Like Facebook’s Mark Zuckerberg, Yoshikazu Tanaka became a self-made billionaire after he started a social networking site.Tanaka heard about Friendster in 2003. He wanted to create a social network like Friendster in Japan, so he coded the first version of what is now GREE out of his Tokyo apartment.
GREE began as a hobby while he was working at an eBay-like commerce company called Rakuten. Tanaka was paying out of pocket to run the service until he had too many users — so he decided to start a company to support its growth.
But Tanaka wants a billion users, so he’s expanding the company worldwide.
Today, GREE announced its investment in IUGO Mobile Entertainment, a Canadian based gaming studio, that fits into his plans for expanding into North America. GREE also bought U.S. social gaming platform OpenFeint for more than $100 million last year.
We sat down with Tanaka in the company’s San Francisco office, which just opened this month. Here’s some of what we learned.
- He bet five years ago that mobile gaming would be bigger than PCs or game consoles. He was right, and now one-third of all people in Japan have his app on their phone.
- Japanese tech companies are smaller, but more creative. As Tanaka said [through an interpreter]: “Japanese companies are smaller. We value creativity. We can compete with bigger companies like Microsoft and Apple, which have a ton of people. So we play to our strengths of being creative.”
- As a kid, he was addicted to playing games on the Nintendo NES. (It was marketed as the Famicom, or Family Computer, in Japan.) “From morning to night after parents bought it. When my parents were asleep, I’d start again. My family used to think I was wasting time. But I had a passion and dedication to games, that’s why I’ve been so successful.”
- What makes a good video game addictive: “I feel a sense of accomplishment drives people. A great thing about gaming is that you can work really hard and see success. It makes it worth it. In the real world, even if you work really hard, you can fail.”
- His favourite movie. Cinema Paradiso. (Read on to find out why….)
Here’s a lightly edited transcript of our conversation, which was conducted through an interpreter.
Business Insider: The office is nice. Is this your first time seeing the office?
Yoshikazu Tanaka: Yes, yesterday was my first time seeing this office.
The office is starting to look like the Tokyo office. We value the white and the glass — you know that modern clean look. It’s like Sony, Nintendo and Apple — and has that cool vibe. The games we make are fun and colourful and fun. We want the clean image in the office.
We have 200 employees at the San Francisco office. And 1400 employees worldwide.
BI: What have you had to sacrifice to build your company?
YT: I’m 35. I haven’t had a personal life.
And I’m not married either. So I’ve had to sacrifice that as well.
BI: By 35, are men expected to be married in Japan?
YT: Most of my friends are mostly married.
That’s a complete joke. The marriage thing is a joke, don’t take it too seriously.
I don’t have too much personal time, I’m dedicated to growing the business internationally.
BI: What difficult decisions have you had to make in building the company?
YT: Originally, about 8 years ago I did this as a hobby out of my apartment. At the time, there was a huge service in the US called Friendster and I wanted to have it in Japan. That was my inspiration. I was doing it by myself and had 100,000 users. Because it was a hobby, I was paying out of pocket for the server.
And of course I didn’t have a lot of money so my savings went to the business. I had two directions, quit the business because I didn’t have money or quit my job and focus on growing a company. Because I had a 100,000 users, there was no way I would just give up. So I focused on making it a success.
I was really worried about creating my own business. I never had experience.
I was really nervous about pulling in my co-founder Kotaro Yamagishi, who was editor of CNET Networks in Japan. I felt really nervous. He had much success at CNET. To suddenly start this business and not know the direction [was risky]. I felt really bad, I couldn’t ask him.
He said, if you are going to start a company, I’ll join you. We were friends from university.
I honestly don’t think this company would have existed if he hadn’t approached me.
After him, I decided to invite my other friends and other successful people. The next person, our CTO, is a famous engineer in Japan. I paid for his dinner and said, you have to join my company.
BI: Everyone wants to be the next Mark Zuckerberg and wants to create the next social network and gaming company. What advice to you have for those entrepreneurs?
YT: I think the number one advice I can give is — you just have to start it. Just get your feet in the water and do it. I learned a lot from just trying it out.
I really believe in a good team. Originally, when the company started out, it was a PC social network. Now we are a social gaming network. There’s a lot of change that happened and I learned from that.
I foresee mobile growing a lot. As a proof point, five years ago, I knew the mobile wave was coming and changed my strategy.
In order to create new services and be successful, you have to look ahead and look into the future. I knew the PC era would be over and mobile would come next.
BI: What about Facebook’s acquisition of Instagram?
YT: They have a lot of money and acquired a good company. I’d do the same thing.
BI: Well, you did. You bought OpenFeint for $100 million.
YT: [Laughs]. That’s 10 times!
Creating a good product is a good goal. Generating revenue is important — after all, we are building a business. We’ve grown a lot. In the last two years, we’ve been more financially flexible.
We’ve invested into 10 companies in China, Japan, and the Asia area. We are definitely focusing on the North America and Canada area for investments. I really think it’s a good opportunity now to invest in a Canadian game developer and co-develop games with them.
BI: How do you position against Zynga and Facebook?
YT: If I explain to you what’s happening in Japan, GREE is growing. Facebook is also growing. Each social network has its own niche market and they can co-exist. We do see Facebook growing. However, we don’t think it is an ideal space for games.
Facebook is really not a pure platform for games, there’s a hole in the industry that needs to be filled.
Zynga heavily relies on the Facebook platform. In terms of that, Zynga hasn’t grown as a platform. They are creating it right now.
In terms of mobile, Japan is at the core of that. The mobile industry is a lot larger than the console market. That change, we’ve seen over the last 3 to 5 years. If I said something like that 3 years ago, nobody would have believed me.
BI: Why do you like the gaming business?
YT: We think being creative is very important in the gaming business. And going to my point about creativity, Japanese companies are smaller. We value creativity. We can compete with bigger companies like Microsoft and Apple, which have a ton of people. So we play to our strengths of being creative.
BI: Are most of the games developed in-house?
YT: In Japan we have 1,000 games, 30 of them are in-house —- everything else was made by third party developers. We’ve partnered with Sega and other gaming companies. For the most part in Japan, their leading titles are on mobile through us. For example, a popular game is Biohazard — which is known as Resident Evil here in the states.
BI: Are you the kind of guy that played a lot of videos games growing up?
YT: I used to play on Famicom entertainment system at lot in the first grade. From morning to night after parents bought it. When my parents were asleep, I’d start again.
My family used to think I was wasting time. But I had a passion and dedication to games, that’s why I’ve been so successful.
BI: But on a society level, how does it make you feel to make games that are addictive? Do you think there’s a downside to this?
YT: I’m also told that when I’m working, I shouldn’t be playing games. But it is our lifeline here. Some people get inspired by games. Some people might find it a waste of time.
My favourite movie is Cinema Paradiso. It’s an Italian movie. It’s about a boy who used to watch movies and he grew up and became a movie director. He was inspired by all the movies. He created scenes because he could draw inspiration from movies he had seen. I think that because I grew up playing so many games, now when I check out a game, I know what a game lacks and what I should change.
BI: What does a game need to feel addictive?
YT: I feel a sense of accomplishment drives people. A great thing about gaming is that you can work really hard and see success. It makes it worth it.
In the real world, even if you work really hard, you can fail.
But I think I can get inspired and learn by playing a game. I can work hard at a game and succeed. There’s a lot of things about building a company that I have learned from my gaming success. If I work hard, some day I will see that success.
BI: What are some things you haven’t achieved that are important to you?
YT: A third of the population in Japan uses my app. It’s on feature phones and smartphones including iPhone and Android.
One of my biggest goals is to have as many users around the world using our services.
I was reading a Wired magazine about Netscape and Yahoo. It was like at the end of high school/early college years. I really surprised that all these young people could change the industry and the world.
Just like looking up to a favourite musician, I looked up to the companies like Yahoo! and Netscape, and wanted to create something that could change the world. It is my life long dream to create something everyone would use.
BI: Who plays your games?
YT: Right now, we are seeing the division between men and women in Japan. Most of them are in their 20s and 30s. We are seeing a lot of growth in the 40 plus market.
BI: What motivates you?
YT: Companies that are changing the world still exist right now. So my primary objective is to make the world a better place and connect all these people.
BI: Why is connecting people so important?
YT: I remember when there was no email and social networks. It’s a great feeling for me. I used to play games on my own, now people are picking up their smartphones and playing with their friends. That hopefully will not just be a trend and will become mainstream.
With smartphones, it’s a different trend. Seeing a lot more adoption in shipments around the world. You know the barrier to entry is not as expensive to purchase [compared to consoles]. If we can exceed that number and connect one billion users, that would be a huge accomplishment.
BI: Do you play games every day?
Not so much everyday anymore. I like creating these games more than I like playing them. I feel a lot more sense of accomplishment when I see people playing the games.
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