Scopely Reed Shaffner

Gaming is a hits driven business. Which means investors should run screaming from it while entrepreneurs are meant to bang their heads against the wall for years, until hopefully stumbling on a big success. How then, given this reputation, has LA-based mobile game publisher Scopely released four consecutive No. 1 free-to-play games? Has it cracked the code?

The short answer, according to Scopely founder and CEO Walter Driver, is yes, albeit with a few qualifiers.

Scopely doesn’t develop its own games, but rather partners with independent development teams to publish and market them. While it’s built a distribution platform and honed a methodology that appears to be working, the company remains beholden to its development partners to create compelling content. Scopely can help massage and refine the games, but it can’t create a masterpiece on its own. It acts kind of like a Hollywood studio, which scouts fully developed films and then offers a distribution deal to get them into cinemas, on to Netflix and Amazon, and pressed into DVDs.

That means the company has to market test the games, seeking an audience and possible advertising before it pulls the trigger.

“The mobile app market is very inefficient about getting right products in front of right people and then connecting advertisers,” Driver says. “We’re focused on connecting those three legs of this stool.”

Scopely’s methodology begins with testing the marketability of every title before releasing it to its broader network. The company employs human interaction PhDs who film and observe hundreds of alpha users playing each new title, taking note of things like where users engage and where they drop off. Then, with this feedback incorporated, the company releases an updated version of the game in private Beta to several thousand power users who submit further feedback. If all goes well and the game is ready for prime time, the company releases it in a small overseas test market like New Zealand for that last little bit of quality assurance before finally flipping the switch in North America.

“By the time we launch a game in the US, we know people are going to love it,” Driver says.

This is only half the battle. The bigger challenge is wading through the noise created by the 1 million apps available in each of the iTunes App Store and the Google Play store and getting users to notice. This is where Scopely’s distribution platform really shines.

Scopely has been rather secretive about its methods to date, leading some to accuse the company of “buying downloads.” This implies that it’s cheating some and, therefore, its success is less meaningful. The thinking goes, if you can pay your way to the top of the app-store charts, then people will see you there and organic downloads will make up for the expense. But this only makes sense if those paid users and the new users acquired through app-store visibility perform highly.

Driver doesn’t deny that Scopely buys traffic. What critics and competitors call cheating, he views as good business. The caveat is that company’s paid user acquisition is aimed at game players it expects to become long-term and highly-engaged users, he says. Remember all that preliminary market research?

“Certainly we like to benefit from having our apps discovered by visibility at the top of the app charts,” Driver says. “But we’re not buying traffic that we don’t think is interested in playing the game.”

Conspiracy theorists be damned. But if Scopely isn’t juicing the results with Chinese bot farms or other unscrupulous tactics, what is the company’s secret?

“Our highest quality source of traffic is our own existing users,” Driver says. “The performance of this segment [measured by post download engagement] is exponentially better than any other channel. We feel like it’s a testament to trust that we’re building with this community.”

Scopely has grown its community of opt-in users to more than 25 million who want to hear when new products are launched, Driver says. The company reaches this audience through in-app cross-promotions, similar to how Zynga promotes its titles, as well as emails. Said another way, Scopely allows small, independent developers to market on the scale and with the strategies of far larger publishers. It may not be the earth shattering answer that people were looking for, but the benefits of scale are well documented.

Scopely has seen conversion rates go up with each launch, Driver contends. The company has just released its sixth title, all of which have made it into the App Store Top 5, although only the last four have reached No. 1: Skee-Ball Arcade, Wordly, Mini Golf MatchUp, and Bubble Galaxy With Buddies. It’s starting to call into question whether gaming has to be hits driven after all. Some of this success can be attributed to growth in the Scopely network, but the company has also refined its market research and game development methods, Driver says, while also eliminating underperforming customer acquisition channels in favor of those driving the highest return on investment.

“We have gotten better at distributing these products over time, and I think we can continue to perform predictably,” Driver says. “Outside observers think the industry is hits driven because of extreme outliers like Candy Crush. The top 1/100,000th percent is very hits driven. But games that are making eight figures per year, we think we can very consistently achieve those results based on the methodology we’ve developed.”

The final piece of the puzzle is to connect these titles with advertisers to generate those eight-figure, free-to-play revenues. The company has previously run branded ad campaigns with Coca-Cola, Starbucks, HP, and Samsung. Scopely’s developer partners would likely struggle to attract this level of advertiser on their own, due to a lack of ad inventory and dedicated sales force.

Scopely has raised $8.5 million from backers including New Enterprise Associates (NEA), Anthem Venture Partners, The Chernin Group, Greycroft Partners, Sands Capital Ventures, Double M Capital, Lerer Ventures, Red Swan Ventures, The Collaborative Fund, and numerous prominent angel investors. The company has assembled a team of 90-plus employees, including several high-profile names recruited from gaming and advertising stalwarts like Zynga, Supercell, and LinkedIn. (Disclosure: Greycroft and Lerer Ventures are investors in PandoDaily.)

Beyond this deep bench of talent and the company’s rapidly growing community of loyal users, one key to Scopely’s success is the fact that the company has had many plate appearances over a short period of time and has thus refined its approach at a rapid clip.

Driver tells me:

If you’re a traditional game studio you have a couple of bets per year, but you don’t know if those things will deserve global distribution until you finish making it. And you haven’t been able to determine what partners to work with on localization and distribution, and what’s most important in terms of sequencing until you’ve tried it a few times. Each time we’ve launched a new title, we’ve eliminated more inefficient channels, and become much more effective than in the past.

The big risk facing Driver’s company is that app distribution may become commoditized. Today, app store discovery is largely broken and many developers are still learning the tricks of the trade in terms of finding success in this rapidly evolving category. Fast forward a few years and it’s easy to imagine Apple and Google putting in place additional search, discovery, and marketing tools aimed at helping both developers and users navigate the app store waters. In such an (admittedly hypothetical) environment, Scopely’s system may prove less valuable.

For all its early secrecy and kitschy recruiting techniques, Scopely appears to have built a repeatable method of launching hit mobile games. This is no small feat. But there’s a lot of smart people and a lot of motivated money chasing the top spot on the app-store charts. The next challenge for Scopely to demonstrate that it can stay ahead of the competition.

“What we’ve built is systematic, yes,” Driver says, “but you always need to improve and evolve the system.”

  1. Scopely is building the next generation of consumer mobile experiences.

    1. David Tisch
      Past Investor