Will Cut the Rope 2 be another mobile blockbuster? Zeptolab's Misha Lyalin hopes so (interview)

Two brothers in Moscow saw their fairy tale success come true with the launch of the iPhone game Cut the Rope in 2010. Their game and its variants have been downloaded more than 400 million times and their Om Nom character has become a recognizable brand character around the world.

Now Semyon and Efim Voinov and their team of 75 people — led by Zeptolab chief executive Misha Lyalin — are back with their long-awaited sequel, Cut the Rope 2. The game will be released on Dec. 19 on iOS and feature the same rope physics game mechanics that will leave gamers scratching their heads. It’s a simple puzzle game with lovable characters like the little green monster Om Nom. Will this game take off in the same way as its predecessor? Zeptolab has done what it could to make the sequel better, introducing more characters and making Om Nom much more of an interactive character. It is also going to do some brand advertising and partner with a number of well-known brands that can help boost recognition of its characters.

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But it won’t be easy. There’s lots of competition, and some mobile brands are struggling to stay at the top of the charts with their sequels. We got a good look at the first levels of the sequel and it’s still charming, addictive, and challenging. If Cut the Rope 2 rises to the top of a crowded Apple iTunes App Store, then it will be like lightning striking twice. We caught up with Lyalin for an interview just before the company’s announcement of the new Apple exclusive game. Here’s an edited transcript of our interview.

GamesBeat: You worked on this game for three years, and you did a lot of updates to the original. What took so long?

Lyalin: It’s been three years, so it’s time for another version of the game. Yeah, we’ve been doing updates and full-on releases like Cut the Rope Experiments and Cut the Rope Time Travel. This, though, it’s a second game. It’s different. It has new characters and game mechanics. But you’ll still cut the rope. [laughs]

This time, Om Nom is animated completely, and the other characters as well. In the previous game, he always sits idle somewhere. Here, he can move around. It goes on and on. All the characters interact with different objects in the game. You see all the surfaces you can use to get the candy into Om Nom. It gets bigger and better from there. We’re proud to call it Cut the Rope 2.

GamesBeat: Can you still do this with a relatively small team, or did the team get much larger now?

Lyalin: We’re much larger now, obviously. We started with two people, and now we’re at 75. But not everyone is doing Cut the Rope. We’re staffed up to do a lot more games.

GamesBeat: This succeeded despite a lot of competition out there. What were some of the assets that helped you do so well? And what did you want to keep for the second game?

Lyalin: Early on, for a lot of people, the notion of cutting the rope on the iPhone screen was a very big novelty. That’s one reason. You can interact with it in a lot of ways now, though. There’s a lot of depth in the game as well.

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You can progress pretty easily in the new game. If you want to collect all the stars and get all the secret levels, though, you’ll have to work very hard to get there. There’s a new character in another location. Om Nom goes missing – the spiders stole the candy, he got tied to the rope, and carried away on a balloon. The new character gets introduced throughout the levels as you progress.

GamesBeat: How large is this one? Is there a certain number of levels?

Lyalin: There are five locations, with 24 levels each. This is the forest, where he goes to a junkyard. Each level has a different character that helps him, and you use different game mechanics from each character. You collect items that unlock secret levels, too.

The game has a lot more depth for people who want to play extensively. You can collect the three stars, and also do different challenges once you first complete a level. There are certain power-ups in the game that you can use, like balloons and candy raid and so on. We also have solutions, if you don’t know how to complete a level.

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There’s a lot of fun you can have within the game. Almost every object is interactive. It’s not just the candy. It used to be that Om Nom was idle. You’d cut the rope and somehow have to get the candy to Om Nom. Now you can get Om Nom to the candy if you want to, or they can meet in the middle.

GamesBeat: How long did you test different versions of this?

Lyalin: We’re constantly testing new versions. We test different mechanics internally and have playtests as well. I wouldn’t say that this product has been ready for a year and we’ve been testing it all that time, though. We got it done and it’s out.

We’re launching as a premium game, still, and we’re launching exclusively on Apple for 99 cents as an introductory sale. We want people to get the experience that they had before.

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GamesBeat: It’s interesting, how physics have led to many of the blockbusters of this generation. Angry Birds and your game.

Lyalin: It’s things like physics in combination with the platform. The touch screen. It’s always with you. The fun physics engine and the great characters and gimmicks. That all makes a great game.

GamesBeat: How popular did Om Nom become, culturally?

Lyalin: It’s interesting. We tried to conduct some focus groups recently, including one group of people who didn’t know about the game. When we started asking about the game, it turned out that they’d actually played it. It’s hard to find somebody who doesn’t know it, who hasn’t had a friend or their kids or somebody obsessed with the game.

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GamesBeat: We’ve seen a lot of knockoffs, too.

Lyalin: We don’t pay too much attention to that. Well, we do when the game is ugly. We try to take those down. But when somebody does a nice clone, we’re completely for that. We might even learn something from it.

GamesBeat: Did you learn anything about some of the different territories here?

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Lyalin: Certainly. For us, it’s very different. First of all, we opened up an office in Shanghai. In China and the Asian markets we have a completely different structure. In China, everything we’ve done has been free. We’ve not done anything premium in China, because there’s no point. The messengers are growing in a big way, so Cut the Rope will take advantage of some of the dynamics that are happening there in Asian markets. We’ll be launching different versions for different platforms, too.

GamesBeat: I went to a conference in Finland, where Ilkka Paananen, the CEO of Supercell (maker of Clash of Clans) was saying that they don’t really change their game for different territories. They keep the game the same. Are you thinking in the same way, about making a universal game?

Lyalin: No, we change the game. In fact, for the Chinese market, we’ve released special content and packaged the game differently. For some people, they don’t have to change everything. For us, this is a very casual experience, and a casual experience is different in every part of the world. When you’re aiming to get 10 million people or 20 million people, it’s one thing. When you’re aiming at a billion people, it’s another. That’s why we have to be very culturally different in every market.

Specifically, here, we’re launching as a paid game on Apple for Christmas. It’s a special, an introductory special, a sale at 99 cents for iPhone and iPad. We haven’t done this before. It’s because in this market, we think there are tens of millions of people that have experienced a game like this before, so we want to keep that experience.

GamesBeat: Does Angry Birds provide you with any kind of model? Merchandising is a big part of their business.

Lyalin: We look at everybody. It’s our model. Merchandising is big, true. They were certainly an inspiration for what we’ve done there. But our business is very different. They’re very different games. Ours isn’t about a big fight. It’s about physics and cute characters and solving problems. That creates different licensing opportunities.

GamesBeat: What’s included in the plan for how to make this take off and become even bigger? Is there a strategy that’s very distinct?

Lyalin: We have a marketing campaign going on with “Om Nom is missing.” We’ve put posters around the cities and done some social media as well. But what’s most important is, within our games we have something interesting. In all of our games today, Om Nom will go missing. You play a little bit and then he’ll disappear, and it will pop up the notice, “Om Nom is missing!”

There are some big events going on today. There’s one in London, one in Paris. But the most important marketing is going to happen within our games, where tens of millions of people will see that “Om Nom is missing!”

GamesBeat: How do you guys design characters like this?

Lyalin: All these characters, the new ones, all of them interact with Om Nom and the different objects. We try to design them based on what they actually do. This one just multiplies, so he looks like somebody who’s very grumpy and weird. This one is a bomb; it explodes and makes Om Nom move. This one has a huge tongue, and it can swing across the screen. You can use different objects on the tongue. This one, called Toss, can toss any object – Om Nom, anything.

GamesBeat: But they’re always appearing on screen with Om Nom? They don’t replace him.

Lyalin: No, they don’t. Om Nom still eats the candies. They’re helpers, helping him get un-lost.

GamesBeat: If someone wants to spend in the game, what will they be buying?

Lyalin: They’ll be buying some of the power-ups, obviously. They’re there to help you. You can get solutions, get balloons. You can win them as well, though. You don’t have to buy them. You can get candy rain. There’s a shop where you can buy all this stuff in different packages. You can also dress up Om Nom. For example, we have a Christmas set. You can make him into a superhero. We’ll be giving some of those away as well. You can even customize the swoosh if you want.

Right now, it’s a paid game. It’s a premium game. We haven’t made the different mechanics work to make it free. So you don’t have to buy power-ups. You can complete the game without them. But they’re fun.

GamesBeat: What are you thinking about how mobile games have changed each year? We’ve noticed that the top rankings keep changing. Angry Birds hasn’t stayed up there forever. Clash of Clans, Puzzle & Dragons, and Candy Crush have come along. They’re sticking for a longer time sometimes, but it’s still not very predictable to me.

Lyalin: The market is changing. It’s maturing. A lot of games that are very hardcore in nature have showed up on the platform, and they’re very different from the casual games that used to dominate. However, it’s all going to change again.

We look at our business differently. We’ve been consistently growing, and not just in the number of downloads. It’s about usage. It’s about people playing the game. Those numbers have constantly grown. We don’t make a lot of money from every player, but that will change as well with different monetization mechanisms. Plus, advertising is something that doesn’t go into the top-grossing charts, but it can make up a big portion of your revenue. That’s going to continue.

We’re very different from a lot of others out there, because we’re not just about traffic. We’re a brand, and when you’re a brand you have really interesting co-branding opportunities. That’s what we’re moving toward with advertising. We want to make advertising more contextual and fun for users, as opposed to just banners and pop-ups.

GamesBeat: What do you think about creating brand-new IP?

Lyalin: We’re working on it. With 75 people in the company, most of them are building new IP. Again, we’ve been fortunate that we don’t have to make a clone of something or otherwise stay focused on what will make us money tomorrow. We can look ahead. Our business model is simple. We grow and we innovate with our games. Once they’re ready, we’ll release them to the public. They won’t necessarily all be similar.

We’re very open to what people want. Because we have the marketing platform, because we have all these users, we can propel these new games ourselves.

GamesBeat: Is most of your development staying in Russia?

Lyalin: No, we don’t have development anywhere else. We opened up an office in China, but it’s not doing development yet. It will be.

GamesBeat: It seems like a good time to launch now, with the holidays. Does Apple still freeze the App Store around December 20 or so and take a week off?

Lyalin: They usually do. What’s happening this year, I don’t know. You never know. But they usually do that.

GamesBeat: There was that nice effect where if you were in the top rankings and the App Store was frozen, you could sell lots of copies. Angry Birds took advantage of that last year. They said they had three million downloads on Christmas day, when all those phones get activated. It’s very different from other game launch cycles. All the console games want to be in stores before Black Friday.

Lyalin: Yeah. We have direct access to consumers now. It’s much faster.

GamesBeat: But was it a coincidence that you finished in time for the season?

Lyalin: No, we were planning to launch on Christmas. We think it’s a good time for games. So many people have experienced our game before, and now they’ll be unpacking new iPhones, new iPads and playing with their friends. Every Christmas, our games go up and up.

GamesBeat: What do you think of the rising cost of acquiring users?

Lyalin: We’ve been saying for a year or more that the dynamics that have happened in the market, where you acquire a customer for, say, two dollars on average, and then get two dollars from the customer on average—It’s been like that for a long time. Now we see data that the numbers are climbing for customer acquisition. This Christmas, a lot of people are spending a lot of money, and they might not make it back.

That’s a good thing for us, because we’re a brand now. To us, the models are the models. We’re a brand everywhere.

GamesBeat: So you don’t have to advertise, but you still do?

Lyalin: Because we grow the brand in every possible way – because we do cross-promotion, because we do all the different marketing – we enjoy all of the scale from downloads. That’s a cool thing for us, because it means we can promote our own games, other games that we do, as well as do nice advertising with different animation trailers and things like that, things that our audience likes. It creates a compelling experience for people, and it creates a good business model too.

To us, we’re about consistent growth. It’s consistent growth and layering revenue on top of that. First we start with paid games. Then we add in-app purchases. Those generate more money than paid games for us. Then we add advertising. That generates even more money. As we continue building the brand, we can leave a lot of money on the table today in order to make more tomorrow, but not screw up the brand in the process. That’s been our way of thinking about the market.

What’s fun is that, first of all, we’ve been doing our own thing. Everyone has been screaming, “The world is going freemium! You’ve gotta change! You’ve gotta adapt!” It’s not that we don’t believe in that. We see the trend. But we’ve been able to focus on game development, on delivering something that people will like. We’ll see how well we do. But I think the chances are good that Cut the Rope 2 will be well-received, and we’ll be able to layer on different revenue opportunities. What’s exciting there is that we’ll also get to innovate a lot.

There’s a lot of talk going around about how you have to do the game loop and building all the freemium gates and so on. A lot of people are competing in that. And obviously we’re doing that. But at the same time, we can innovate with things like advertising, which not a lot of people can do. We innovate with allocation-based advertising. Putting two big brands together creates a very different experience.

The most important thing is, because we’ve done all this, because the brand continues to grow, we have an awesome opportunity to launch new games. Both related to Om Nom and Cut the Rope and also some things that are very new. We have a lot of new products in the pipeline.

GamesBeat: Soon it’ll be a $10 billion brand.

Lyalin: [chuckles] Why not? Right now the world is changing. Some very big new game companies will be built in this generation. We’re in the process of doing that.

GamesBeat: What platforms are attractive to you? Does it make sense to spread out across a lot of platforms?

Lyalin: We do everything. We do Windows, we do web. We released on Nintendo, and we’ll be releasing more on consoles. If customers have the hardware, and we can deliver a great experience, we’ll do that. Obviously our platforms of choice are iOS and Android at this point. But we’re constantly innovating. We’re launching in Firefox with HTML 5. We didn’t believe the HTML 5 game would run on a phone, but it does. It runs really well.

A lot of new things are coming on different platforms, and we’re trying to watch and see what dynamics work in the market. But one thing is certain. Our biggest focus has been growing the brand and pursuing the traffic and making sure people know who we are. The reason is simple. Acquiring customers is never going to get cheaper. It’s always going to go up. When we have a brand, when people know to expect good stuff from us, customers come cheaper. Right now they’re free. Later we’ll put more money into buying traffic. But still, our customers will be cheap.

GamesBeat: You mentioned putting other brands together with this. Do you already have some in place that are going to happen?

Lyalin: We’ve done some advertising with Starbucks and so on. You’ll see a lot more in the coming year.

GamesBeat: Is there a pattern to how you choose those partners?

Lyalin: There is. First of all, they have to be comparable in terms of reach and size. We’ve done studies to show that the Cut the Rope brand has grown to be recognized by a huge number of people. We’re installed on every fifth smartphone or tablet in the world. We look at market penetration. We look at usage. We look at total portion of monthly active users on smartphones.

All of this gives us the ability to say, “We’re doing something right.” We might not be making as much money as we should be right now, but that’s a process. It’s important to build the fundamentals and layer money on top of that.

GamesBeat: Are there any other numbers that are really interesting to you? Statistics you’ve gathered about the market or your game?

Lyalin: We have a bunch of funny statistics about the number of times people have cut the rope and so on. But we’re watching patterns, the way people play different games. I watch my son, who’s five and a half.

We see people constantly coming back to Cut the Rope. It’s pretty amazing. It’s not like the usual scenario where people will play it intensively and then be done and give up. With us, they play for a long time, and then they come back every so often. It’s pretty amazing. Partially it’s because of updates, but also, the nature of the brand contributes to that. So many people have told us that they want Om Nom as a pet. [laughs] We’re doing a little bit at a time.