Animoca’s David Kim on his company’s 7-Eleven business approach, South Korea as trendsetters and Silicon Valley’s myopia

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Hong Kong-based mobile game developer and publisher Animoca is known for its Android-focused development approach, with notable games in its “app supermarket“-sized portfolio including Star Girl, Aqua City and Pretty Pet Salon.

The company, which was founded in January 2011, has reached the 115 million downloads mark and now serves 100 million game sessions a month.

We sat down with Animoca CEO David Kim who filled us in on his company’s 7-Eleven business approach, South Korea as trendsetters, Silicon Valley’s myopia and the mobile game industry tsunami in 2013.

Inside Mobile Apps: Since it’s the beginning of 2013, what did Animoca learn in 2012 that it will bring into this year?Animoca CEO David Kim headshot

David Kim, Animoca CEO (pictured right): I don’t know if this is a lesson unique to us, but our biggest surprise to us that we quickly adjusted to was the meteoric growth of Android. Everybody kind of talks about it. Everybody kind of knows it. For all of us that are more Bay Area, Silicon Valley-focused, you forget how ubiquitous Android is everywhere. Right now, the number overseas have surpassed iOS a long time ago. The pace of change on Android, and the newer versions, and what that’s abled us to do, in terms of developing games that are slightly cooler. It really is small adjustments that make all the difference in what takes an average game to a cool game. That’s the biggest pleasant surprise and what we adjusted to very quickly in 2012.

IMA: Can you compare Animoca’s long-tail game development approach to the velocity, hit-driven approach?

Kim: Animoca, being based in Hong Kong, we’re easily overlooked because we’re not in your face all the time in the Valley. I don’t come knocking at your door every other week. Looking back at how Yat [Siu] and I built the business, understand that we’re actually from Internet 1.0 and we’ve seen the blowup and we’ve seen cycles. As individuals, we have built games on PC, Wii, DS and various other platforms over the years. While the mobile industry itself is new, we’re actually very familiar with games. We’re not that old, but in the industry, we’re very much old timers in terms of games as well as Internet slash new media. If you’re going back to the mid-90’s, that’s as far as you go, and we were there. Not to disparage the younger folks who are in the industry now, you need that vivacious energy. You need that raw, aggressive energy, but we’re not jumpy. If you look at our approach, we’ve got 250-plus games, and we’ll be somewhere in between doubling that into 2013. The reason why we have this broad portfolio approach, and not the hub-and-spokes model, is the hit-driven business. Quite frankly, we’re not Miramax of old. We’re not [The Weinstein Company] where we can throw out a movie and we know it’s going to be a hit because we’re going to make it so. We’re a little bit more humble than that.

We’re taking a broader, portfolio approach what we’ll call the Safeway approach where you’ll find our products in each aisle. We might not take the biggest space on the shelf, but you’ll certainly see it, and with enough time, if the users are actually looking around, you’ll be familiar with our games, if not necessarily Animoca. We’re not as dogmatic as having our brand out there as a company. We want our products, our games, to do its own talking. What’s been happening in our board approach is, if we do what we do well, which are simulation games that are a little bit more female skewed and younger skewed, we know this segment extremely well now.  We’ve thrown a lot of different IP at it, and we’ve done a lot of different formats of the simulation strategy game. We know what’s going to work. We now have enough of these games that are small cash cow calves that we as a business can run this indefinitely. We have a 7-Eleven, which is never going to be a Whole Foods or Trader Joe’s with this meteoric rise and take over the world. But your 7-Elevens, they are everywhere because each one of them make money. We have a collection of these 7-Elevens, if you will. That’s our steady base. Once in a while we have our super hits like Pretty Pet Salon and Star Girl, with huge numbers. I won’t say that those aren’t pleasant surprises, because we’ve been working at it, but sometimes things just work extremely well. That’s how we get our gravy on top. This is how we actually run our business. We can run this any which way. As a business, I would prefer that over super hits, super driven and here today, gone tomorrow.

IMA: Talking about more international, emerging markets, you guys are Hong Kong-based, what do you think is the key to success in emerging markets such as China?

Kim: China is its own animal. Whenever you talk about the international market, or the emerging markets, you have to caveat China because [China is] its own thing. Few companies, even American-Chinese companies, have a difficult time penetrating China. It’s a tough market to crack. [Animoca is] in a great geographic, and figurative, location. We’re seeing everything. Although we’re Hong Kong-based, our view is global. We’re almost evenly distributed, slightly skewed more toward the U.S., then Asia about a third, and then the rest of the world. Of the companies that are public and have their numbers out in the open, I don’t know of companies that are as evenly distributed. Rovio is everywhere. But other than those exceptions, companies like ours, that produce, develop and publish games, to have even distribution of revenue is unique.

We’re able to do that because we’re not in [Silicon Valley]. When you’re in the Valley, enough people have myopia, they think the world starts in the Valley and ends in New York. While that is the single largest market, it certainly isn’t the only market, and certainly not the majority of the global market. We refer to [certain countries] as emerging markets economically, but in Korea, Hong Kong, the penetration rate is higher than it is in the U.S. You can actually get a lot of trends if you pay close attention to a market like Korea. There are a lot of things that happen there where you can see that’s where the rest of the world is going to go. Korea showed that they were ahead in search before Google. Before Facebook, there was a company in Korea called Cyworld that took over the market. Korea exports Samsung, Hyundai and games. Somewhere between Samsung being there, mobile taking off as it is, and having games in their DNA, they are the trendsetters. You can see the viral social growth of games on the Kakao platform in Korea. That’s probably a foreshadowing of a lot of things that are going to happen elsewhere. Being in Hong Kong, not so much the geography, but being outside the U.S., and being able to see a more broader view of what’s happening globally, you’re actually able to see that pattern a lot more clearly. And not so much the blinders, California and New York view. Great states by the way.

IMA: Speaking of South Korea and countries like Japan, they have carrier billing. How much of a difference does it make for Animoca when compared to the U.S.?

Kim: It makes a huge difference. Google Play is a viable store in Korea, but still, T Store, and [Korea Telecom’s] version of the store, that is the reason [why] the Korean Android market just went through the roof. The payment was so easy and seamless. Again, it’s a market where gamers are king, so whatever you want to do, the platform and the carrier are there to let it happen, and it made a huge difference. There’s various attempts at it in the states, but they haven’t gotten that formula and process seamless enough to make it a [reality]. Google Play is still dominant and probably will be in the U.S. because the mind frame is different here. Korea in that regard is a trendsetter. I am sure that other markets will follow suit.

All the telcos want the revenues to come through them. Lets call an ace an ace. Telcos are worried about what’s happening, all the calls are dropping, all the texts are dropping, so where are they going to make money? Telcos think they can do content but they can’t, it’s not in their DNA. They can at least be the gateway, and they want to be able to control the gateway and extrapolate as much value and money where they can. They’re incentivized to do so. I’m very sure telco billing will get bigger across the globe. U.S. is a little bit different in that although Verizon’s the biggest, in Korea there’s SK [Telecom] and Korea Telecom. In Japan there’s [Nippon Telegraph and Telephone Corporation] and SoftBank. In most countries there’s a single biggest [carrier] with a second smaller carrier. The government makes that quasi-oligopoly happen. Here you’ve got at least four telcos that don’t work with each other, so it’s not a market that’s made for telco billing, but I’m sure that it’s something that will go that direction, just because of the efficiency.

IMA: What are your mobile game predictions for 2013?

Kim: What I’m seeing is the tsunami of Android development that’s going on and there’s going to be additional platforms that are going to start making some noise. Samsung maybe. It’s only going to get more competitive. There’s definitely a shakeup that started in 2012 that’s going to carry on to 2013. There’s always going to be room for small guys and small games. There should always be an indie system that allows it to happen and celebrates that activity, but this is where you’re going to see the ones who really know what they’re doing start to shine. I make a lot of a analogies to the Internet because that’s where I started, but a lot of the trends are the same but compressed. What on the Internet took seven to eight years is now happening in a year or two in the mobile space.

The importance of advertising will increase. Right now people are not paying as much attention to advertising. That will be a bigger factor. In the early days people thought, advertising? Is that really how we’re going to make money? Paid subscriptions? Commerce? Was eBay really going to make money? Was Amazon really going to make money? People just didn’t know back then. Everything is happening a lot faster because people have confidence that [advertising] will be [important]. We’ve seen it with Web 1.0 and quasi 2.0, you saw that happen so people are a lot more comfortable. A lot of the learning curve is skipped over. A lot of the trends of the importance of advertising will go more mobile. They will be more competitive, and what happened with Internet 1.0, is what will happen here, which is that a lot of companies will die off, as they should. I don’t want to get overly Darwinian about this, but this will be survival of, not necessarily the fittest, but the ones who at least know how to maneuver. Again, this is where sometimes experience does matter, because if you can see the trends coming a little ahead of time, as a business operator you’re a lot better off. We saw a little bit of this in 2012. 2013 will be the big swell, but by 2014 or later, this tsunami of activity will basically take over and get rid of a lot of the noise and we’ll have more clarity about what works and who’ll survive.