20VC Why Success in Gaming is Like Success in VC, The Key To Building An Enduring Game & Why Few Metrics Matter in Gaming with Kevin Chou, Founder & CEO @ Kabam

In a comprehensive discussion on the "20 minutes vc" podcast, Harry Stebbings interviews Kevin Chow, co-founder and CEO of Kabam, exploring the evolution of the mobile gaming industry. Kevin shares Kabam's journey from a Facebook competitor to a mobile gaming giant, highlighting the importance of pivots, community engagement, and long-term player retention. He discusses the valuation disparities between mobile and traditional console games, emphasizing that mobile games' longevity is underestimated. Kevin also touches on the rise of esports and its potential, provided player careers extend beyond the current short spans. Additionally, he considers the early days of AR and VR in gaming and speculates on their future impact. Kevin, reflecting on his diverse career, expresses interest in exploring innovations in healthcare and fintech after a break from his intense entrepreneurial journey.

• Harry Stebbings hosts the 20 minutes vc podcast, available on Snapchat and Mojitovc.com.
• Kevin Chou, co-founder and CEO of Kabam, joins the podcast.
• Kabam is a leading company in mobile free-to-play games.
• Kevin Chou led Kabam to $400 million in revenue and a valuation exceeding a billion dollars in 2014.
• Kabam has raised over $240 million from investors including Alibaba, Google, Intel, and Warner Bros.
• Kevin previously worked at Canaan Partners and was recognized by Fortune magazine as a top entrepreneur.
• Harry gives thanks for the introductions facilitated by Gotham at Naturebox and Maha at Canaan.
• Harry endorses X.AI and Workable as transformative products in their respective fields.

You are listening to the 20 minutes vc with me, Harry Stebbings at h stepbings on Snapchat and writing frequently these days on Mojitovc.com.

This quote introduces the podcast and its host, Harry Stebbings, along with his social media presence and writing platform.

So joining me in the hot seat, I'm thrilled to welcome Kevin Chow, cofounder and CEO at Kabam, a world leader in mobile free to play games.

Harry introduces his guest, Kevin Chou, highlighting his role and the significance of his company, Kabam, in the mobile gaming industry.

• Kabam started as a social network to compete with Facebook.
• The company pivoted to creating sports fan communities on social networks like Facebook and Myspace.
• Kabam grew to 60 million consumers and $3 million in revenue before the 2008 recession.
• The recession caused a significant drop in advertising revenue, leading to another pivot.
• Kabam transitioned to free-to-play gaming on Facebook, targeting a male audience.
• The company experienced multiple pivots and near-death experiences before its eventual sale.

Kabam is a company that may be one of the few that I'm aware of that got over a thousand employees, but has multiple pivots.

Kevin Chou discusses Kabam's unique journey of growing significantly while undergoing several business pivots.

And at that point, we had a good number of consumers, good number of page views. Maus Daus. But we couldn't make any money in terms of our advertising anymore.

Kevin describes the impact of the 2008 recession on Kabam's business model and the need for change due to declining advertising revenue.

• The gaming industry has evolved from needing frequent new hits to sustaining long-term successful games.
• Successful games now have the potential to grow for several years and maintain a long shelf life.
• The challenge in modern gaming is extending the life of a successful game.
• Large gaming companies are valued based on a small number of games that have been successful for a long time.

The key to gaming today is how do you get your game that's already successful to last another ten years?

Kevin Chou explains the current focus in the gaming industry is on longevity and maintaining the success of existing games.

There's companies that, they have a game, they grow it in. These days, games can continue to grow for three, four, five years in terms of its user base, in terms of its revenue, and potentially have a nice shelf life for another five to ten years beyond that.

This quote emphasizes the potential for games to continue growing and generating revenue for many years, highlighting a shift in the industry's approach to game development.

• Mobile gaming was once characterized by transient trends and short-lived games.
• The industry is rapidly changing, with top games maintaining their position for years.
• The current market favors well-capitalized companies that can produce high-quality gaming content and experiences.
• Longevity in mobile gaming is becoming more common, with top games enjoying extended success.

Again, I think this is a rapidly changing part of the gaming industry. I would say three years ago, absolutely, you're right. There was kind of these fly by night games that some random company would come, it would create, and it would be a top charting game for a few weeks, and then it would fall off a couple of months later, and then people would forget about it and be on to the next thing.

Kevin acknowledges past trends in mobile gaming but indicates a shift towards longer-lasting success for top games.## Longevity of Mobile Games

• Successful mobile games often last for years, maintaining player engagement over extended periods.
• The gaming industry has seen games reach new heights in terms of player base and revenue.
• Examples include "Angry Birds" and "Candy Crush," which achieved hundreds of millions of downloads and significant revenue.

"So let me give you an example. So when the iPhone first came out, the idea that a game would sell that would have 100 million people play it and make $100 million, nobody thought that would be the case."

This quote illustrates the initial skepticism about the commercial potential of mobile games, which was later proven wrong by the success of games like "Angry Birds."

• The concept of a 'Godzilla game' refers to a game that reaches an unprecedented scale in the market.
• The expectation is that such a game could attract up to a billion players and generate over $10 billion in revenue.
• The proliferation of smartphones globally enables the possibility of reaching billions of consumers.

"That would be a game that would do well over $10 billion in revenue. And I think at some point over the next few years, we will see a game like that."

The quote predicts the emergence of a mega game that could surpass current revenue records due to the vast reach of mobile platforms.

• Players are deeply engaged with games that offer interesting content and a sense of community.
• Top gaming companies focus on creating highly social experiences that match players with similar skill levels and time investment.
• The combination of social connection, content, technology, and marketing leads to multi-billion dollar products.

"And that social connection, plus amazing content, plus great technology, plus a great marketing and distribution strategy. You put all those things together and then you have these multi billion dollar products."

This quote emphasizes the importance of social connectivity and well-rounded game development in achieving significant financial success in the gaming industry.

• Gaming has a unique user lifecycle compared to other consumer services, making it challenging to predict long-term engagement.
• Standard metrics like DAU (Daily Active Users) and MAU (Monthly Active Users) do not adequately capture the nuances of gaming engagement.
• Looking for 'regulars'—players who engage daily for extended periods—is key to understanding game stickiness and potential longevity.
• Churn models based on in-game triggers help predict when players might leave the game.

"So what we look for is we look for a player who's playing our game every single day for a certain amount of time, at least a week. But the more that they play a game every single day, the stickier they are."

This quote explains the focus on daily engagement as a more reliable indicator of a game's stickiness and potential for long-term success.## Player Engagement and Retention

• The primary goal is to deeply engage players with content and social experiences.
• It's crucial to identify and address any game aspects that may cause player frustration or lead to quitting (churn points).
• Maintaining player interest without causing rage quits is a balancing act.

"So we're always finding those little churn points and making sure that we're constantly looking out for any point of the game that might frustrate a player, paying attention to that."

This quote emphasizes the importance of monitoring the game for potential churn points which could lead to player frustration and disengagement, underscoring the focus on retention strategies.

• Monetization timing is a hotly debated topic among gaming industry executives.
• The focus on monetization varies between early and long-term retention.
• Western markets favor gradual spending, while Asian markets expect quicker spending opportunities.
• The cultural and market differences shape monetization strategies and player expectations.

"I do believe that these days, by far and away, the most important thing is to get the long term retention right."

Kevin Chou argues that for game developers, prioritizing long-term player retention is more important than early monetization, as premature focus on monetization can negatively impact player engagement.

• Asian and Western markets have matured differently due to factors like piracy.
• Western players value fairness and skill over monetary advantage.
• Asian players historically have been more accepting of spending money for in-game advantages.
• There is a trend towards convergence, with Western players becoming more accepting of spend-based advantages and Asian players seeking fairer gameplay.

"Asia, because of piracy, never had a really large pre packaged gaming business. There's too much piracy."

Kevin Chou explains the historical context of why Asian markets have different attitudes towards in-game spending, linking it to the impact of piracy on traditional gaming revenue models.

• Currently, games are not completely transferable between Eastern and Western markets.
• Esports is driving a convergence in player expectations across markets.
• The gaming industry is still in the early stages of creating a global marketplace for free-to-play games.

"I think in another five to ten years, you're going to see games cross kind of east to west a lot more."

Kevin Chou predicts that the differences between Eastern and Western gaming markets will diminish over time, leading to more games that are successful across both markets.

• Esports is a rapidly growing field with a large player base and significant prize money.
• Top esports games are skill-based and span a wide spectrum of abilities.
• Esports faces challenges with player longevity due to the intense demands of competitive play.
• New types of esports, like Hearthstone, are emerging that don't require fast-twitch skills, potentially increasing player longevity.

"So esports is one of the most interesting and exciting fields in gaming right now."

Kevin Chou highlights the significance of esports in the gaming industry, noting its current popularity and potential for future growth.

• Careers in esports are typically short, lasting only a few years.
• The physical and mental demands of high-level competitive play limit player longevity.
• The industry needs to extend player careers to build fan loyalty and support long-term engagement.

"People love having a favorite athlete, right? Like, if you're a huge LeBron fan, or if you're a huge Steph Curry fan or whatever it is, or you need players that play the game for more than two years to develop a fan base and have people loyal to them."

Kevin Chou compares esports athletes to traditional sports athletes, emphasizing the importance of career longevity in developing a loyal fan base and enhancing the esports viewing experience.

• The infrastructure for esports monetization is not fully developed.
• There is a significant investment in establishing the necessary structures for media rights, licensing, and franchising.
• Successful monetization will depend on a persistent and growing fan base.

"I think that will come. So that is something that I'm less. You're absolutely right. In the state of the market today, there's some of that infrastructure is not quite there today, but there's actually a lot of money being put into this."

Kevin Chou acknowledges the current lack of infrastructure for esports monetization but is optimistic about its development due to the substantial investments being made in the industry.## Esports Player Recognition

• Recognition of esports players isn't as widespread as traditional sports athletes.
• Hardcore esports fans may know some top players, but the general audience is less aware.
• Traditional sports have a larger base of fans who follow specific players or teams for many years.

"The really hardcore players will be able to name a few names, but we're still not at a point where you can go pull 5 million players and get their favorite players names."

This quote emphasizes the lack of widespread recognition and fan base for individual esports players compared to traditional sports athletes.

• AR and VR are still in early stages within the gaming industry.
• Sales of VR hardware have been disappointing.
• Significant growth in AR and VR for gaming is contingent on a larger installed base of users.

"I think we're a little too early. The hardware sales for VR have been pretty disappointing."

Kevin Chou indicates that VR technology has not yet reached a level of adoption that would make it a successful platform for gaming content companies.

• "Homo Sapiens" is Kevin Chou's contemporary book of choice.
• The book gives a perspective on human evolution and the unique current moment in history.
• It provides a long-term view that helps understand potential future developments.

"I really like homo sapiens. I just think it's a book that really made me think about the evolution of humans over the last tens of thousands of years."

Kevin Chou appreciates "Homo Sapiens" for its thought-provoking take on human history and its implications for the future.

• The mobile gaming space has fewer opportunities for entrepreneurs compared to seven years ago.
• The industry is experiencing consolidation with larger companies acquiring smaller ones.
• Kevin Chou believes partnering with larger companies is a sensible strategy for growth.

"I think it just makes sense right now for there to be consolidation in the industry and to partner up with a much bigger company."

Kevin Chou explains his reasoning for selling in the mobile gaming space, highlighting industry consolidation as a strategic move for growth.

• Mobile gaming companies may be undervalued compared to traditional console gaming companies.
• The perception of mobile games having a short shelf life affects their valuation.
• If mobile games start having longevity similar to successful console games, the valuation could be considered low.

"But if we're instead in a world where we're just starting to see mobile games, we're starting to see the beginnings of what will become the call of duties. The World of Warcraft, the halos and battlefields of mobile, then the mobile gaming companies to me are dramatically undervalued."

Kevin Chou discusses the potential undervaluation of mobile gaming companies based on the longevity and success of their games, comparing them to iconic console games.

• Kevin Chou's preferred sources for gaming news are Dean Takahashi's Gamesbeat and Gameindustry.biz.
• These outlets are considered essential reads for staying informed about the gaming industry.

"So I definitely love Dean Takahashi's trade press with Gamespeat. Gameindustry biz is another great site."

Kevin Chou shares his go-to resources for gaming industry news, highlighting the value of these publications for professionals in the field.

• Kevin Chou has a diverse career background, including finance, mobile technology, venture capital, and gaming.
• He enjoys innovation, building teams, and finding product-market fit.
• Kevin Chou is considering exploring opportunities in healthcare and fintech after taking a break.

"I'm definitely planning to take six months off after ten years of being at the helm of a startup, but very excited to jump back into saddle and start a new company at some point."

Kevin Chou reflects on his career journey and expresses his excitement for future entrepreneurial endeavors, signaling an interest in sectors beyond gaming.

• Harry Stebbings expresses gratitude to Maha at Kanan Partners and Gotham at Naturebox for facilitating the interview.
• The show promotes AI personal assistants and recruiting software as useful tools for startups.

"So huge thanks to him for that. I also want to say huge thanks to Maha at Kanan Partners and Gotham at Naturebox for the intro today, without which the show would not have been possible."

Harry Stebbings thanks Kevin Chou for his insights and acknowledges the contributions of individuals who made the interview possible, while also promoting services beneficial to the startup ecosystem.