46 Cents in Revenue Per Daily Active User? Vancouver’s A Thinking Ape Has Seen It Before

Vancouver-based A Thinking Ape may be a quiet player in the mobile games space, but the company’s silence doesn’t mean it hasn’t been up to much.

Founded by Kenshi Arasaki and Wilkins Chung, two Canadian former Amazon developers, A Thinking Ape was originally a chat client company that was backed by Y Combinator three years ago. After pivoting into social games in 2009, fellow Canadian and former Facebook developer Eric Diep joined the team and since then things haven’t slowed down for the company.

In the past year, A Thinking Ape has grown from from three to 40 employees, begun porting its flagship game Kingdoms at War to Android, bought out a smaller Vancouver developer called Good Guy Robots and begun working on a brand-new social casual game outside of the company’s core RPG niche.

We sat down with co-founder Kenshi Arasaki in A Thinking Ape’s still-under-renovation two floor office in Vancouver’s Gastown district.

Inside Network: As far as I know you haven’t taken any additional funding after your initial angel round, is that something you’re looking at?

Kenshi Arasaki: Given that we’ve been able to grow completely off of revenue, cashflow isn’t the issue. There are obviously situations in which we would consider raising a Series A, but it would have to be a situation where we had to raise a boatload of cash to take over the market.

IN: All three of A Thinking Ape’s co-founders are Canadian, but the company got its start in San Francisco. Why did you choose to come back to Canada?

KA: While I really love Canada and Vancouver, the primary goal behind the moving the development office was saying, “Where can we build a company long term? Where can we scale out our company now that we’ve got some traction?” Once you have a business model, you need a really good source of incredible people. Vancouver turned out to be a really good fit and we decided to build our head office here and grow our company to hundreds if not thousands of people. You can build a team of up to 100 people anywhere, but where can you build a team that’s thousands of people?

IN: Expansion is clearly on your mind. Where do you see the company in a couple of years? 

KA: We’re not always going to be a social gaming company. One thing that we’re really good at is building a social layer within games, so at the end of the day we want to build out the social platform that’s been so good to us and make it available for other people. Right now we’re still trying to figure out how to make that a generalizable product.

IN: So you’re looking to transition into a service or platform company?

KA: It’s possible that we won’t always make games. But for the foreseeable future, it’s games. We’re at the intersection of two amazingly large markets that are growing really quickly: mobile and social games. While the race is over for Facebook, it’s still being determined who the players are on mobile and there’s no clear winner. We’re uniquely positioned in iOS to be one of those players.

If you become a major player, it’s not out of the ordinary to see it becoming a billion dollar business, and that’s something we’re striving for.

IN: Speaking of your games, how are your MAU and DAU figures doing? Are you still growing or are you looking to Android for expansion?

KA: In terms of our MAU growth, you remember the issue in the app store where incentivized installs were killed? That hurt a lot of our competitors.

We never monetized through offer walls, but it also hurt a lot of people who were buying ad inventory because it was a cheap way to acquire users. Because our per-unit economics are so strong in comparison that it hasn’t hurt us as much, so we haven’t seen a decline. When they cut the offer walls, we actually went up to the #6 on the US highest grossing app chart.

IN: Kingdoms at War is usually around the middle of the top grossing apps chart. How do you keep that position?

KA: Because we have such good per-unit economics in terms of how our users monetize on a per user level, we control our app store ranking.

That’s why you never see Kingdoms at War at the top of the top grossing list, but we keep it on top of our sub-category. Games have an innate organic appeal. No matter how many people are exposed to the game, only a certain number will continue to play it. As you go up in ranks you get more users, but the quality goes down. We figured out where we need to be in the app store to have the highest ROI per user.

IN: While you don’t have to report your earnings, is there anything you can share with us?

KA: If you’re a top tier developer on the iPhone, you will make between $1 to $3 million dollars a month before Apple’s cut. We’re a top tier developer on the iPhone.

IN: How do those earnings break down? How are your games performing?

KA: Kingdoms at War is where we spend most of our marketing effort, but Future Combat has the highest per user monetization by far of all of our games. It’s actually ridiculous how crazy it is.

IN: Can you share some specifics?

KA: Four to six cents per DAU is about average in the industry, but for Future Combat we’ve seen our revenue per DAU go as high as 46 cents. However, that might not even be our high end anymore because I looked at those figures a month and a half ago. I can tell you that even for our lowest monetizing game per user it’s at the top end or higher than the industry averages. As an RPG company our users are more niche and more hardcore.

IN: What are your averages then?

KA: Keep this in mind – we limit whales. When we were getting guys that were spending $20,000 a day in our game. (Editor’s note: Yes, we were incredulous about this figure too. But we double-checked with A Thinking Ape by e-mail on this and they said $20,000, as in real — not virtual — currency.)

We realized it was skewing our revenue and we realized we didn’t want to create a game community where people thought that you had to pay to win. Our games are so social that you could see people rise to the top of the leaderboards because they could afford to be there. That’s actually really bad for the community. We want people to rise slowly and move up the charts and have the ability to get integrated within the communities. Our users, even with those high monetization numbers are limited to like, $150 bucks a day.

IN: Do you think that fosters a better community in your games?

KA: I think so, yes. Even though we limit whales, our number one complaint is “Why can’t I pay you more per day?” That isn’t a bad issue, but there are other risks associated with it. If you don’t allow whales to spend whale amounts of money, maybe they get bored faster and never spend as much as they would have. But the focus is on encouraging a strong community and making sure that people who didn’t spend as much money can have just as a strong experience. We tried to do what was best for the users.

IN: That seems to go against the prevailing logic of some developers. Do you think this is where social gaming needs to go?

KA: We wanted to do what was best for the users, so we had some altruistic tendencies. We’re trading off monetization for the growth of the community because at the end of the day if your community isn’t healthy, your company is dead long term if you’re trying to develop a truly social game. In single player games, you can have as many whales as you want.

IN: So community is very important to you. Why do you think your community is so engaged?

KA: Well, if you look at our competitors in the app store, one thing you’ll notice is that their games have much more content than ours do. Like, orders of magnitude more content. They have dedicated art teams and are releasing new things for the players to consume every week. We’re starting to add more content, but we were a chat company to begin with and we wanted to build games that were thin veils over kickass chat clients.

This gave us a very strong social layer within our games, so we have extremely strong game communities. So, even when people run out of things to do in our game, they log-in just to hang out with their friends. This core group of friends serves as a force multiplier for things like engagement, and with greater engagement comes greater monetization.

IN: So gameplay may even be secondary for your users after a while. Why are you making the transition to adding more content to your games now then?

KA: It’s a low hanging fruit. We started off as a chat company, but there’s no reason we can’t up the production values of our games. We now have the resources to do both.

IN: So now you can be a great chat client company and a great game company?

KA: A lot of social games are not actually social, other than inviting your friends. We’ve cracked what it takes to build an inherently social game on the iPhone, and what our competitors do really well is high production values for the market. In the beginning the whole industry started out with not much social content and bad production values, and started moving up towards better production. We kind of went over into the social side of things. The thing is it’s fairly standard knowledge how to make your games richer, but not how to make your game actually social, and how to develop vibrant online communities.

IN: So it’s not just — “Our game has a leaderboard”!

KA: Exactly, or “I invited 10 friends!” We’ve had whole groups of people who play our games, people who have never met each other in real life, take trips to Disney World together. We get wedding pictures mailed to us of people who have met in our games. We’ve seen wedding cakes with our game’s loading screen on it because they met in our games.

IN: How many weddings have you facilitated? More than 10?

KA: Probably. And if not weddings, at least relationships. It’s something that turned out to be completely emergent behavior. A really touching thing was one of our players was a child and he got cancer, but he was well known in the community. He started posting things like “I’m sick, I won’t be able to play because I need to go through treatment,” and he stopped posting.

After a while his Mom started posting for him explaining that “He and our family are so incredibly grateful for all the love that you guys have shown us.” It just goes to show you the power of an online community. People say “Oh, you’re just building games.”

But at the end of the day we’re doing a very human thing, creating vibrant online communities that enrich people’s lives. And this is all through a phone, in a chatroom in a game that people play with their disposable time.