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App Developer Conversations – What the Popcap layoffs mean to the games industry

Robi Ganguly  //  August 25, 2012  //  6 min read

In this week’s App Developer Conversations with Ian Sefferman of MobileDevHQ and Ryan Morel of PlacePlay we discussed Popcap’s announcement this week that they’ll be laying off ~50 people. The net of the conversation is that the move to mobile and social games is happening much faster than even the most sophisticated of companies can anticipate. Watch to find out more and be sure to see the other two videos from this week:

We hope you enjoy this series – please let us know in the comments about future topics you might want to hear about and if you have anything to add to the discussion!

The Transcript
Robi: Hello. Welcome to App Developer Conversations. I’m here with Ryan
Morel, CEO of PlacePlay, and Ian Sefferman, CEO of MobileDevHQ, and I’m
Robi Ganguly from Apptentive. Let’s just jump into it.

This week, PopCap announced that they’re going to be laying off about 50
people here in North America and that they’re going to be evaluating their
operation in Dublin. In talking about it in his blog post, the CEO of
PopCap stated that the reason for it was that the move, to quote him, “was
that in the past year, we’ve seen a dramatic change in the way people play
and pay for games. Free-to-play, social, and mobile games have exploded in
popularity. It happened fast, surprisingly so.” So, they were shocked. They
had to do some reduction in force really quickly because of this move.
Let’s discuss what this means for mobile apps in general.

Ryan: I think it’s probably a proxy for what’s going on in the rest of what
we call “the traditional publisher world.” We saw this a little bit in
mobile when we moved from the carrier distribution model to smart phones,
where the big guys were slow, like glue, had big problems. This is probably
happening on a much greater scale with people like EA, Activision, etc.,
because their business is set up to build these huge multimillion dollar
franchises that take two years.

Now you’re presented with a market that favors much smaller, faster,
cheaper, lower quality titles that need to be pumped out in three to nine
months. How do you restructure your entire business not only from a
development perspective, but also from a distribution, marketing, and
monetization perspective? That’s obviously really difficult, and just
speaking for myself, I was really surprised by PopCap being really honest
about this, simply because we always assumed they’re doing so well. This
doesn’t mean that they’re not, but it means that they’re seeing changes
affecting their business in a negative way.

Ian: I would actually go so far as to say that this isn’t necessarily only
to gain publishers, and that kind of thing. This is actually pretty
widespread in the start-up community. We talk a lot about how start-ups now
just simply take less capital. You can get more things done quicker, and
that can hurt a lot of incumbents very fast. So, it’s not necessarily just
a games publisher thing. I think it’s more, this is how technology is
progressing, and it’s becoming cheaper, and quicker, and easier to fund,
and easier to build. A hit isn’t as big of a hit anymore. It’s no longer
that you’re going to get $100 million dollar franchise out of something.
You might get a $10 million dollar franchise out of something. So, I think
that’s interesting as well.

Robi: I think something that strikes me about this is just the fact that
the business cycle is really speeding up. We’ve seen changes in the games
industry. Typically, companies know in advance that their business is
deteriorating, and if they’re going to do layoffs, oftentimes they do it in
the form of stopping hiring. They might have 50 open heads, and they end up
saying, “Okay, our business is changing, so we’re going to cut it to 25
open heads.”

But the fact that they had to actively say, “This portion of our company
was good a year ago, when we had these plans, and now it’s not and we have
to lay people off,” says to me, “Wow, it’s moving so fast that a
sophisticated company like PopCap, that’s historically been really well
managed, was caught off guard.” That’s a little bit scary.

Ryan: Yeah. I think to your point, you see different variations of this.
We’ve seen it recently with Nokia saying they’re going to lay off X
thousands of people by 2014. Being in a small company, you look at that and
go, “What are you talking about? If you need to lay these people off, you
do it today.” I think to both of your points, it’s interesting to see how
these big established business approach things very differently than start-
ups do, especially in the scenario where start-ups are part of the reason
why they’re getting crushed.

The iPhone, obviously, is the big driver behind Nokia’s issues, but you
could make a pretty valid argument, potentially, that what really is
hurting Nokia is the fact that Apple has thousands of developers building
apps for them and keeping that ecosystem really strong, and that’s hurting
Nokia just as much. I think that’s an interesting point.

Ian: I think another thing that I see coming out of this is that when you,
typically, are an established game company with a big brand and lots of
distribution, like selling boxes into Wal-Mart, for example, there are only
a few companies in the world that really do that successfully. Pop-Cap is
there.

The fact that they’re feeling like the assets that they had to communicate
to people, to distribute their copies of the game, are not actually assets
anymore, that they’re not successfully maintaining that businesses, says a
lot about the fragmentation of people’s attention to games. Being a PopCap
doesn’t mean what it used to mean.

Ryan: I think that’s exactly right. Distribution used to be a competitive
advantage to PopCap. No longer, because distribution is totally
democratized by Apple and by Google.

Robi: Yeah. Although, and you guys help solve this problem in particular,
the advantages of distribution in the App Store are varied. It’s a black
box in many ways. What would you advise if you were to sit down with PopCap
and say, “Clearly, you’re moving to mobile. You’ve got to be thinking more
about how to create advantages in this new world of distribution. How would
you go about that?”

Ian: I think there’s a lot to be said to actually putting together the paid
side and the organic side in order to do well within the app store. So, in
rankings, in search, driving people from ads elsewhere, from other apps. I
think the more you look at app distribution, the more you have to be
sophisticated and really think of a multichannel approach, and that
multichannel approach makes every channel better.

Ryan: This kind of [delves] into our conversation from last week about
Zynga. I think what we’re going to see is similar to what Zynga’s doing,
where companies are going to try to do manage their customer relationships
and those engagements a little bit differently than they have been today. A
year ago, everyone was relying on OpenFeint to create these faux-
communities. Now people use Game Center. But those aren’t engagement
solutions, and they don’t allow PopCap to have one-to-one interactions,
like something that you guys do.

Ian: Yeah. It’s totally what we’re trying to enable, because we think this
fragmentation’s a huge problem, and if you don’t have a relationship with
the end-consumer, if you’re used to distribution being something you can
count on, and that moves away from you because the app store is not
featuring you anymore, for example, if you don’t have that ability to talk
to somebody, you’re dead in the water, it seems like.

Ryan: Yep. There are a series of articles on our blog right now about
engaging consumers via social media. The guy ha we talked to has done a
fantastic job with community marketing, and it’s really interesting to hear
him talk about how companies should be stepping back from marketing a
feature, and talk more about, “We’re going to create this emotional
connection, and we’re part of your life,” community marketing stuff.

I think we’re going to see more of that as companies realize, “Hey, me just
putting out this content, and relying on this black box of distribution
isn’t good enough. I really need to own this customer engagement, and this
customer interaction.” I think that’s going to be really interesting.

Robi: Any last words on this topic?

Ian: No. I think it’s super interesting. We’ll see how it plays out. My
thoughts certainly go with the people who got laid off. I have a feeling
that they’ll be totally fine and will be able to find great work, and I
look forward to seeing what PopCap does. I think they’re really
interesting, ultimately.

Ryan: I’d echo that.

Robi: Yeah, definitely the folks who have been laid off, thoughts to those
guys. Thanks for joining us. Be sure to check out the other videos we’ve
got coming today.

Ian: Let’s start out with an example. I think that the biggest and best
example right now is probably Uber, where they are a sole mobile play, but
everything that they do is based in the offline world, based in getting
around, going places, where they’re driving .

About Robi Ganguly

Robi Ganguly is the Co-founder and CEO at Apptentive. He is passionate about giving customers a voice via mobile. Follow Robi on Twitter @rganguly.
View all posts by Robi Ganguly >

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