Mobile Game Maker Storm8 Competes With Goliaths of the Industry

4/3/12Follow @xconomy

Unlike a lot of revenue-poor startups with freemium business models, mobile game maker Storm8 is rolling in cash. The fully bootstrapped producer of 25 Android and iOS games like iMobsters, World War, and Pets LIVE brought in $1 million dollars in a single day last year, and hit more than 200 million downloads in June 2011.

“The good thing about Storm8 is we’re profitable,” cofounder and CEO Perry Tam says. “We’re able to live on our own feet and keep growing the company by pouring earnings back in.”

Tam (pictured above right) won’t disclose how many of the games have been downloaded since the Redwood City, CA-based company hit the 200 million mark, but says that the pace has accelerated significantly since then. He also declined to comment on rumors (published by TechCrunch in August of 2011) that claimed Storm8 raised $300 million and had a valuation of $1 billion.

“We are still a self-funded, bootstrapped, profitable company,” he said.

Now a 110-person operation, Storm8 started by a group of veterans from Facebook, Zynga, and Hi5 who saw the potential of the iPhone and the popularity of social games on platforms like Facebook.

Storm8's iPhone titles include World War, Racing Live, iMobsters, Vampires Live, Ninjas Live, and Pets Live.

Back in 2009, Tam and co-founder William Siu were working on the architecture of Facebook credits, the social network’s payment system, while co-founder Chak Ming Li was helping develop the company’s advertising engine and gaining insight on how developers were successfully acquiring users from Facebook. (Before that, he worked on Google’s ad system.)

As they watched social games grow more and more popular, the cofounders saw a lot of potential for a mobile gaming company.

“People used to think of gaming with single players as antisocial,” Tam says. “They used to attack us saying, ‘You sit in front of your computer not talking to anyone,’ but social gaming is different. It allows you to bring your friends into it. That’s what inspired us.”

But even then, there was already a fair amount of competition in the social games space, so the co-founders decided to “take a chance and go mobile.”

They released their first game, iMobsters, in 2009. The game itself was pretty basic, with simple graphics, and it wasn’t an instant success. But as the startup released more games with better features, the developers would go back and continue to improve the earlier titles, adding more elements. It’s a process they go through for each game.

“We keep working on it, thinking about the infrastructure and making things scalable,” he says. “It’s that Facebook mentality, to build in very scalable way to support hundreds of millions of users.”

All of the games are free for users to play and download; instead the company makes money by allowing players to pay for increased features, like a particular stove in a restaurant, or to get around a time restriction by paying to have crops grow faster. “There are hooks in the games that allow the user to pay to get more satisfaction,” he says.

It’s a essentially the same business model as Zynga, the social gaming monster that Tam considers to be one of Storm8′s biggest competitors, along with giants Disney and Electronic Arts. But Tam isn’t concerned by the competition from some of the biggest powerhouses in gaming. “For all the competitors in this space, it’s not the case that if someone wins, so-and-so loses,” he says. “There’s enough growth for everyone to be successful. All the companies have to invest lots of time and money into the space.”

But that said, he believes that Storm8 has to distinguish itself by moving quickly and identifying new trends in mobile gaming. When the company started building for the iPhone back in 2009, they were among the first. By 2010 they were on Android as well, “and back then, it wasn’t all that hyped up,” he says. Last year, they began to create in HTML5, and were among Facebook’s Open Graph launch partners. “We keep innovating and stay ahead of the curve, compared to bigger companies that might not be able to spot those trends,” he says.

Storm8 also constantly invests in its back end, reinforcing its infrastructure so that the company can be agile enough to quickly create new genres of games. In 2010, they launched another brand called TeamLava with more gender-neutral games. “You’re not trying to fight your friends, you’re trying to send them gifts to help them build whatever structure they’re trying to build,” he says. “That was our second brand, and that’s been a phenomenal success.”

Storm8's office in Redwood City, CA

In the last three years, as the company has grown from that first group to 110 employees, Tam has found it increasingly important to invest in the happiness of his team. Storm8′s Chief People Officer, Laura Yip (a co-founder, also Tam’s wife), started a program called the “Pimp Your Desk” competition, where each new employee gets a stipend to decorate his or her desk with a theme. Employees compete against the other new additions, and the winner gets an iPad. One employee even went so far as to create a Tron theme, neon lights and all.

Tam also borrowed an idea from his time at Facebook, hosting hackathons between 4 p.m. and 4 a.m. Teams are expected to get everything they need, including the engineers, to actually make something. It’s been a great way for the company to generate creativity, Tam says. “You come up with some ideas and implement them. Don’t just say you want to do it. Lots of people even create their own games.”

For Tam, this team-oriented culture is really important to the success of the company. “There are no cubicles, no offices; it’s all open space. We really want to drive home the point that we are collaborative.”

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