ngmoco CEO Neil Young: "People thought we were crazy"

DeNA acquired ngmoco in 2010, 2011 was about getting the integrated platform stood up, the ngcore technology framework stood up, third-party developers signed to the platform, and a complete retooling of our first-party studios so that we could take advantage of the expertise that DeNA has developed in building mobile social games in Japan and combine that with what we know about building smartphone games. We released the platform in August and have iterated through that on Android. Last week we released the first iOS titles. We're at the place now where we've got a good foundation to be able to build and grow. There's 45 titles live on the platform today from a whole host of different developers. You can target the Mobage platform, deliver your game on Android and iOS, which is sort of the cross-platform strategy, and you can get carriage on the network here in the West or carriage on the network in Japan, which is the cross-border piece of the equation.

Mostly on Android, because we are literally still testing on iOS. We have three titles on iOS live right now, and they essentially run the same code base that is live on the Android Market and has been live for a while. But we'll roll out more titles on iOS, and we'll have some titles that are available on both platforms, and others that are just available on one or the other. For example, Tiny Tower, which was last year's Game of the Year on iOS, is exclusively available on Mobage on Android. That's an example of a pre-existing IP, we're not going to do a competing iOS version. That will just live in the Android space, but there are other titles that exist in both places.

Really by the title, it's more of a title-by-title decision. It's a full virtual goods platform, on Android it has a unified currency, you can buy Moba-coin in one game and use it in another game. Obviously on iOS Apple's rules don't allow that, so it's on a product by product basis. We have store management and currency management systems, we also have a full ad platform inside the platform, so if developers want to monetize their applications through ads then they can do that. If you look at where Android is versus iOS, the Android ecosystem from a monetization standpoint simply isn't as mature yet as the iOS ecosystem. What you're seeing in Android is many of the same things that were happening in iOS maybe 12 months ago. We think over time more and more of the Android ecosystem will move to virtual-goods-powered free-to-play. When we first moved to free-to-play in the summer of 2009, people thought we were crazy. There weren't any titles that free-to-play titles in the top-grossing charts. Now it's hard not to find free-to-play titles.

There's still things on the technology front. Apple obviously has a big database in iTunes. Android is allowing users to tap directly into their carrier bill or Google Wallet, and Google Wallet's just not as well-formed as iTunes is. Customers on iOS are just more comfortable billing directly than Android customers are. That's just a function of where the Android ecosystem is in its development.

That definitely creates some challenges. One of the objectives of the ngcore framework was to abstract that from developers, so we have what we call a white list, a gray list, and a black list. The white list is fully supported by ngcore, the gray list we let the software run but we inform the user the software might not be optimized for their device, and then the black list we don't support. If you target ngcore then you can be assured that you'll run on the white and the gray list without too much difficulty. That gives you really good coverage over the market that matters to all game makers.

It's not trivial, as well. There are a lot of subtle differences between each of these different devices, and then some really meaningful differences, like screen resolution, the amount of available memory, or processing power. So if you target ngcore, you get that abstraction; you get the ability to access all of these libraries that we've been building our first-party games with over the years. You can author your game logic in Javascript, take advantage of all of the frameworks that Mobage has to offer, and you get an application that can run on Android and it can run on iOS and is competitive with some of the best products on the platform.

I think it is one of the strong selling points. In the final analysis, what's going to end up happening is there will be many middleware solutions that will allow developers to move from iOS to Android and whether those are code libraries or the always exciting but never quite materializing HTML 5, whatever the solution ends up being, I think that there will be mechanisms that allow developers to move around. I think the real value that Mobage ultimately brings will be access to audience and monetization, an audience that does monetize in the virtual goods realm very well. When you combine that with the knowledge and expertise that we have inside the organization, that we make available to developers in terms of how to optimize their software to monetize most effectively, the type of features that can change the percentage paying from half a per cent to two per cent, or from $2 a transaction to $12 a transaction, that's where the real value will ultimately lie.

The fact that we have first-party studios and we have this business in Japan that's been doing this at some pretty considerable scale for some time, that's just a wealth of expertise that we can deploy directly back to developers that come to the platform.

It really depends on a product by product basis. The number one thing to be successful in Japan is to have the right game mechanics, and the right theme. If you get those two things right then... Let me put it the other way: If you get those two things wrong, there's no amount of localization that's going to help. Then localizing the software, both from a language standpoint and from a cultural norm standpoint, is important. We help developers with that. We can either connect them with localization services, or in some cases for intellectual property that we're closely partnered on, we have studios that will help do that work with the developer. We have a studio in Chile, Akatama, that we acquired, that has helped bring Tiny Tower to Android and helped bring Zombie Farm to Japan. We have GameView studio in Pakistan which has about 300 people and does a lot of work to help developers move their titles abroad. We've got a lot of facilities that are able to assist developers.

I was in a meeting just before this, and there are 30 titles from Japanese developers that are readying to come across to the platform. A blend of ngcore-powered frameworks and also we have a native SDK as well that we're making available to developers so that they can easily move native applications into the Mobage framework.

Absolutely. I think that's one of the great selling points for developers in Japan, and ngmoco for developers in the West, to be able to say "Look, we have experts in Japan. We have a big scale network in Japan and we can deliver your titles to that audience, and it's an audience that pays a lot of money for virtual goods inside software." In Japan, DeNA can say "Look, we can differentiate ourselves from another platform company because we have ngmoco, and these guys really understand what works in the West, and we'll candidly share with you their opinions and feedback about what is or is not going to work and help you build software that can be successful."

If I can summarize what I've learned in a single sentence: We are all humans. When you strip away the cultural differences, and you look at the actual human behavior, it is shockingly similar between what social game players do in Japan and what social game players do in the West. The challenge is making that social veneer work. Dating, or falling in love, or falling in lust, or whatever it is, that's actually fairly human. We just deal with it differently culturally. Japan is definitely unique; it is very easy to dismiss the experience of Japan as not being relevant in the rest of the world. My experience so far, now being part of a Japanese company, is actually the experience is really relevant. The challenges often are language or cultural, but the inherent expertise and knowledge is very transferable.

Exactly right. If you look at where the US is today, it's analogous to Japan in the mid-2000s. You had mobile penetration into 90 per cent plus of the population, 3G penetration above 40 per cent, low-cost or affordable or fixed rate billing plans, and devices that from a user's perspective - you know, strip away the apps and the slidey screens - in addition to making phone calls, their telephones could send messages, play games, listen to music, take photos, buy goods and services, all seamlessly connected to your bill or a master credit card bill. It's that unique blend of usability and capability that changed the usage patterns of users in Japan, that drove the media services business there from a small business, a business that's smaller than our mobile business here in the West, into a really big business over the following seven years. That's one of the main reasons that we decided to sell our company to DeNA, to try to take advantage of the knowledge of a company that's gone up through that ramp, in an industry that's gone through that ramp, so that we can 5 years from now be looking at a scaled business that's doing billions of dollars of revenue and is mapped to what has happened in Japan.

It is. About two quarters ago smartphone shipments exceeded feature phone shipments. Now for most of the carriers, while they still carry feature phones, they're really focused on smartphones, and those smartphones are really dominated by Android. Right now Android is carried by DoCoMo, KDDI and Softbank, and the iPhone is only carried by Softbank in Japan, which is the number two or number three carrier. There's a big opportunity for us; if you just look at the developed world it has about 10 times the population of Japan. If you combine what I was talking about from a usage and industry scaling standpoint, multiply that by some percentage of the Western world, even if you assume we're not quite as rabid as Japanese people can be, there's still an incredibly big business to be built there. And that's how we view it. This is a marathon, not a sprint. It's important at times to sprint, but it's most important to get the company to a position where we can succeed in the long term.

Yes. We have competitors, some that are in the market, like Papaya, and some that aren't yet really in the market with anything virtual-goods relevant or free-to-play relevant, which is GREE, and Zynga, which is really just focusing in the Facebook space for now, or the web space for now, but I'm sure at some point they'll try to figure out how to scale the mobile platform.

You would think. We're in the market, and we understand the market, the ngmoco heritage was born in this market, so I think we're in pretty good shape. When we talk to developers they recognize the value in that.

Which will be OpenFeint with a virtual-goods layer. But being able to combine those three pieces, the platform, the third-party ecosystem, and then first-party studios, you need all those three things to build a very successful company.

We do that; we make code available to third parties for them to use, we try to share as much as we possibly can with the third-party ecosystem from our first-party studios. It's not just show what you can do from a technology standpoint; but it's also show what you can do from a monetization/retention standpoint.

Everything necessary to give developers at the end of the day what they need, which is access to audience and monetization, and we're very committed to do that.

If you think of the overall umbrella of marketing, there's PR and communications, which developers tend to be not great at; there's traditional product marketing, which developers tend not to be great at; and then in this space there's user acquisition, which is the science around acquiring customers through different channels, and that's very, very hard to do. To buy customers at a low enough cost of acquisition that's lower than the lifetime value of the customer, to be able to tune the lifetime value of a customer, to be able to drive down the cost of acquisition because of the volume at which you're buying or the way in which you're targeting those channels, that is non-trivial. We have very, very smart that spend all day every day thinking about how to do that and doing that across a large number of titles. I think in each of those three areas we can help in varying degrees. PR - in this world, if you've got a great app, I think it's quite easy for that app to transmit through word of mouth. Product marketing is I think a little less relevant now, but as the games get more sophisticated and the customers get more sophisticated, product marketing will become important again. User acquisition is really essential. Unless you have a retention rate in your software which is infinite, you're going to find it hard to keep growing your audience or at the very least maintaining your audience so you can say you've got this money coming in every single day assuredly.

Actually, they've come down a little bit, they tend to peak historically in the fourth quarter, and first quarter they've come down a little bit. It's more how do you get a user who's going to be highly monetizing user and is highly likely to stick around? The targeting of that user acquisition is really important. And then for us, where we've got many many millions, tens of millions of people inside our network, being able to introduce a user who may have lapsed out of one game in the network to another game in the network, and connecting them together, further drives down the cost of acquisition because that's a cost you've already incurred.

Exactly. We've built the network in such a way that we know all that information. You might be a player of We Rule who had lapsed out of We Rule, and because we know you've lapsed we can send you a message in We Rule that we'll send as a push notification to your Android device, when you launch that push notification it will launch We Rule in its referral mode and it will refer you directly to the Android Market so you can try out that new application. We really do know those things; we do know what you've played. If a user has a choice of going to the Android Market and browsing for a game, or being introduced to one that is appropriate for them, then that's another method of targeting.

The friction for getting into these applications is so low right now, we find many users do just try. They've been introduced to it, they say "Oh I'll just try it," and then they get into it, now you've captured from the developer's standpoint a new customer.

It's awesome, a strong evolution. I'm really looking forward to what they do with TV. That has the ability to complete the loop for Apple. They've disrupted phones, they've disrupted handheld gaming, and then to disrupt consoles and television viewing, that's going to be pretty exciting. We have a studio in Sweden, run by Ben Cousins, who was the EP on Battlefield, and he is assembling an all-star team, and they are building something pretty cool for tablets. Our view is that tablets really have the opportunity to reinvent living-room play experiences. They're powerful enough that you can take the tablet with you and continue an experience that is essentially exactly the same, and they're also used predominantly in the living room as control surfaces. If you just see what Apple's doing with AirPlay, and imagine a couple of steps forward, it's going to be pretty cool. I'm excited about the new iPad.