Angel investor and executive Peter Relan is deeply immersed in the mobile industry and social games.
He runs the YouWeb incubator, which focuses on social gaming, and is the executive chairman of several other companies in the space, including AuroraFeint, which Japanese mobile gaming company GREE bought for $104 million earlier this year, and Sibblingz, which is building a system for developers to create social games that work on multiple mobile phone platforms.
Although he’s focused on cutting-edge business areas, Relan is no youngster. He has been in the Valley since 1983, and got his start at enterprise stalwarts HP and Oracle before co-founding dot-com poster child Webvan.
We had a couple conversations with Relan recently, where we asked him about the latest trends in mobile and social networking, and the startup scene in Silicon Valley.
Here’s some of what he told us:
- Facebook will have a hard time dominating mobile. “The difference between Facebook and mobile, is Facebook is a stumble upon platform….It’s not a destination play, because the destination from a Facebook perspective is, ‘What’s going on with my friends?’ not ‘let me get a daily deal.’ I think whether they like it or not, Facebook is an entertainment platform.”
- Facebook can’t built its own phone like Amazon can. “For them [Amazon], it was an extension of their Kindle strategy — they have a brand, they have an experience, they sell digital media with books and music. [Second], to do any kind of mobile strategy, you have to know how to run an app store. Which is the most capable company in the world today, capable of running a store on the Internet? Amazon. It may not be an app store but it’s still a store. It’s a store which has promotion, featuring, merchandising, pricing, all the stuff you need to run a store. Facebook has neither.”
- Android is the only way Google+ will become relevant. “I think that the only way Google+ will take off is on Android, not on the web. They’re 5 or 6 years behind on the PC web, so you can only catch up when you’re that far behind if there’s a platform inflection….Is Google+ or Android the tide? Android. What is the boat? Google+.”
- Y Combinator and DST have created a “factory” approach to investing that will shake out a lot of angels. “It’s one thing if Y Combinator had remained small but it happened around the time YC graduated close to 100 companies per class. 100 every month getting guaranteed access to 150K is the factory approach. I think that it’s probably fine, because it still will find those 5 or 10 jewels….I think it’s already impacted the VC early stagers. Now you’re going to see it impact the angels.”
Here are some excerpts from our conversations, lightly edited.
Business Insider: What trends are you following now?
Peter Relan: By the nature of the focus of my incubator, I’m always following social gaming. I think mobile gaming is now more on my radar than ever before. Location based games are becoming big, there are some ramifications for non-gaming problems. There was something where a bunch of gamers cracked a structure of an enzyme for the AIDS virus. The scientists created a game and put it out there and within 3 weeks, it was cracked. That’s kind of my core, mobile, location based and gamification are big themes.
HTML5, watching that space closely. I think there’s a lot there.
Global implementation of Silicon Valley innovation is happening. You’re going to see that a lot faster. The Twitter of China and India, these things are going to happen so fast because the barriers are low.
I’m still interested in interactive TV, waiting for Apple TV to come out. Google TV looks like it’s not happening. I’m cautious of that but I am interested.
Education is ready for a pretty big revolution. Online education entertainment in a big space will change.
On the social front, I think it’s hard to see any disruptive players in the near term, everyone is talking about social commerce, it’s been done with the Groupon thing. I haven’t personally seen anything that was breakthrough. It’s like utility meets entertainment, which hasn’t worked in the past.
BI: Do you think HTML5 is going to be the future, and if so, what does it mean for Apple and the other incumbents?
PR: I think that if you look at the value of Apple’s app store, it’s curated, and it offers pretty good discount rates. For Apple, there’s probably a little more time than, let’s say, Google. For games, which are a huge portion of the downloads on app stores, I think that’s still a viable channel. HTML5 based games don’t have the performance today on mobile. This Christmas holiday season, it’s still a native app season. By next holiday season, you should see HTML5 in a number of categories. I think there’s a good year ahead, but there will be a crossover here. 2013 could be the year of HTML5.
BI: What do you think of what Facebook is doing with their new platform?
PR: The question really is, do people want to do everything inside the Facebook HTML5 app? Facebook is a stumble upon platform. Users are thinking “hang out with my friends,” and in that experience you see game feed or content, and you become engaged….I think whether they like it or not, Facebook is an entertainment platform. Will there be a large category of apps outside of Facebook, in cross platform? Of course. The biggest area which will be interesting, is communication. Facebook as a communication platform. Do you go to Skype as an app on mobile, or something like a chat app? Or Apple Facetime? This will be hotly contested.
BI: What do you think is going on between Facebook and Apple? It almost seemed like Facebook launched their mobile app platform with Apple’s total cooperation. Was that Facebook backing down?
PR: Remember that originally there were rumours that the iPad app would launch at the [iPhone 4S] event. That didn’t happen. I think Facebook’s having to play really nice with Apple right now. They’re having to. Facebook as a company is built on the open Web. But on mobile, it’s not that way. Their fiercest competitor is Google, which controls one platform, Android. And then they have Apple, which has deep integration with Twitter, and to some extent there’s been competitive issues between Twitter and Facebook….So I think Facebook in mobile is challenged and they’re having to play nice. Between Android and iOS, I’d say iOS is friendlier, simply because it’s not Google.
But while it’s friendlier than Android, that’s like choosing the lesser of two evils.
BI: Do you think Facebook has to do what Amazon did, take a fork of Android and build their own entirely new mobile platform? A Facebook phone with all Facebook apps?
PR: [Amazon] is already in the business of the Kindle tablet. So for them, it was an extension of their Kindle strategy — they have a brand, they have an experience, they sell digital media with books and music.
The second is, to do any kind of mobile strategy, you have to know how to run an app store. Which is the most capable company in the world today, capable of running a store on the Internet? Amazon. It may not be an app store but it’s still a store. It’s a store which has promotion, featuring, merchandising, pricing, all the stuff you need to run a store.
Facebook has neither….Mobile is going to be a long marathon for Facebook. Their approach will not be to go into the phone business, but to fundamentally weave themselves into the infrastructure of these two operating systems over a long period of time.
BI: Do you think Apple could get more out of Facebook? They tried to launch Ping, their social network for music, and it went nowhere.
PR: Apple in terms of deep integration has clearly chosen Twitter. My opinion is it’s logical. Here’s why. First of all, 50% of all tweets occur from a mobile phone now. I would be surprised if 50% of all Facebook activity occurs from a mobile phone. A good chunk of it does, but the bulk of it is not from a mobile phone.
BI: What do you think of what Microsoft is doing?
PR: It’s a solid number three and possibly number two. Android as a phone unit is selling in large quantities, but as a monetizable app store on a phone….If next year, they can truly get it going or even this holiday season and leverage Windows 8 from PC to tablet to mobile, like Apple has done, they might be a number two.
BI: If I’m a small developer, what’s your advice? What platform do I target, and what should my resource allocation be for the next one to two years?
BI: What do you think of what Google is doing in social?
PR: I think that the only way Google+ will take off is on Android, not on the web. They’re 5 or 6 years behind on the PC web, so you can only catch up when you’re that far behind if there’s a platform inflection….Is Google + or Android the tide? Android. What is the boat? Google+. It’s very clear what the tide and the boat is. When you control the platform, you can bake a social network in. Will Facebook be on Android? Of course. Can Google counter that with certain things?….It’s a pretty big war, so lets see what happens. Facebook will come at it from the HTML5 angle, while Google could come from the app store angle.
BI: What do you think about what Zynga announced the other day? It sounds like they were going to announce a social gaming network, then they got a little cagey.
PR: To me they did three things. They’re trying to IPO — I certainly hope they do, it’d be great for the overall market. One was, second quarter they had lower bookings growth, a flattening of their overall bookings. If I was in their shoes, I’d say “we’ve only launched one or two games this year, and here’s our full pipeline, and look at how many games we have in our pipeline” — they announced 10 games yesterday. Bookings will grow again….Like any entertainment business, if it’s movies, if you don’t have movie launches you don’t make money. So I think they addressed that and nailed that in terms of investor interest.
The second one is, a lot of people have said they’re too dependent on the Facebook platform. They did a good shot by announcing the Zynga network and Project Z, we’ll have our own destination, a place where you can play your own games, you won’t need to play in Facebook. That was a pretty good shot, the jury’s out on that, whether that works. Social gaming so far hasn’t been a destination gaming. I call it stumble-upon gaming. When you do social games, there’s a reason why social precedes gaming. You’ve got to go to Facebook, hang out with your friends, then you get reminded in that social context, either through bookmarks, or through a news item, or through a request, to play that game. So the question is, can the user’s psychology be transformed to turn these semi-casual games into destination games. Traditionally, destination games have been hardcore games that you play on a console or a hardcore PC, World of Warcraft or Halo, these are games they don’t need a social context to drive them — people line up on launch day to buy DVDs….If they can pull that off, they will have mitigated their Facebook dependence dramatically. This is why they were being cagey — it’s an unproven thing, but I think it’s a pretty good shot….There’s no question they won’t get the entire audience, so they’re still saying they’ll support Facebook Connect.
The third one is the hottest growth area for social games is mobile. They had a couple of games but nothing big. So obviously they announced HTML5 games, which are targeted toward mobile. I think that is experimental. I don’t think that has the same seriousness to it that Castleville and Project Z have.
BI: So if you’re a developer and want to add social features to gaming, what’s the strategy?
PR: The social APIs are a small part of the game, it’s nowhere near as big a problem of building a native iOS, Android, or Windows game. Go with the winner, it’s not as big of a deal as people think.
BI: So if you’re making a social app, you think going with Facebook makes most sense?
PR: I think in mobile, it’s not clear going with Facebook makes the most sense. A huge addressable market in mobile is under 13. Something like 50% of activated devices, or people who download, are iPod Touches. By law, these people can’t even open Facebook accounts. Mobile gaming has taken off without Facebook.
BI: So what do you think of the startup scene today? Are too many companies getting too much early stage funding?
PR: I think that it’s pretty flush. When Yuri Milner and DST offered 150K to every company, we entered uncharted territory. It’s one thing if Y Combinator had remained small but it happened around the time YC graduated close to 100 companies per class. 100 every month getting guaranteed access to 150K is the factory approach. I think that it’s probably fine, because it still will find those 5 or 10 jewels….It’s basically like a scalable gold mine for DST, but culturally for the Valley, it de-emphasises the value of an angel. The true effects of that have yet to be seen.
BI: When is there going to be a shakeout in the companies and investment community?
PR: I think it’s already impacted the VC early stagers. Now you’re going to see it impact the angels. It’s industrializing VC investing, it’s all becoming factory. Look at YouWeb, I don’t take business plans. I only invest in a raw entrepreneur, a great developer. I feel relatively comfortable with YouWeb that’s not what Yuri Milner and YC are investing in. The bulk of early stage investors, are investing in ideas in startups. I feel completely unthreatened because I invest in entrepreneurs, not the startup.
BI: How do you pick them?
PR: It’s everything. I have specific criteria…you can’t have done a successful startup. You’re a brilliant developer, a few years out of college. I have them read books on business, biographies on Ellison, Jobs, Gates, et cetera, then write essays. It takes three to six months to get through the process. Hundreds of applicants and a lot come with ideas, occasionally someone will say, I don’t know what I’m doing but I’m smart and want to start a company. Once you whittle it down to 20 to 30 people, 10% make it. A lot of guys don’t have persistence to read and write. By the time we have somebody here, I feel I know this person so I’m willing to spend next few years building a company with them. YC it’s easy come, easy go.
Business Insider Emails & Alerts
Site highlights each day to your inbox.