How Is VC Money Set to Change the Mobile Gaming Landscape?
Last week, I was in the strange position of being in Berlin instead of San Francisco’s GDC where all the industry bigwigs were. But luckily, it turned out that the top paid iPhone app and the top free iPad one were by two different rookie developers from Germany.
I met one of them — Berlin-based Chrome Gekko, which is made of two brothers, a sister and a Polish guy. Long story short: they met because of a washing machine and they had the best-selling free iPad app in nearly 40 countries last week. Before creating their apps, Bowmaster for iPhone and later for the iPad, they had never made a game before. They were really quite charming and genuine. Unlike the conversations I have with larger developers, they didn’t — or didn’t know how to — throw around more monetization acronyms than can be counted on ten fingers.
It was bittersweet in a way, because I hope they’re not part of a vanishing constituency at the top of the iOS charts.
When you look at it from afar, Apple’s platform sits at a fascinating nexus within the gaming industry. It attracts top-flight developers hailing from the video game world, social gaming companies that dominate on Facebook and publicly-traded companies like Glu Mobile, which arrived with a pre-iOS wave of mobile gaming startups.
Then there are first-timers who unexpectedly strike a chord — studios like Chrome Gekko and the eighth-grader who temporarily knocked the free version of Angry Birds out of the top spot with a game called Bubble Ball.
The iOS platform is also fiercely international: Chart fixture Texas Poker is run by Kama Games out of Vladivostok, Russia (yes, a city in Siberia). Australia has a couple good studios like Firemint and Fruit Ninja-maker Halfbrick Studios. A handful of Slovenian developers are behind, Outfit7, the talking animal characters empire that surpassed 60 million downloads in January. A game we reviewed the other day came out of Hanoi, Vietnam. There’s Finland’s Rovio. This could go on and on.
But every year, incumbents assume more of the top 10 slots. Right now, Silicon Valley venture capital dollars are lining up in such a way that this relatively egalitarian environment may not exist a year from now.
For example, Andreessen Horowitz just led an $18 million round behind San Francisco-based TinyCo (formerly known as Brooklyn Packet) and Sequoia Capital led a $5 million funding round for another Silicon Valley developer Pocket Gems. Zynga is also scooping up mobile startups to break into the space, most recently with its purchase of Words With Friends-maker Newtoy. Giants like EA and Gameloft can also muscle their way in with app fire-sales and well-recognized IP from their console and PC businesses.
At the same time, there are now around 10 or so pay-per-install advertising networks like Tapjoy, W3i, Flurry or Mdotm that let developers buy downloads or essentially pay their way into the charts. The hope is to get the visibility and the so-called “organic lift” that comes when consumers download what’s right in front of them.
I should stress that by less egalitarian, I mean that while the top developers should always have to have engaging game design and highly-orchestrated marketing campaigns, the days may be limited for one-man breakouts like Tiny Wings, the work of a single developer named Andreas Illiger from the Northern German city of Kiel. Illiger appears to be outselling Rovio’s Angry Birds for a thirteenth consecutive day in the U.S.
Silicon Valley has long had a me-against-the-man ethos; it’s about disrupting powerful incumbents and staid, inefficient industries. Yet the eight- and now even nine-figure valuations mobile developers are starting to attract may serve to exclude talent from more remote parts of the world from getting to the top.
It will become increasingly expensive to produce a top-selling title as venture-backed companies spend their way up the charts. Two months ago, we were hearing that the cost of breaking into the top 25 through a pay-per-install network was about $20,000. Now it seems to be running around $30,000. We might see what happened on the Facebook platform where a handful of entrenched and largely Silicon Valley-based incumbents dominate through multi-million dollar spends and aggressive cross-promotion.
Android’s Tim Bray wrote a post last week suggesting that there isn’t enough money in mobile gaming for venture investing to make sense and that will be thousands of mom-and-pop, lifestyle businesses. But Marc Andreessen, in joining TinyCo’s board and leading an $18 million round in the company, is effectively taking the opposite side of that bet.
It’s easy to see where both are coming from. With a Facebook board seat, Andreessen saw how the platform matured and is betting that mobile will assume a similar trajectory. On the other side, Android has intentionally kept its ranking system opaque, making distribution difficult to predict and manage — which in turn makes the platform challenging to build a business upon. Unlike iOS, it’s not based on only raw downloads. Among other factors, it considers how long an app remains installed, which favors older applications and can make it hard for new ones to break through. It’s not even clear that Google, which has a tendency to commodify everything, would even really want a heavyweight to emerge.
Neither vision is necessarily mutually exclusive; you can have a world with corporate blockbusters and indie darlings.
However with more VC money pouring in, while all apps may have an equal chance at getting to the top, some will be more equal than others.