It’s too difficult to build an A-class mobile game development company here in Silicon Valley:
- Extremely good mobile game talent is too spread out
- Salaries are way too high
Anecdotally, I have more than a few friends here in Silicon Valley whose companies have had open reqs for mobile game developers especially server side developers for over 6 months. On top of that, most of the key talent has already been absorbed so getting new extremely good developers is very difficult. One company I know had to interview 100 candidates to hire 3 engineers.
There is only one key advantage of being located in Silicon Valley: information.
Knowing the economics of mobile games in the early “Tapjoy Mafia” days and how to do Tapjoy distribution in those days rocketed all of the early guys to success. Having knowledge of the latest mechanics, key trends, targets for success, user acquisition tricks, etc. can make a critical difference between success and failure.
Today, however, much of the early information advantage is getting out.
So what makes a mobile game company successful?
- Game design capability
- Development execution
Information advantage helps inform #1 & #3 but in my opinion Silicon Valley is getting killed by #2.
Here’s how we got here:
- In the early days the majority of mobile games were primarily client-side architectures for cost and because client-side is more responsive
- With the transition to mid-core and especially PVP as a primary contributor to monetization there was a sudden mad rush to acquire server side devs and more games shifted to server side architectures
- In addition, the mobile game industry overall grew rapidly as social game companies, console game guys, media companies, and foreign companies especially Japanese all jumped into Silicon Valley
- We’re also recently seeing another new trend towards 3-D and standardizing on Unity as a platform causing a client side talent crunch.
Silicon Valley is at a major disadvantage. To illustrate this point, let’s take the example of comparing Supercell to a typical Silicon Valley mobile game startup:
|Point of Comparison||Supercell||Silicon Valley Company||Conclusion|
|Team||With the demise of Nokia Supercell has picked up some of the world's greatest mobile developers.||Tech talent the most expensive in the world. Also, Silicon Valley is known for tech geeks but not great game designers. The few really good producers and designers who are here are super expensive. With all of the mobile game companies here it's hard to keep anyone good anywhere for any significant length of time.||Massive Advantage to Supercell / Finland|
|Cost Structure||Developers, producers, and designers hired for a fraction of the cost enabling Supercell to take many more bets in the market than a SV company.||Over $200K for key engineers and over $100K for guys a couple years out of college.||Massive Advantage to Supercell / Finland|
|Information||Ex-Digital Chocolate guys who already have relationships. Also helps they have good VC backing (Accel). Further, they have had a local guy here who has gathered the information they need and fed it back to Finland.||Amazingly, even some of the Silicon Valley companies here are pretty clueless about some of the key mobile game information that could really help their business.||Even|
Supercell’s founders came from the Finnish studio Sumea (acquired by Digital Chocolate here in Silicon Valley) but they were able to develop Silicon Valley relationships via Digital Chocolate and by having a local guy in place. Hence they were able to get all of the Information advantage of Silicon Valley and all of the Team and Cost Structure advantage of Finland.
If it takes twice as long, costs 2x as much, and is 3x harder to put the team together to build a game than it does a company like Supercell (or Rovio or King.com) how can Silicon Valley compete?
I don’t think it’s an accident that the top mobile game companies now are not from Silicon Valley. The examples of successful companies in mobile gaming are all from the 1st and 2nd generation of mobile game companies. Companies like Funzio also hired shortly before the talent crunch and cost escalation here (while taking advantage of the information advantages). Further the early Silicon Valley mobile game that achieved success are now having a lot of difficulty being competitive and have largely dropped out of the top 50 grossing.
In my view, we will continue to see foreign companies dominate by using the Supercell model: foreign talent with local bus dev and relationship guys to learn and send information back to the mothership.
UPDATE: This post was updated on 6/21 based upon feedback from Eric Seufert of Grey Area Labs. Thanks Eric! Supercell’s founder history and labor comparison details were revised.
Another thing to consider is that the company cultures in Finland are vastly different from what it is in the valley. The reason Supercell will likely retain 99,5% of their staff over the coming years is simply that they treat them incredibly well and it’s not down to salary, even though it’s good by finnish standards. This is something a lot of companies have a hard time understanding (especially US companies) that not everyone is motivated by money.
Money is nice, but it doesn’t drive anyone except bankers. If your only way to motivate and retain people is by offering them more money, I’d say you will have a massive problem in your hands. Also, if your company “events” only consist of getting drunk, I’d say good luck in retaining anyone over 30 or so.
Frank that’s a good point. To be honest I’m pretty disappointed with the culture of a lot of workers here in SV.
There is a widespread (obviously with many exceptions) mercenary culture here. Further, the number of Tim Ferriss 4-hour workweek wannabes is pretty disappointing.
So for me there is both the cultural aspect with respect to money focus/being mercenary as well as a work ethic issue. I visit a number of start-ups here in SV and am surprised how many people are going home by 6PM. This isn’t everyone: Funzio scheduled builds at midnight and were able to build a culture around strong work ethic… but that’s more exception from what I’ve seen.
So based on this analysis, Nordic game developers and designers should move to the US to increase their salaries?
We’re in a bubble… can’t go on forever and we’re already seeing a market rationalization occurring. Also, as Frank mentions it’s not just about money.
Short term if a Nordic dev wants to come here to make more money definitely can do so… especially Unity client or server side devs.
how is supercell taking a risk? they have exactly 2 games on the markets. Taking a risk means launching various games and seeing if they do well outside of soft launch.
Joseph Kim says
Mike, not quite sure the point you’re trying to make or the issue wrt risk taking. Supercell has killed off a bunch of games during soft launch. Taking a game to soft launch is where most of the cost and risk is until you get your numbers.
If your point is that Supercell should take games to WW launch and spend marketing dollars behind it even though they know the games aren’t working after testing during soft launch… that just doesn’t make any sense.
Gabe Leydon says
This is a great post and a great blog!
I agree with this post and think about this same issue often. My response is, the only way to justify mobile development in SV is to create games that are incredibly technical. So technical that you could not make the game anywhere else in the world.
Game of War is a game that would be very difficult to make outside of SV because of the extreme technical demands. The diverse talent required to make GoW would be incredibly hard to put together anywhere else. If MZ were not committed to pushing the limits in mobile gaming technology there would be little justification to making mobile games here other than SV is where we want to live. 🙂
Joseph Kim says
Thanks for the compliment Gabe!
You’re right. At the end of the day I think it comes down to: “What is our source of key competitive advantage?”.
If we look at mobile game companies like Zynga or Glu (at least today) vs. Supercell, it’s almost like a baseball game where Supercell gets an extra 5 or 6 hits at bat (due to team, cost structure, etc.) for every batter. It’s just very difficult to win in this situation… and I do contend that with the structure of app store and power law distribution it is a zero sum, one company benefits vs. loss for another situation.
If in Silicon Valley, you can win with a local dev team based on playing a different game whether it’s tech (you guys), or brand (WB), or user leverage (Aeria), or something else. Tech requires local proximity although the other plays not so much…
Good luck at MZ and with Game of War… I’ll be rooting for you guys!
Future Works Pvt. Ltd. says
I am agree with this post for some how but not completely. You can work with mobile game companies in Silicon Valley.
Joseph Kim says
The new model is the “Seriously” model. Have dev in a low cost area with good tech talent e.g., Finland, Eastern Europe, Toronto/Montreal, etc. and then have publishing in SF/LA.
Warren DK says
We all know Silicon Valley is hub of many amazing software companies of world. It is not easy to develop a mobile game app , this need talented Human Resources.
Joseph Kim says
True, but all things being equal if I can take 5 swings at bat and your SV company can only take 1, I win over the long term. That’s called structural advantage. Also, you need to think about the whole team. Not just the badass back-end engineer but the game designer, the economy designer, the artists, etc. Payscales aren’t the same and given the economics of living in SV, a lot of the best in those areas have left. To your point, you “need talented Human Resources”… like all of them. Not just the engineer. If you’re arguing that the best artists and designers including like level designers are in SV, then I’d say you were definitely wrong.