Why Tripledot Became a Unicorn

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Roundtable #36: Prioritize New Game Ideas, Cost of Buggy Game Launches, & Youtube’s NFTs

In this Metacast episode, Matt Dion and Sebastian Park join your host Maria Gillies to discuss:

How to Prioritize New Game Ideas
The Costs of Buggy Game Launches
YouTube’s NFT announcement

You can find our YouTube video available here. If you’d like us to discuss any other gaming-related topics, do reach out at [email protected]. We’d love to hear your general thoughts and feedback too! You can find us on Spotify, Apple Podcasts, Google Podcasts, our website, or anywhere else you listen to podcasts.

Listen to The Metacast

#1: Tripledot Has Flown Under the Radar Long Enough

On February 14th, a new unicorn was born in the gaming industry — Tripledot Studios! The three co-founders announced a $116M Series B, following a $78M Series A in April 2021, which brings the total funding to $202M and a current post-money valuation of $1.4B. The team plans to use the fresh funds to bolster future M&A.

Based on publicly available information, here is a quick recap of how Tripledot’s KPIs have grown over the last year:

MAUs: 6M (Oct 2020) → 11M (Apr 2021) → 25M (Feb 2022)
Revenue: $100M ARR (Apr 2021) → 3x revenues over 2021 (Feb 2022)
Valuation: $500M (April 2021) → ~3x increase to $1.4B (Feb 2022)
Employees: 90 (Apr 2021) → 2.2x increase to 200 (Feb 2022)

Tripledot Founders — *(From left to right) Akin Babayigit (COO), Eyal Chameides (CPO), Lior Shiff (CEO) | Source:* *Silicon Canals*

Tripledot has been on my radar for the past two years, and the trajectory of the above numbers is quite impressive. In my eyes, however, the three most interesting things about this company lie behind the numbers.

First, this is a highly experienced founding team, and they’re proven operators. More specifically, Lior Shiff was the co-founder and CEO of Product Madness — a top five social casino mobile game developer that was eventually acquired by Aristocrat. Eyal Chameides was the Creative Director of the same company, has many titles under his belt, and is an industry veteran. Simply put, they understand how to identify and build great mobile gaming products.

Second, even though Akin Babayigit’s direct industry experience is limited to a year at King as their Head of Business Operations & Special Projects, it is Akin’s past that is more interesting. Before King, he spent ~6 years in the mobile advertising side of the industry. This started off with one year at InMobi but was then followed up with give years at Facebook, where he eventually became the head of Facebook’s Audience Network across EMEA. It wouldn’t be crazy to assume that Akin has a deep first-hand understanding of user acquisition and how to scale mobile games on the biggest ad network of them all. An interesting side note is that both Lior and Akin built and sold Luna Labs — a Unity-native platform allowing app developers to create and manage video and playable ads — to ironSource while operating Tripledot. Talk about being your own customer.

Putting the above points together brings us to the third — a unique approach toward building a mobile games portfolio where the sum is greater than its parts.

Tripledot Games — *Source:* *VentureBeat*

While the above showcases just 5 of the 17 active portfolio games tracked on SensorTower, it is quite interesting to see:

A general focus on the Casual category
Within that, a focus on generally older (>30 years old, skewing slightly female) global audiences
Within that, a design agnostic approach to which sub-genres the team builds for
Within that, a unique focus on sub-genres that have the potential for strong long-term player retention, which is why Hypercasual is not a focus
All of that being monetized primarily through ads; SensorTower reports ~$500K IAP revenue over ~79M all time downloads (!)

Clearly, Tripledot is being very intentional about this entire strategy. And the reason I say “the sum is greater than its parts” is clearly showcased by the stacked DAU curve of the three key titles in the company’s portfolio.

Tripledot Graph — *Source:* *SensorTower*

It cannot be understated how none of these titles are breakout successes and/or highly innovative concepts relative to how most of the industry would generally define those terms. Therefore, what the data above really exhibits is the founding team’s talent to know what “good” looks like and how to get there with a scalable and repeatable process that can be applied across a wide, but focused range of product/team bets. As Lior says here — “We’ve gotten to the point of having a lot of technology and expertise that we can now leverage, so we want to buy studios, and use our platform to take those great games to reach a much larger audience… many of our peers excel in making great games but not how to reach large audiences, or to scale them into sustainable businesses. Now this capital gives us firepower.”

Looking ahead, it seems like Tripledot is slowly looking to transform the revenue face of the company by building and scaling more IAP revenue dependent games. Two of the newer titles the team is currently scaling include Merge Party and Piper’s Pet Cafe. And the studios they’re partnering with to build some of these newer games will likely be the first of many M&A targets that could be plugged into Tripledot’s “platform.” In some ways, what Tripledot is building reminds me of Playtika’s strategy, which recently announced that it is looking for a buyer just one year after its IPO.

While Tripledot’s strategic shifts make all the sense for building a better long-term business, there are a few hurdles that Tripledot will need to cross on their continued journey. For starters, monetizing through IAPs versus ads is simply a different nut to crack and there will be a learning curve there. Further, the broader user acquisition environment is not getting any easier to play in due to ever increasing competition across the team’s focus genres and IDFA woes continuing to loom large. And finally, M&A can be a pill that sometime takes significant time to swallow and consequently generate longer-term accretive business value. That said, even with all these potential headwinds, there is no question that Tripledot’s track record is stellar! I’m generally optimistic about the company’s future and continue to wish them the very best. (Written by Abhimanyu Kumar)

#2: Backbone Raises a $40M Series A

Earlier this week, Backbone, the mobile gaming hardware company, announced that it raised a $40M Series A. The round was led by Index Ventures with participation from a variety of noteworthy angel investors, including executives and celebrities from across the hardware and gaming industries.

Since the company first caught my attention last year, I’ve felt that Backbone is representative of a broader shift we’re seeing across North America’s hardware market that first kicked off with mobile games in the early 2000s. Before mobile, most of America’s hardware history has been an arms race of sorts. Whether it’s Sony versus Microsoft in the 2010s or Nintendo versus Sega in the 1990s, the “best” gaming device has historically been defined as the one that made games look the best and play as smoothly as possible. This is still generally true, but the lens of competition has shifted increasingly to other elements of ecosystems (such as multi-platform subscriptions, where Xbox Game Pass, for example, has surpassed 25 million users), and great gaming experiences are possible on more devices than ever before.

This shift is largely driven by the ubiquity of smartphones; after all, it’s much easier to bring gaming to a device that we already carry in our pockets than it is to convince someone new to spend $300+ to buy a device just made for games. And mobile gaming has improved to the point where most any gamer could find something that fits them (even if it means streaming from the cloud). This is why even major North American companies like EA and Activision are bringing their AAA IP (like Call of Duty, Diablo, Apex Legends, and FIFA) to mobile in addition to their standard console releases. They want to grow their ecosystems — audiences, IP, and revenue — by providing console-like experiences for established gamers, but on their phones, rather than traditional hardware.

Backbone’s success largely hinges on that established gaming audience. The company is betting that as more mobile games take on console-like attributes, gamers will be willing to spend more time playing those types of games (like Call of Duty, Genshin Impact, Minecraft, etc.) on their phones. It won’t mean gamers replace consoles, but it does mean that mobile could steal increasing market share or increase the total play time for certain cohorts of gamers. Of course, some gamers may opt for cheaper mobile peripherals than buy a console/PC altogether.

If you subscribe to the company’s idea that gamers want to spend more time playing controller-supported games on their phones, there’s a lot to like about the company. They are already well-positioned to take advantage of multiple industry-wide tailwinds that could very well propel them to success, including:

The proliferation of mobile-based social tools: As AAA games have moved to an increasingly cross-play-friendly development cycle, many of gaming’s core social tools have shifted away from consoles to become mobile-centric in recent years. Discord is used instead of Xbox Party Chat or Playstation Friends Lists, meaning that a mobile-first Backbone can leverage existing network effects of both cross-play titles and mobile-first social tools to make close the utility and content gap between phones and consoles.

Indie market saturation: In the early days of Xbox Game Pass and the Nintendo Switch, low-budget indie titles dominated the market while developers took their time building up a catalog of AAA hits. While mobile games are certainly “saturated” already, the volume of “console-esque” mobile titles is actually quite low, meaning that Backbone could see a huge boom if indie developers were to turn their focus to recreating controller-enabled indie experiences on mobile.

Huge R&D budgets into cloud gaming: Companies like Xbox are forgoing unit sales as a key metric in favor of hardware-agnostic service metrics, and nearly every big tech player in the industry is working on some kind of cloud-gaming offering. Phones will play an increasingly larger role in allowing more traditional games to truly be played anywhere. Backbone already offers support for xCloud — being the definitive peripheral for every other service in the market is a big opportunity for the business.

It’s worth noting, however, that there are more than a few “ifs” that need to be addressed for these assumptions of success to be true. The most notable risk to Backbone’s business today is undoubtedly competition. It takes more than hardware to build a sustainable competitive advantage, and it’s fair to imagine that the same companies investing in cloud gaming are also exploring hardware-based peripherals to help adoption for their new products, and thanks to economies of scale, could likely produce them at lower costs. There’s also the ever looming threat of the peripheral giant, Apple, to deal with. The company has already launched its own mobile gaming subscription service and has a history of turning iPhone adjacent products into billion dollar businesses.

The company will also have to contend with mobile gaming’s relative lack of adoption amongst North America’s “hardcore” gaming audience. Titles like Fortnite, Call of Duty Mobile, and Wild Rift are helping to change the idea that “real” gaming can’t happen on mobile, but these titles alone aren’t likely to drive the type of change necessary for turning Backbone into a billion dollar business.

The company’s current business is also hardware-centric — charging consumers $100 for a “one and done” type purchase of the company’s flagship controller. Other peripherals companies like Razer and Logitech have already turned their eyes to software services, which offer higher margin recurring revenues, and Backbone may need to find similar ways to diversify. Backbone’s social software, which allows for mobile-based parties and integrations with GamePass and Stadia for $50 per year, is the company’s early attempt at attacking this software opportunity, but it’s too soon to tell if the traction is there for the product.

Backbone is one of the most intriguing gaming companies I’ve seen over the past few years. Sure, some gamers will simply prefer playing games like Call of Duty Mobile with a controller or Genshin Impact handheld. The company’s success, however, feels as though it’s very much tied to the success of cloud gaming itself — either controller-using gamers will want to stream AAA titles on mobile in addition to their consoles, or they won’t. There’s also the question of competitive viability — even if games like Call of Duty Mobile generate robust competitive scenes in the West, will using something like Backbone even be tournament legal? The future of the space very much remains in flux, but I’ll be keeping a close eye on Backbone’s progress as the gaming world changes around them. (Written by Max Lowenthal)

🎮 In Other News…

💸 Funding & Acquisitions:

Earnings reports: NetEase | Ubisoft | Stillfront | Square Enix
Backbone raised $40M from Index Ventures. Link
Tencent acquired Inflexion Games from Improbable. Link
Potato Play raised $5M and launched its new merge game. Link

📊 Business:

Activision announced it would delay the release of next year’s Call of Duty, the first time it does so in two decades. Link
Related news on Activision: The President and CCO of Candy Crush are both leaving. Link
FTX launched a new gaming division to help studios with backend blockchain services. Link
Epic has over 500M registered accounts. Link

🕹️ Culture & Games:

Meta’s Horizon hit 300K users. Link
The rise of prestige Chinese games. Link
Elden Rings is one of the best reviewed games ever. Link
A list of video game TV shows and movies in development. Link

👾 Miscellaneous Musings:

Kickstarter & Games in 2021. Link
The Rise and Fall of New World. Link
Clone culture and its continuous impact on indie developers. Link
A statistics-based approach to picking a game setting that best matches your chosen genre. Link