Mobile Entertainment

"Our mobile business is steadily improving. We've been profitable for awhile now, which seems a rarity among mobile game companies.  Of course we have to scratch and claw for every penny but we are a well-organized and productive developer and our revenue growth is accelerating.

For the last several quarters our growth rate has increased, and we know we are growing faster than our competitors since almost all of them are public companies that report their numbers.

Many companies have never figured out how to make a profit, and in this economy it is harder to raise money. Hence, the consolidation continues in the industry as illustrated by the Superscape deal and the rumors of Vivendi's exit. We are bucking this trend - we have plenty of cash, are growing and profitable.

I have read and heard false speculation that we are for sale. I will just say that we are making it on our own and we think we have great opportunities to improve our business and become an even stronger independent company.
 
We are now achieving tremendous rates of viral discovery and free trial of our games on the web, where we have now deployed more than a dozen of our games and are adding 2-3 new games per month. This is helping our mobile game business in two new ways.

First, consumers are falling in love with our brands and are more likely to know them when they seen them listed on their carrier's game deck.  As one example, a typical original mobile game for us last year would only produce 10,000 page hits on a Google search. But now some of our web games will produce upwards of 1 million page hits from search results.

Second, we have served over 100 million free game trials this year, and all of them include a mobile upsell button. Already a few million consumers have clicked on that button, which enables them to get a link sent to their phone. If they click on the link it takes them to the purchase page for the game on the carrier deck, which increases deck revenue without the customer having to even know that the deck is there.

Major carriers including Verizon Wireless are embracing our approach and working collaboratively with us as cross-promotional marketing partners.  As a result, last month we had 2 of our original mobile games chart in the top 20 of Verizon Top Sellers - the only new original games to achieve this in 2008, or for that matter at any time in the last two years (the games were Brain Tester 24-Pack and Mini Golf 99 Holes).  
 
We have also become the most efficient producer of quality games in the world, now that we have harnessed our technology base to produce across all platforms from roughly the same studio impetus. From our primary studio production process we are now able to extend support to over 1200 feature phones, produce native smartphone versions including NGI and iPhone, make both free trial and premium PC versions, support Facebook and other SNSs, and even extend to highly customized platforms like the Xbox, where Microsoft has approved our first project (Tower Bloxx Deluxe 3D).

And even with expanded game and platform output, as you know we have sustained the highest quality grades and continue to win the most awards.  Critical acclaim has extended onto the PC, where one critic hailed Tower Bloxx as, "The Best Facebook Game, Bar None," and Rollercoaster Rush, became the all-time Most Favorited Game on AddictingGames.Com.  Other games such as Crazy Penguin Catapult have done big numbers and scored high ratings from consumers on various web game sites.
 
Tower Bloxx is now among the 50 apps with the largest number of monthly users on Facebook, out of more than 30,000 apps. Our first iPhone and NGI apps will launch in Q4 and Xbox will follow. With AvaPeeps, we are offering what I think is arguably the first multimedia application with a consistent client experience across all platforms and a converged server side.

What that means is that the server code is universal, and you can reach your account and your avatar from any platform, and the client experience feels consistent on all platforms.

I would say Google was the first brand to cross such boundaries but I would call that a text app, not multimedia. AvaPeeps will launch shortly on 3 in the UK and AT&T in the US, has already launched in the US on T-Mobile, Virgin, and Boost, already has its own PC/web URL, and will be on Facebook and iPhone in Q4.
 
I recently introduced the notion of the Omni Media Market - personal, digital, short-form networked media that is being consumed by true mass consumers and that will ultimately reach billions of customers. You might say that SMS is the first such example, and the primary consumer benefit of Omni Media is social contact.  

Looking specifically at games, the vast majority of consumers do not think of themselves as gamers, but in the last few years they have engaged in many of the following new behaviors:  played a free game on the web, installed a Facebook app, personalized their phone with digital content, played Guitar Hero or Wii at a friend's house, voted on American Idol, sideloaded iTunes content, etc.

My thesis is that for the first time games will reach a billion consumers and that the biggest platform in use will be mobile phones.
 
We think that going cross-platform is the key to our continuing mobile growth.  Since we are focused on Omni Media and social benefit, our games are a perfect fit.  When a consumer gets hooked on one of our games, we believe they will want it on their mobile phone because it is their most mission critical social platform.

We also believe we will be one of the pioneers of new converged services where the public expects to use the brand in a consistent fashion regardless of the client device, and again there will be great synergy using the web for viral spread and free trial, and the mobile side for consumer benefit and monetization. Mobile will continue to be the key for Digital Chocolate.
 
Ultimately the web unlocks higher consumption levels and the largest possible audience on the mobile side. What the iPhone has done already with Google search activity, and what the iPhone apps store has already done, are examples of what I am talking about. Without question, the mobile audience will dwarf any other platform installed base. Consider that color TV stalled at 1.5B households, and the PC stalled at around 1B desktops.

However, mobile phones now represent an installed base of 3B computers that will grow easily to 4B or more.  It would of course be very disappointing if TV remained analog or if phones remained primarily a voice product.  But the reality is that everything is going digital with interactive broadband networks.

And the public is comfortable with computers because they grew up with them. They see them in schools, at work, in homes. They use ATMs. And now they use digital features of what was until recently their voice phone, but is now a social computer with digital messaging, contacts, photos, personalization, and more.

The public response to the iPhone indicates a huge trend - it was really the first time the mass public got excited about a mobile computing platform as a content device.  It shows that whereas 100 million people want a hardcore game console like the PlayStation, the number that would like to have, and will have, a platform like the iPhone, is going to be measured in the billions.

It will take the entire industry to supply this demand, just as it took an entire industry to supply the PC market after Apple established the archetypal ideas."