Ngmoco CEO Neil Young on the iPad, Monetization, and Challenges for New Mobile Developers

In the small world of the iPhone’s top game publishers, Ngmoco looms large. Its releases include early iPhone hits like Maze Finger and Doctor Awesome and the later, more graphically mature Eliminate and Star Defense; in all, the company has had just under a dozen successful games, far more than most can claim.

We sat down with co-founder and CEO Neil Young to get his perspective on where mobile gaming is headed in the future — whether on the iPhone or another platform. Note that this interview, like our last one with SGN’s Randy Breen, runs a bit long; just click through below to get the full read.

Inside Social Games: I feel like I have to ask: What’s your view on the iPad? And on Google’s new Nexus One?

Neil Young: I’m very bullish on the iPad. The negative commentary I read on the internet reminds me of when the iPod came out. I think real humans will be amazed with the iPad. It’s going to be a very important computing device, and potentially the death of the netbook. In a couple year’s time it’ll be huge.

We’ll have titles at the iPad’s launch and support it through the year. You can think about four classes of products that you could build for the iPad. The first is an iPhone app sold through the app store. You do nothing at all, no work. Class two is to take those products and up the resolution to make them look good on a larger device. I expect a bunch of people will do that because it’s the easiest thing to do, and they’ll try to position themselves as leaders. The third class of things will be to take products that are being shipped on the iPhone OS and make enhancements and changes to really take advantage of the screen format. It’s not just about resolution, it’s actually having more real estate for function. The last thing you can do is build native applications that can only ever be on the iPad, not on smaller devices.

For Ngmoco, we’re going to predominantly live in that third category for now. We’ll take our games and add to them for the iPad.

Android continues to make improvements. I don’t think the Nexus One has done very much to change the commercial profile of Android. It’s still very clearly far behind the iPhone OS devices. Having said that, I think the Nexus One is a piece of hardware, in terms of its form and processing power, that’s pretty impressive. It’s really the tight integration between operating system, applications and hardware that’s lacking. My sense is that there are a few more turns of the crank before Android gets into the ballpark.

ISG: All of your games so far have been in the top 25. Do you see that continuing as competition increases? And as the market grows, is it even necessary to be at the top of the charts?

NY: Certainly as the market expands, the value of a chart placement will increase, even for lower positions. The beauty of free to play games is you disconnect your revenue model from chart position. It’s important to get as many people as you can into the game, for sure, but you’re not making money only when the game is in the charts. That’s the difference from the paid side –- there, if you’re not in the top 100, you’re not making money. In the top 50, even. On a free to play game, it’s really about usage. Once you’ve got a customer, they could theoretically stay with you forever and pay you forever. You’ve changed your monetization from being in the chart to maintaining a relationship with a customer. That also means you get to think differently about the way you design, about how the games get into people’s hands, how you treat your customers.

ISG: You’ve been around for about a year and a half, and have a number of games that, from the outside, don’t seem very similar to one another. What has happened so far, and what’s your direction?

NY: We released the first two games in October 2008, intentionally priced one at free and one at 99 cents, because those were the lowest and second-lowest friction price points, and heavily instrumented the software to report back on every session. We were fortunate that both of those games went right to the top, so we took the data and iterated on it, and it helped inform a lot of what went into our first big game, Rolando, which we did with Hand Circus.

After that Christmas we embarked on two strategies. One was the Plus+ network, which is embedded in our games and some other people’s products. From the outside, Plus looks like it’s trying to be Xbox Live for the iPhone. But the stuff that’s really unique about Plus today is what happens in the cloud: the building of an account relationship with the customer, a social graph, a follower graph, feed-in systems, and now with games like Eliminate, synchronous multi-player. Virtual goods, a storefront, game servers –- there’s a really meaningful game developer platform there. The developers need these ways to create a relationship with the customer over time.

In concert with that, in Q1 and Q2 of 2009, the average price of the top 5 games dropped to an average of $1.68. As we released Star Defense and Rolando 2, we started to see the affect of that pricing pressure — we were disappointed with their performance relative to the pace of the market growth. What we knew was that people were downloading games, but it was only the ones they liked that they used a lot. So we needed to revisit our thesis. We decided that if we can’t make a game free to play, we’re going to kill it. We needed to learn about the free to play market, so we acquired Miraphonic, which published Epic Pet Wars. On the surface that game looked derivative of [Zynga’s Facebook game] Mafia Wars, but we were drawn to it because it seemed like it had character. We took that learning and drove it into Eliminate and Touch Pets midway through their development. I would argue that the freemium implementation in those two is, candidly, clumsy. They’re sort of jammed in there.

So that’s the phase that we’re in now. We released those games in November, and we’ve been living in the freemium world since. Eliminate and Touch Pets not only both went to number 1, but we’ve been able to constantly re-promote them into the top of the charts. The same thing is true of Epic Pet Wars. We’re growing our daily active users every day. And the next releases will be better, without such clumsy monetization models.

ISG: When I interviewed SGN’s new CEO Randy Breen a couple weeks back, we talked about how bare-bones Mafia Wars is, and you seemed to be suggesting just now that Epic Pet Wars has more “character” than that game. If so, why is Mafia Wars so successful?

NY: I absolutely respect Mafia Wars and all its different incarnations, like Sorority Life. They are very compulsive, and as a designer I admire compulsion loops. That’s essentially what games are, and they do it well. If you think of why those games were able to be so successful on the Facebook platform, it’s because they were perfectly suited to what the web could do well.

All games ultimately resolve themselves down to the compulsion loop. If you think about the games that you’ve loved, the graphics were important for a moment, but eventually it was about the compulsion loop. The graphics in the new Super Mario Bros are not as good as the graphics in Dante’s Inferno. But the compulsion loop in Mario is spectacular. That’s what you play games for. The graphics melt away, and it’s really about the relationship between the compulsion loop and your imagination. Now, those PHP games are very, very purely compulsion. They’re very light on the graphics, but it doesn’t take away from them.

The iPhone is suited to other things. We want to combine the very best of game making –- compulsion loops, imagery, user experience –- with what we’ve learned about the freemium business. There’s something incredible when you combine great designers with the liberating model of free to play.

ISG: But aren’t games like Mafia Wars only so successful because so many of their players are new to gaming?

NY: Games with great compulsion loops have a better chance of being successful. They resonate with what people want to do. But you can’t just look at it through the lens of traditional game design. You have to look at it as what humans want to do. That’s why games in the social web have been so compelling. They blend what people want to do, primally, with their desire to show off to their friends, or beat their friends. It’s wonderful that social games have done such a good job of taking compulsion loops and socialization, which for them means distribution, into the core of games. That’s what allows them to reach so many more people.

ISG: How do you plan to promote your own games as the field gets more crowded?

NY: We have two predominate mechanisms. The first is the Plus network. The second is our daily active user base. So we have a large number of DAUs in our system, and if you think about free to play games, roughly on any given day, 2 percent pay you money. The other 98 percent don’t, but they’re happy to do things in return, for either a virtual good, or a buff, or a look at new products. That does two things. It allows you to introduce and cross-promote games in a fairly frictionless way. And the act of them downloading moves it up the chart, and picks up more people. Then we try to do everything that others do too: communicate with a core fan base that we send advance info to, and when appropriate we buy advertising.

ISG: That’s a pretty powerful mechanism once you’ve gotten established. Are new publishers already having trouble breaking in, or will they soon?

NY: There’s a long road ahead of us in terms of new products with new innovations being able to catch on fire and come into the market. I don’t think we’re yet at, or even close to the point that the market is defined by a few key players. We want to be one of those, but we don’t think we make, in house here, all the great ideas. There are people all over the world who are incredibly talented. We want to continue working with them.

The real challenge for developers is a little different. As you get greater device capability, it will be challenging for web developers to move across to the mobile landscape. Speak to any social web company, and they’ll tell you one of their greatest challenges is to go from PHP to Flash. But in mobile, they have to go from Flash to building 3D models and procedural animation systems, so the foot position of your character is uniform in a dynamic environment. It’s a completely different challenge.

But I also trust that the DNA that has grown up in the social web and free to play, has one very important advantage, which is the idea of essentially building your product in the wild. They can make minimum viable products, release them and then evolve. The lack of that is what has created some of the biggest problems for the traditional game space –- games that have taken two or three years for a huge team of people with no chance of economic return, versus something that’s being iterated at web speed, with multiple changes every single day.

ISG: It sounds like you’re saying that we’re actually heading into a golden age of design.

NY: We’re going through what happened in South Korea a decade ago, and there’s a lot to learn from the Korean experience. Those guys were releasing betas before we knew what they were. They’re well ahead of the curve in understanding freemium models. They’re not perfect, but they’re a long way ahead of us.

ISG: You also mentioned earlier that you think the monetization model in your new games is clumsy. What would make it more suave?

NY: I think what would be suave would be, ideally, a direct currency purchase, or just one layer of abstraction around a simple theme that’s important to the core of the gameplay. An example I’ll give you is in We Rule [ed. note: not yet released], which is a social kingdom game that we have. What you purchase in it is Mojo. It speeds up the things you do in the world. If I plant a crop and I want it to mature, it may take 12 hours, or two Mojo. What we’re trying to do is take the fundamental idea in the game, time, and put the monetization there.

ISG: Last question: How much are your users playing, and what’s growing?

NY: The average is 24 minutes per day, and the average session length is 11 minutes. The thing that’s important is DAU growth, which we don’t share. What I’d like to see rise is the number of sessions per day, not necessarily the number of minutes. I think a session is an opportunity for engagement, and it’s a high quality moment. If people come back more times per day, the caliber is higher.