So you inherently need to think from day 1 How's the behavior Morgan new product incentivizing social behavior or, you know, group behavior? And that's just a loop that keeps on giving. It's not something that we build a product, and then the team said something, okay, how can we make it social? That rarely works. It needs to be from day 1 particle for selling points. Gabby, we've known each other now for a decade. That sounds crazy to say.
I was an investor in player in early on, the company that you founded with the 3 additional founders, one of the brother. We eventually sold the 4 more than $500,000,000 to aristocrat. And, you know, we do these days these posts about why we invest in companies And, you know, thinking about this session, I thought about why did I invest in Plarium? And we usually have, like, 3 reasons, like, you know, number 1 because of the network effect and number 2 and so on.
And when I thought about Clarium, the funny thing that came to my mind is that why did I invest in Clarium? I invested because of three things. It was team, team, and team. Because on paper, there was so many reasons not to invest, but then there was the team, the team, and the team that made me invest. And I happy that I did because I got to meet you guys and be friends and join this amazing journey.
You're an amazing game founder that I wanna talk about today which means that you are have the rare combination of innovation, fast iteration, and quality that game companies require.
And the reason why I want to talk to Pete today is because I want to share this with all other founders because I think one of the biggest secret is that the things that make game companies successful can actually make any company And this is something that we've been saying for a while now, and I think that lots of founders could really benefit from understanding what makes game companies succeed. So welcome, Gabby. Katie, thanks for having me on the podcast, and lots of fun.
And so the first thing I want to talk about is Pete. And, you know, when we talk about speed, we talk about ultra fast iterations. Right? This is the kind of psychology that we keep lecturing on, and it carries a lot of magic, and it turns the company into something else, but the games industry in general is faster than any other industry. It's like crazily fast which crazy fast iteration. A lot of us, because we have so much data.
But, like, what did it take you to build your first game when you started? Yeah. It was a great story. Think because we knew exactly what we were building, we Pete a product out there in a month. It was, I don't know, 30 days, maybe a little less. And the idea was to put something out there, so it would be first movers and to iterate as we go along. Right? And we knew that this is something that was required of every game's company at the time.
And the idea was to just get out there and start doing business. Anything that that was a very good move for us. What was that first game? It was a social poker game on the game. So it was a hugely fast growing social network in and it was a big opportunity to be one of the first developers on that platform. So we kinda seized that opportunity, and we knew that first thing that we're gonna do, it needs to be something that kinda proven. It works.
That's why it was poker, and that's why in 1 month. And what do you think you did faster than anybody else at the time? Because I know that you guys James. So that the largest developer on that platform, and really, in a matter of months, what made you so fast at the time? We felt that the market was about to explode, and it's 10, 12 years since it's still exploding. So I think what drove us is that we felt we had to seize the moment, seize the opportunity.
Just to give you an example, Gigi, back then a user to cost a cent to acquire. I mean, all the viral. Right? A bit different from today. Right? Right. So we thought it was crazy. So we thought, okay. As much as content, we can get out there, as many games at that stage, then we'll just get a big chunk of loyal Beller race. That was driving our passion to kinda be super fast. And quality was always very important for us. So we never really sacrificed quality.
So I could probably say it was a top poker up at that time. And even a couple years ahead. So we Beller we we did both. And so this is really an interesting topic because at the end of the day, I think many founders are always feeling that they need to sacrifice 1 of the 2. And you've got, like, you know, one approach is move fast and break things and come out with maybe poor quality, but it takes you're moving very fast. And another approaches.
Let's build something pixel perfect and put it out. Only when it's really, really, really amazing. Before that, I don't wanna put it out. It's my baby. I want it to be perfect. How did you strike the balance? How did you balance between, you know, just continuing to polish the game forever, which is what some game companies, you know, tend to do sometimes and actually move fast as fast as you did. How do you managed to find the balance. And what do you think other founders can learn from that?
I think what I learned throughout the history of coloring, I would say, is this, right, you have to do a few things very well. So a few things you need to have very high quality. Right? And where founders kinda make the mistake is that they say, okay, I need to do everything great and everything needs to be polished. And only then I'm gonna go to the Morgan, and that's not necessarily true because you don't necessarily need huge step from day 1. You need that core product, the core, whatever.
If it's a game, if it's a feature, whatever it is, the core needs to be strong. Needs to be published, and then you can iterate. So the idea is to get the core out very quickly to start testing. And then once you feel super confident about that, but then you can build on top. There's no point in investing in something a user's gonna experience only in month 8, right, when you can test at the beginning. So that's the idea. So that's how you do call quality, basically.
Focus on less quality, do it fast, and then build. Okay. So the framework that I'm hearing here is that basic the best thing is to start from a very small part of the James, maybe not the full thing that you need to build over time, but make that high Currier the equivalent for other founders would be start with the core of your app or the core of your product. Make this core really Beller. Build it really perfectly. Put it out as fast as you can.
And then when you see it works, start expanding into more content or more features or more additional thing that you need around the court. And one of the best recent examples of this was on Morgan. And what they did is they even put out the first version without monetization, without even payments. Right? Yep. And they put up an amazing game without payments. If you look at the games today, of course, it skyrocketed in the monetization, but the engagement was there day 1.
So how do you decide what's the core? So each product is different. Right? If it's the battle itself, right, if it's the core loop, it's a battle, and then if it's depending on what genre you are. Right? So eventually, there's 1 or 2 things that your users come back to your game every day. Yep. If that's not everything else around it. It's not really worth much. Right? So that's the way you need to look at it.
So if it's the core battle, if it's the core shooter mechanics, I don't know if it's the art style that you wanna test. You don't need to build 1000 characters. Right? You need to build 10, 12. If that fits, that works. People love that. You can stand the content. So that's the way we work with.
And so, you know, at the end of the period, when, just before, leaving Playa, the company was already thousands of Pete, with games making, you know, 100 of 1,000,000, close to a $1,000,000,000 in revenue. How do you maintain that in a larger company? How did you manage to maintain that speed? Did did you manage to in kind of working on a fast core and then growing from that. That's a very good question.
I think the way we did it, and I think in games, it's a little bit easier than in other industries is with very dedicated teams per game, right, per direction. When you break things up, that makes things move much quicker because you're not as dependent. Each team is not waiting for the other team. Right?
So so they can, in their own pace, quickly, build out game content, live ops, you kind of break it down to pieces and manage each process, each studio on its own, and it gives you a lot of flexibility and speed. Right? You're not waiting for the headquarter organization to approve every little thing, and you create this little bottleneck as possible. The way you grow big is you stay small and the whole combination of the group is big, right?
But you keep the dedicated product teams small and quick. You just add one more thing. I think with that, the incentive structure is also Morgan. Everybody also needs to feel that whatever they're building, they have a big upset in what they're building. You don't want to make organization Beller something amazing and feel like it's not aligned with what you're building.
We'll get back to the culture of a large organization, but I think one of the thing that really was always amazing in Claring was that our managers, the people that were working for the company all across the world, and, you know, we had many sites around the world. All of them seems to be as addicted to speed and to getting quick to market as the founders. And I've always found that, phenomenal because many James, the founders won that, but the rest of the team is just not that.
And so I'm kinda wondering, what did you do that allowed you to get everybody addicted on speed the way usually just the founders are. What was the secret for that? The secret for that was we very clearly told every studio what is their Morgan? What is their market opportunity? What are they going after? Right? And that gave them a lot of motivation to go and build better products that has 2 products. And I think that's very clear. Right?
They need to know exactly who they're going is, what they can do better, how they can do better, and where the market stands. That continues chase against the market and getting better, especially in games where you see innovation on a weekly basis. If you have the feedback loop with the team all the time, and they see what they're doing, but they also see what the market is and where they're heading. That motivates them even more prove themselves and to continuously improve.
And, inherently, that definitely adds speed. And then were there anything in the weekly processes or in the way you work with them on an ongoing basis that continued reminding them how fast they need to be because many of them came from other industry. They were not necessarily game people, and all of them got gonna educated to be game people and to move really fast. Did you find any processes that helped you basically get them to be like that? Of course, we're a very data driven company.
Data is keen to being fast because without data, you cannot really move fast. You don't know where to move. So one thing you need to have the layer of data analytics all of I don't think you need to have very clear KPIs. And what are you trying to improve? Right? Is it day 1? Is it day 3? Is it session time? Is it engagement per day? As we dug into our game, more KPIs we had, we could create shorter term goals much quicker and kind of follow-up on that.
But more granular there, the more shorter term because if you're optimizing towards the 30 retention, there's probably 100 factors in between that could be optimized to improve between day 1 and day 30. Morgan granular we got, the more we were able to drive the team to kinda improve all those KPIs. If it's payment retention session time, return to deposit, whatever the KPI was. Right? So it's a combination of being data driven and kinda hungry to improve every single data point that we collect.
So that's super interesting. So what I'm basically hearing is that the framework is to take the big OKRs, the big goals, break them into smaller trouble KPIs that are much quicker and then assign them to people and measure them on them and basically use them as a language so that you basically are encouraging speed through the data. And then it's very objective also. Right? It's very objective that number is moving or not. How quickly we can do that.
And what were your framework and hiring people. At the end of the day, you know, I keep thinking that game companies have very unique talent. How did you know beforehand which people could or couldn't become this, you know, data, addicted, very fast moving, very iterative people before recruiting them. What was the frameworks around that? I think we had a very particular culture Larry. We looked at certain things across all the studios.
Across all the headquarters, it was hunger, hunger to succeed. Honestly, we look less at experience, because this is something that we just didn't have in the locations that we're at. We look more for ability to learn, and we also facilitate it. Right? So if he was learning English, if he was switching from web to unity, if he was just learning how to work with data, All of this is something that was super important for us internally at Claring, and we had courses for each one of them.
We had internal courses with our teachers that we kind of pushed people to do that. So people that succeeded the most at Clarium, I would say not just the most talented people, but there were the people that could learn workers. And we had an organization where we kind of gave benefit to people that were fast learners. It wasn't political. Right. It was about can you perform? Can you grow? And one of the best examples of that with a guy in one of our studios, which was growing Beller.
And within three years, he became an athlete on one of our biggest games. Because it was good. Because it was good. Right? That cannot happen in any organization, right, politically or whatever. But in our organization, we felt that people that were going up fast, we gave them the opportunity. It's scary, but this is what it takes to kind of foster that innovation in data mentality. Completely agree.
And, you know, one thing that jumps to my mind is that you use the word that I don't often use, but I often think about, which is hunger when I think about founders. Right? So when I look at founders I wanna invest in, the word hunger comes to mind. And, you know, maybe I'm not using it because it could have some negative context in people's minds, but it's actually a 1. And for me, the biggest question is how do you identify hunger?
How do you basically manage to interview somebody and see what's the framework for identifying somebody is hungry or not hungry? That's very good question. So for us, it was one of a huge interview questions where we looked at did the person look at his Currier? Right. What was important for him in his career? Was it important for him to just get titles, or it was important for him to learn at the job? It's, okay, where do you wanna be in 3 years professionally? Right?
And if we felt that person was really professionally, you wanted to level up we Beller that was the right person. If the guy would says, look, I'm reading a lot. I'm always following the market. I'm always learning new technologies All of that were indicators of a person that wanted to come in, contribute, and learn at the job. And a lot of people that came to Plarium, I think, they hired them because they were super excited about products that we're building.
And that drove a lot of the drive hunger to succeed to show that they can compete with the big publishers in the west and in the east. I actually remember in the time, when I was at the board of the company that we used speak about senior people that wanted to join the company, and you guys would look at them and say, they're too senior. They're not gonna be hungry. They're not gonna do everything.
They're not gonna, you know, they're not gonna be committed as the kind of people that we recruit, and that strategy worked really well. And I think that in many cases, this is, a balance that founders went to strike between getting people that have experience. And maybe they've done this before because it's a shortcut on one hand, but then getting people with the right DNA the DNA of hunger, the DNA of wanting to learn, the DNA of wanting to improve.
And what we always tell founders and, and, you know, I'm interested if you think the same is that we'll always prefer attitude skill. We always would prefer somebody that comes with the right attitude than somebody that just comes with the right skills, even if the skills are better because the person with the right attitude learn much faster and actually end up performing much better than the person that comes with the skills, but they won't get it to you. Do you feel the same?
Yeah. Definitely. I think in today's world where education is democratized, and you can learn so much, you know, within the company online, from peers, everything's so open and transparent. So attitude is number 1 attribute. And then the skill because the gap could be caught up very quickly. What do you see in your company's degree? What do you see in terms of, like, hiring?
Yeah. I think one other thing we're trying to do always is we're trying to teach founders to take the leap of faith and prefer attitude to skill. And it's not an easy one because many James, at the end of the day, you wanna recruit somebody and you wanted them to tick all the boxes. And, you know, they need 5 years experience in this and 3 years experience in that.
But if they don't with their ID and A, there are gonna be a liability on the company, and they're gonna end up slowing the company down and eventually leaving. And then not only are you not gonna enjoy their skills, but you're also gonna leave cars that are gonna hurt the organization. And so we're constantly telling founders that, you know, we really need to 1st and foremost test people for attitude, for their ID and it's not even the same people for the same company.
The companies are different. So if you need different DNAs for different companies, but when you find the person that does the right DNA, getting them to the right skill set is much easier than the other way around. People hardly ever change attitude and very often can learn new skills. On that topic, one of the things that was also very impressive in Claring was fact that player kept growing talent from within.
I think that, you know, over the years, we've had some senior managers that moved on, and there were always managers from within that could grow to the role. And I think that part of it is the culture of constant learning and constant improvement and teaching everybody in the company, in the inside. How did you guys do that? What was the principle behind it? Because I think that was one of the key success factors of the company. Yeah. It was not necessarily a choice.
It was something that we had to do because I'm not sure if we could have survived if we didn't write when we started out again, we didn't have huge talent pool to, like, hire from the best game published companies. Eventually, we sat down and we said, okay.
If we want to be big, if we want to be at scale with, to develop talent, and how do we develop talent, right, from teaching them to language skills, to programming skills, to data skills, to, you know, running, I would call it, mini universities within Telarium, but with two core of twenty Pete, we said, okay. It's a 6 months course. Whoever's gonna do great, 3 of you is gonna stay in the company. Right?
So within a lot of hacking, and that brought us a lot of super talented Pete, which were humble, which wanted to succeed, and that were very loyal. Awesome. Yeah. That was very clear in the company. Our HRs still are doing amazing job at developing talent. It's a muscle that we had to acquire, but I think it was one of our biggest strengths And this is something it's a long term investment. Right?
It's always a long term investment, but the sooner you make that investment, right, the sooner you plan the seeds, the more upside you're gonna see. It's something that some companies delay. They think about it. Let me think about it. That's a work like this. If it's a good idea to start, good. The worst thing is gonna happen. You'll scratch it. You'll find talents somewhere else. Right? So you have to take risks. You have to take the risks like it.
I think there's one of few things that we did in the company that worked out very well. Yeah. And I totally agree. I think that always investing in getting your internal talent to constantly learn and constantly advance. We'll pay back dividends. You know, when do you need people to do more than what they're doing today, when you need to promote Pete, the best companies now there are those where the vast majority of open positions in the managerial ones are being fulfilled by internal talent.
And these people that grew within the company, with the DNA of the company and are now taking them in area or role, they tend to be the best managers that you can bring, you know, and entering the position is gonna be so much easier for them because they come from the right DNA from the DNA of the company, and that was something super strong in platinum.
It's important to show that you're willing to promote with it because the trust comes from the, actually, you as a company showing that you believe in calendar that you have Right? And not all of a sudden, hire some super high key exec and being given opportunity to the people that were with you for 5, 7 years. Right? Do not just say you have to show it, when you do hire from outside, you need to be very sure that the person is gonna drive value.
I truly believe as long as you hire people or you even grow people as long as they're Pete feel like they're driving Beller, they're willing to take orders or whatever. They're willing to listen to anybody as long as it's driving value. And this is the kind of mentality that we had within our definitely agree to that. Let's talk for a second about pivoting. So, you know, Clarium as a games company, you know, continue doing James. So it started doing games continue doing James.
But over the period, you know, we started from a Russian social network called VK. We moved to Facebook and found a much better target audience there. And then we had to completely almost abandon that, not abandon, but move on and move to mobile. Each one of those, while not a pivot in the direction of the company, was a huge pivot in the company itself. Right? You know, it's new skills, new capabilities, new everything. How does that work?
How do think about this process that basically forces you to take the company, a successful company where everybody kinda looks at it and says it's sort of working. It's still working. It will continue working. Then as founders, knowing that if you don't move, it's not gonna be as good as it could be. How did you think about it? How did the company make the changes? I think it was our obsession with growth, not just financially, and I think we're very confident in our ability.
So when we were in VK, our thinking was, oh, we can be number 1 developer in Eastern Europe. Oh, we have to conquer Facebook to be a global player. So that was the goal. And then we said we decided we have to be a global player. We can do more. And the way we did it is we never took one bet We always felt that the team that is supporting the existing business needs to be there. So you kinda have to do it as you expand talent and expand team. It's very hard to ask the same team. You know what?
Maintain the current business and then grow into new platforms. So we understood that we had to invest in talent, so hire people. And then from Facebook to mobile. That was even harder because, technologically, that was even a bigger jump. But we were thinking is we had to do it. Otherwise, will miss out one of the biggest opportunities ever in the games industry, and it was a matter of time until, you know, social games would cap out.
So Morgan, we sat down and we decided how much we want to invest, how many people, 200 people, 300 people, and it was a matter of being patient because it didn't happen overnight took us couple of years to succeed on mobile. And even if some of our best teams didn't make it on mobile for, like, 3, 4, 5 years, So we had to take a lot of Pete. Be very patient. Take hits on Pete and L, which some companies don't love to do, but you can't have the upside if you're not gonna financially invest.
So were big believers in that. And I would even add a few more points, Gigi, that we're willing to invest always ahead of time ahead of our ability, at least. Maybe not ahead of time, but ahead of our ability saying, you know, what? We're gonna invest in Morgan capture studio because in 3, 4 years, that's gonna yield their dividends.
Not something that yield the dividends year 1, but we felt if we build capacity and capability, then down the line, we could build any game we would want and we Beller that we'll pay dividends down the line. So the thinking was very long term. It's not a short term decisions. We're lucky that we had stable revenue at that kinda Beller us make those pivots and allowed the company to do these pivots without having to raise more money, which was, I think, you know, great for the founders.
I think in this something that that jumps to my mind as I hear you speak is the principle that I always thought about you guys and maybe some other most successful game companies, which is in order to seeds, I guess, generally in startups, you need to play to win rather than not to lose, right, because you can always play to not lose can invest less money. You can do things carefully. You cannot run to a new field.
You can say, I'm not gonna invest in studio, I'm not gonna invest in the technology. But if you wanna play to win, then you really can't stop. You need to continue chasing growth at all price. You need continue taking risks even when the company theoretically in a good place. And that was one of the characteristics that worked for Plurium, and I think about it now, works for the most successful games companies. This is ongoing desire to continue playing to win. Yeah. I agree with you.
And I think we as founders pushed each other in a very good way where we said we can do more, and we can invest in the future. I'll be honest with you a lot. But so what? Nobody remembers the failures now. Now, we can look at successes that we had, you know. So we weren't afraid to fail. That's very important. We weren't afraid to spend money and maybe to lose cash that we could have pocketed or whatever because it was a profitable company. It cannot be a financial exercise.
Let's put it that way. It needs to be an exercise that you are much more obsessed about success than about potentially losing certain amount of cash flow, money. That's the way we always looked at it. So it wasn't a smooth ride, but it's definitely when I look back and Looking back, if we'd invested more, we'll probably yield bigger fruits now. Two things that James to my mind on this. The first one is that you really have to be paranoid to not miss pivoting opportunities.
There are also risks, but opportunities because you wouldn't have thought that Facebook is gonna beat VK. If you wouldn't have thought that mobile is gonna eat that up, then you would have been in behind. You guys were paranoid enough to say, you know, where is it going? Where is everything moving? And the second thing is that to really, really succeed in making such pivots, you really need to go all in. There's like, no. You can't do it halfheartedly.
You know, you need to you know, there's this famous move of Facebook from web to mobile where basically everybody that was not working on mobile was supposed to stop whatever they were doing and start working on mobile. And I think that, you know, while with Claring continued running the web James. The general understanding was that we're taking every top talent we have, and we're putting this on this new Flint, and we're basically making a hard pivot rather than a soft attempt at going at it.
Right. For sure. And I would love to hear your thoughts on this, but even the people that stayed back and worked on games that they not seems so attractive. They knew their purpose in the sense. Like, they knew that they were the ones that were creating chance for the new studios or new games to be created. Right?
So It also made sense on the organization level, but I 100% agree with you that many of these initiatives we went all in I think any big company has to reinvent itself every couple of years. No matter how big or if you're Apple, Facebook, and the best companies do This is an obsession in DNA thing. If you don't, especially in 2 days, world where the pace of innovation's gonna be left behind.
So it's the mindset of nothing is secure and you always have to out innovate yourself and even out cannibalize yourself. Right? So this is one of the things that we're never afraid of. Calculating our game or products, we would rather be in the front of that than be behind in innovation. There's always, telling founders that they're facing this issue and telling them that it's, much better to cannibalize yourself than have somebody else eat you.
Let's hope second about the social elements or the network element of our Clarium James. And I think that, you know, people call games social games, but in reality that the vast majority of them were not social, like, you were playing them against yourself more or less, and it may be inviting other people.
But one of the thing that made the player game so successful with such crazy, crazy retention, like people playing 4 or 5 years or more at the same game and continuing to spend money in it was the fact that they were really, really social. You were really playing them with other people.
And for us, you know, their network effect Pete on, this is really critical because it shows how once you created the network inside the game, it becomes so difficult to leave the James, and it brings the power of retention and the power of retained growth that network effects bring How did you really embed this into the games and, you know, how real was the need for the network inside the game and the benefits you provided the players who had many titles. So poker was inherently as a James.
Very social. Right? And there were some games that were inherently non social. But let's talk about the social ones, poker, even strategy. Right? Our strategy games, the whole idea was playing strategies is is playing with your classmates. Right? Some people call it their 2nd family, and we facilitate a lot of that. So the idea is the way we thought about it is you have to build it at the core, and this is not something you add Beller on. It used to be core design of the product of the game.
Right? In strategy, you had to team up with your Flint members up to 100 Pete. 50, 100 people. And together, you kinda had to go on different missions and the different survival tactics, and you had to build out armies together. It was the team effort. And then bonding experience kind of brought them closer to each other and to the game at the same time. Right? So what we facilitated is the game design. So we build the design of the game. In a way where we kind of pushed users to do that.
Of course, we had all the social features like chat. And on top of that, outside of the James. We also did a lot of facilitation. Like, we created a lot of tools for clients to communicate, talk to each other, you know. Some clients asked us for merge, for flags, whatever for their offline event. He was building the James, and he was also managing the community in a way and helping them bond that kind of created the game social. And drove retention long term.
What we saw is that the same game with plans would command, like, you know, double the retention quality than the game without plans because of the connection between people. And the way that you've really done it is that the game actually became much better when you played it with other Right? Like a true network effect phenomenon could achieve more. You could do more.
You could to reach new heights only by paying with your friends with people that you knew online, not your friend from home, but with people that you partnered with. Yes. You would unlock the different content, the different shops, different game mechanics that, as a single player, was not necessarily So we definitely incentivize that in the design of the game.
And, sir, if you think about non game companies, what would you recommend to non game companies when they think about the power, social in their product? What's the framework that led you to Clans and to the joint activity in the game that you think non game founders could detail can use as well. So I'll break it down to 2 things. Tools and tools, I think that's easier to create this with all of those tools. And second is a Morgan design of what you're doing. Right?
What kind of behavior do you want to incentivize? So really, you need to think, do I want them to purchase something together? Right? If Pete people purchase an item, then, you know, then then you get a discount or you get something for free. Right? So you inherently need to think from day 1, How's the behavior or the new product incentivizing social behavior or, you know, group behavior? And that's just a loop that keeps on giving.
It's not something that we build a product, and then the team said something, okay. How can we make it social? That rarely works. It needs to be from day 1, part of the core selling point. What I hear is give the tools that allow it to be social.
Plan the benefit of social into the core product at the beginning, not patch it onto it afterwards, creating incentives that would basically make the product better if you're consuming it in social and then create feedback loops that constantly make it positive feedback and give benefits as people are consuming your product in a social manner. From your experience, I wanna in the same bush into you. What do you think makes the product successful?
I think that at the end of the day, what we see is that what you can do in games easily is many times tougher to do another product. We are in effect. We're always looking for the network effect.
Basically, the place we're adding more users in benefits the entire community, and then the user gets a lot of value from that, from the fact that they're joining a pool, a network, a pool of users that are already doing something, right, making something what we call a multi player product versus a single player product, then this is something that we, you know, try to teach everybody to do early on. In some places, it is always difficult.
You know, if I all I wanna buy is, I don't know, is a cup of coffee. Maybe that's difficult to do. If I wanna basically partner with others and do something this is Currier, but I think this combination of tools, of methodology of thinking about your product, and how to make it better for a group to consume together, and then the positive feedback loop of them are artificial and some of them really embedded into the product are really the same thing that we're seeing everywhere.
So I think that game companies just have a better chance of doing because there's so much more activity. There's so much more data points, so much more ability to influence the behavior through the content and the features of the game, which is offer in ecommerce and other places, but the same things are actually applying. One more thing about game companies is that game companies really have probably the best mechanisms of converting free users into paid users.
In many other companies, we either see companies that are great at holding tons and tons and tons of free users. And then you monetize them to ads or you don't monetize them, or they basically are really, really good at just converting users to paying, but then losing all the other users. And James companies have this phenomenal balance of being able to really keep lots of free users and then over time, convert them into paying users.
What can real companies other non James companies learn from this thing? How do you basically maintain this balance between three tier and the pay tier and make it not something where you have to lose 1 of the 2 long term. I'll start with games and then we'll move on and see where we end up. I think in games, the latest trend in games is that I would say Cosmetics is huge. Games right now. What do I mean by cosmetics? Right?
So if we take a game of skill like a shooter, right, you won't necessarily wanna give advantage to a payer. Right? Yep. But you still wanna give ability to somebody that wants to feel good, show off, you know, or just do it for himself. You want to give the player the depth for him to actually spend money in your James. Right? And to feel unique, that's very important. So a lot of people, especially online, you're not seeing who you are as a personality, maybe.
So you have to give those abilities to be the type of personality online and shooters who they do it best. If it's through clothing, if it's through the guns that you have, if it were the shoes that you put. So customization is huge. I think it's a huge way of monetizing a free audience that will not necessarily pay. Right? And somebody that is playing for free doesn't necessarily feel bad because he's the gameplay, the core gameplay is exactly the same. So I think that's a very good example.
If I had to take it to non gaming, I think you need to think of things that can add on top of experience at the core experience. So if the core experience is 1, How can you make it super interesting for people that are willing to pay customizable again? Unique. And the more depth you can add the more options of monetization you can have. And you just strike that fine balance.
I think you always use a balance because you don't wanna upset free player because they're also hard on the soul of the ecosystem that you're building. On that end, you wanna incentivize people to monetize and feel great And if you look at TikTok or Facebook, I see more and more people that are consuming content on one side they're consuming. They're enjoying. They're having fun. But people that are creating content, they should be the ones that kind of monetize, right?
Yeah. I guess the incentive from that. So if a platform can think about how to help people or make money or actually monetize them by them paying them to doing extra work, customized. So that's the way I would think about it. What are you thinking? What are your thoughts where the world is headed on the content creation? So. I think that I agree that a balance that you need to create on it.
I think that one of the things that's really unique in game companies that other companies don't really do is that kind of a knob that you turn between the free and paid that in a game company, you keep turning to test the water. You keep making it, you know, more geared towards paying, less geared towards paying. It's a little bit like, I remember, I remember Facebook playing around with the frequency of ads or Google playing with how many ads you have above the organic result. Right?
Because at the end of the day, the knob of paying is like the knob of how many ads you're exposed if there's an ad every 2 posts, maybe people will churn because it's annoying. If there's an ad every 50 posts, nobody cares about the ad. Faith right now is around that. 1 out of 10 is an ad. And I think that the same thing really applies for that knob in games where we constantly play between making the game fun forever for free.
And so getting retention to be as high as possible, everybody's everybody can consume whatever they want and making the game a lot more expensive to consume. And I think that, you know, some of the games of the best games in the world are the ones that are finding a way to keep the free fun element as free as possible and then create layers of monetization on top of it that are not impacting the core fun like you said before, like Cosmetics and other areas.
And what I think we see is that in many, many companies, we don't see non game companies. We don't see founders thinking enough about this in in a way, what they're doing is that they're setting the knob somewhere. And what's happening is that they're starting to lose customers on the free, or they're not converting enough and they're not constantly playing with it. Not to mention the fact, of course, that you can play it with it very differently for different users. Right?
For some users, you can put the knob in one place another user, you could put the knob in another place in terms of conversion pressure on it. Sure. You have to play with the conversion pressure pricing point, you know, give the user optionality to pay for something that somebody else pay. Right? The more optionality you happen to monetize So sometimes Pete have one pay point, and that's it. So you can't limit your experience.
So there's no reason why not to experiment with many pain points, many different products, what do we see in gateway, which is quite amazing, is that a lot of free players are very proud that they've progressed to the same level where paid players and they're like, look, I got to this account free. Wow. It's so amazing. And this guy paid $500 to get to the same spot. So the kind of competition between free and paid if it's healthy, that's great. You never wanna skew that one way or the other.
So you see a lot of that. Yes. Definitely. One more thing unique to the game industry is this concept called LiveOps, you know, so most internet companies, they build a product, and they may have a promotion error there, but they don't really have what we call in the game industry live ops. So let's start and take a minute. Could you explain live ops? Because you guys were really pioneers in live ops in the west. It happened in the east, but you're pioneers of live ops in the west.
What is it exactly? We'll look at it live ops. It's a combination of new content always coming into the game, right, to keep the game fresh and new new pricing points for items. It could be items. It could be collectibles in the game. Always playing around with pricing point and what are you Beller, right, and how you're selling it. Let me explain a little bit. You can sell one item at one price, or you can sell 10 items together, they would cost $10, but you're selling this for 8. Right?
Sometimes Pete will buy it in 10 items because they will feel Beller. I'm getting so much for this, price points. So you always need to combine different assets and think what people wanna pay. And on top of that, of course, you need crazy segmentation. You really need to understand your customer. There's a couple examples there. You'll be surprised. Sometimes there are people that pay $5 every day right and they will never pay $20 Beller.
Even though if you take 5 and multiply it by 30, they pay $150. They cannot psychologically pay more than $5. So offering him a $30 promotion or whatever product doesn't make any sense. He'll never convert, but there's many user behaviors if it's How many times a month they pay? How often they pay? What is the price point? What are they buying exactly? So all of that needs to be data driven segmented and kinda analyze together with new content and together with tournaments and events. Right?
So you have to create an area of excitement tournaments events, a very good way to create competition, excitement, and give back rewards to your top players. This is a place where a free player could possibly earn something that that is usually paid or paid player would would buy. Right? So you, again, through live ops, you can incentivize a lot of competition between free and paid players and you can also, on top of that, incentivize a lot of engagement.
Which is the last thing, what's important Pete, where a lot of companies don't kinda understand is they don't invest behind it. This takes time. You need proper teams on this. This this cannot be one to many operations. So companies really need to commit to it long term. And the payback is definitely huge for any product, any content. I think that, you know, maybe to explain it to non game founders.
I think that, you know, the equivalent could be an activity on your e commerce website where there is a competition between users.
They choose clothing, and one of them gets or few of them winning something can get their card for free, but many others are buying Morgan special offer where you can buy a shirt, but if you bring 10 other friends buy the same shirt, you're gonna get a 50% discount or things like that that are not like one off thing that's always on the website, but there is a day in the week where something special is happening and people get notified that there's something special is happening.
And then I'm not gonna get the same notification as you because I can't bring 10 friends. So maybe my offer is gonna be 3 friends, but you've already brought in the past tens of friends. So your offer is gonna be for 10 friends, and I'm gonna get the offer on the jacket I like, and you're gonna get the offer on shoes you like. And all these things are segmented and they're live and they're exciting, and they have leaderboards.
And there's something that gets me more engaged because it's actually fun, and it's actually a higher level of excitement than normal activity on the website. That would be the equivalent. Right? The more that you do, the more you learn about your customer also, the same time. So you kinda be gaining advantage over time.
In comparison to have something static or, you know, periodical sales, the more you can do, the more you can get user engagement and excitement in the product regardless of what it is, the more benefit you're gonna get and the customer also, I think.
And so if I'm a founder and I wanna start doing things like that, what are the things I need to build in my company, or what are the kind of people I need to bring in that are gonna make this useful other than trying to steal top live ops people from games companies. I think in 2 days' time, it's easier than ever if you ask me. Because when we had to build all the value by ourselves, they, Amazon, Google, give you so many solutions, think people don't look deep enough there.
They have all the data infrastructure solutions. They have all the real time server data solutions. So a lot of the technologies out there, you can just pick it up, but you still need people to operate it. You still need the analysts. You still need people that would be able to do the hard work of segmenting it thinking what type of content people will want. So the good thing is the infrastructure is there. It's easier than ever accessible. You still need talent to run this usually start slow.
And as you get better, learn your customer, you kind of become much more segmented about it. You know, what kind of content they want over time Morgan more. It's hiring and investing long term. It's not something that from day 1, you should expect magic. Right? It's like anything else in business No. But I do think that this is one of the deep secrets of the game industry that other industries gotta learn from because, you know, I think that people are not aware of it.
I think that you take any successful game and you strip it out of live ops and you lose probably 40% of revenues. Right? It's like you really lose big part it. And so Pete being gable is like a magic gift that keeps on giving because when you get more, revenue out of customers, you basically can then go because the customer value becomes higher. Go and basically then acquire more customers because their value is gonna be higher. And so this is basically starting your growth loop.
And if you don't do it and you're time value is lower because you're not doing it, then you just kinda acquire customers. And that basically, you know, deems you to be with lower revenues in a smaller company. So this is really one of the top secret of the game industry. And what James do that others don't believe is that we try so many things that that doesn't work, but what we keep trying, and we keep trying to innovate. Okay. Also in live ops, also in products.
So I think a lot of the companies are afraid to do that. And that's in gains, I get it. It's easier because content maybe won't cost us as much as you know, something physical in e commerce, but not trying as much more costly than making mistakes. So you have to maximize, operate your product to the fullest. I've gotta ask you one question about the game industry. So, you know, we are now the game industry is it's it's it's all time high. Games are bigger than any other entertainment.
Games are, you know, growing last year. It, you know, the game industry grew by tens of percent and continues to grow. What do you think about the stages of the industry? What are you kind of your predictions to where we're gonna see the industry evolving in the coming few years? I think it's an amazing place, but I truly think it's just starting out. I think the base of gamers is growing faster than Beller, and it's super exciting for any game developer if you're small or big.
So and the type of games, the range of games that we're seeing seating, monetizing is also growing. So that's very beautiful. If you're three people team or if you're a thousand people team, there's opportunity for everybody, if I had to look long term, what do I see? I see bigger games, bigger in the sense, like, higher production value, multiple last form, launching at the same times was similar to what JENSION Impact did. Right? They launched. Just tell you the quickly the story of that.
They basically took a very long game which is Beller. Which was on Switch. It was a paid James, and they said, okay. And there were so many people that they didn't have Switch wanted to play Zelda. So what did they do with Zelda? They took down the payroll, which they made it super free, right? Did they made it accessible across any platform? And they kinda exploded and created huge viral loop for demos. Because everybody started talking about.
So bigger games, higher production value, and much more innovation in terms of gameplay. Great. I tend to agree. I also think it's becoming sadly, slightly tougher for small teams because the expectation of users is so much higher than it was, which was years ago. And as you said, if you're not high production value, you're not a great James. If you're not multi platform, then your chances of succeeding are smarter today than they were before.
Yeah. I think the good thing is that will force company to try to be a little more innovative if before fast following was a very viable strategy for many of the even small motor companies. So today, you will have to think outside of the book. The way you mitigate the risk of user acquisitions is to come up with something slightly newer, slightly better.
That doesn't necessarily need to be bigger, right, but as long as your user feels it's fresh, they see that in your value proposition, you will still get low CPA's today, right? So it's the challenge of Pete becomes when you know the differentiated enough when you kinda compete head on with the big giants. So I completely agree. I think that at the state of the industry, new startups definitely need to be more innovative than they were before.
If they wanna succeed, then that is actually not a bad thing. One last question for me assuming you're starting a new company today, if you're a founder starting a new company today and you need to fight all these huge companies that are around and you want to be able to beat them, Kinda, what's the one thing, you know, from you building, you know, a company that got to close to a $1,000,000,000. What is your one tip that you think founders of new companies need to focus on?
If they wanna have a chance in today's fast moving world. I think you need a very strong court. So what I believe in that is the first 4, 5 key people. If it's product, CTO, if it's producer, our director, that needs to be super core and so super top Outside of that, you can be much more lenient in the sense.
You can take people with less experience that are more hungry to learn, and they kinda have the patience to be with you for many, many years because as a game sponsor, if 10 years ago, it took you 2 months to create a game to the 8 year plus, if not 2 plus. Right? And you need to have a chance to have couple shots. So you need 4 years, 4 or 5 years. So as a James sponsor, I think you need to have the passion, the patience, of course, the capital. And the core team needs to be really strong.
If the core team is strong, you don't necessarily need to have 100 top employees. I think that that's even counter productive and patience. Patience is the biggest thing in games industry that a lot of founders found out works magic because you always acquire knowledge and get better. What do I mean by that there were plenty of even epic, right, or 5, 6 years that they didn't have a hit?
And then boom, they got fortnights of it's not a business that grows from month to month always, although some companies do. But if you're patient enough, if you believe in team, believe in yourself. It's a matter of time until you get a hit, and we've seen that last 15 years proven out all the time from companies all over the world. It's Eastern Europe, if it's south, Eastern Asia, you don't necessarily need to be in the biggest hubs.
You just need to have teams that wanna learn what wanna get Beller. And want to succeed. That's the way we, look at it. I love that because this is exactly what we believe. If you build the right tour team and you have the right direction and you work card and reiterate fast. Results will eventually come. There's no question. Gabby.
Just last question from me to you as somebody that's an investor, how do you match that expectation that an investor has from a team to succeed relatively fast, right, at least the financial expectation to having the patience and you'd be living in the team and not seeing the results from day 1. And how's it different from it if you would invest in a James company to if you would have the same expectation from an e commerce company or any other field. Like, how do you guys think about that?
I think that at the end of the day, it's a great question. And it is slightly different, although not that different between game companies and non game companies that what we know is that exits in the market today, you know, take between 7 to 10 So we're not expecting anything immediate, but what we are expecting immediate, we're expecting, usually a relatively immediate display of product market what we want is we want to know that the company's running into the right direction.
The company, you know, at the end of the day, companies that die are those that run out of money before they find product market fit. And what we're really panicking about is if we're seeing a company moving in the same course, notes finding their product Flint and not changing, not iterating, not pivoting, not trying to find it. And Morgan, the real conflicts between us and founders, if there are, are we're founders are saying, hey.
I'm gonna continue at the same course, and we, sometimes, from our experience, are looking and saying, look, you know, you're not gonna change anything material. This is not gonna get dramatically better.
Now this is a bit in the game industry because in the game industry, I think that when you get to a specific playable game, that already had, as you suggested, a great production quality on the core, if the numbers are not there, because the numbers are so obvious, it's very difficult for the founders to basically, you know, put their hand in the sand and say, oh, that's okay. That's gonna be fine because it's so easy to benchmark today.
It's so easy to see your retention compared to the, you know, the retention, you know, in the industry for segment, we still see this. We still see founders that believe that they're only gonna change the character's color and everything's gonna work well. We hardly see this with experienced founders. And so, you know, for us, this is not about seeing financial results fast. It's about us seeing the process of iterating and changing course and optimizing toward finding your product market fit.
And as long as we're seeing this as a fund as investors, we're happy with the process. We're happy with the, you know, it's Flint. Somebody's lucky they can find this in 2 months, and somebody else can find it in 2 years. The part that really bothers me is when I see people that are not they chose a course, and they're running in this course, and the numbers tell them that it's not Pete ingots, and they don't have product market fit.
And they're, like, expecting that small change are gonna get it going. And we all know that small changes hardly ever are gonna make big changes in the numbers. And so, you know, as long as we're seeing the direction, as long as we're seeing the process as long as we're seeing the founders obsessed with finding the product market fit, we really don't care how long it takes Pete the common thinking that VCs want everything to work really, really fast. So I think that's not really an issue.
Gabby, this has been, like, the decade of working together. This has been super fun and learned a lot, and I hope that everybody as well. Thank you so much for being with us. Thank you, Gigi. I hope it was helpful. And really appreciate it, Gigi. And it's a great Morgan, and you should continue many Morgan these into the future. Thank you, Gabby. Bye bye. Bye. You've been listening to the NFX podcast.
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