Patrick Moberg is the cofounder of Playdots, which is a mobile game studio in New York. They make Dots, Two Dots, and Dots and Co.

Holly Liu is is a Visiting Partner at YC. Before that she cofounded the gaming company Kabam.

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Transcript

Craig Cannon [00:00] – Hey, how’s it going? This is Craig Cannon and you’re listening to Y Combinator’s podcast. Today’s episode is with Patrick Moberg and Holly Liu. Patrick is the co-founder of Playdots, which is a mobile game studio in New York. They make Dots, Playdots, and Dots & Co. Holly Liu is a visiting partner at YC. Before that, she co-founded the gaming company Kabam. Alright, here we go. Let’s start with an explanation of what Dots is, what the whole entity is, and we’ll just go from there.

Patrick Moberg [00:30] – Okay. Dots started as sort of this little art project that was born at Betaworks, which is an incubator/investor in New York city. It was sort of my final synthesis of art and technology, which I had been dancing in between up until then. Games was this really natural progression, so sort of my first foray into that, and it was a lot of right place, right time. The idea was simple enough that it would just sort of I think, as a group we’re kind of surprised by how well and how far it took off, and the fan base that it resonated with.

Craig Cannon [01:09] – Yeah.

Patrick Moberg [01:10] – We’ve now built a… studio around that idea.

Craig Cannon [01:15] – Had you made a game of any kind before?

Patrick Moberg [01:18] – It’s funny. Right when I started learning how to program, I was messing around with 2D arrays, and grids, and very similar to what Dots sort of became, but that was 10 years earlier. Then I kind of hit a wall because I was so new to programming, so I moved to serverside stuff and started doing much different type of work. It was interesting to come full circle back to that after programming for a long time, but I really didn’t, in the interim, there wasn’t a lot of interesting games.

Craig Cannon [01:48] – Why art and technology then? What made you synthesize the two?

Patrick Moberg [01:55] – Around Dots?

Craig Cannon [01:57] – Yeah, well t obviously resembles a Damien Hirst piece, right? Did you try out other things where you were like, “Oh, maybe I can match this up, or was that the first?”

Patrick Moberg [02:06] – Yeah, the big point of inspiration was this artist Yayoi Kusama.

Craig Cannon [02:11] – Okay.

Patrick Moberg [02:12] – The year before, I went on this trip to Japan, and I went to this city Matsumoto where there was in a retrospective of this artist’s work, and it’s all dot-based. It’s a little more like an off-the-grid than Damien Hirst.

Craig Cannon [02:25] – Yeah.

Patrick Moberg [02:26] – The whole city was covered in her work.

Craig Cannon [02:28] – Okay.

Patrick Moberg [02:29] – The buses were wrapped. The Coke vending machines were wrapped. There’s a couple big museums that were showing just her work, and so it was sort of dots everywhere. The way the program at Betaworks was run was it was basically an open prompt to build a prototype of whatever you wanted within three or four months.

Craig Cannon [02:47] – Okay.

Patrick Moberg [02:48] – It was you had to launch something at that time. I was looking back on that trip, and I think her work was really formative because it was beautiful, but accessible. It was the idea that it could almost be playful to be interacting with something beautiful.

Craig Cannon [03:05] – Okay.

Patrick Moberg [03:06] – Was kind of the impetus. I started with screenshots of just, what could a mobile game look like that would be different from what else is available? The gameplay kind of came from that design. It was very much like, “Okay, here’s what it could look like. How would this play?” I started sort of, the rules kind of came from there.

Craig Cannon [03:28] – Are you prototyping these interactions and then showing them to people? Are you asking? I don’t know much about game development, so how do you figure out those mechanics?

Patrick Moberg [03:36] – What was really cool was that, so Paul Murphy, who would later become my co-founder with Dots, the way he ran this program at Betaworks was that basically, every week we would check in on Thursdays, and sort of either talk about what you sort of did, or later in the program, share what you had completed. We got on this weekly cadence that I really wanted to show something every Thursday, and so it kind of drove that prototype really quickly, and it made me want to make things that I was proud to show. I found that was a great way to produce that type of game, and so it was every week, getting in people’s hands and seeing how people reacted to it.

Craig Cannon [04:16] – Is that the same way you develop games now? How many games are you guys making now?

Patrick Moberg [04:22] – We’ve put out… We sort of have three that are live in the store. We’ve done a few others that didn’t make it to full releases. We can get into it later, but we’ll put stuff in sort of test market and do that on a bigger scale. Dots was really born out of friends and family testing it, and now we sort of just need to do things at a bigger scale to know how it’ll resonate with people beyond our sort of network.

Craig Cannon [04:49] – Yeah, and so the initial launch. How was it received in the beginning?

Patrick Moberg [04:54] – Again, a lot of luck, a lot of right place, right time. I think Betaworks, it was their first foray into games, and so their network, which is a very substantial and influential network, I think it felt cool to them to be a part of a game launch, and so they were great advocates for it. People with tons of Twitter followers talked about it day one, and then Paul was forward-thinking. He was like, “We got to try Facebook marketing,” which at the time, I think very few other Betaworks companies were doing. He was just like, “This is a good thing to test that with.” We had a really small budget, and I think there was actually a mistake, and it all got instantly, instantly bought a ton of players. It was $10,000, I think. It was still relatively small compared to other budgets now.

Craig Cannon [05:49] – Yeah, but you spent it in like, one day?

Patrick Moberg [05:51] – Like one hour.

Craig Cannon [05:52] – Whoa!

Patrick Moberg [05:53] – It was just a bug. Paul’s talked about it like, he fucked up, but it kind of worked out. It was kind of like that. Great word-of-mouth. There’s like this foray into Facebook marketing in a really early time. The aesthetics led to really inexpensive CPIs. Cost per install.

Craig Cannon [06:14] – Really?

Patrick Moberg [06:15] – Yeah.

Craig Cannon [06:16] – Why?

Patrick Moberg [06:16] – It was just such a clean image of a white screen with dots on it, that that just popped in the Facebook feed. I always felt like the less character a game had, like a wider audience could almost project whatever they wanted onto it. It was maybe you won’t find the most hardcore fan, but it’s going to appeal to such a broader sort of audience. Which you kind of see decoed in things like Ketchup, or there’s Voodoo Games, which do these, they’re really simple games that are also geometric shape driven. For that particular title, it was awesome. And then to see that evolve into our second game, Two Dots, which was directed by David Hohusen, he took it in this way that I didn’t really anticipate, which was more sort of character, and sort of a rich art world. That was ultimately, the right decision, in hindsight. Fans from the first game who wanted a deeper gameplay, they were hungry for a product like Two Dots.

Patrick Moberg [07:22] – Which had both the deeper gameplay, and this sort of deeper aesthetic, and it was just the right mixture that I actually didn’t know was going to work that well. I had this idea that Dots was going to remain this sort of minimalist approach. But what’s been cool is now we sort of have this studio that can support different types of perspectives on stuff like that.

Craig Cannon [07:43] – Is your hypothesis around CPIs true?

Patrick Moberg [07:49] – Now CPIs are way more competitive because there’s games with higher LTVs.

Craig Cannon [07:52] – Okay.

Patrick Moberg [07:53] – You need a lifetime value–

Craig Cannon [07:54] – All these acronyms we’re learning.

Patrick Moberg [07:56] – I know. It’s real easy to slip and just use them all the time. The goal is basically to get a lifetime value that’s more than the cost per install.

Craig Cannon [08:07] – For sure.

Patrick Moberg [08:09] – Once you sort of dial that in, you can kind of scale it. But then you start competing with other people who most likely have higher LTV games. Because this mobile game industry has evolved so much, there’s people with higher LTVs who are willing to pay much more. The competition on Facebook has gotten really steep.

Craig Cannon [08:29] – But going back to your initial point, is that the clean style still effective?

Patrick Moberg [08:34] – It’s difficult to create high LTV games with that style. Because you do want passionate, niche audiences which can be large, but they want to sort of gravitate around a certain theme, or something like that, if they’re going to financially invest in something.

Craig Cannon [08:51] – Right, so now it’s about building more narrative, building bigger characters, getting people really engaged.

Patrick Moberg [08:56] – For a lot of people that work at the studio, they’re excited to do that. It’s not just an ends to the means of financial growth. It’s like people like narrative, both working on it and interacting with it. It’s kind of like two birds with one stone sort of thing.

Craig Cannon [09:15] – What does that mean on the creative side? Are you turning these games out in three months now? When you storyboard, or do you even storyboard these longer games?

Patrick Moberg [09:26] – Yeah, the big thing a game like Two Dots is that it’s basically a game, and this is kind of disseminating throughout the entire games industry, it’s games have multiple phases. There’s pre-production where you’re prototyping and pitching out a game idea, then you move into production. The time it takes to get it to a launchable state. Then you launch it, and now things have live-ops, which means you’re adding additional content, and doing updates, whether it’s to maintain stability, or sort of performance, or to add new levels, or other sort of things to a game. We have a really sort of iterative, or sort of finely tuned process that makes new levels, which include either a new mechanic, always include new art, and new gameplay for players every three weeks. There’s new levels added every three weeks.

Craig Cannon [10:29] – Whoa.

Patrick Moberg [10:30] – Then on top of that, there’s weekly events that are levels you can only play for that week, and if you complete them, you get sort of a medallion, or bonus sort of things.

Craig Cannon [10:39] – Okay.

Patrick Moberg [10:41] – This has all sort of been, it evolved for…

Craig Cannon [10:45] – Alright, give a pause. Hey. What’s up? Holly’s here, everyone.

Holly Liu [10:51] – Hi guys. I’m back. Or just arrived.

Craig Cannon [10:57] – Patrick was explaining what it meant to develop Dots, and then Two Dots, and how it was different in terms of storyboarding, creating a game. Because his first prototype was a couple weeks before you had it?

Patrick Moberg [11:10] – Then three months to launch. Because it was sort of more arcade-y, the gameplay loop was pretty much infinite. Now we’re with Two Dots, it’s like in a live-ops operation. We do releases every three weeks, and weekly events, and stuff like that.

Craig Cannon [11:23] – Yeah. Holly, on your side, what did that mean at Kabam?

Holly Liu [11:26] – Like in terms of game design? Early, early on when we were on Facebook, the development cycles were a lot shorter.

Craig Cannon [11:31] – Okay.

Holly Liu [11:32] – Within about three months, we could launch a game, and that was really because our game mechanics were simpler even for a midcore game. Even our–

Craig Cannon [11:41] – What does that mean, midcore?

Patrick Moberg [11:42] – Midcore games tend to be a little bit… They’re more engaging. Well not more engaging, but you have to spend some more time. There’s several steps. A midcore game is something like, I don’t know if anybody’s heard of Civilization, but those are kind of the strategy-based games we started on, and strategy-based games are kind of like if you have resources, you want to build those resources so that you could build your village. Then ultimately, in most of these things,

Holly Liu [12:08] – is you build these villages so that you can raise an army and go attack people. Usually, there’s some type of battle mechanic, and a lot of our initial games, we eventually moved into racing games, or RPG games. Where RPGs is like a lot of role-playing where you could build out a character, and that you can do something with that over time, but oftentimes there was some type of attack, or battling of some sort, and so it always kind of lend towards some type of, something that was quite competitive. We got a lot of competitive players.

Craig Cannon [12:36] – Yeah.

Holly Liu [12:37] – Early on, our cycles were a bit shorter, mainly because web was a bit shorter. Also, I guess technically it wasn’t, yeah, it was three months, but there was a lot of stuff that wasn’t built out when we launched. I will say that. When we first did something like MVP on Facebook, it was just trying to catch, just kind of move as fast as possible to get an MVP. We were able to build resources to build the buildings, and you could get to an army, but you could not attack. The main part of it, we were like, it’s just going to take so long for them to get to that stage, but as we moved onto mobile the cycles just got a lot longer, to today, I mean it takes us about probably 18 to 24, 18 months is on the short side. 24 months, like two years.

Craig Cannon [13:23] – Really?

Holly Liu [13:24] – It’s partly, kind of for us, the mechanics have gotten more involved on mobile game. You couldn’t just push new code every day. You had to get submitted. There’s just so many things. Also, the quality has gotten a lot higher. We’ve moved into 3D art, which is very different setup than 2D. I don’t know with Dots, it’s probably still 2D.

Craig Cannon [13:47] – Yeah.

Holly Liu [13:48] – I would imagine.

Patrick Moberg [13:49] – We’re dipping our toe in the water of 3D.

Holly Liu [13:51] – Well we can have a discussion around that.

Craig Cannon [13:53] – Yeah, absolutely.

Holly Liu [13:54] – It was very different, in terms of that, so it definitely for us, pushed a lot. And then also on top of that, we did a lot of IP licensing, so that also adds time. You got to talk to the Fox people about, “Hey, does this make sense?” Or the Hunger Games people with the characters.

Craig Cannon [14:11] – Right. Is that similar to Lego? You can have massive hits if you get rights to that stuff?

Holly Liu [14:16] – Oh, definitely for sure, how you could get massive hits, so I think I might be jumping the gun, but somebody did ask about–

Craig Cannon [14:25] – Yeah, no we should read the question properly.

Holly Liu [14:27] – CAC is growing, and CPIs are reaching $3. How do you fix this? Me and Patrick were discussing about there’s just two sides to each side. It’s CAC, which is cost of acquiring a customer, for those that don’t know. And then CPI, which is cost per install, which is part of that. It’s literally, you have to get an install in order for them to convert into customer. That’s on one side. And then the other side is what we call LTV, which is the lifetime value of a customer, and we’re constantly, which I’m pretty sure you guys are at Dots, trying to sort out what’s that LTV? Because it changes over time and you want to model it correctly, because the game’s still live, and you’re like, “Oh my goodness, there are people who are playing from inception.” That actually plays into kind of your average LTV. Either way, the whole trick is to get your LTV really high, and your CAC low. What this person was asking is, as your CAC gets higher and higher, it’s very hard to collect that margin. For us on our end, we saw that, that our cost of customer acquisition was just getting higher and higher, and I do think it’s because we are what we call the midcore game. People who maybe identify as gamers, and those people are not necessarily all your friends. It’s like watching TV. It’s not necessarily they’re all into a certain show. You could have friends that are just your friends, and not everybody wanted to go build a farm so they could build a building. It’s not something my grandma would want to play, or my mom, right? Whereas Dots is probably so much more accessible.

Holly Liu [15:57] – For us, the IP has been very helpful in reducing that CAC, because I don’t have to explain what Marvel is. I could go after the Marvel fans and it’s so much cheaper than just trying to get them to understand what is Edgeworld or Dragons of Atlantis. Once we acquire that customer, their LTV does tend to be a bit higher than casual. It’s usually what we find.

Patrick Moberg [16:23] – One helpful way to describe the different casual midcore, and then there’s hardcore,. Casual, you kind of play whenever you have free time. Midcore, you’ll schedule time to play, and then hardcore, you schedule your life around playing.

Craig Cannon [16:37] – A hardcore game example is what?

Patrick Moberg [16:39] – World of Warcraft.

Holly Liu [16:40] – Yeah, World of Warcraft. You have to setup your headphones. We’ve also found in our midcore games, especially when we went to mobile, we had to make the site like what people could input short enough so when they’re standing in line. For us, to kick off building a building, it was almost like a setup game in some ways. Some pieces were super setup, and then come back and see what was the result. For sure. We had to adapt some of those things, but they’ve gotten more adaptive in terms of what you’re saying. You don’t build your life around it, but you’re intentional about it. Especially our Marvel game, you have to, especially when you’re battling, it’s quite engaging. You’re not going to just put it on auto-battle, or something of that sort, right? They try to make it like Street Fighter for your Marvel characters.

Craig Cannon [17:27] – Right. Okay.

Holly Liu [17:28] – Is really what our Marvel game is. Early on, we certainly had to reduce it so that it would just be filler, like it could fill your time while you’re waiting in line, and we just found that with mobile platform. It was very hard to sit there and not think about interruptions, and not think about, I really wish I could capture World of Warcraft type, even though we’re on our phones all the time.

Craig Cannon [17:52] – Has hardcore become a thing on mobile or is that still console, PC?

Holly Liu [17:58] – I still think it’s console, PC.

Patrick Moberg [18:00] – Yeah, what’s interesting and happening right now is that, so two games, Fortnite and PUBG are the number one games right now. Both of those just got ported to mobile, so you can basically play against other PC players on your mobile device. They’re first-person shooter games. Those lines are going to blur, but right now it’s still fairly segmented.

Holly Liu [18:22] – It’d be interesting to see if the porting, because I still feel like your platform does have impact on your game design.

Patrick Moberg [18:29] – Yeah, of course, yeah.

Holly Liu [18:30] – I wonder how they kind of adjust it for that, because I haven’t seen, I’ll be honest, I haven’t seen total successful first-person shooters on mobile. I don’t know if you’ve seen–

Patrick Moberg [18:40] – These are historically I know, Fornite just came out last week, or something. It’s like top 10 grossing.

Holly Liu [18:49] – On the mobile store? Oh okay, then there you go.

Patrick Moberg [18:51] – Yeah, it’ll spike, and then sort of maybe die off.

Holly Liu [18:54] – It’s true.

Patrick Moberg [18:54] – It’s really novel right now to play this against other players on your mobile device.

Holly Liu [18:59] – Oh okay. Well maybe that’s yeah, then that’s great.

Patrick Moberg [19:03] – Who knows?

Craig Cannon [19:05] – I’m just curious on the business side. Are people always chasing these new areas where they can make a little bit of money, or to historically, it’s these midcore games, like that’s where you have the cash? Yeah, what do you guys feel?

Holly Liu [19:18] – For us, we were quite focused around what we were doing. In the beginning, we didn’t know what we didn’t know, so we probably were a bit more open. We were doing a casual game on Facebook, and then we were doing, we thought this would be great, we were like, “Hey, we got this strategy game that worked really well. Let’s just put a theme of science fiction on it.” Like a Roman theme, and Call of Duty type theme, and all of this, but we realized that, that just became really derivative. In our world, everything was derivative in terms of players, and revenue, and all of that. It was just really difficult to… I think players are really smart, humans are really smart. You can’t just clone something, and then not have anything–

Craig Cannon [20:05] – That was a separate question I had about all the Dots fix.

Holly Liu [20:08] – Oh, really?

Craig Cannon [20:09] – I was looking at it before, it’s insane. But anyway, sorry, keep going.

Holly Liu [20:13] – Yeah, even all the Dots, there has to be something new outside of just theme, and don’t get me wrong, there were new things for us, but we also learned that maybe we didn’t copy the right things. That was us doing it to ourselves, in some ways. We definitely did open up more audience, but as time went on and the production costs of our games went higher, we had to be super thoughtful about thinking about even genres that we’re going to go into. Do we even have the talent? Is there a place in the market right now that mobile really needed to be at, and it just wasn’t there right now? A great example of this would’ve been racing. We looked at racing as a category that came up and down on racing, and we had realized that there were some early ones that were starting some traction. We were like, this is great. But at the same time, we didn’t have internal talent, so that’s where we found our Vancouver studio. And at the same time we had the IP, but we were like, “Hey, we need the right team.” We’re really focused on the right genre with the right team. Everything matching together. It would’ve been disaster if our Kingdoms of Camelot team

Holly Liu [21:25] – would’ve built a racing game, because you have to get the drifting right. You have to get the starting right. Getting it on mobile, that kind of game design is fundamentally different than from RPG, or to what we call, strategy-based games, and building that. That’s certainly for us, changed quite drastically over time along with the business environment. I’m pretty sure you’re probably seeing a lot of consolidation in the marketplace. As the person asked about CAC getting higher, we just realized every single shot on goal had to be really, really good, and we were pouring more money. At some point, we tell some game designers, this was a year or two ago so it mighta been higher, is if you’re going to spend money on customer acquisition, reserve at least $5 million.

Craig Cannon [22:12] – Whoa.

Holly Liu [22:13] – That was a year or two ago. You guys can’t see, but Craig’s eyes are– His eyes are like, whoa!

Craig Cannon [22:19] – No, that’s big money.

Patrick Moberg [22:21] – I heard double that, so yeah.

Holly Liu [22:22] – Oh, okay. See, that was two years ago, so today it might be double that because it’s gotten to this person’s questions gotten so expensive.

Craig Cannon [22:29] – Wow. Double that to what reach? Profitability on a game that took 24 months to develop? That’s what you’re saying?

Patrick Moberg [22:36] – Yeah.

Holly Liu [22:37] – Just for it to get a good shot to know that you have enough customers, to see if its retention is good, all of that kind of stuff. In terms of getting it to get higher. You wouldn’t spend that much in beta, so I’m not recommending. If anybody’s like a game developer out there and you’re starting a new game, certainly launch it in beta. You could do it in beta countries first. That’s what a lot of people do. And get at least enough, like a couple thousand. Just buy a little bit so you could fix some of these bugs, and then when you’re ready, that’s like turning on the hose is the $10 million.

Craig Cannon [23:10] – That’s so big time.

Patrick Moberg [23:12] – I mean and when you think about it, like the LTV’s almost just a little bit higher than CPI. You’re not making that much money on each acquisition, so that’s why you sort of need that big scale to sort of profit from that launch.

Craig Cannon [23:23] – What is it for you guys? You’ve talked about games that you guys prototyped internally, and then never released. I assume you didn’t spend two years building those games, right?

Patrick Moberg [23:33] – Yeah, I think for ours, it’s three to six months.

Craig Cannon [23:36] – Okay.

Patrick Moberg [23:38] – Dots took three months, but it was very simple. Two Dots actually took about six months. Some of our other prototypes that we did put like, it’s called soft launching, so you put it in the Philippines, or the Netherlands, and sort of like–

Craig Cannon [23:50] – Through the App Store?

Patrick Moberg [23:51] – Yeah.

Craig Cannon [23:52] – Okay.

Patrick Moberg [23:53] – Those would take three months to get to that minimal viable product, and you look at the KPIs, key performance indicators. Of how long people play, if they’re enjoying it, those sort of things. And then yeah, you decide if it has the legs, like are there things you can tweak to change those, or is it sort of just onto the next one?

Craig Cannon [24:15] – Were you launching in the same way, Holly? Were you just–

Holly Liu [24:19] – We were very similar, except for us, prototyping the game took a bit longer, and then we would beta it. For a midcore studio, it’s very hard to kill your baby. We’ve had ones where there was one that we had to kill, and it had taken at least 12 months, and then we found day 90 retention was horrible. It was so funny ’cause the studio lead, the studio president, he’s like, “One of the things I learned is I wish we would have released that earlier, then we would’ve known that just the engine was broken.” Because we thought the engine would be really good, and then if you just look at day 90, the retention was so bad. He was like, “Well if I’d released that three months earlier, I could have taken that learnings to the next game that we were building.”

Craig Cannon [25:07] – Yeah, Patrick mentioned Minecraft basically being released before it was done. Did you guys enter that territory as well? Are mobile game developers doing this kind of thing?

Holly Liu [25:18] – For us, definitely early on, on the web, our first game, we launched it before it was done. We all cannot probably get away with something that’s quote, unquote, not done, but we certainly can what we call an elder game, maybe not release that portion of it until later because we know it takes some time. The cycles, I will say, because I think you guys probably see this as well, is on mobile, what we call consuming content happens so much faster. That means when you release a game, don’t have just 10 levels. You need an order of magnitude larger than that, because you’ll be surprised how much people just eat up while they’re waiting. It’s just surprising. I don’t know how many levels you have to launch with this many. I don’t remember with us.

Patrick Moberg [26:04] – Yeah, we learned it the really hard way. We launched Two Dots with 85, which seems like an okay amount, but we had such a good organic launch, people telling their friends, that we were sort of scrambling to add more levels because people were going through that so quickly.

Craig Cannon [26:20] – That’s insane to me. Why not just make the game–

Holly Liu [26:22] – In a week, they were going through it, probably?

Patrick Moberg [26:23] – Yeah.

Holly Liu [26:23] – Yeah. Probably, I wouldn’t be surprised because Dots is like, you just keep playing it.

Craig Cannon [26:27] – Because you don’t want to make it exponentially more difficult, otherwise they’d bounce.

Patrick Moberg [26:34] – What do you mean?

Craig Cannon [26:36] – Alright, so you launch with 85 levels, but what if at level 50 it becomes so hard that each level takes progressively longer, right? That’s no good.

Patrick Moberg [26:45] – Yeah, so then you’ll get people churning out, and just sort of abandoning the game forever.

Craig Cannon [26:50] – Really?

Patrick Moberg [26:51] – We look at really granular win rates per level, and sort of see how, because you do want that nice difficulty curve that does sort of ebb and flow, that isn’t just always getting more difficult. You do want levels that are challenging, but you do want to make sure that they’re not too difficult they’ll just make people quit.

Holly Liu [27:12] – That’s right. Ours is very similar, except for we don’t have a straight level mechanics system. We have other kind of things that kickoff as well. For us, when we think about elder game, or later game, it’s not just level mechanics that make it maybe harder to win a battle, but it might be at that point, what is it that you unlock that’s meaningful for say, your character, or your team? You do have to think about a bit of the elder game because those guys are your rabid fans. Your rabid customers, your really loyal customers, and you want to keep them around because they actually help bring in others. One of the things that’s a bit unique about I think every one of our games, yes. Every one of our games, is we have social features of alliance, as well as chat. Those types of customers that are loyal and play every single day, or get to those later levels, end up becoming almost like the social, they recruit people for their alliance. They’re usually the alliance leaders, they’re the ones that are highly retaining and very valuable to bring on other players. You do have to take good care and think about that, because we are also somewhat managing a community, in many ways. Each one of our games has a community.

Craig Cannon [28:26] – Which is challenging when you’re building a portfolio of games, right? Beause you’re like, “Oh man, racing is sexy right now, except this person doing a first person shooter doesn’t care about racing.” How do you build your community from that, right?

Holly Liu [28:38] – Ours was very bottoms up. Partly, we’ve had license IPs to help keep the CAC down, so we could go after Fast and Furious fans versus Marvel fans. Almost every game had its own community manager as well, because at that point, we realized what that fan cared about was probably different than what a first person shooter fan cared about. That’s certainly something that we do have, and because we have less games, we only end up launching two to four a year before we exited, it’s very, very minimal in that way. If you are a larger portfolio, then you have to think about centralizing and think about the community a little bit different. But we certainly would have individual, every game would have had somebody that would help the community. They would either be called a live operations person that would do some community stuff, feedback what’s happening, and they would cross with our customer service department, in many ways, which we call player experience. Ours was a little bit different in that way,

Holly Liu [29:47] – but as we got just fewer shots on goal, it was very, very focused. Each one was an independent studio in many ways.

Patrick Moberg [29:53] – A big question we’re asking with every new pitch that comes now is like, “Would you be excited to work on this for five years?” You have to sort of think about them now as these sort of projects that will–

Holly Liu [30:04] – That’s right. Long-term franchises is what we used to talk about. It’s like we’re building franchises and really I don’t know if your monetization model is very similar. Ours is what we call free to play. The user can download it for free, and if there’s something like maybe they want to buy a sword, or they want to do something maybe faster, they will pay money. Our end users are actually our customers. One of the things we’d always liken ourselves to a lot more is A, games as a service, and B, very much like TV shows. Movies versus TV. If you think about console games or premium-based games, they have to think of the whole thing, and then they market it, because the way they monetize as a player, you pay them the money upfront, and then that’s about it. Even for those that don’t know this, but any gamer would know this, is like if you buy a disc, like a Xbox disc from the store, once you open it you cannot return it. It’s just like movies. Once you go to the movies and you didn’t like that movie, too bad, they’re not going to give your money back, right? But with TV it’s very different. You think about content episodes. You think about audience, you think about earning it, you think about it as a service in some ways. If you actually see kind of the, it was really interesting, we had pulled some graph from The Simpsons and their viewership, and you just see this long tail of retention over time. It’s very different than movies. You see Star Wars, and it’s a peak, and then it goes down, and you have to wait

Holly Liu [31:39] – for the next Star Wars movies, and it’s time over time. But we’re thinking about long-term TV franchises. Keeping our players around day after day, week after week, is something that we thought about a lot, and it had to do a lot with how we monetized.

Craig Cannon [31:54] – Are there different learnings that you guys see indie game developers take? All this stuff is just big, massive scale. $5 million budget minimum. That’s insane. How do indie developers handle this, because that’s still a pretty big community, right?

Patrick Moberg [32:12] – On the PC, console side, or more PC Steam, it’s like they are starting to develop in the open. Something like Minecraft was in development, but people could basically buy it before it was done, but they were opting into this sort of this tolerance for bugs and sort of weird behavior in the game. Because they were excited to be sort of along for that ride of the development. You see that a lot with smaller studios, like five to 10 people, sort of pre-selling the game almost, before it’s ready. That helps them bug test it for a profit, and then just also building that community that’s going to be their champions when they do launch.

Holly Liu [32:51] – You see some actually startups that support individual game developers. There’s this one called Fig, which is like Kickstarter for indie game developers. It was started by the Double Fine guys. Usually I find, whenever I think such an amazing core to indie is the passion and the craft that they put in there. That does not get overlooked when they’re building a game. The idea that they can build a rabid fan base from the get-go from the indie world is something that’s super special. I do think that they leverage their reputation from someplace. They worked on this game, and these followers tend to follow them. That works very well for premium games, I guess you’d say. Free to play, it’s still kind of working out its kinks, but it’s starting that culture. When you kind of see how the games have developed on mobile, there’s just such high quality now. Supercell kicked it up a notch. All of these things that I think the quality that usually comes out of indie studios can match that in many, many ways. I do think that there is, it’s just such a tough environment. I will be honest about that. It’s a tough, tough business environment out there, but with places like Steam, Humble Bundle,

Holly Liu [34:11] – there’s just still people who are rabid fans of that stuff.

Craig Cannon [34:15] – Right, but so on the acquisitions side, they kind of have to employ different tactics, because they can’t keep up with you guys.

Holly Liu [34:21] – Well yeah, but I also think nowadays, it’s not even smart. Even if you have big budgets, I wouldn’t spend it all on customer acquisition. You’re just not going to get bang for your buck. You’ll also find folks like us that went after the Marvel fans, so we have to go individual. Like start focusing on that community and building that community. Places like Fig are a great way to start building that. Like how Kickstarter does that, right? Is building your fan base, and then getting it into social media. Influencers have become very powerful. There’s been other game companies that obviously have dabbled in, even ourselves, commercials, which do help. I wouldn’t recommend that for indie.

Craig Cannon [35:00] – Billboards?

Holly Liu [35:01] – All I’m saying–

Craig Cannon [35:02] – Sky writing?

Holly Liu [35:03] – All I’m saying is you just see because of the pressures of just straight, paid acquisition, is the pressures are so high on there. That’s when you see things move more towards organic, because you’re always trying to reduce the cost of customer acquisition. Either raise your LTV or lower your CAC. One of the two of those.

Patrick Moberg [35:23] – Platforms can also be helpful there.

Holly Liu [35:24] – Oh, that’s right. That’s a great point.

Patrick Moberg [35:26] – Apple’s doing a great job now at sort of showcasing those indie developers. Both their games, but also the individuals behind them. They’re doing profiles of really small developers, and sort of, I think, the work they’re doing well.

Holly Liu [35:38] – That’s a really good point. Yeah, Apple’s done a great job supporting indie developers.

Craig Cannon [35:43] – How has Twitch affected game development? Or has it affected it at all? Are there certain games that are just more fun to watch someone stream, and therefore that’s a growth strategy? Or is it just kind of, it’s a popular game, a lot of people stream it, that’s whatever?

Patrick Moberg [35:57] – Games that have emergent behavior, so something like Minecraft where it’s almost like the random chaos of things happening creates this narrative that’s almost like, fun to watch, creates a longer term sales cycle for a game. It’s less spikey sort of like the movies, and then it is sort of starting to almost grow over time if you do have a game like that, that is really fun to watch.

Holly Liu [36:19] – I’ll be honest. I don’t think I’ve found a mobile game yet that has been interesting enough to stream. It’s always been reversed, I feel like. Things on Steam, or Activision Blizzard, or Overwatch, all these other things have all been downloadable, big, mass, MML, massively multiplayer environments. I just haven’t seen that. I definitely know that people are trying to crack this. Vainglory, they’re trying to basically make a game on mobile that’s for eSports, and I think the first hurdle you have to, have to jump over is, is it a successful mobile game? I just haven’t seen that yet. There might be some interesting stuff. They’re streaming more, I don’t know. You guys might know more. Streaming more stuff about Clash.

Holly Liu [37:10] – As well as the battle card game that they have.

Patrick Moberg [37:15] – Hearthstone, yeah.

Holly Liu [37:15] – Hearthstone. Those are probably closer. Actually, Hearthstone is probably–

Patrick Moberg [37:21] – Yeah.

Holly Liu [37:22] – But first, it was I feel like, first it was a successful mobile game.

Patrick Moberg [37:24] – Yeah.

Holly Liu [37:25] – And then it got streamed, versus the other way around where it’s yet to be seen, but it’s not to say that it can’t happen that hey, it’s not that successful on mobile yet, but the streaming has caused it to be successful.

Patrick Moberg [37:35] – That was the hook, right.

Holly Liu [37:37] – This might be happening with PUBG. PUBG is super successful as a game, as well as really friendly to watch. It’s an exciting, interesting thing you do want to watch. This might be one of those, a great example where it’s, because it’s a great eSports game, a good game, great to watch, and pushes it over to this side. That might be one.

Patrick Moberg [38:01] – Supercell is a good example. They are somebody who does kill a lot of projects. Famously, sort of. It’s because they have such a high bar to meet. It’s interesting to see now, I think with one of their games that they’re sort of in test markets with, it’s called Brawl Stars, and you see them trying to make that into this eSport before it’s even readily available everywhere. It’s because they are trying to hit this sort of insanely high bar, so they’re trying to make sure that that can supersede everything that they’ve done before.

Craig Cannon [38:33] – That makes sense.

Patrick Moberg [38:35] – They’re trying to employ that tactic really early on, yeah.

Holly Liu [38:37] – What other things do you see happening in the future? People have talked about collectibles, crypto-related stuff, like VR. In the nearer term, games in development right now, where do you see things getting traction? I still think eSports. eSports has so many eyeballs. I think more and more are just, I think that’s just going to be a natural like, oh, this needs to be a great game that’s viewable. Not only a great game, but also viewable. VR’s kind of interesting because it’s like, I’ve always felt like it has a lot of capital. A lot of buzz around it, but not enough traction. There’s a little bit around that with AR, with some people that have done the glasses. It’s just lots of money, lots of cash, lots of buzz, but not enough traction. I do feel like for VR, for it to hit right now,

Holly Liu [39:31] – it’s just everything’s not accessible. It still could be more accessible. I do think that AR will be kind of like this jump into it. Pokemon Go did a really nice job of introducing AR. I do think even Apple and Google are all supporting that platform, so I can see it a bit more, especially as you see successful games from a business perspective, as well as people loving it go on there. I could see that one in the nearer term. Blockchain games.

Craig Cannon [40:01] – Yeah, of course.

Holly Liu [40:02] – I think that blockchain games are a little bit currently suffering from the VR type world. There’s a lot of heat. There’s a lot of excitement around it, and you can make some great cash like CryptoKitties, but I think they only drove 100,000 downloads on MetaMask, and that’s what you need in order to get on the block. There’s just so many things. It’s almost like back in the day with the internet. You needed your modem, you needed somebody to not be on the phone, do not call. You needed a special line. Everything had to get setup just right. However, I do think with crypto, there’s so much buzz around it. There’s also a lot of capital. It might be a short, because it’s mainly software to make those things accessible to kind of like, get on it, might actually be a lot easier, in my mind. If you’re just talking about the UX, and the accessibility, and then therefore that encourages more people to be able to play it.

Holly Liu [40:57] – More players, and more developers developing on there, and playing the game.

Craig Cannon [41:03] – At the end of the day you still have to make a good game, right?

Holly Liu [41:05] – That’s right.

Craig Cannon [41:06] – Most people don’t care about how the internet ends up on my iPhone, let alone how my iPhone works.

Holly Liu [41:11] – But if nobody can even understand how to play your game–

Craig Cannon [41:14] – Exactly.

Holly Liu [41:15] – Get to that point, then nobody knows. And even I think the ones on there right now are very interesting. They’re like the first games, I’ll be honest, that we saw on Facebook. CryptoKitties, CryptoCelebs. I was like, “Oh yeah, we have that game Friends for sale,” and now we’re just selling celebrities, and it’s just a very simple mechanic. And you’ll probably see that early on, and then I definitely know, I’m sure there’s game developers working on something that’s much more in-depth than what can the blockchain be used for? That technology, I think it’s interesting. It’s always in my world, gaming. Gaming definitely pushes those types of technologies forward, or at least tests those boundaries of how far can it go? I’m always encouraging. I think in the blockchain world, and with crypto, what better people to really explore this than people who know how to create virtual worlds? They’re okay with virtual economies. I remember at one point, one of my co-founders said this about our CEO because he loves playing games. He was like, yeah, he was spending real money to buy this fake currency. I was like, “Yeah, that’s just like crypto.”

Holly Liu [42:19] – It’s not fake, but it’s virtual currency because you’re giving an experience. This is why gaming’s considered entertainment. You’re paying for entertainment. Those are my long two cents. Make that 20 cents.

Patrick Moberg [42:31] – I heard another pitch recently about back to the idea that once you buy a game you can’t really resell it, but with something like blockchain, maybe there is opportunities to transfer ownership of either goods, or titles. There could be interesting applications like that, but I totally agree. If a player has to understand how that system works, it’s going to be difficult to sell. If it does become sort of this invisible, underlying thing, maybe.

Holly Liu [42:57] – Yeah, it’s very confusing right now. Very confusing. When you get on a blockchain, you’re just like, what? There’s three networks, and your public key, private key, seed, oh yeah.

Craig Cannon [43:06] – Especially with something like MetaMask where you’re like, “Oh this is great if you have someone over your shoulder saying like, okay no, don’t do that. This is how it works.” That’s why I was telling, I’m just going to send someone $1,000 right now and say–

Patrick Moberg [43:16] – Yeah, exactly! I just sent something the wrong thing!

Holly Liu [43:20] – Let’s get some of the Twitter questions out of the way. David Trudeau had a question for you, Patrick. What kind of role did psychology play in making all the Dots games so addictive?

Patrick Moberg [43:32] – It definitely wasn’t a design to be addictive, but I think the methodology with which it was developed facilitated that. Basically what I would do is sit down every day and think about what I wanted to change or add to the game. Once I found myself more fascinated by playing it than the meta game of making games, I knew there was something working there. I just found myself, “Oh wow, I just spent 10 minutes playing the prototype. I should be working.” It was like that sign that the thing was working, and maybe you didn’t really have to add much more. Then I kind of stripped stuff out and just made that core experience shine, and then all the games we’ve put out so far have been built on that sort of core functionality.

Patrick Moberg [44:15] – That’s what’s been foundational for the type of games we put out so far.

Craig Cannon [44:22] – Same for you, Holly? Basically, you try it until you find a mechanism that’s addictive, and then you just keep it?

Holly Liu [44:28] – Yeah, well I think a little bit, it’s with casual games, there’s a little bit of great time for iteration. For us, our game loops have to be a little bit more fleshed out, and like I said, we have to stick it out for 90 days, at least, to see what the day 90 retention is like. Because I feel like Dots, what’s so great is you have this core mechanic that you could play over and over again, and then you might just change a couple of things, but for us, the core mechanic, it does get a little bit iterated on, and definitely in beta, we would probably kind of change it, but there’s definitely less iteration. A lot more discussion, discussion, and then throw it out there. I wish there was a way to be able to do it, but there’s so many things that happen in a midcore game that trigger all these other things that’s very hard to test just one piece of it without the full context of the game. To say like, “Okay, is this thing compelling? Because it could actually be something else.” In reality, we actually build three or four loops of just that that’s it is, it is what it is. One of the things we do try to do on de-risking,

Holly Liu [45:37] – I will say this, is like, we definitely talked, we had focus groups, we had a whole team called consumer insights, and he would inform, well his team would inform things like, not just genres, but even things like some features in the game. Trying to collect that kind of stuff early on, but this is where it became, well, we’d like to say it became much more closer to premium cable television. It was like Game of Thrones, where it’s just this high production, but on TV, but you have to think about where does the character development go? You can’t just kind of throw it out, or it can’t be like a soap opera where all of a sudden the twin is dead, but they actually came back alive. It just can’t be that way, where you know… It has to just have a lot more, so this is why we started moving a lot of our game designer stuff. Some of them had 10 years of experience on just racing alone.

Holly Liu [46:34] – To make our Fast and Furious game, and that’s kind of what was needed. It just got much more specialized.

Craig Cannon [46:39] – Cool. Another Twitter question. Hexel asked, how can you predict what will be a successful game? We kind of talked about that. The second part of their question is, how do you come up with game ideas?

Holly Liu [46:52] – Interesting to hear from Patrick on this one.

Patrick Moberg [46:54] – I don’t know. There’s a bunch of different ways to do it. I think for Dots, it was definitely driven by what I wanted it to look like. The sort of gameplay fell out of that. It was like, “Okay, I want this grid to look this sort of way, and decided what naturally did I then want to do?” Actually to the former question, it’s the psychology of just connecting dots is something kind of ingrained in us as kids, or humans, I don’t know. Just that simple act is really easy to pick up. And then, so if you think of it, concentric rings, if that’s the thing you’re doing every second, then what are you doing every 10 seconds, or minute, or week, or month? And then creating features that accommodate for those different time scales. I know the Nintendo preaches taking hobbies and turning those into games. Things that people naturally want to do, and sort of gamifying those. At Dots, we’re really heavily driven by the aesthetic inspiration that we find.

Holly Liu [47:57] – I think ours was driven a bit more by consumer insights. Yeah, ours was very purposeful, and things had to be super strategic. It was a little bit harder. We had to ask our people that we’re hiring, like same thing, you’re going to be on this genre. It’s going to be hard to swap genres once you’re on here. You need to really love racing games. You really need to love RPG. Do you love Marvel? Marvel’s been around for a couple years, and even some of our older games, there’s still people playing it today, even the ones on Facebook.

Craig Cannon [48:36] – Wow.

Holly Liu [48:37] – That’s just how.

Craig Cannon [48:38] – When someone’s just getting into the gaming industry, or if they were to get into it right now, what do you advise them? Start your own company? Start your own game and apply–

Holly Liu [48:46] – No, no!

Craig Cannon [48:47] – Okay.

Holly Liu [48:48] – No, not start your own company. Well I guess, if you want the revenue, like if you have means. Because the thing with gaming is it can be lucrative to where you can bootstrap it, right? Anything that can generate revenue pretty quickly, I guess you would say, if you have the means, go ahead and bootstrap it. It’s probably going to be the best way you’re going to learn is to actually just do it. But I do think if you’re kind of cash constrained, it really depends on what area you want to get into gaming. If you want to be a game designer, it’s great to go work at a gaming studio. That’s always really good. If you are a student, and you don’t have that means yet, and you can’t intern, or whatnot, I think it’s great to just even try to start designing your own game because you’ll learn so much about it. There’s all these fun things you could do old school. Starting to paper prototype some things if you even wanted to. I do think trying to get into a gaming studio is really good.

Holly Liu [49:49] – I feel like it’s still very apprenticeship– In many ways. It just takes such a long time.

Patrick Moberg [49:54] – Yeah. If you are sort of, you find yourself in a vacuum and not sure where to start, tools like Unity are really accessible to sort of, the access to a game engine is now accessible to most people. Also modifying games has become more of a sort of cultural thing. On Steam, there’s a big sub-genre of modifications to games. Games that are designed to be modified, and sort of have a game designer just add new rule sets to the games. That’s a good way that’s relatively low cost, or low barrier to entry. Paper prototypes, for sure. Having work that you can show at least that you’ve started, and got over the initial hump of just trying something yourself, goes a long way.

Craig Cannon [50:43] – In other words, differentiate someone, because you guys have both interviewed people for these kinds of jobs. If they showed that they had made something, or forked something in a cool way.

Holly Liu [50:53] – Oh yeah, for sure. Definitely, engineer, game design of some sorts.

Craig Cannon [50:58] – Let’s assume that someone is crazy enough to start their own game. Their own studio, or whatever. What are the biggest mistakes you guys have made that you would advise them to avoid?

Holly Liu [51:08] – Raise enough money not just for one game, but two or three, because you’re never, like your first one, likely it will not be a hit.

Craig Cannon [51:15] – What’s a ballpark number?

Holly Liu [51:17] – Well, we already know it’s like, what? Well it depends. Are you on mobile? I guess if you go on PC it’s probably cheaper for customer acquisition costs. I don’t know. Something like Roblox has been really interesting in terms of opening up a development platform for kids, and also being able to push other users to it. They’ve been doing some pretty crazy stuff on that.

Patrick Moberg [51:47] – The not mistake, but the challenge we’re facing now is super common. I think you’ve described what we’re facing. It’s that we… People want to be working on different stuff.

Holly Liu [52:01] – Oh, that’s really hard.

Patrick Moberg [52:02] – The business side is all about de-riskifying, and I think creativity–

Holly Liu [52:06] – Riskifying, I like that word.

Patrick Moberg [52:08] – Creativity inherently, is about creating risk, and so it’s the dichotomy of those two things. If it’s not balanced right, it just causes–

Holly Liu [52:14] – At one time , at one time we had a hack-a-thon, but it was only things that you could do on the game. It’s kind of like, what’s usually a hack-a-thon is something more open, and I’m sure people craved more. Even I would’ve like, ooh, I don’t know guys. I mean they still like, hacked, and some people wanted to try all these things. They’re like, I’ve been wanting to fix this thing. It’s been broken. But usually people didn’t. We’ve tried to do things like open submissions of game ideas, but we had… The thing is, is we needed to give people a business case, and some people didn’t have enough business case. At the end of the day, we had set up some types of submission. It was only three people that really did end up submitting, right? This is like, we’re already a couple hundred people already, so we’re like, hmm. Do you really want to? They say this, but do they really want it? And then the other thing, what we could’ve done, and which I think would’ve been much more streamlined, is if like, at one point there was someone who really pushed for a particular theme-type game. It should have went through consumer insights

Holly Liu [53:20] – because it was super clear that that type of theme did not work with that type of genre. Yeah, that was something we really cared a lot about, which also for IP, this might be a side tidbit, but IP, we cared a lot about would it fit one of the genres that we’ve done? For example, Star Wars. We had conversations with them early on, but all we had was a strategy engine. Does it make sense? Later, we had a different… We’re like, okay, this probably makes sense, or The Hobbit, or something like that. The Hobbit, does it make sense? We only have this type of engine. Would it make sense to put racing on with Hobbit?

Craig Cannon [54:02] – Hobbit racing. Yeah, maybe not. Alright, my last question. What’s your favorite game that you have not made?

Holly Liu [54:11] – Not made? I love Candy Crush. I really do love Candy Crush.

Craig Cannon [54:15] – The classics.

Holly Liu [54:16] – I love that one. I was like, this is brilliant, because I loved Bejeweled. Obviously Dots, I love Dots too. But I really, Candy Crush, I’ve spent a lot of time on there. I’ve spent…

Patrick Moberg [54:32] – Threes? That game. It’s just head to toe, really impressive. An interesting story, if you know the ins and outs of what happened, that they basically got cloned, and 2048 became this ubiquitous version of their game, basically.

Craig Cannon [54:49] – Really?

Patrick Moberg [54:50] – Yeah, which is this really tragic story of really amazing product that cost $3, but the market wasn’t willing to pay for that, so the free version just became this thing that a small studio sort of like, I don’t know. Launched basically, with this clone.

Craig Cannon [55:11] – I forgot to ask you. How do you deal with clones?

Patrick Moberg [55:14] – We have, there’s a lawyer that–

Craig Cannon [55:16] – Ooh! People still fork it and put dots in the title. Crazy Dots, Wacky Dots, whatever.

Patrick Moberg [55:23] – There are also Candy Dots 2048. This string of these key phrases that are just so transparently trying to, I don’t know.

Holly Liu [55:33] – Yeah, it must be harder I think, in casual world. It’s much easier to clone.

Patrick Moberg [55:37] – Also, Dots attracts people that are like, that looks so simple. I could do that, and they do it.

Holly Liu [55:42] – That’s true. It’s much harder underneath.

Craig Cannon [55:46] – Alright, well thanks for coming in, guys.

Holly Liu [55:48] – Thank you.

Patrick Moberg [55:49] – Thanks Craig.

Craig Cannon [55:50] – Alright, thanks for listening. As always, you can find the transcript and video at blog.ycombinator.com. If you have a second, it would be awesome to give us a rating and review wherever you find your podcasts. See you next time.