Screen Shot 2014-07-11 at 5.14.35 PMEarlier today, Mind Candy founder, Michael “Mr Moshi” Acton Smith, posted a YouTube video announcing he was standing down as CEO of the company he founded back in 2003. At the same time, he rejected “bizarre rumors” that he was leaving the company altogether.

Instead he’ll be taking more of a creative role. “Mind Candy over the last few years has got a lot more complex,” he said. “We’ve gone from a one product company to multiple products to multiple studios [with] staff all around the world and the challenges have become a lot more complex…. I am self-aware enough to know I’m much better on the creative side of the business than the operations side — that probably doesn’t come as too much of a surprise to anyone who has worked with me.”

I should make clear: I’m far from a dispassionate observer of the company. I’ve been friends with Acton Smith since… well… since he was just plain old Michael Smith. He was a major “character” in two of my books, including one memorable adventure where the two of us posed as hair stylists in order to get ourselves invited to  lecture at a San Diego hair school. Slightly less unprofessionally, I was the first reporter to profile Mind Candy’s first product, Perplex City, an elaborate alternate reality game for grown-ups, back in early 2005.

That strategy of focusing on adults almost tanked the young company, with investors rumored to have come within days of pulling the plug after Perplex City failed to gain traction. But then Acton Smith proposed retargetting the company’s puzzles to children, creating the equally elaborate Moshi universe.  The empire quickly grew to include trading cards, action figures, music albums and a movie. At one point it was rumored that one in three European children had a Moshi account.

In recent months, however, rumors have mounted that the company has again lost its way. In particular its browser-first strategy had caused the company’s growth to slow as more and more kids moved to mobile gaming.

Last week, the company finally made its first serious move into mobile, launching PopJam, a kid-friendly version of Instagram. Still, I’d heard from sources close to the company’s investors that there were serious doubts at board level about Acton Smith’s ability to steer such a large, international organization while what the company needed more than anything was his creative ideas on how to expand Mind Candy’s user base beyond Moshi Monsters.

For those reasons, today’s move — with Acton Smith stepping down from a day to day operations role and instead spending more time with his notebooks, plotting the creative future of Mind Candy — makes a lot of sense. The question is did he jump or was he pushed?

He insists it was the former.

“I can see how this might look a little unusual,” he admitted by email. “But it was my decision after some deep thinking and consultation with the management team.  As the business has grown and become more complex I’ve moved further and further away from the creative side that I love.  I want to spin up new characters, stories and brands.”

He confirms he’ll become “Chief Creative Officer” and remain on the board and senior management team. He will also remain the face of the company.

“I’ve loved being CEO but there are definitely CEOs out there with more suitable skills for the current phase of the journey we’re on,” he added.

Saul Klein from Index Ventures, a Moshi investor and board member, told me that “the board is totally behind [Acton Smith] and [president] Divinia [Knowles] wanting to get support to take company to next level.” He added that he thinks “it’s actually an amazing move and symptomatic of his ambition, emotional intelligence and desire to create an enormous business…. [The] kind of thinking only seen normally in the Valley.”

Which, of course, is exactly what he would say. Still, I haven’t been able to find anyone who said, on or off the record, that this wasn’t ultimately Acton Smith’s decision, albeit one with enthusiastic board support.

For Acton Smith, this is certainly an opportunity he relishes. His enthusiasm at getting back into the creative space is impossible to hide. As is his determination to crack the company’s mobile problem:

Moshi was a phenomenon in the web era but kids have rapidly switched to mobile and we’ve yet to crack it.  We’ve launched multiple Moshi apps and while they get great reviews and good downloads, they don’t make enough money to justify their development costs.

Creating commercially successful mobile games for kids is extremely tough and I can’t think of any company that has cracked it.  It’s an industry wide problem.

These challenges in mobile gaming are one of the factors that has driven our strategy to become a family entertainment company rather than just kids entertainment.  Warriors is our first new brand that we’re hoping will appeal to a much wider audience (it’s Game of Thrones meets Pokemon)

The web to mobile shift has definitely been challenging for Mind Candy but we’ve been developing a lot of new products and are very optimistic about the future.

Here’s Acton Smith’s video announcing he is stepping down: