GDC10: Justin Hall, Fate of a Social Games Company
The story of what happened to PMOG.
Justin Hall, “Fate of a Small Social Games Studio”
Justin started writing online 1994, did game journalism until 1998-2004, then USC Interactive Media Division 2004-2007, whih led to GameLayers Inc.
In mid 2006 saw ppl playing WoW, this sounds great but we are already on computers all day working, why jump back on to play? Could you take the elements of Wow and put them on top of everyday computer life, and get points, levels, etc?
prototype in May 2006, putting D&D stats on top of popular websites, like flickr and google, get str by surfing LA Times, lower Con by surfing Kotaku. Got funded for 10,000 pounds by the BBC. Use this to teach web literacy! But you need British programmers. So we got a British prototyper and built pmog. A toolbar that sat in an iframe and followed you around the web, classified you based on sites visited, let you level up.
This was enough to spend allt he money and please the BBC. But we kept going and in mid 2007 had a firefox sidebar, miniprofile, chat, leave a mine on a page, connet websites into quests, etc.
A roleplaying game of websurfing. And in mid 2007 if you had an idea like let’s make Firefox into an MMO for surfing, people would give you money and tell you to build a company. I had been a part of Internet startups in the 90s, bu7t had not made the connection. So then i agreed to take people’s money. Joi Ito put in the first $50k, and then let to 500k seed funding in september 2007 from O’Reilly Alpha Tech Ventures.
Chart of our operating expenses. Closed funding… don’t raise money in the summer, people take time off. When you have money, you spend a lot of it on other people. One thing I learned when raising money and being part of this VC thing, if you want to know how much it costs, you take it and multiply the employees times $10000 per head. So we hired more people. So we spent our money.
Chart of money and actual expenses. [Laughter] We planned to run out of money by April, but we could not hire fast enough, moved to cheap offices in Oakland, bang bang (scary) [Laughter].
So we didn’t spend as fast as we wanted. We iterated PMOG. We got Wired press and Techcrunch, sounded extremely innovative, people wrote articles about it. Have you played an MMO in a firefox plugin? No? Obviously a gaping hole in your life, write an article!
We hit the road, driving up and down, Menlo Park, Palo Alto, taking meetings, [hilarious desription of meetings with VCs]. So intense… just a year ago I thought it wouold be cool to make this game, and now you have all these hard questions, and I don’t know the answer to your questions, but we’re cool, do you want to write a check now, or…?
So someon said we were cool and sort of saved us. So jun 08 we got more funding… right when we were running on fumes (29k balance). The new VC was all about “how fast can you move, has your time doubled, what are your strategic initiatives,” targets got bigger, spending went way up.
June 17th, we got married, On Monday we moved to house, an Tuesday we signed 1.5m term sheet, and on Friday we fired someone for the first time. Glad to say we are still married.
I think there are part sof being a CEO I was not very good at. VC calls at 9:30am, asks what is up, and I would go straight into the weeds on crates not working, the mission system is fixed, and what he wanted was “we are on track with our strategic targets” and I had to learn how to communicate with my investors.
So the VCs and my wife went out to dinner, and one of the reasons was that they said they wanted a new CEO. I had spent every waking minute on this company. We’re six people, who are we going to hire? Can they code? If we find, Javascript, AJAX, and CEO, that would be good!
So we are going to spend $100000 to find the ceo, then raise $5m.
Then the economy went down the toilet, and it was clear that a Firefox game with 100k users can’t raise money in 2009.
So we changed. A friend at EA said you can innovate on theme, gameplay, or platform. So pick one. And I said no, we should do all three! But we realized we innovated too much. The UPS guy would drop off a package and I would focus test him and say we have a firefox mmo and you leave crates on websites! And he would say cool, wanna sign for the package? Hard to get people’s eyes to light up with a short picture.
So we started The nethernet, a new theme. We got a distribution deal with Mozilla and our servers fell over. And our CTO in the UK stepped back from the company. it’s march, the product is renamed, there is no CTO, I am still CEO…
The tool bar `had all these buttons, it was really slick — windows with rounded corners! It was aewsome! But the new TO came in and said, we are out of money. We need to make money. So we screwdd up monetization.
We took stuff we had given players for free and we took it away. We did it quikly with no announement. Then we started raking in $20 a day.
July 2009:
120k registered.
40 signups a day
2500 daily connected
low hundreds using tools a day
$24 revenue a day. Burning $60,000 a month, Close the gap!
So we decide to shut this down and make games that will make money to keep the studio alive. So Facebook.
So we decide to make a social RPG. FarmTown debuted then, but we didn’t know Flash, so we ignored it. Instead, we made Dictator Wars social RPG, a dark time I spent reading four months of dictator biolgraphies.
So we put out Dictator Wars and then Supr Cute Zoo, targeting men, targeting women. W ran to Facebook right when facebook ran to Flash gaming.
Mid October 2009
28k registere for Dictators wars, 1700 DAU, .3% growth rate. 3 cents/DAU. I am watching the blood seep out of our corpse as our FB allocations are locked down.
Basically, we had $40,000 left, we rebooted, nobody is going to play them, so we lay off everyone.
Lessons:
– focus! Pick your innovation! A Firefox MMO might work, but test it!
– build-in the business. Seems obvious in 2010, but in 2007 seemed like 1999 again.
– test core interactions and experience before accelerating with money
– don’t wait to lose non-performers.
I am pleased to announce the guys who worked on it and played it were upset that we closed it, so we paid to host it with the remaining cash, and we are open sourcing the engine, so this is exciting for me because we spent $2m to make an open source way to make web mmo’s. So go innovate with it.
Q: Would you do it again? Yes, but I went and got a job so I could learn how to run a business.
Q: How much of your company did you sell off to raise? 20% at each round, basically. First VC meeting, “How about your company is worth $2m?” “How about $3m?” I said. He said “How about $2m?” I said cool!
We looked at Facebook as another startup. But the reality is if you are making a play for a new platform, you need to have time to noodle, it is a process unless you have unfair advantages.
23 Responses to “GDC10: Justin Hall, Fate of a Social Games Company”
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http://thenethernet.com/
The revived open version lives! š
This seems to be a pattern followed by other games and worlds and social media — someone should make a cute satirical video about it. This blog entry provides the script.
Here’s why I didn’t like PMOG:
o geeky game dudes who run it are flippant and snarky
o help is flippant and self-justifying and snarky
o the people they attract are flippant and snarky
o privacy issues never really grappled with and explained — say, snarky and flippant game dudes, what are YOU going to do with MY surfing patterns and TO WHOM and HOW will you be selling them?
o too hard to level up, it’s a boy’s thing
o worst of all, can’t create a relevant track history/profile/levelling device because I’m not the only one using the computer/URL IP address etc. browser cookie. So while I’m not a shopper, the fact that my daughter uses the same browser/computer to shop means my PMOG gets messed up
o frames — why does any website in this day and age have frames?
o medieval culture memes — who needs it? I’m not in the goddamn Middle Ages. Can you realize why the Sims is so popular? It doesn’t force modern people to go into the Middle Ages; they can at least get as far as 1950s or 1970s American suburbia.
When I see that these cynics and snarks go cynically to Facebook to try to capture us there with “casual gaming,” even being interested in dictators’ histories in RL and such, I don’t bite. I feel I’m being used. Of course, Island Life has that feeling, too.
When the culture of geek game gods changes, then they will do better. It’s not fixable with VC cash. Companies that were self-righteous or oblivious about their geek game god culture, like Linden Lab, ended up making painful changes to stay alive.
That figure was supposed to be written $100K, not $10K?
Justin,
From the age of 8 I have been writing video games. One could only hope to create something as innovative and well received as PMOG was. It reached beyond it’s humble beginnings, and came from insight into the direction of the net that matched perfectly. You and your team have the gift, hindsight is easy when the calculator is glowing at you now.
I can’t thank you enough for opening the source. Those of us continuing the genre have received so much already, so the Nova Initia team, and I, thank you. We promise to be mindful commiters on the project. I think our privacy modifications will make a welcome addition for the F/OSS community.
I look forward to the day where your reflections here are recalled only in the context of how they are guiding you in your new endeavor.
Stephen
Ok, rant time:
“Prokofy Neva”, really, so bitter over something given for free? Many of your comments (“Frames” & “Medival”) make no sense… if you played you know lingo, you even chose these terms to berate. Gamelayers was a business, we knew this. In the end they never turned to selling our info, and they let every single person who played influence the dynamic of the game if they had an opinion and the time.
Casual gaming is the non-“gamers” game. My family never played Warcraft or Metal Gear… but they’ll play a game of Mafia Wars or Farkle just like they’d pick up a deck of cards. There is an opportunity to bring back the entertainment we found in old NES titles that we see so lacking in today’s games. Maybe Justin can remind us who said it… “Hello there core gameplay”. The wording may be different and trendy, but it’s just a horse of a different color. Simple enough to be fun, but fun enough to not be simple.
Stephen
Oh, I see how these guys lost *more* value, by opensourcing the code. Well, we see how nicely *that* worked out for them. Why am I supposed to be grateful for something that is free? I’m not. Because it’s the usual technocommunist recipe for failure, and it means all my unpaid person hours on the collective farm is for nought, as the owners can’t hold value because…they give everything away, and then fail. Small wonder?
The website had frames. And it employed the usual medieval MMORPG memes of fighting, classes, knights, etc.
Gosh, I’m all for letting every single person influence the game. Then…I shouldn’t have been greeted with snark and even the sort of hate I see from you — so typical of the uncritical male fanboy – for pointing out that the game was worthless if you shared computers in your home.
Also…we see how well that whole opensourced thing worked out for them. The sad truth of games and worlds is that the publishers haven’t figured out how to make them both accountable and democratic, and profitable. And they always reach for the facile solutions to make them profitable because making them democratic takes longer — or isn’t profitable.
Truly, a deeper economic analysis should be made of the entire scene propped up by venture capitalists just trading these things around, or giant companies, buying them and then often killing them off. It’s not like other kinds of businesses that have to sell a widget or a subscription and work it up the old-fashioned way. The boomtown rushes of VC capital, and then their unseemly pressure on companies — but pressure that seems realistic given the goofy and irresponsible nature of the garage coders they often hook up with — all of this deserves criticism. And hey, it gets it in books like Julia Ingwin’s book on MySpace.
The same sort of critical journalistic study should be done on the gaming industry.
Morgan: no, it was $10k a month.
I had other people use my computer when I wasn’t playing, all you have to do is not log into the game of you want to avoid getting extra points.
Oh, and thanks for sharing this, I had wondered where it had gone to. Too bad, there were some great ideas in there.
@Prokofy Neva
you do realise that these VCs are basically gamblers who don’t really know what they are doing. certainly not the people you can sell the truth to. hence, the results you see everywhere.
now and again, they might get lucky as you do when you hit a jackpot but apart from that, no measure of market researching or capital will give them an advantage over you, ie. they are not wiser than those they invest in.
Oh, monthly, so $120K annually per employee. Understood.
@Prokofy: Economic analysis be damned, I think he made that point nicely in the post. However, I do get your point. I think I misinterpreted your comments as an overall lack of faith in the people, rather than a commentary on how the business seems to ruin ideas and people without second thought.
I’m no fanboy, I just can’t stand to kick a man when he’s down.
@Jah: Good to see you found a new home with a respectable bunch. Slip that old PMOG iPhone version into an Easter egg sometime.
[…] waiting to publish this article, Raphās put up a GDC session post that reinforces what Iāve been talking about. My take on Gamelayers, Inc. from his article […]
I’m reconsidering that reckless impulse to get off my lazy backside and start coding my own game. Money takes all the fun out of it. I guess that makes me a hedonosocialist or something.
Definitely important to have a very clear revenue stream as part of your seed round, raising money with the prospectus of raising more money just leads to this greater-fool bid that even in the best case leaves an entreprenuer with much less equity.
@Morgan: $120K annually is pretty accurate for almost anywhere in the USA save some of the huge cities, San Fran, Chicago, NY…
Everyone likes to think in terms of what they make when doing the math but the math is much larger than that. An $80K salary costs the company significantly more than that depending upon benefits. It’s not inconceivable that $120K equates to an $80K salary for the employee.
@Patrick
It’s not as simple as that without limiting your game design to something that can be done with a single round of funding. The size of the single round is also mostly determined by your regional investors because the chance of securing funding in Boston as a company in Austin decreases dramatically due to how VC/angel networks are about strong social ties more than solid business plans.
In San Fran, you might be able to raise a first round of $10M to build your game. You can’t do that in Louisville, KY where by some estimates, the entire VC market was only worth $20M for last year. If you need more than a few hundred thousand to build your game, then you are stuck raising multiple rounds of funding and the best you can do is manage the dilution that comes along with it to the best of your ability.
Seems high to me. Based on my private discussions with Raph, Scott Hartsman, and a several other founders, payroll burden for start-ups is typically estimated at 40% of payroll. 10 employees at $80K plus 40% burden comes to $1.12M, or $112K per employee.
@Morgan, that’s like a rounding error though. Close enough for a quick rule of thumb?
Eolirin: When you’re starting something, you need to start somewhere. Anything more accurate and you’re just wasting time. Budgets can be adjusted with real numbers as you move forward. I just think $120K per employee is a bit too high. Just a bit though! With 10 employees, that’s $80K that isn’t allotted elsewhere. That extra slack can add up.
Derek: Before when I asked about whether the $10K number was supposed to be $100K, the $10K number had confused me because “monthly” is nowhere in the liveblog. I assumed yearly and $10K/year per employee just doesn’t make any sense in the U.S.
@Morgan – Agreed that it was confusing. $10K is crazy cheap to the point of where can I get some cheap. $10K per month could be a bit on the high side. It all depends upon your local taxes, the general health of your new employees and their age against what you’re paying for health care and other benefits. We’re splitting hairs at this point because the total number will vary by region.
This was my favorite session at GDC. Thank you, Justin, for explaining what you did and may have done wrong.
I believe it is 10k per month. It is most likely impossible to have 10k per month in US. Even the smallest rate earner would get more than 10k a year.
[…] rapidly up to a dozen-plus employees to build an innovative browser-based MMO. Raph koster has a detailed write-up of Justin’s rant. Paul Bettner, formerly of Ensemble Studios, spoke about the decline and […]