Hey parents: you may be annoyed that your kid whips out his Nintendo 3DS at every opportunity, but you never know if that obsession with gaming is going to turn into a million-dollar payday.
That’s exactly what happened with Jason Citron, the 26-year-old CEO and creator of OpenFeint, a mobile platform for social gaming. Last month, he sold the company to Japanese mobile game maker GREE for a whopping $104 million.
Citron says he was obsessed with mobile games since getting a Nintendo DES at the age of five, and credits his parents for not limiting the amount of time he spent with it — as long as he finished his homework first, they didn’t care if he played video games instead of going outside.
Citron also shared some other amazing stories from his two-year journey from tiny startup to hundred million dollar payday:
- A great bluff: Aurora Feint, the predecessor to OpenFeint, had made a couple of unprofitable but well-reviewed iOS games and was running out of money. Citron floated the idea for OpenFeint in a brainstorming session. He and his partners put up a Web site, got TechCrunch to cover it, and were suddenly inundated with requests. They spent the next 45 days building the product.
- The importance of an incubator: Citron is a programmer first — not a business type. But he managed to get into the YouWeb incubator, which helped him with tasks like hiring, marketing, and legal while he got the company off the ground.
- The funding game. Citron doesn’t think there’s a bubble, but he notes that two years ago it was almost impossible to land a startup round. Now, it’s almost too easy.
Here’s a transcript of the interview, lightly edited for length.
Business Insider: You’re 26 years old, right?
Jason Citron: Yep, yep.
BI: Tell me a little bit about your background. When did you get into gaming and start programming?
JC: I got into gaming when I was five years old, my parents got me an NES and that was the beginning of the end of everything. Got into programming…. I must’ve been 12 or 13 and at my first sleepover party, my friend taught me how to program in Qbasic. We stayed up after everyone else went to sleep and made a text adventure video game. That was a long time ago.
BI: What was the computer? Early Windows PC?
JC: Probably a Pentium One, 80 Mhz processor on Windows 95 or 98.
BI: Did your parents limit your NES access?
JC: You know, they really didn’t. A lot of my friends’ [parents] would do it. They’d say “you have to go out and play in the pool now.” We’d always begrudgingly go into it but my parents never limited my video game time. They just said to do my homework first, then whatever.
BI: So OpenFeint started by building an iPhone app, right? And that was a single player app at first?
JC: Actually it was a single player game, but it had high scores in it. The vision of the app the whole time was kind of like World of Warcraft but in your pocket. We started with what amounted to a single player puzzle game but with leaderboards..
BI: When did you pivot to making more of a general purpose platform? How did you make that decision?
JC: We launched the second game, which was a massively asynchronous multiplayer game for iPhone and we had inside the game walls, profiles, chat rooms, buddy lists, ghost battling, asynchronous multiplayer, all this stuff. And the game was a lot of fun but we launched it at eight dollars which was a lot of money for an iPhone game. Prices were just coming down and everyone was realising that it was going to become a 99 cent world. So we launched this game and it was doing alright, but after that first month or so, we realised it wasn’t going to be a very profitable business. So we started looking around and thinking about what we’re going to try.
We tried a casual version of it where we took out a lot of features and launched it for a buck, and it did OK.
We were about to run out of money–we were maybe four people at the time–and just sitting around thinking “this sucks, what do we do?”
So I made this off the wall comment that was like “nobody built Xbox Live on this thing yet. I wonder if we can take some of our chat and video board stuff and spin it into an Xbox Live for iPhone? That sounds like a lot of work, but maybe I wonder if it would work. Let’s just announce it and see if people would want it.”
We literally did an announcement, got TechCrunch to cover it, put up a sign up form, and had about 400 developers sign up overnight! We said “oh crap, this is going to be big.”
I personally spent the next 45 days programming and my team members went out and tried to recruit developers. We launched OpenFeint at the end of March, with 30 games from 15 developers, and the rest is history I guess.
BI: This is March of 2009?
JC: Yeah, it was two years ago.
BI: So as you worked on this product for 45 days, you must’ve been looking to hire pretty fast as well, right? How did you manage that?
JC: Back then, we weren’t really hiring. It was seriously heads down “crank out” mode. We were four or five when we launched, and then we went into hiring mode and hired a couple of people, got to about eight or nine that summer, maybe fifteen around Christmas, and now we’re 60.
BI: And you got some investments from Intel Capital and some other folks right?
JC: Yes we did. We got a round at the end of 09 from DNA, and then in 2010 we got from Intel and The9.
BI: Were you always focusing on the programming and product features, or did there come a time when you had to focus more on some of these business aspects like hiring and legal and funding? How did that work for you?
JC: I focused a lot on programming in the early days. I started working out of an incubator called YouWeb. They did Crowdstar which is a big social game company, and iSwifter which is a streaming Flash game service for iPad, and most recently SpacePort which is a cross platform HTML 5 game engine which runs with native performance.
Anyway, so I started at YouWeb. The model there is that they bring in an entrepreneur, usually a developer, and give them a year to try and start a company. During that time, the incubator provides a lot of the support for things like legal, and business advice. So the first year of the company, YouWeb guys, mainly Peter Relan, the found of YouWeb, really acted as a hands-on mentor and advisor for me helping with hiring, marketing, business issues, sales and all that stuff.
At some point I transitioned into CEO a little after we launched OpenFeint. So for almost two years now, I really haven’t been programming.
BI: Do you think the acquisition is going to allow you to get back to programming? Was that a goal?
JC: No, I don’t think it’s a goal. Maybe on the weekend sometimes I’ll write some code and my programmers will not let me check it in.
BI: One big question for mobile developers is how to promote their apps. What’s your take on the best way for app promotion? What do you think of Apple’s recent move to block some of the incentivized app promotions like they did with Tapjoy?
JC: Well, I’ll give you the OpenFeint CEO answer first. We have something called Game Channel which we use to promote apps every day. We’ve driven up to two million downloads over the course of a couple days.
The basic idea is that a developer will come to us and say they want to promote their game, and we’ll do some kind of discount on the game, so he’ll either make it free for the day, or drop the price after enough people to vote on it (like with a Groupon mechanic), or we have an app where users can come check it out and we promote it through our network. And if enough people download it it’ll go up the charts and everybody’s happy. We do that, and there are a couple other services that do a similar style promotion.
If you use OpenFeint, there’s organic cross-promotion you can get just for people playing your game and seeing your game in a chat room.
I think the trouble with the Apple ecosystem right now is that there’s no really slam-dunk way to promote any app. If you come to Game Channel with an app that’s not so great, it’s not going to get a ton of downloads, so you still have to build quality content. I think the incentivized API model was the only way that you could be guaranteed to get tons of downloads for your app even if it wasn’t so good.
I think that Apple didn’t like that. They’re very much about having a high quality app store where people can come and find great content. The notion that you could buy app slot number 2 even if your game didn’t deserve it is fundamentally questionable. I can understand why Apple changed the rankings and did what they did. Making the changes is probably good, but obviously not so good for the companies that were involved in it but they’ll evolve.
BI: I’ve been hearing Android developers complaining a lot about discoverability in the Android Market. Do you think that’s a problem, and if you think so, what would you suggest Google do to make the Android Market better for developers?
JC: What we’re seeing as far as discoverability goes is that it’s very much like iPhone. Tons of downloads on the free side. Paid games get much less activity. The problem though is that there isn’t a great way to monetise the free game.
I think that to make the Market better, Google needs to focus more on its billing infrastructure. I think that Google Checkout, while a great idea and a good effort, falls short in a number of areas because people don’t necessarily like whipping out their credit cards so there’s a lot of friction in purchasing. And then in-app purchases as well has a done of friction and in many places doesn’t even work. Google needs to fix its billing infrastructure. That’s the most important thing.
BI: Right now you support iPhone and Android right? How do you decide which other platforms to support?
JC: Not exactly: we have an initiative called “OS Connect” which lets developers use OpenFeint from any platform as long as it has an internet connection. If you wanted to make a leaderboard for your toaster, you could do it if it has an internet connection.
The way that we approach the market is that we build native SDKs for platforms that our developers really want to use, so we’ll build a lot of deep functionality for iPhone, iPad, and Android tablets. And then for all the other platforms that a couple developers want but aren’t as popular, we have Connect. So as new platforms gain traction, and I think there will be at least one or two more, we will move to that platform and build deep native experiences for them as well.
BI: Who are those one or two more? Who do you handicap as a competitor?
JC: I think it could be Windows Phone 7. I think they have a shot. It could be WebOS, particularly on the tablet market. I think that HP has such tremendous distribution power around the PC market that they can just leverage that channel for tablets. Smartphones too, but definitely on tablets. I love the WebOS product itself, it’s a beautiful operating system. Those are probably the two big ones up next would be my guess.
BI: Do you think that for gaming, native apps are a requirement? Or do you think that we’re moving towards a future where everything is HTML 5 and it all works cross platform and people gradually move off native development?
So you’re not going to get games like super top-end first person shooters written in HTML 5 technology or something like Infinity Blade on iOS. That’s never going to show up on HTML 5. But most games that you play on your phone don’t really push the processor. HTML 5 for casual games is probably a year or two years away, because you need penetration of the technologies and maybe iOS 5 will have it. But no smartphone right now really has these technologies. I mentioned in passing, SpacePort, the YouWeb company that has a very interesting hybrid technology that solves this problem by basically taking WebGL.
BI: Chrome supports WebGL — what do you think about Chrome as a platform? Do you think that Chrome is going to move forward, or die and get sucked into Android?
JC: I really don’t know. I think that Google’s whole angle to build two operating systems for two devices that are going to converge at some point smells like a big company move. We have so many resources we’ll do two operating systems! I think that Chrome might be a much longer-term play for a full cloud-based device whereas Android is really about a native operation system for devices that have apps. So to the extent that the “cloud” moves mainstream more than it is today, maybe in five years, maybe all of a sudden Chrome OS will be like this stroke of genius and Google will be like “aha we told you so!” But in the short term, next one to three years at least, I can’t imagine Chrome OS having much traction.
BI: How long are you going to stick around? Are you there for a while? Do you have plans to do anything else?
JC: I will be sticking around for a while. My personal ambition–it might come off as a little naive–but it’s a change-the-world kind of thing. I see OpenFeint as an opportunity for me to really help developers create what I call “shared experiences.” You play games, right? So you’ve had experiences like Mario Kart or FIFA where you’re playing with buddies and right as you’re about to win, your friend comes up behind you and wins. You throw the controller on the ground and yell and scream at each other. Those moments of connecting with your friends where you can laugh and share like that are so powerful.
I feel like with OpenFeint I have the opportunity to create those kinds of experiences for billions of people all around the world, and particularly the touch screen platform. They’re going to be everywhere. Every nook and cranny around the world is going to have a touchscreen device in the next five or 10 years. I’m really into the idea of building a platform that lets developers create these shared experience to reach billions of people. We haven’t gotten there yet though. We have 80 million users and the types of shared experiences that we’re enabling are just scratching the surface. So I’m personally excited about chasing that dream and I think that the GREE merger enables me to accelerate my path towards that.
BI: The question I ask everybody: do you think that we’re in a bubble?
JC: No. I don’t think we’re in a bubble.
Let me rephrase that. If by bubble like the ’99 bubble, then no. That was lack of awareness around what type of value Internet companies could actually create. It was companies going public with no revenues or minimal revenues and no real foundation to stand on. So the definition of a bubble as I take it is as something fragile that could pop at any moment. So, I don’t think that we’re in a bubble that’s based on misconceptions right now. I think the environment we’re in is one where companies that are being bought and going public are revenue generating. Or they have real assets that they can build lasting businesses on.
I do think that early stage valuations might be in a bubble, because there’s a lot of excitement to get in at the ground floor and build a company like this. So you’re seeing lots of early stage funding go through the roof. So I think that that piece of the puzzle might be in a bubble, but across the board, we’re not in a bubble.
BI: It seems like there’s a lot of money flying around and there wasn’t two years ago, so it’s an interesting time.
JC: I remember when we started OpenFeint it was very difficult to raise a round. And over the last two years it’s got to the point where I’d be getting emails every day from people trying to fund. It’s a very different climate.
BI: Last question. Any new games that you’re really hot on right now or addicted to?
JC: I’m itching to play Portal 2, but I just haven’t had four hours to just sit down and play it. That’s the big one on my list right now.