There are only two things that humans do on Earth: We work and we play. The latter is what we learn first — as children, we go outside, learn sports, and even pretend. In fact, humans are quite good at playing games and it’s been a central part of our evolutionary development. Science says so.
Today’s generation of players have migrated online and gravitate toward games specifically crafted for mobile devices.
MySpace co-founder Chris DeWolfe founded Los Angeles-based Social Gaming Network (SGN) in
2010 through a series of three strategic acquisitions. Each piece was acquired for what it offered the company as a whole.
“We came up with a thesis to buy a gaming company that had a big footprint on Facebook FB +2.9%, which was MindJolt. A big footprint on mobile, which was SGN. And a big footprint on the Web, which was HallPass Media. So we quickly amassed 20 to 25 million unique users and then quickly sought out a way to bring all the companies together in a really smart way,” said DeWolfe.
The start-up — once known as MindJolt and renamed SGN — has blossomed over the last three years. SGN’s revenue growth has approximately doubled each year, with a projected $50 million for 2013.
Most recently, the company acquired a games studio near San Diego, California, giving SGN three California-based studios located in San Francisco, in Los Angeles, and near San Diego, as well as three studios located in Buenos Aires, Argentina.
The Social-Mobile Connection
Some of the future of the Internet belongs to those who make great predictions.
Internet pioneering afforded the founders of MySpace early knowledge of what a global digital marketplace would look like.
While MySpace was the dominant global, social network before Facebook, founders of the site were able to gain perspective into how global players engaged with various forms of digital media, including what the future might be beyond the social web, how various populations were using social media, and global interactions with mobile devices.
The social-mobile connection became apparent early on.
“There were definitely a lot of inspirations, during my time at MySpace. For example, we naturally visited our competition. And in Japan in 2006, a company called Mixi — which is a top social network there — was seeing over half of their members log in through mobile devices and they were all playing games. So, to me, that was a clear signal that, in the future, mobile gaming was going to be much bigger than everyone thought.”
“Around that same time, we were doing our joint venture in China, and all the farm games started getting really big there, before Farmville was even born. The whole notion of buying virtual goods was definitely much further ahead in Asia in general, and we saw it specifically scale in China.”
After MySpace, DeWolfe took critical lessons from the social network and then applied them to the growing games industry.
If social networks are the glue that’s keeping us all connected, then games are something to do while we are already connected. Whether on our mobile phones, on a social network, or on the Web — people seek a way to relate to each other, and playing a game is a simple way to do just that.
And as the world becomes more mobile, both through a massive increase in new devices and through our global economy, we can surmise that even more game play will be had on current mobile devices and on those to come.
It stands to reason as the world becomes more mobile, it naturally also becomes more social.
As we reach for our phones up to 150 times per day, some of those instances constitute looking for a way to pass time, take your mind elsewhere, stave off boredom while waiting in line, and so on — thusly, the social-mobile connection could not be more rife with opportunity for capitalizing on what people are doing all day.
Applying Science To Art
When it comes to creating games, one first thinks of the animation, the characters, graphics, a possible storyline, and perhaps how to win.
And great art is essential to making a game lovable.
However, behind the curtain, there’s also a method as to how to make social games discoverable, playable, and possibly addicting. A formulaic balancing act that requires analytics, heat maps, game leveling, and big data.
This is the process by which SGN is strategically measuring their games’ successes, including how well a game will likely do and who their target audiences will likely be.
“Our basic strategy is that we’ll launch a game and if it hits certain metrics — retention and monetization metrics — then we’ll either double or triple the size of the team, working on that game. And the game itself becomes it’s own business. So, it’s not like the old shrink-wrapped videogames, where Mortal Kombat 3 is done and it’s at Best Buy BBY +0.44%, and we’re all set. Instead, our games are living, breathing organisms that are always getting bigger and better — with new content and new levels. We’re constantly tweaking the economy and gauging user behavior.”
“As you turn it into more of science, that gives us a big competitive advantage.”
DeWolfe emphasized the importance of being device agnostic.
“When we started out, what we saw was there were mobile developers and there were social developers. Coming from L.A., we thought: Movie companies don’t shoot a film four times, so why are companies like Zynga making their games three times. Or why aren’t they making them, so the user can play whenever and wherever they want. So we developed technology to enable that.”
SGN has employs specialty technology, called MasterKey — that allows them to create a game once and then quickly port it to other platforms, including Facebook, iOS, HTML5 (Web), and Android. The technology essentially works like a translator or convertor.
This methodology combined with his team’s background in social, marketing, digital advertising, and analytics gives them significant experience in cross-promotion and figuring out user behavior. Diversification is also part of their alchemy: SGN has not solely relied on virtual goods for revenue; they are currently earning 30 percent of their revenues from advertising.
The company currently has four main games that generate the majority of their revenue, but holds a catalog of as many as 40 games in total. They will launch six more new games by the end of the year.
The Social Gaming Industry’s Future
As recent reports from once-dominant social-gaming company Zynga reveal social gaming’s pitfalls — just last week it was reported that Zynga lost 18% of its entire workforce, due to their transition toward mobile that hasn’t happened fast enough — it becomes easy to write off the industry as a whole. But a single company does not constitute the entire sector by any stretch.
And in every inopportunity, there lies opportunity.
If the social gaming industry was a game itself, when one huge player has a setback, it gives other players on the field significant advantages.
Such is the case with SGN, as they’ve hired several former Zynga talents, in the last few months. As SGN has focused on mobile from its genesis and has since consistently grown, it’s one indication that social gaming remains a thriving space.
The Electronic Entertainment Expo (E3) in Los Angeles this week only underscores the idea that games have, and likely always will, do well in the marketplace — especially as mobile starts to dominate consumers’ purchases and choices, possibly over console systems.
DeWolfe said that his company is poised to make one or two more acquisitions in 2013, and that eventually SGN would be open to partnerships and even becoming acquired themselves. But, at present, they are enjoying the building process, and their main focus is perfecting their game slate.
“Right now, we’re primarily buying the best creative teams in the world in order to build the best and most polished triple-A title games.”