Trip Hawkins on Digital Chocolate's Social Gaming Focus

Talk to Trip Hawkins for more than a few moments about Digital Chocolate's efforts on Facebook, and he'll be sure to tell you that his company has been the fastest-growing social game developer this year. That assertion comes with a few qualifiers -- mainly that Digital Chocolate is still far smaller than competitors that started earlier, so it's easier to have a higher growth rate -- but it's true enough to get the point across. The point, of course, is that Hawkins considers Digital Chocolate a viable contender to become one of the top five social gaming companies. With the money earned from developing hundreds of mobile and casual games, Hawkins has been turning his 300-employee company's attention to Facebook, and beyond. There are more than a few entrepreneurs with similarly aggressive visions. But Hawkins, who founded both gaming giant Electronic Arts and the now closed console maker and publisher 3DO, has a rare set of credentials. One more thing about Hawkins: he can certainly keep up a conversation. The below interview is a bit long. But there's plenty of good material, especially in the second half, so don't miss out. Inside Social Games: What's happening with Digital Chocolate on Facebook right now? Trip Hawkins: Millionaire City is the first of our second wave of Facebook games. Its success was informed by a lot of the things we learned on first products like MMA Pro Fighter. That's encouraging for us. We did a lot better with Millionaire City, so we know we're learning. There's a perfect storm we want to create between marketing, and virality and cross-promotion. If you can get one product built to a certain level, that's a leverage point to launch your other products. We're just finding it's more efficient and easier for us as we go on. ISG: In 2009, Digital Chocolate was all about the iPhone; now you're getting large on Facebook. Are you more excited about one or other? TH: I think at the moment the iPhone is a better platform for conventional games and Facebook is better for social games. For the iPhone every customer has already provided payment details and Apple has one-touch payment. On Facebook you have a legitimate social network and a lot of social channels and cross-promotion, but not as many people with a one-touch payment method, so you're better off if you're focused on virtual goods. Whereas a virtual goods social game isn't as likely to do well on Apple because it's a smaller audience, and you don't have the viral channels. Over time the platforms could become more functionally similar. If Apple is really successful with Game Center and social features and grows their customer base to a billion, and Facebook does the same, you could start to see more similarities. ISG: Millionaire City has become your big Facebook game, while your NanoStar franchise hasn't done as well -- but you've said the latter is close to your heart. What's the plan for NanoStar? TH: With the Nanostars, it's just the beginning. We built two games and launched them around the same time, had a lot of good customer reactions and saw some good metrics. We also saw some technical problems that up to this point have not allowed us to really promote the Nanostar platform. We're about to start doing that now, and we've made a lot of improvements in both games. There are also certain game design models that are better for the Facebook environment. A game like Millionaire is focused on asynchronous sessions, it appeals to both men and women, it's clearly a casual game. ISG: NanoStar Siege is an in-depth strategy game. Are there enough players for it? TH: What we'd hope to have is eventually a deeper and longer-term relationship with someone for whom gaming is more of a hobby. We're not really daunted by the challenge of sifting through players on Facebook to find out which ones can really fall in love with being a gamer. I'd say I went through a similar process with EA, because before that people played board games. When I built EA Sports, I could reach a larger audience, because I could bury the game in the computer. I called it real life in a box. Some of these board and card games didn't reach a large audience, but EA has reached tens of millions of people. Those people didn't think of themselves as gamers, and now they do. On Facebook, a lot of people absolutely don't think of themselves as gamers, but now they are. People that are EA sports gamers wouldn't like to go back to play Strat-O-Matic, and a Facebook farm game player wouldn't want to play the EA sports games. You can tell there are certain kinds of games that, because they're simple and purposely shallow, it's easy to get people to play them. Anyone with a background in the game industry would hope to do more than that, to get people to be patient enough that they can develop an interest. That's one of the challenges on Facebook. The Facebook audience is the new ADD generation, so there's a lot of drive-by activity where people don't want to embarass a friend so they'll take an action, but they won't stick around. ISG: So you're going to keep working on the existing NanoStars games? TH: For Nanostar Castles we thought, hey, this will be really fun to play live, then when we put it out there we discovered there were server scale issues so we couldn't really promote it. And when you have a live game you can't promote, you'll have trouble getting a critical mass of players. We just recently got that problem fixed. Now what we're working on is to make the single-player game better. When we first started with the NanoStars we had the idea that some people could get NanoStars [in-game heroes] for free and you could get more if you paid for them.More recently we've realized that that policy is too alienating for free players, they churn out of the games faster than we'd like. So we've concluded that it's better to keep the free players interested, since they add to the community and the virality and give the paying player more people to play with. To make it more motivating for the paying player to stay in -- we've already rolled this out in Siege, it now has earnable heroes. We're going to do a similar thing in the Castles game. Another thing is live in-game chat, so you can chat with whom you're playing even if they're not a friend, and go look at their profile to add them as a friend if you want. ISG: Most of the big Facebook developers avoid live chat in their games. What's the attraction for you? TH: You can make the argument that there are a lot of people on Facebook who don't want it to be a gaming destination. If you look at what we're doing, it's a portfolio approach where we'll try to do different things, some are more game-y and some are more Facebook-y. We'll keep trying to do things that are more game oriented for people who want it. But instead of us beating our heads against the wall and wishing Facebook were different, those products will be our lead as we move off Facebook. By the end of this quarter you'll see our first few games have their own websites. We're working on bringing some of those social games to mobile devices for the first time, and you'll see us anouncing distribution and partnerships that go beyond Facebook. Even Facebook wants gaming to move off, and use the open graph. Facebook.com will probably remain premier when it comes to cost per acquisition, cost per trial and ease of virality, and when you get to an off-Facebook destination, you get the people who are more into it, it's a more important gaming activity for them than just sneaking it in for three minutes while they're on Facebook.com. ISG: What about the other developers? Will everyone move off Facebook? TH: Zynga is a product entirely of Facebook.com. As they move beyond Facebook, they have tremendous size, scale and resources going for them, but as far as their game design, they're a creature of Facebook. That's how they understand design and gamer behavior. We come from other platforms and we're very new to Facebook, so we're way behind Zynga in that way, but we understand gamers and games. As a deeper game company and more of a cross-platform company, as we go off Facebook and onto mobile, that plays to some of our strengths that haven't been useful on Facebook. [Various communication devices] will eventually became interoperable. We're just at the starting point where you'll see that for games. For me it makes sense as software-as-a-service. In the future people will like a particular game, and no matter what the device or screen size, they can get to that game and communicate with their friends. It's a huge opportunity for social media, because it so much wants to be and needs to be interoperable. For social media it's not just convenience. Facebook doesn't want the entire world to be camping on Facebook.com, they want people to be out in the long tail. ISG: For now, is Facebook the new frontier for creativity in game design? TH: It's a very different kind of platform, and for that reason there's plenty of potential for innovation and creativity. It's obviously from what new kind of games have been invented. You have to look at the farming genre and realize that there are some pretty fresh, interesting approaches in games like that that happen to fit the Facebook platform pretty well. ISG: My followup to that, then: is enough innovation happening on Facebook? TH: No. As a general rule, there are a lot of people trying to get onto Facebook who haven't been there before, who are doing things that are derivative. They're coming from somewhere else or trying to copy someone. There's way too much of that activity, but that shouldn't surprise anybody. There could be innovative things going on that nobody has discovered. I don't think there's ever been a better opportunity in the game industry for innovative, original IP. The internet already demonstrated that truth. If you look at it, where's the big value? With CBS? Microsoft? It's with new IP like Facebook and Google, and now Zynga and so forth. ISG: Can a new developer make it in this market? TH: I think a lot of developers are being lured to the slaughter because they think it's easy to publish on the iPhone. What they discover is that it's not easy to make a profit on the iPhone. You don't hear so much about the little developers who lost their nest egg, you hear about Angry Birds. So for every one of those there are another thousand who will go lose their nest egg. If you think about books or music, the publisher provided both an editorial role and a business role, manufacturing, packing, shipping. As an artist you sure didn't want to deal with that. With all these virtual channels there's nothing more like that, so you can collapse the chain. But the baby got thrown out with the bathwater, because a lot of developers do need business advice and editorial guidance on the game. To bring that back to both the iPhone and Facebook, you have guys who stand in the middle of that and say, hey you're a developer and you're intimidated, or you tried to publish and aren't getting traction. Join forces with us, we'll get you that. Then they're asking for, in my opinion, too big a share of revenue, and what they're gonna do is not sustainable. They say, we'll go promote your game and you'll make this much, but they're only going to promote it for a brief period. With the iPhone for example, no game gets promoted for a long period. I look at the top grossing chart all the time. No matter what product is in there, within a couple months it will get churned out. There's this massive tidal wave of apps coming, and they just plow under what was there a week before. That's an unhealthy ecosystem because it's encouraging oversupply, and that makes it hard for anyone to get traction to scale up. ISG: That sounds pretty dismal. Why isn't there an online equivalent to a publisher and distributor, like EA in the traditional gaming world? TH: Here's how EA does it. They go into Walmart and say hey, we've got the exclusive NFL license. Now a whole bunch of inventory is on the shelf and Walmart owes a payout to EA. At some point the game is no longer selling so fast, so Walmart asks them to take some back. EA says sure, we can take some back, but I want you to take another umpteen thousand units of this next product. Over a period of time they can build up ownership and control of more shelf space, and they control more working capital owed through the payables. I saw this from both sides, at EA where we felt like we owned that shelf space, and at 3DO where I felt like even though I could make a better baseball game, I could go to a retailer and instead they'd buy all the EA units of an inferior game. It makes you wonder if someone could do online what I did at EA, saying hey, there are a whole bunch of these little guys, they need to be rounded up and gotten organized. I'd express skepticism about that because it's all virtual shelf space. ISG: What will make any given gaming company successful in the future? TH: The past of media is finance and leverage that made people into winners. In the future it's technology and IP. EA was in the middle. If you look at the past it's all analog, brick and mortar, and in the future it's digital and on networks. I think of Pixar, where at the start of its relationship with Disney, Disney thought of them a lot like its other studios. They thought, we'll make all this money because we control access to the theaters. What did Pixar do? They took the money and built a technology model, got vertically integrated, got best practices, attacked a particular segment that benefited from technology, and systematically built better movies, because each movie could use previous technology. Not a lot of companies in film were willing to do that, and not a lot could because it required a lot of engineering and tech expertise. Look at how the Pixar story ends up. They get systematically better until they're actually threatening the biggest business in Disney's history, animated movies. Who armed them? Who gave them the money? Disney. And how much did it cost them to fix that? Eight billion dollars later, they bought Pixar. In my view, that trend accelerates as we move to the internet and unlimited digital shelf space. You need a strategy if you're going to cover more billing systems, technologies, languages -- you need to be organized to do that, and big media companies aren't really doing it yet. I'm sure established brands will have value in these new media paradigms, but it's also a big opportunity for the creation of new IP. The best way for startup companies to really create their own value is to be tech companies.

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Trip Hawkins on Digital Chocolate's Social Gaming Focus

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