Glu Mobile chief says Google Glass could trigger another ‘iPhone moment’ for gaming (interview)

Stepping into unknown territory, mobile game developer Glu Mobile announced last week that it had developed a word game, Spellista, for the Google Glass wearable device.

From Google’s perspective, games could be crucial to the future of Glass as games often become the biggest moneymaker on any new digital platform. Once the price of Glass comes down and apps such as games proliferate, the platform could in turn become an important market for game companies. At least that’s what Glu is betting on.

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Niccolo de Masi, the chief executive of the publicly traded San Francisco company, talked with us about it alongside Sourabh Ahuja, the vice president of Glass development at Glu, to give us a full picture of the game. The company worked closely with Google as a top Glass developer to create the game for the Google Glass GDK beta program. In our interview, de Masi said he believes Glass may deliver “an iPhone moment” in terms of big changes for gaming that are as significant as the introduction of the original iPhone in 2007.

The title may never make money. But it is an experiment worth trying as mobile game companies like Glu are always looking for a new frontier and a chance to steal an advantage on rivals. Glu is riding high off of its Deer Hunter 2014 title today, one of the rare action-shooter games that has been successful on mobile devices. While such games can generate $50 million a year for Glu, experimenting in the unknown remains critical.

Let’s find out why in the edited interview transcript that follows.

GamesBeat: Could you give me a picture of where Glu Mobile is now?

Niccolo de Masi: Well, some exciting news on that front. We did our Q3 earnings a couple of weeks ago, and we’ve guided Q4 2013 to be the largest, by revenue and by profitability, in our 12-year history. We’re very pleased with the fact that Deer Hunter 2014, which launched in September, is on track to be our best performing game in history. We’re also pleased that for the fourth year in a row now, we’ve shipped the biggest grossing action shooter of the year on the mobile platforms. I’d argue we have a 50 percent market share of that genre, whether it’s with Deer Hunter, Frontline Commando, Contract Killer, and so on.

Big things in store for Glu in 2014. We’ve guided to 20 percent growth year on year, at least. We’ve guided to break even or profitable. The new management team we focused on bringing in over the past year has begun to make a positive impact on our ability to not only improve average revenue per daily active user (ARPDAU) on our games, but also things like retention. We’ve made the right investments in the last year. We’re doing a good job on talent attraction these days.

GB: I never would have predicted a revival for Deer Hunter — once a big PC game hit — on mobile.

de Masi: Remember, though, that Deer Hunter 2012 – Deer Hunter Reloaded – was, I would posit, the biggest grossing shooter of last year. That one surprised everyone too. This one is even bigger. It’s been hanging out in the top-grossing for considerably longer than the first one.

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The market’s bigger now. This phenomenon is happening across the app stores. The market is doubling every year, but the top 10 games are getting bigger at an even faster rate. We went from 2010, where a $10 million new game like Gun Bros was a big game, to today, where it’s a $50 million game if you’re in the same grossing position. That’s been helpful for a company like Glu that’s invested a lot of time in original IP franchises and trying to build barriers to entry around the stuff we’re really good at.

I would say that in the last four years, the stuff we’re good at has been action games and Android.

GB: Tell us about Glass.

de Masi: We’ve been a big partner with Google for six or seven years. We were the first company to build Android games in 2008, 2009. We have a board member in common with Google. We’ve consistently been the pioneer for every new technology enhancement, evolution, refinement — whether it’s hardware or software – that they’ve brought out.

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Glass is very much an extension of that. We think there’s room for this to be a phone replacer in the long term. We always want to be early to things we believe can go somewhere. We think there’s room for the price point to come down and drive interesting adoption of this long term, especially when you think about Moore’s Law and the reduction of form factors. It’s a brand new paradigm for interactivity, so it’s a brand new paradigm for games.

If you haven’t seen the game, you have to try it out. It’s voice commands and head movements, rather than using your thumbs. We’re pretty pleased with the ability to innovate with new technology protocols and the new GDK that we’ve helped them establish. Our game is taking more advantage of everything that Glass can do than all the other apps that were demo’d there. It’s significantly more advanced in its use of the technology. We’re innovating in ways like the ability to send levels from Glass to Glass, and the ability to not only play the game, but also construct levels in the game.

GB: So if Android took four or five years to pay off, are you expecting something similar around Glass?

de Masi: Android started paying off in 2011. They brought in-app purchasing in March 2011, I think? We were the first doing that too. So that’s a fair statement. I guess we were three years earlier on that one.

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Sourabh Ahuja: It’s wearables in general. The watches are starting to pick up – the Samsung, the Pebble. The wearables double up on your battery life, so it works both ways. We have delivered three innovations here. We have a voice tutorial, peer-to-peer messaging, and user-generated content. You can create your own levels. Once people get the hang of it, they just want to keep going. It’s fun. You start getting the words. Initially you think, “Uh, what am I doing?” But then it sticks.

de Masi: The game is built for one- or two-minute sessions. Wherever you are, you can say, “OK Glass, play a game.” We’re the only game in the store.

Ahuja: We did a lot of brainstorming with Google in the beginning. Google wants this device to be something that’s not in your way, that takes away your focus for a maximum of one or two minutes. It gets you what you need and you’re back to what you’re doing. It’s the same way with the game. It’s not supposed to be a really involved experience for 10 minutes at a time.

We shipped with nine pre-set levels, and then you can create as many levels as you want, by taking a picture and speaking words associated with it. You can make them public or private. They all go to spellista.google.com. I can log in with my Google account right now, browse the public levels created by the community, and send them to myself. You can create them on your device as well. Then you can log in to the website and send it to a friend or to a Glass device.

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Say you want to wish somebody a happy birthday. You just take a picture of a cake, you say your statement to the other person, and it goes to them as an encoded message. If you’re playing and you don’t get a word for 30 seconds, a little gift box drops. You can catch the box and it will just put the word right there in front of you. Or you can tap to skip a word and move on to the next one. We didn’t try to build any competition into this game. It’s just fun and engaging with your friends. It’s more focused on socializing than competing for the best time. We wanted to encourage user-generated content.

It’s amazing how that lets us scale the game. We don’t have to have artists constantly making new levels. We ship with those nine levels, and now all of a sudden, on spellista.google.com, even if you’re not a Glass user, you can create levels and send them to your friends who are Glass users. Just sign in with your Google account. You can have up to five levels per account stored on our servers – edit them, add words, change images, and send them to your friends. You almost have picture messaging, except the fun part is that the message doesn’t just show up. You have to decode the message.

de Masi: So if Glass takes off, we hopefully have something between a Draw Something and an Instagram type of phenomenon. We’ve obviously done most of our damage in the core business on tablets and phones. This is a great opportunity for us to broaden our appeal and do something for a very broad demographic, very casual. We’re doing it in conjunction with brand new hardware, so we have an advantage getting into this new area of the market.

GB: What would you compare this to as far as other past experiments you’ve done? You mentioned Android. Does this kind of thing happen for you very often?

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de Masi: Glu’s going on 12 years. We have been early to every piece of mobile hardware, in the broadest sense of the word, that we think has an odds-on probability of being a goer. We were early to Palm, to RIM. We were also early to things like controllers. Sourabh has a lot of practice in this industry as far as making that work early for the Android system.

Looking back at what’s worked and what hasn’t worked, it’s obviously done good things for us to be early on Android. It was great to be early on iOS. We built some of the first games for the first iPhone in 2007. Every five or 10 years, something more revolutionary than evolutionary comes along. It’s been six or seven years since the first iPhone. This could be one of those moments. The next seven years could well be a wearable wave. It could happen as fast or even faster than the smartphone, this PC in your pocket.

It’s a great way for us to be early to something that could take off exponentially. It also gives us a technological lead in potentially building a publishing platform around Glass, if that goes anywhere. We’ve built a lot of proprietary tools, and we have some proprietary intellectual property now. All of that we can leverage in the long term.

I’m cautiously optimistic that this is an iPhone moment, so to speak. If you think about how quickly hardware and software progress these days, this thing—I’m sure you’ve heard that the prototypes now are not even two years old. They were the size of a laptop. Look at it now. Imagine where it’ll be in two more years or four more years. There’s a miniaturization opportunity where that could get small enough so that I could go to Lenscrafters and install it as an option on my glasses. That day will come. The question is when.

There’s more and more clever heuristic technology in these devices. The voice recognition is impressive compared to most other platforms. The gyroscope, the accelerometer, all this stuff is getting cleverer and cleverer. It doesn’t have a cell phone connection in there at the moment, but I would imagine that in the fullness of time, those kinds of things are going to come into play.

GB: Which things are you taking advantage of from Glass in this game?

Ahuja: We have the voice tutorials, so we use the microphone. We’re using voice recognition. We’re using the gyroscope. We’re also using the Mirror API that was released some time ago. That was the only way to make games for Glass until yesterday. That’s how our website connection works with the app. We’re using the camera for user-generated content.

To be honest, when we were sitting in the Q&A for the GDK yesterday, every developer was asking questions that we’d already tackled in the last two or three months and are using in the game, with the combination of the GDK and the Mirror API. We’ve done Glass to Glass, which even the Glass guys don’t offer right now. We’ve figured out how to do that with our website.

We have a head start. The Google guys are actually amazed at the speed with which we were able to do things. That’s the expertise of our Android team.

GB: Are you anticipating a certain number of Glass games at a certain point, bringing some brands over onto it?

de Masi: We haven’t said anything about that so far. We’re trying to build new IP here. When you say “brands,” other Glu brands, perhaps, but this is such a unique piece of hardware. Our view is that you have to create brand new concepts, and probably brand new brands and IP.

In the long term, who knows how interoperability will work? It’s easy to see how playing a Glu game on your tablet could sync with notifications to your phone and your Glass and so on. But you won’t be able to play exactly the same experience on all these devices.

Ahuja: Just today I was discussing how, if you take a racing game, we could use this as the speedometer. You can’t have Glass distract you too much. You can’t concentrate on that and play something with your phone at the same time. But if it was just some big bold letters, one number, or doing navigation with turns, something that’s always showing up in a racing game, we could make these two talk with each other.

de Masi: There are two big opportunities. We have the Glass-only games, like Spellista, and then the “and” instead of the “or.” The watches and glasses at some point will be a big “and” for gaming on your mobile device. You can do amazing things with all three of them if you think about different control schemes. They all have gyroscopes in them.

Ahuja: With the games-as-service stuff we’re doing now, maybe you can’t really play the game because you’re in a meeting, but if you get a notification on your Glass, you can tell it to go feed your crops.

de Masi: Your base is being attacked!

Ahuja: Exactly. There could be binary actions you could do just by tapping through Glass.

de Masi: Or voice commands. Kill!

Ahuja: It sends the command to our server, and the next time you launch the game on your phone or tablet, that’s already taken care of for you.

GB: Someone like Gameloft, they go to a lot of new platforms as well. Do you feel like you distinguish from the way they operate?

de Masi: I’m fairly bold and confident that in terms of Android expertise, Glu is the world leader right now, at least in gaming. Not in the volume of headcount we have, but certainly by any efficiency metric, as well as our ability to get to new technology. We’ve crushed everybody for at least four years, if not six years, quite regularly. If you look at the things we’ve been first at, it’s probably a dozen in the last six years.

GB: How many people do you have right now?

de Masi: Worldwide, between 500 and 550.

GB: For this, how many resources are you putting into it right now?

Ahuja: Three, plus me as a supervisor. I wasn’t full time on the project. It’s been three or four months. We did a lot of original art for this game, too.

GB: Is there a way to see where this could monetize?

Ahuja: The goal here, being first with this, is to cement our position with the Glass team. Now when they come out with something new, they’ll come to us, hopefully. That may include when they launch a store where you can monetize a product, all the way to the commercial launch of the device.

de Masi: Google already has it built in, when you think about the ecosystem. They have Google+, Google Checkout. If you can play it with your Android phone, it’s not too big a logical leap. This isn’t 2010, where they didn’t even have billing.

Ahuja: Once they have a way to bill, we can figure out ways to monetize.

GB: What have they signaled as far as what’s coming for this? Any other clues for how long this is going to take to become a complete platform?

Ahuja: They already have a store, called MyGlass, the Glassware store. Everything is free. They were very particular about taking the in-app purchase clause out of our standard agreement. Right now they don’t have that. But ultimately they may plan to do that.

de Masi: They’re following the usual playbook here, as we are, which is to get the device penetration and then worry about that later. Right now it’s us and the New York Times that are available on Glass. But they obviously have plans to make big progress next year.

GB: There was a wearable conference recently. Everybody seems to be talking about things like Glass.

de Masi: Yeah. But this project is unique in the wearable ecosystem. It’s the furthest along. It’s the most functional. It has the support of one of the two founders of Google. That gives them almost unparalleled resources to make it a realizable vision. Google has obviously been a software company, but they bought Motorola, and they have an eye on trying to be a hardware/software play. This is a unique opportunity to do something big. Especially if you think about what wearability can be for their search business in the long term. It fits nicely there.

Ahuja: Google has already filed a patent for pay-per-gaze advertising, which is related to Glass.

GB: What do you think of the state of the game business these days, especially in mobile?

de Masi: It’s the land of the big getting bigger. There are opportunities for small companies like Supercell to come out of nowhere, but over time you’re going to see—My prediction I made a few months ago is that by the end of next year, every company of any significance will be public. Supercell is now part of a public company. King is trying to go public. Kabam, the rumors are going up and down. We’re public. Nexon, Gree, DeNA, Tencent.

Since I joined Glu four years ago, the space has gone from when we were the only public mobile game company – aside from EA and Gameloft – to now, where virtually everything is public. That will help Glu in the long term. It brings transparency to all competitors over all metrics. We’ve been living with that for a long time.

GB: What’s the scale for a hit now? $50 million is what kind of hit to you guys?

de Masi: It’s fairly significant. We’re an approximately $100 million business this year. We can grow that meaningfully year-in year-out. I said when I joined Glu that we could double the smartphone business every year. We’ve done about that. We started from almost nothing. I don’t know if we can keep doing that at this size, but we’ve guided to 20 percent year-on-year growth, and that’s something you can easily exceed if you get another $50 million game.

The thing about the game business is that for a company like Glu, which puts out maybe a dozen games a year, the chances of one of them being really meaningful to the size of the business has improved dramatically. I always tell our investors, if you’re looking for a good gaming investment, Glu is highly compelling because of the ratio of the size of a top 10 grossing game to our existing revenues and market cap. If you’re Zynga and you have $1 billion of revenue and a $2.5 billion enterprise value, you can get a $100 million game shipped and it doesn’t make much of a difference. You sustain what you have. For Glu, we get a $100 million game and the company is not only twice the size, but the profitability profile goes from breaking even to $20, $30, $40 million of EBITDA.

This is the King.com phenomenon. They went from $50 million in 2011 to goodness knows where they are now, on the back of one game. That leverage ratio is interesting for us right now. We have better expertise than ever now. We’re making strides in the talent wars. Our chances of getting a $100 million, $500 million game are better than ever right now. And they’ll probably keep going higher as time goes by.

GB: I talked to John Riccitiello, the former CEO of Electronic Arts, recently. He was saying that brands are the big thing. Is that similar to what you were saying about how public companies are going to rule?

de Masi: Size is going to matter. EA has arguably more franchises in more categories than any other company. He did that deliberately when he was there. I think that is going to happen in the rest of the industry. There will be consolidation. Company size will be dictated by the number of categories where you have a leading IP shot on goal – something that’s in a top three position in that genre. For us, the core of the business will be to be that in the action space and the shooter space. We’ll see what we can converge to in the action space.

We think we’re unique in that no one else is doing anything in the shooter category other than us. 50 or 60 percent of revenue on console is shooters and action game. On mobile, what’s that percentage? Maybe five, or three? We probably have a huge market share of a small category right now, but in the long run it’s hard to believe that small percentage on phones and tablets is not going to go up. I’m not saying it’s going to 50 percent. But even if it goes to 13 percent, which is highly plausible in the next five years, that would benefit us dramatically.

Some of the ways that it’ll get there—It’s not only us continuing to figure out the right analog for action games and shooters on phones and tablets. It’ll be figuring out how these peripherals and companion devices can bring the experience to life.

GB: The Moga guys, what do you think of those folks who are doing the controllers for mobile?

Ahuja: We’re already live with support in Eternity Warriors II. It works in the menus, in gameplay, in the entire experience with Moga and Nvidia Shield. Our stance there is that as long as you follow the Android guidelines with your controller, we’ll support it. We’re taking it on a game-by-game basis. Deer Hunter 2014, in a week or so we’ll launch with support for Moga and Shield. We’ll do some analytics and see how many people are using these controllers and go from there.

GB: Apple did something with iOS 7 that enables these controllers. It’s certified now?

Ahuja: Apple is certifiying. Google is not. Apple, as always with hardware, they have their specific requirements, which is why you don’t have to deal with fragmentation. But Google has issued guidelines on Android as well. They’re not going to certify these controllers, but there are guidelines you need to follow, and we’re only going for the ones who follow Google’s guidelines.

GB: That could hopefully be the thing that brings shooters up in market share.

de Masi: I think it’ll be one of the things. As the hardware keeps getting more powerful, and tablet resolution goes up—Deer Hunter is a shooter, and the reality is that it has the largest DAU probably ever on a shooter for phones and tablets. Who would have thought it would have been that large? RTS games have had a big ride between 2012 and 2013. So has casino. Before that it was casual games. What has not had a ride like that? It’s action games, shooters.

It’s inevitable, in my mind, that there will come a moment where this stuff performs exceptionally well. One of the reasons for that—I like to joke about this internally. Shooters are the world’s second-oldest profession. They’ve been around forever. It’s a permanent, timeless, low design concept kind of thing. High design concepts, we all remember Zen Bound in 2009. Who cares? No one wants to wrap a block with rope. Shooting things seems to be fairly timeless. I’m confident about finding the right analog for these things, as opposed to the genre itself having any fundamental long-term constraints to it.