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Summary:

It’s tough for developers to standout in the apps market. What’s even tougher? Trying to build a scalable business based on the apps. Neil Young, co-founder and CEO of ngmoco, a mobile gaming company, knows it all too well, and shares his insights in an interview.

neilyoung

There are over 350,000 apps in the Apple’s iTunes App store alone. No wonder it’s tough for developers to standout. What’s even tougher? Trying to build a scalable business based on the apps – be it for iOS, Android, Blackberry or all of those platforms. Neil Young, co-founder and CEO of ngmoco, a mobile gaming company, knows it all too well.

Earlier this week, in my email newsletter Om Says, I shared Young’s story about how he changed his company’s business model: a decision that not only saved his company, but also ended up getting it acquired by Japan’s DeNA for $403 million.

In a wide-ranging video interview, he shared some of his thoughts about the gaming industry and mobile app platforms (and business) with me, which I believe are incredibly useful for anyone building apps and app-based businesses. First, though, let me give you context as to why you should listen to him (and why I have a lot of respect for what he has to say).

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The first time I came across Neil was about seven years ago.  Then a senior executive at Electronics Arts, he gave a talk about the future of games titled, “Can a game make you cry?” He argued we were entering the phase where games would be nearly movie-like. It was a powerful presentation, impressive enough for me to stay in touch and follow Young’s career.

About three years ago, he decided he was going to leave EA and start ngmoco, a mobile game company. The company raised tons of money from the likes of Kleiner Perkins Caufield and Byers. It rode the iPhone wave, and last year, it sold out to Japan’s DeNA for $403 million.

Young started the company building premium games. He raised millions of dollars from top venture capitalists. Apple promoted his apps inside the app store. Along the way, he learned some vital lessons and formed opinions I think would (and should) come in handy for a lot of entrepreneurs, especially those in the business of developing apps.

“Opportunity is here to build a new kind of entertainment company, thanks to the disruption in media, social and mobile,” says Young. “iOS and Android are the platform for the future of media and entertainment. “ Still, he bemoans the fact that not a lot of apps are not taking full advantage of the technological capabilities of the iPhone and the iPad platforms.

He doesn’t believe you can start an app company based on the iPhone, though does think it’s time to start a tablet-oriented company built on the premise of creating awesome tablet experiences.  He pointed out that on the mobile platform, the “opportunities are for companies that connect customers together and maintain relationships with those customers for a long time.”

Lesson #1: Hits Aren’t a Sure Thing

  • You can’t build a company of consequence inside the app store, because it’s a hits-driven business, and the half-life of a game is pretty short.
  • The company would have to have two games appear in the top five paid games on the iPhone store every day for 365 days for the company to build a $10-million-a-year business.
  • There are thousands of apps in the app marketplace/store. The likelihood that your app is going to break out from the pack without significant support is pretty low.

Lessons #2: Awesome Products Engage Customers & Bring Profits

  • Don’t build products for fleeting moments. Instead, focus on building products that build on a relationship with the customer. The longer the relationship, longer you have a chance to monetize that relationship.
  • Snoop Dog tells his son that everyone is good at something. Be great. That’s particularly true in the app market. There are a lot of good apps; build something great.

Lesson #3: Great Experiences, not Whiz Bang Technology Are What Matters

  • You have to look at games (and apps) through the eyes of the users and look at how you are delighting the customers.
  • Great games are those with fun game mechanics, and they always win over games with the greatest/most-cutting-edge technology.

These lessons are only a distillation of what I believe is a knowledge-laced interview with Neil.

Related research from GigaOM Pro (subscription req’d):

  1. I really enjoyed reading this article because I completely agree that a huge part of what makes an app successful and gives it longevity is its user experience. Also, download numbers of an app don’t really say much either. In order to really analyze the successful of a mobile game, it’s important to take into account the user engagement and retention numbers. Millions of people can download a game, but not many will continue playing it three months down the road.

    Thanks for the article, it’s very good advice for up and coming developers.

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    1. Chi,

      You should watch this video if you got a few minutes!

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  2. Nice article. I am new to the android system and market and can attest to having downloaded numerous apps only to delete them 30 minutes later because the game play and/or user experience is less than satisfactory. Quality over quantity any day. Thanks for the good read.

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  3. I think it’s fascinating that all these different industries are moving in the same direction. It’s hardly news that everyone has loyalty cards, for example, but Starbucks, Amazon and videogame publishers are moving beyond that basic contact info relationship to engaging customers constantly. He’s not just advocating something for game companies, but for every company: the more engaged your customer, the more opportunities for monetization. It’s the digital version of a Super Walmart: Super Walmart, when you’re there, will wear you down if you’re there long enough, esp. with kids, and you end up buying all kinds of things ‘just in case’. Or with Starbucks, the longer they can keep you around, the more you’ll buy.

    With these games, you can feed the classic gaming addiction (‘just one more turn’ or ‘I’m almost beating him’) with add-on purchases.

    This is also the way MS grew their developer base for years, with freebies and conferences, etc. that kept people engaged and rewarded for that engagement. Foursquare’s mayor system is a more recent example – a game mechanic keeps people engaged and provides a mechanism for third parties to reach them.

    In comparison, and relevant to this article specifically, it’s rather sad how PSN, XBL and Nintendo look so traditional on their console business. They’re clearly pursuing motion sensing and 3d while their non-traditional competitors build self-reinforcing ecosystems. Google, Apple and Facebook could be positioned to completely displace them, apple and facebook are obviously farther along that path.

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  4. Awesome products engage customers – This couldn’t be more true. Since our product is entirely free and we make money through advertising rather than sign ups, our success is dependent on users actively using engaged in the product – whereas other vendors can simply walk away at the point of sale. This means it has to be lightweight, intuitive, and fully functional.

    Helen Phung
    Practice Fusion

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  5. It all depends on the degree to which Apple feels comfortable having it’s ever growing gaming community and its trappings occupying the same space as that of the larger network they have planned. It may take some time to figure out how prevent Facebook-like security foibles and community exploitability before it would be wise to launch an all-out grab for the attention of the most competitive gamers everywhere,

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  6. It all depends on the degree to which Apple feels comfortable having the sizable iOS gaming community and its trappings occupy the same space as that of the larger network they have planned. It may take some time to figure out how prevent Facebook-like security foibles and community exploitability before it would be wise to launch an all-out grab for the attention of the most competitive gamers everywhere.

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    1. Make that “how to prevent Facebook- and Somy-like security foibles…”

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      1. *Sony

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  7. Paul Schejtman Thursday, March 10, 2011

    lets be real. all neil young did was use kleiner money to roll up tech oriented (but not business oriented) developers. its easy to buy young (no pun intended) dumb developers for less than they are actually worth. neil failed many times before and would have again had it not been for raising a whopping $40m. I would not take his advice at all.

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