market, because it’s harder to target those users. Ultimately we achieved 40 million unique monthly active users. When you can get a game in the top 10 in more than 50 countries, that usually does it. Sometimes we do a little bit of user acquisition, but mainly in situations where we want to improve from, say, number 10 to number six.
On the mid-core front, with the rising cost of user acquisition, there are all sorts of new calculations around CPI and LTV. It’s a whole science. It’s very complicated and it’s changing every day. You need to keep track of that. The idea of gaming as a service is spreading to other platforms through things like Steam. On the kids’ front we’re cooperating with different stores and releasing subscription-based content. We need to find better ways to adapt the games-as-service model as it becomes a part of bigger games. That’s going to be a challenge.
Levy-Weiss: The reality is that there is a big problem with user acquisition. The main reason is that for a couple of years now, the main channel for user acquisition on mobile has been Facebook. Google has been extremely slow at adapting. Right now they’re catching up with YouTube ads and so forth, but Facebook has moved almost everything to its mobile platform and has close to a billion users globally. It’s become the go-to place for game installs.
In the beginning that was great for the game companies that moved quickly. They could get installs very cheaply in one place. At a certain point, 80 or 90 percent of installs in mobile came from Facebook. But as more and more companies started getting on top of it, and in the last year as Facebook started onboarding more brands and e-commerce companies into in-feed advertising, the prices started to go up and up.
Right now the Facebook inventory is more or less fixed. It’s about one ad for every 10 items in your feed. That’s the way it’s calibrated today. As long as they don’t decide to push more, the inventory is fixed. The number of advertisers is only growing, and so CPI has grown by more than 120 percent over the last year. There’s hopefully going to be a few things that are stopping it now. But the reality is that if it keeps going up, it’s going to be tougher for game companies to succeed, especially smaller game companies.
Above: Dean Takahashi of GamesBeat at the Geektime Conference 2015.
GamesBeat: Game companies can be very big, but everything is relative. You mentioned the platform companies like Facebook, Google, and Apple. Sometimes the game companies seem like pawns on somebody else’s chessboard. How do game companies have to think about that?
Levy-Weiss: Do you feel like pawns, guys?
Frankel: We’re having fun at what we’re doing, at least. Apple is not in the business of distributing apps. It’s in the business of distributing devices. We’re their means of distributing devices. It’s gotten to a point where we sometimes need to take into consideration what’s important for Apple in a game. If you get some love from Apple, that’s free users. So I totally understand what you’re saying.
There are other platforms in the world, though. There’s Google Play. There’s Amazon, which is growing fast. In Asia there are even more platforms as well. But Apple and Google are the main platforms and we do have to play by their rules if we want to grow in this market.
Schliesser: It’s a complex mixture. On the one side, you need to believe in what you’re doing when you push your features and content. In many cases, users don’t really care about features unless they can use them in a way that enhances their experience. It’s a big challenge. New devices, new features, sometimes you can use them in an interesting way, and sometimes you just can’t. It really depends. Sometimes you face all sorts of requirements that make sense for some kinds of apps, but they don’t go into making a good game.
Like any business, you have to work around many different influences. In the end, the companies that succeed will be the ones that listen closely and do things accordingly, but have their own kind of vision. This is the ideal we want to lead us down our path.