Living on the Edge: What OMGPOP's Stunning Reversal Says about Modern Day Gaming

By Sarah Lacy , written on March 5, 2012

From The News Desk

The other day, Dan Porter was in the elevator of his New York office building, one populated by several startups. A hip kid working for one of the other startups, which Porter declined to name, asked Porter if he worked in the building.

"Yeah, I'm the CEO of OMGPOP," he said.

"Wow, I didn't know VCs were still funding older people," the kid said.

Porter had two thoughts. Surprisingly, neither of them were, "Fuuuuuuuucckkkk youuuu." I'm pretty sure that would have been mine.

His first thought was, "I don't think of myself as an 'older person.'" But later, he thought, "Thank God I am in my 40s, because I probably wouldn't know what was too cool to become mainstream. Everyone loves the cool young entrepreneur who sees the future. But I don't know. Maybe there's some value in focusing less on being super cool and impressing people who are super cool and just trying to find something that hits the sweet spot and goes mainstream."

That's exactly what OMGPOP's latest game Draw Something has done. In three weeks it zoomed to number one in nearly every category: Free game, paid game, free app, paid app, and it's number one in more than 50 countries. As of today, the app has had more than ten million downloads, over six million daily active users, and close to half a billion drawings. Over two-thirds of the matches are played with a response time of less than five minutes. The game is effectively real time. This after the company endured years of lackluster semi-flops.

The company started life in the early Web 2.0 days of launch parties and gossip blogs as the terminally hip The company was literally terminally hip. Despite buzz among hipsters in New York and its ink-worthy young founder Charles Forman, the site didn't have mainstream appeal and it never really went anywhere.

The company spent years and nearly $16 million in funding trying to reinvent itself as a game company in a  Zynga and Angry Birds world, still getting nowhere. Finally on venture capital fumes, Porter dug into the games pipeline and seized on a concept that had worked pretty well on the Web site. It didn't have a ton of users, but it had a decent amount and those people loved it. They retooled it for the iPhone and it became Draw Something.

It took ten days for the game to hit one million drawings. On the 11th day it did a million drawings in a single day. The night before I interviewed Porter last week, they did one million drawings in an hour. Celebrities are Tweeting about it. The cast of the Jersey Shore is using it. In Sweden and Norway it's on a whopping 20% of iOS devices. All of a sudden, people are returning Porter's calls, oldtrepreneur or not. "We are just holding on for dear life. I'm watching this ticker next to my desk that shows the downloads and it's like, 'Who are you people!?'" he says.

"I worked in the music industry twenty years ago when I was out of college," Porter says. "This was at RCA back when the 'Dirty Dancing' soundtrack was big.* People in the music business just throw a bunch of stuff against the wall and see what sticks. If you knew what the hit was going to be, that's the one you'd pick. But you don't. Now here we are with one of the last things to throw against the wall, and it sticks. It sticks insanely hard."

The success of Draw Something has been reported -- although strangely not as widely as the numbers and the rags to riches story merit. But what's more interesting is what it says about how startups in the game space are markedly different than traditional consumer Internet or social media plays.

"It's a weird business," Porter says. "It's more similar to being a VC; it's very hits-based business. You can flatline, but still be always one game away from releasing that title that changes your life. It's oddly different than being a startup, where you release something and it succeeds, fails or pivots. You're releasing mini-startups every three to six months, and at some point you get big enough that the odds increase one will get a lot of traction."

The downside of this type of business is you can run through a lot of cash with nothing to show for it. I asked Porter and some of his investors why they kept believing that big hit was just the next game away. They couldn't totally put a finger on it. It was a je ne sais quoi of the Web games they'd developed that didn't have a lot of traction, but had some rabid fans.

The upside is that, unlike a lot of consumer Web companies -- say, blogs for instance -- that hit can bring in loads of cash quickly. Porter won't say how close to insolvency OMGPOP came, but says "It was tight." Less than a month later, that's a very different story. "In addition to virtual goods, we did 100 million paid ad impressions yesterday from the game," he said when we talked last week. In a matter of weeks, the company has made six-figure revenues from paid downloads, virtual goods and ads. The last update included a tutorial on how to buy virtual goods and sales "climbed dramatically."

"In a week we've made enough revenue from the game to vastly increase our runway," Porter says.

All startups require nerves of steel, but gaming companies are taking this to a newer, even more intense make-or-break level. And in the case of OMGPOP, age is proving an advantage.

*Wow, he is old