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Trip Hawkins
Trip Hawkins the CEO of Digital Chooclate, gaming pioneer
Trip Hawkins the CEO of Digital Chooclate, gaming pioneer

Trip Hawkins's posts


This blog post completes The Browser Manifesto with the notion that Indie game developers can collectively have the power of Zynga if we collaborate to create The Republic of Gaming. United, we are as strong as anyone.

We are entering the age of convenient computing. The browser will become the next big game platform. Core gamers, or whales, will migrate by the millions to this new model and drive a $100 billion market based on free to play games with virtual goods. Distribution principles will be disrupted and some big players will fall while many newcomers succeed on the basis of great new games that use the Discovery business model. There is potential greatness in every game developer that will now have a chance to flourish and stand on its own, if we work together.

We need only recognize the benefits of collaboration and trust each other. We trust the World Wide Web and need to master how we leverage it. The same can be said for Google search, Facebook friends, email lists, ad networks, offer networks, affiliate networks, development tools and innovative partnerships like FreeGameLeaders.Com.

Your heart is free. Have the courage to follow it.

Tags: The Browser Manifesto, Zynga, The Republic of Gaming,whales, distribution, Discovery business model, Google, Facebook, FreeGameLeaders.Com


I’ve made the argument that game developers should build tools that allow them to support all platforms and screens from the same R&D thrust. Among these platforms the open browser is the most critical because it is the one that isnot controlled by a giant corporation with a profit motive.

It is always tempting to align with the titans because they are big, powerful, and influential and know how to market themselves and their business propositions. But historically, closed platforms don’t work any better for game developers than the Berlin Wall. Prior to Nintendo there were many open media platforms including print, painting, photography, film, video,music. While Philips invented the CD player they widely licensed their patents and charged a mere 6 cents per disc, and allowed complete freedom of operations and expression. More recently, the World Wide Web was a gift to the public and we’ve seen again how a free, open, competitive platform can flourish. But Nintendo ushered in a new generation of closed platforms with unappealing license terms for third-parties. It has always been great for Nintendo, but there isn’t a single great game software company today that was built on the back of Nintendo. In general, these licenses in the console industry drove up costs, crippled innovation and despite industry growth more than 90% of publishers that bore these costs were wiped out.

Rather than operating like the web or CD, Nintendo has been the reference point for many new closed platforms. Digital licenses have gotten even worse because the licensors all reserve the right to constantly make unilateral changes, thereby creating a slippery slope for third-party game developers who are at the end of the whip. Hot new digital platforms with high growth have been as alluring as the Pied Piper, promising developers liberation from publishers and retailers and a chance to be first-movers. Thousands of developers followed because it seemed reasonable at the time. Apple, for example seemed generous initially to be raking only 30% of the pot, because Western mobile carriers had been taking 50-75%. But not enough science or even study of history went into the choice of 30% that has become a de factostandard. The mobile carriers had failed, so that was not a good reference point. DoCoMo succeeded by charging only 9%. Other huge platform successes like the CD and the web were essentially free. Where is the analysis or evidence that a 30% fee is viable for a third-party industry? There isn’t any. Instead we have many examples to the contrary.

Consider that for games, it will cost up to 30% of revenue for the cost of acquisition(also known as advertising, even after averaging this cost down to eCPA as a result of other free traffic sources). Sales or VAT tax can be another10% or more. Server overhead to operate free client-server games can also be 10% or more. If there is a 30% platform fee a game developer is now looking at variable costs eating up 80% or more of revenue, and they still have to cover product development and overhead costs. From what I can tell from published industry stats, on many platforms these other costs are 50% or more of revenue so now we’re at 130% for a median performing app. Given a bell curve distribution and 200,000 apps you’ll still have outliers like Angry Birds and Millionaire City but overall this is not a healthy economic picture for game developers.

Many other companies have simply copied the 30% rate from Apple, justifying it onthe simple argument that Apple had set the standard. Well, I guarantee you that Steve Jobs did not envision the cost structure and business model of today’s games and arrive at the 30% number based on a clear understanding of a win-win scenario that would create a healthy value system for game developers. Steve Jobs may have been a genius but he never liked the game industry and he never understood it, nor did he care about the needs of game developers. While we’re currently stuck with the number he made up, there are signs of increasing platform competition as Windows 8 will charge a reduced rate of 20% and Google+ launched at only a 5% fee. But history has shown that as developers invest and help platform owners become strong, the rates go up.

Game developers need to wake up now and realize that they have too often been willing serfs in feudal kingdoms where they don’t own the soil that theytill. The open browser is the next big game platform. But even ifit wasn’t, it is the one, only and best place for a developer to plant their flag and invest in their future. Because it is open and free! Being strong in the browser will create even more synergy if you are also extending your reach with Facebook, Apple, Android and other platforms that you can branch to from the browser. We can even tolerate their 30% tariffs if our technology leverages product investments to reach all screens and to provide more sources of free traffic. But freedom for game developers must come first. If we are free, we can consider a flanking move on a closed platform from a position of strength and we can negotiate with some bargaining power, perhaps even with a collective viewpoint.

There have been other freedom fights in game industry history and we’ve had our William Wallaces. Activision’s founders were sued by their former bosses at Atari but their bid for independence survived. Tengen challenged Nintendo but suffered a fatal loss. I founded Electronic Arts to create abetter business model for game developers. The most important single thing I did at EA was to push my team to reverse-engineer the Sega Genesis so that EA could be liberated from the draconian license agreements that were offered in those days. I founded 3DO as a bold attempt to help developers and improve the value chain, but 3DO was outflanked by Sony’s deeper pockets. 3DO reduced industry standard console license fees by 70% but Sony put them right back where they had been. More than 900 companies signed3DO licenses but they fled to Sony when Sony proved willing to take big losses to build their hardware installed base. Sony executives did tell me later that they copied many business practices and licensing philosophies from 3DO,which made things better for developers. With Steam, Valve pioneered digital distribution at a time when none of the PC game publishers would touch it. Bigpoint and Game Forge pioneered browser games when the mainstream didn’t care. In every one of these cases, game developers took risks and ventured into unknown territory for the betterment of game developers and the public. The courage of a few did help grow an industry that can now support a vastly larger number of global game developers. Today, the open browser gives all game developers a chance to be courageous and help the industry reach for a new age that could be truly golden for game developers,not just for Apple, Facebook and Zynga.

The browser is worth fighting for. We need to be free. We are all William Wallaces. Let’s follow our hearts.

Tags: R&D, gamedevelopers, Berlin Wall, Nintendo, Philips, CD player, Apple, DoCoMo, eCPA, VATtax, Angry Birds, Millionaire City, Steve Jobs, Facebook, Android, WilliamWallace, Activision, Atari, Tengen, Electronic Arts, EA, Sega Genesis, 3DO,Sony,, Valve, Bigpoint, GameForge, Zynga

Check out this recent interview with Trip!


The industry has worn out old terms like, “hardcore gamer”, “casual gamer” and “whale”. None of them perfectly explains the nature of the emerging digital gamer. Let’s call them dolphins. Why?

Dolphins love to play. They’re curious and intelligent.

Dolphins are social, and happy to play with both friends and strangers.

Dolphins are competitive. They’re carnivores. They’ll kill rivals in fights for territory, just like gamers.

They’re early Internet adopters (they call it “echolocation”).

They prefer casual, short sessions before they come up for air.

As for whales, they are actually just really big dolphins. Or you could say that dolphins are whales that have migrated to Hawaii because it is more casual and convenient. So dolphins may be whales that became more “streamlined” when they decided to join the revolution and play on the web and with their mobile phone.

The dolphin market is going to be huge!


In The Republic, Plato uses the “Allegory of the Cave” to show how we can be deceived by forms and make the wrong assumptions about reality. Prisoners in the cave only see shadows and come to think of them as a reality that makes imprisonment tolerable. They could discover the truth and beauty of life if they would only just question their assumptions, work together to free themselves from their shackles and step outside into the light. Game developers today that have shackled themselves exclusively to any one platform are now in a similar cave.

Today’s biggest lament is app discovery, an issue heard most loudly and frequently about app stores now that there are hundreds of thousands of apps and the storefront screen can only give you brief listings of 5 or 10 of them at a time. It’s a valid concern. The stores are crowded with inventory and we can’t expect the customer to catch a particular fish by drinking an ocean through a straw. Viral techniques aren’t fixing the problem, either because the viral channels aren’t there, aren’t effective or the app requires a download that is inconvenient and requires ownership or membership of a particular platform. Making matters even more challenging, a reasonable methodology like Tapjoy was helping with both discovery and monetization on Facebook and Apple and got banned by both of them.

A game developer that depends on just one platform for all of its discovery is living in the past and relying on a distribution model over which they have neither control nor influence. Discovery business models are the solution. In the fundamental equation of Internet lift-to-drag, game developers need to keep effective CPA (eCPA) as low as possible by getting more free traffic, and need to dedicate themselves to optimizing retention and monetization rates to make lifetime customer value (LCV) as high as possible. When the rates are properly balanced, a game developer can use marketing acquisition to fund traffic at the nominal CPA. Free traffic that feeds off the CPA can then reduce eCPA such that a game is profitable more easily when LCV is greater than R&D + eCPA.

But too many developers are only on one platform and don’t get enough free traffic. Zynga got historic amounts of free traffic from Facebook in 2009 but those days are over even for Zynga. Mobile game developers are paying for the majority of their traffic because they aren’t in the browser where they could be using free viral and marketing methods to quadruple traffic for free.

But the companies that make standalone browser games are also paying for most of their traffic. This is because these game developers typically don’t have SNS experience, don’t want to use affiliate networks and don’t want to help competitors by doing cross-promotion.Ladies and gentlemen, help each other and release your shackles!At Digital Chocolate, we know that we cannot compete with the free traffic that Zynga can generate on Facebook. But Zynga lacks that advantage on other platforms. And when we compare ourselves against nearly all other competitors, we think we can gain an advantage by getting more than half of our traffic for free and having a much lower eCPA. We will use any method in the book to get traffic and we’ll even add some chapters to the book.One big example is that we can allow a customer to try a free game in the convenience of the browser on a PC, but still be drive and enable them to play on other screens and devices as they prefer. A mobile game developer that has no browser version cannot do this.

An even bigger example is our willingness to collaborate with our Indie brethren to cross-promote and to lift ourselves as a group. While none of us can drive traffic like Apple, Google, Facebook or Zynga, any form of consortium in which we can help each other gives us scale that is comparable with the titans. We’re willing to do this between any two games with similar audiences, in the form of a link exchange of free trial offers on banner ads in the games. We’re also collaborating with our industry to create, a cooperative game website that has its own traffic sources and operates as an even bigger link exchange. It’s a bit like the Yellow Pages except that it’s not owned by anyone with a profit motive. This kind of collaboration requires fairness, trust, openness, transparency and the recognition that we can all hang together or we can all hang separately. And it is set up as a collectively-owned non-profit to establish the right foundation for the future.

We want to be the single most convenient way to try the best games of a certain type. This means instant free trials in the browser that don’t require plug-ins, installs, downloads or platform memberships. With a well-curated, merchandised and reviewed collection of the finest virtual goods games we can cross-promote well with each other and give the public consistently good experiences.Together, we can all step out into the light and find a better reality.

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An interview with with Trip about his friendship with Steve Jobs


Apple began a revolution when they launched the iPhone and their App Store. The user experience was indeed revolutionary but in truth the app store was invented by NTT DoCoMo over a decade ago. DoCoMo also had the good sense to give 91% of content fees back to the developers and to launch the mobile web and make it browser-based. Today NTT DoCoMo is worth $74 billion.

But the Western media hadn’t seen or used i-mode in Japan. They were comparing the Apple App Store to a feature phone using a 2G WAP deck that had not been created by a great technology company. Thus Apple’s App Store looked new, great and the start of something big that might last for eternity. Then again, so is the World Wide Web and they’re on a collision course that Apple cannot win. The same thing happened to the PC desktop metaphor on its way to the web. Instead of the web merely becoming a desktop app, it became the fundamental new way that people organize their use of computers.

Meanwhile, just like Microsoft with Windows, Google rapidly cloned the iPhone UI and began to give it away in the form of Android licenses. There are a hundred equipment manufacturers that will turn to Android because Apple refuses to license their wonderful ecosystem to anyone. It’s déjà vu as Apple’s smartphone market share has plummeted and an even faster decline lies just ahead with tablets. You know this is bad for Apple when the biographer of Steve Jobs says his biggest betrayal, anger, and regret revolve around Android

.And anywhere that Android goes a good browser is sure to follow. With the browser comes the real killer app, the World Wide Web. We are now beginning to see hardware OEMs that make TVs, DVD players and tablets begin to use the Internet. More of them over time will realize there is more value in offering buttons to major browser services like Facebook and Google search than a button to a comparatively limited collection of apps.

This opens up new business model opportunities for OEMs that are better than licensing, or paying for, an ecosystem that in the end is inferior to Apple and identical to many rivals. Every browser service button that an OEM puts on the landing page of their device could generate revenue for the OEM. Instead of being stuck with wafer-thin manufacturing profit margins, they could take a bounty from each web software service provider. They could also collaborate and partner with new services in which they get a share of new customer revenue that is generated. The services would benefit because it would bring them new traffic on new devices and be cheaper than app stores.

All of this is now beginning to happen. It will take a few years, because native apps do offer higher performance, just as desktop apps can outperform a cloud-based enterprise app (even Apple is now embracing the cloud). Browser performance needs to migrate intact to mobile devices and stabilize; the migration of more customers from performance to convenience needs to be completed.

Also, the media is still caught up in their high opinion of app stores. I’ve noticed how media reviews of new tablet devices in the last year are always comparing app stores and often forget to talk about the browser. This will change rapidly before your eyes in the coming year. Smart game developers are already cloud-based, and in the short-term will cover both the browser and native apps on the client side. Over time the scale will tilt to the browser.

Tags: 2G WAP deck, Android, App Store, Apple, browser, cloud, DVD, enterprise, Facebook, Google, i-mode, iPhone, Japan, Microsoft, mobile, NTT DoCoMo, OEMs, PC, Smartphone, Steve Jobs, tablets, TVs, Western, Windows, World Wide Web

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Historically most films have been live action shot by independent production teams, while most video games have been made by independent third-party developers under a similar kind of contract with a publisher. Pixar is radically different because they are a technology company that systematically leverages tools. We do something similar and like Pixar, have found that it is easier to implement under your own roof with your own staff. Just for starters this eliminates questions about direction, ownership and sharing. But there is much more to it.

To create a systematic competitive advantage a game developer needs to be building a system, not a game. The organization must become part of this system. It begins with corporate culture and values and you want people that have the desire and confidence to innovate and collaborate. Strategically you are going to be better off if your people believe they can make a great, new original game because you’ll get less market share in a clone war and less revenue share if you are always licensing other people’s brands. It will also make an enormous difference if you can convince everyone to use the same tools and to collaborate on a technology roadmap and the sharing of Best Practices. This way everyone can learn from internal experts about how to use tools and metrics to make games that drive traffic, retain customers and monetize better.

These kinds of things beg for a centralized organization with everyone in the same building to improve communications and management. However, I will instead argue for a global organization with several medium-sized offices. The market is global and if your employees aren’t global you’ll remain too foreign for many potential customers. Our office in Finland is an interesting melting pot all by itself because people born in 35 different countries have worked there. They have a good idea of global tastes because it is in the building. Costs are also much more competitive when you are global, as compared to only being in an expensive city like San Francisco or London. In many of our seven locations the turnover rate and organizational churn are also lower because we’re the best game company in town – simply because there are fewer competitors of note

.To make such a structure work we ask everyone to communicate in English, we make extensive use of tools like email, IM and Skype and we gratefully get people to participate in conference calls that have to span a lot of time zones. We are respectful and courteous about the demands and it works because everyone is learning much faster and advancing in their career. It seems like every office has some big brother offices that they aspire to follow, and some little brother offices that they are training and managing on some projects. This process allows the most advanced people to take on exciting new work by enabling them to hand down mastered categories to a new owner for whom it is a chance to advance and grow. Pixar continues to be a great role model for us. Harvard Business School was sufficiently fascinated by how we do it that they wrote a case study about Digital Chocolate:

Tags: case study, Digital Chocolate, English, Finland, Harvard Business School, IM, London, melting pot, Pixar, San Francisco, Skype

Better With Guano


After doubling European farming output with the potato, there was a further tripling of value from another South American import: the bird droppings known as guano. Let’s apply the fertilizer metaphor to how we can make games better with a new technical discipline that I’ll call Discovery Engineering. In short, how do we start with the same game but add engineering and technology that brings in much more new daily traffic as well as more frequent return visits?

Our gaming guano starts with my very old concept that great games must be Simple, Hot and Deep. I’ve been saying this since I founded Electronic Arts in 1982 and it remains true nearly 30 years later. Consider the ocean, which is simple enough in concept and access that everyone likes to go to the beach. The babies are playing in the sand and puddles while the kids that can walk are getting wet and letting the lapping waves chase them. It’s hot and the graphics and sound are fantastic; everyone is enthralled by the spectacle and can’t get enough. And no matter how far you go it just keeps getting deeper until you need a surfboard or scuba gear and have to worry about sharks. The analogy I used earlier was how the depth satisfies the whales, also known as wolves, who generate your revenue. The wolves need to conquer the sheep that are represented by the casual players. Hence the game must appeal to everyone like the ocean. You cannot even begin to make this work if the game is not Simple, Hot and Deep.

There are additional things that can now be embodied in the game itself that will drive more traffic and return visits. Game mechanics that are very satisfying to play by yourself are of less value than mechanics that engage you in competition and contact with other players, which provokes both viral spread and higher return rates. Repeatable game mechanics that are driven more by algebra and stats, like Fantasy Sports, are not only more efficient to build than a content treadmill, but they provoke endless competitive comparisons leading to higher return rates and more spending.

Independent of the game, additional technology layers can be wrapped around it to generate more free traffic. The APIs of an SNS like Facebook are one great example. Apple makes it easy to send an email invitation but any of these ideas is going to be more effective if the game is not limited to one platform. Everyone that is looking at email or Facebook is but one click away from the browser, regardless of his or her preferred game platform. If your game runs in the browser without requiring any plug-ins, installs or memberships you have a better chance of getting the recipient of an invitation to try it right now. If they like a short trial session, they may later become a Facebook member or buy an iPhone but even if they don’t they can play your game in any case.

My favorite example of Discovery Engineering is how we do cross-promotion. Many people dislike this idea because they don’t understand it and are clinging to the past. Old School thinking says that customers go to destinations and that you would be crazy to distract them or let them exit prematurely once you have gone to all the trouble to bring them to your game. But if your game is in the browser, the player only invested in one simple click to get to you. Not only was the “investment” nothing, he’s busy right now, possibly at work or at school, and he’s going to be leaving your website within seconds regardless of how you treat him.

The principle of cross-promotion is to get something of value when, inevitably, he leaves. Hence we show a display ad banner offering a few other games to try. If the current game is no longer holding his attention, he’s a goner anyway. But if he clicks on a game in the banner, he goes to a competitor’s game for a free trial, and that competitor now owes our company a return click from one of their customers that we don’t already have. If your product is lousy this will only make you fail faster. But if you make a superior game you will double your customers this way, because your game is good enough that your departing player will remember to come back to your game again. And your competitor is giving you a new customer who will also like your game, so you’ll have two good customers instead of just one. Voila, your eCPA just dropped in half, which dramatically increases the chance that the game’s lifetime value will be profitable.

It is for the same reason that auto dealerships cluster together on the same street. But many game developers are too paranoid and distrusting to do this kind of cross-promotion. They’re afraid to help a competitor or they’re insecure or overly protective about their game. But we know this works for us; it’s the best guano we’ve got.

Tags: Apple, cross-promotion, Discovery Engineering, eCPA, Electronic Arts, Europe, Facebook, Fantasy Sports, guano, iPhone, potato, sheep, South America, SPI, whales, wolves
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