We had the pleasure of interviewing Uri Marchand, Founder and CEO of Overwolf. Overwolf is a modding-as-a-service platform that enables game developers to build a UGC strategy, and creators to easily build and scale mods and apps for their favorite games. We discuss why Uri is so bullish on creators, the future of modding, learnings from building a company, and much more. This is an edited and abbreviated transcript. Enjoy!
The Early Days of Overwolf
Nico Vereecke: I have the pleasure to speak with Uri Marchand. Uri is the co-founder and CEO of Overwolf, the guild for in-game creators that allows them to create, grow, and monetize in-game mods and apps.
I first heard of Overwolf about six years ago, when I was try-harding in Hearthstone, and used your HearthArena Companion app. Later I also used Overwolf apps in Teamfight Tactics and Warzone. The reason I used them was because they really enhanced my gaming experience. Overall, it's much more than that today. Also, the company has seen quite a big transformation since its inception. Let's take a step back and discuss the early days. You co-founded Overwolf almost 12 years ago. What was your initial vision? What problem did you detect and what were you trying to solve?
I started working full-time with two friends in May of 2010 when we finished computer science, and graduated. Back then, we had a very simple problem we wanted to solve. We used to use Skype when playing online games. When you're using Skype, someone texts you, and if you're in a game, you can’t see what's going on. Mobile devices weren't as big back then and multitasking was virtually impossible. Tabbing out would freeze the game, or crash the game. We had this idea "What if we don't start from scratch by building another communication product, but instead we take the existing one that we loved and perfect the experience so that it works well for gamers?"
Then we thought, "Once we do that, why don't we add a browser, because sometimes you tab out to check out some things online? Why don't we add social media connectivity?" Eventually, the first idea behind Overwolf graduated into becoming this Swiss army knife of a bunch of features that we set ourselves the mission to build. This is how things started.
I saw videos of people in World of Warcraft, showing all of the cool stuff. It could really do anything, because they were super excited about the fact that you also could record gameplay and all that stuff.
Correct. We also had gameplay recording. Back then every new idea that we heard, either from the community or that we wanted to build for ourselves, we just started building. We had this crazy mentality of young entrepreneurs, the disease of "Sure. We can do that." Like having a lot of kids. Maybe technically, the physical thing you need to do to have kids doesn't require a lot of effort, but if you want them to graduate, go to university, you need to invest a lot in their education. That was the disease we had back then - we just thought short-term.
When I looked at your website, you're quite open in your story about some of the mistakes you made and some challenges that you faced early. Could you tell us a bit more, especially the challenges you faced, and the mistakes you made, and what you learned from that?
I think it comes down to focus in these early days. For me, everything was mixed between the big vision for the company and where we wanted to be in the future, to what we need to do tomorrow. If you're an entrepreneur and you're building a business, you better think very big on what you're building, but start small.
What ends up happening, if you think really big and you think you need to achieve everything within the next 12, 16 or 18 months before your money runs out, you're probably going to be left without anything. This is what happened to us. We tried to develop both Skype at high quality, and then game capture, and the browser, and social media, and so many different things — we ended up having this very mediocre product where it was like jack of all trades, but master of none. It's the safe way to fail if you're in the consumer or entertainment space.
At the end of the day, it comes down to focus and quality, and the maturity to differentiate between where you want to be in ten years versus what you need to do tomorrow. In our case, what we should've done better is probably to focus on a single feature for a single game, do it in amazing quality, and then perhaps evolve into doing additional things, or to do what we're doing today. But back then it was a big mistake, doing all those things altogether.
When did the realization come, that you were on a wrong path? How did that insight grow, that you had to change?
I think it started back in mid-2012. We were below radar between 2010 and the first release of the product back in July of 2011. Once we released it, we actually got a lot of traction, so a lot of great feedback. Some feedback that we got, both from big companies and users, were like, "Wow! This is amazing. How did you guys manage to build so much with such a small team?" That got us motivated. We came across a few opportunities, and we decided to execute on them. We thought that this is going to be the way.
Then things started not to work. Numbers didn't grow, revenue didn't come. We thought, "Are we doing this wrong?" But then there was another opportunity that came along for a very big collaboration with a very big company that looked really promising. So we stayed consistent with our mistakes and went ahead, and stormed to get it done.
That deal failed to mature back around May 2013. We got a phone call, learned that they're ditching the product that we were building for them for the entire company. We were focused on getting that thing done. At that point, it was no cash, no traction, we lost a huge contract on which we built the future of the company on. It was like, "Alright. What's next?" I think it started back in mid-2012, but the final decision of pivoting to another framework was in mid-2013.
The Beginnings of “Modding-As-A-Service”
What was next? What did you decide then?
Obviously, we ran out of money. We had a bunch of prototypes and no traction. We had to ask ourselves the hard questions of "Was our strategy even right? Is the market even here? Do people need what we build? What have we learned from doing this in the past three years? How can we create benefit for the future?"
We came to a few conclusions. First, gaming is growing and it's here to stay. Two, we struggled as creators, so there must be a ton of other people struggling as creators too. It doesn't matter if they're mod authors, app developers. If you're building content around games, there are so many different things you need to get right, so you must be struggling. And we learned from that; we bled those struggles.
At that point, because of that and the constant flow of more companies and users asking for more features, we just understood that there was no way we'd be able to serve all their needs as a single company. So we turned ourselves from a consumer company to a B2B2C company, and took all of the technology that we had built to serve third party creators.
You mentioned HearthArena. That was one of the first apps on Overwolf, created by a third party developer who had a website for drafting, heartharena.com. After developing an app, drafting became a lot easier because we didn't have to constantly tab out to the website and manually enter which options to choose from. We came to the conclusion that the market was there and we needed to be obsessed with just building the best platform out there.
In 2015, we started seeing traction with app developers building and getting serious engagement with end consumers through this strategy. From a revenue standpoint, we only started monetizing in 2016, so it took another year before we saw actual cash return.
Until now, we've been talking about apps. Today, you also do mods. If I'm not mistaken, a big part of that is your acquisition of CurseForge which happened last year. Could you first introduce what CurseForge is?
CurseForge is a two-sided marketplace for mod authors and gamers. If you're a mod author and you want a place to upload your files, update them, and get rewarded for your work, — like monetization — then CurseForge is a great solution for that. If you're a gamer and you're looking for mods for the game that we support — for World of Warcraft or Minecraft or other games — you could go to the website, download them manually or download our app, and have an easier configuration process on your computer.
How did that acquisition fit within your vision?
Ever since 2013, we decided that we'd be a platform for all gaming user-generated content, mods included. For example, back in 2014 I posted this thought leadership article in GamesIndustry.biz, titled “Modders are developers, and we should stop treating them differently." In this article I talked about how the industry did not welcome creators necessarily, but rather fighting them through different tools. Obviously, there are cheats and bad things that third party creators do in games, but if the vast majority of times the content is good, it can contribute to the game. If you do it right and curate the content in a way that's consistent with the game developer’s policies, gamers and creators can benefit.
At that point, back when we did the pivot our Series A round, mods were always a part of the menu, but we didn't want to repeat past mistakes. So we focused on just doing apps before expanding into mods. We actually started working on mods before we acquired CurseForge. As we were working on our MVP, we came across the opportunity to acquire CurseForge and thought that it’d be a great shortcut.
What are your takeaways from that experience? I don't think a lot of people get to acquire a company, especially not from Twitch.
It was a really good experience, very professional. The Twitch folks were very focused on what they were looking to get from the acquisition, and the most important thing for them was the community, maintaining the service, and finding the best partner for the long-term. This is why eventually we won the bid. They talked with a number of companies — game developers and game publishers included — and I'm assuming that it was clear some companies were going to treat it like an asset that they were going to monetize.
For us, our goal was to build a new profession in the world. I think this is why they eventually chose us — putting the community in the front, and particularly the author community played a dramatic role in that. I'm pleased to share that eight months in we already quadrupled how much money creators make. We have this graph that we released with our last newsletter on how much creators made back in the Twitch days and how much they make today. It's about four times what they used to make. I'm still expecting it to grow based on everything that I'm seeing.
How would you describe Overwolf's role within the modding industry today? What will people know you for?
From a creator’s perspective — people know us from providing them tools & community to succeed as a mod developer. We want to make it easy for a kid to sit down and say “I want to be a modder for Minecraft or GTA” and have that be achievable.
And modding is already a legitimate profession. You can actually make a very decent living and make it work. In essence, we're a company that's aiming to serve third party creators who are building content around games, and to provide an environment for them to grow.
In practice, having a successful creator community requires so many elements — you need discovery, you need an app store in your game, you need LiveOps for content curation, you need payments. Just like you use Unity or Unreal to build your game, you use us to support your mod community. That’s how we think about our role in it all. If you think about it, if you want to have a successful creator community around your game, then you need to build so many elements, you need to build discovery, you need to have an app store inside your game — so that people can discover mods and rate them — you need to have LiveOps team for content curation, and you need to do payments for thousands of creators. If we provide it for you as an engine, just like you may use Unity or Unreal to build your game, you may use us to support your creator community. That's exactly how we're thinking about this, and this is our role.
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Overwolf As It Exists Today
Let's talk about the people who are currently creating on the platform. Do you mainly have individual creators, or are there already companies building this stuff?
We're seeing both very young people, but also people who are probably 50 plus years old, doing this for a living.
To your question, I think right now it's very diversified. We have startups building on Overwolf, we have bigger companies, like Intel, building on Overwolf, and we have indie developers, young kids and college students, who are building as well.
I've never tried to build an app. How should we think about the complexity? What kind of technical knowledge do people need in order to get started building with Overwolf?
The rule of thumb is that if you can build a website, you can build an Overwolf app.
You mean the website from scratch, not necessarily on a drag and drop one?
As gamers, we want to have as many people as possible building mods, building apps, because they can provide the tools that you need to bring your game and your enjoyment of the game to the next level. As an industry, what can we do to get more people to start building these mods and apps?
Obviously, we're working hard on solving all of the problems, but if what we want is volume, the number one thing we can do is direct innovations with the game developers themselves. When you open the game menu, you see a mod stamp, you click the mod stamp, and then there's a whole lot of things you can download, but then there's this small button, a small call to action, saying something like, "Hey, do you want to build something?" If you click it, then you go to the community area where you can talk with people, you can read, or listen to webinars or podcasts like this one, or see a video and a tutorial on how to start building. If we do this from the ground-up, from the game to the creators, that's probably the best way to reach scale. Honestly, the industry is at this point mature to reach that scale.
How Overwolf Monetizes
In a recent article you predicted that you would be paying out $50 million to app and mod developers. Could you tell me a bit more about your business plan? Where does that money come from? How do you split revenues with other stakeholders in your ecosystem?
Let me explain how it works now, and how we want to take it in the future. Right now, the way we monetize is through ads, donations, and subscriptions. If you have an app, then all of the revenue from ads that you show in your app's real estate is split with us, 70/30. We keep 30%, the creator keeps 70%. It's the same model for donations or subscriptions in the context of the app.
However, if you're building a mod, it's more complicated, because you can't put an ad in a mod. There needs to be a mod manager. In that case, there's CurseForge, which is basically a marketplace for mod content. When someone engages with a mod, the artist gets paid based on engagement, which is a factor of usage, downloads, and bunch of other things we have behind the scenes.
Now imagine this pool of cash being distributed every month based on that engagement I described. That's how it works now. But in the future, its going to be about in-app purchases, with some mods might be free and some paid. You could potentially have a set up where you need a subscription to get all the paid mods within the game. This lets us include the game developer themselves in this ecosystem.
The way we think about the revenue here is a similar split: the mod creator gets 50%, then we split the remainder with the developer themselves. In this model, we enable the developer to own the IP, and the mod creator is still front and center on the experience. We want the mod developer to get a lion’s share of the revenue, but there obviously needs to be something for the game developer to be incentivized to support us, the community and everything we’re building.
So right now you have the ads, donations, and subscriptions. Where does the lion’s share of the revenue come from?
Currently ads. I wish it were subscriptions, but we're not there yet and I think we have a lot to do to get there. Eventually, with time, it's going to be around 50/50 or more. Ads done right are really important in fueling a creator economy. You can see it with TikTok, or Snapchat, or YouTube, or Twitch. It allows people that create mediocre content in the early stages and still make some money, because its’s hard to build a following that will pay for recurring content. Like Patreon, which is an amazing product, can be hard to get off the ground for a game creator or modder, they wont be getting enough money to sustain their work.
Take the creator of the Deadly Bus, which is a super popular add-on for World of Warcraft. Even with his engagement, he still needs to tell his community “I’m dedicating my life to building this, can you please support me?” And that builds a lot of short-term subscriptions, but doesn’t help him make a living or time. And also for him asking and reminding the community isn’t a pleasant experience, so we want to help create a more passive way to generate that kind of revenue.
The Competitive Landscape
Could you tell me a bit more about the competitive landscape of modding and apps? How Overwolf differ from other companies in this space?
On the apps front, our biggest competitor is probably Electron. It’s a framework for building desktop apps that uses web technology. Most of the gaming apps you see out there are built on it. Essentially if you have a gaming website, building a gaming app with Electron (or Overwolf) is really easy. Our differentiator versus them is that we can do what Electron can't. For example, we can help our creators understand what's happening in the game with an overlay to help create more meaningful experiences, publishing distribution etc. We also have a huge emphasis on feedback - we can connect you with relationships to game developers, give you analytics, crash reports etc. And if someone really wants to switch to Electron, we also make it super easy.
On the mods front, our competitors are other platforms or even developer’s in-house teams. Microsoft for example has solutions for the Minecraft ecosystem and is starting to offer things through PlayFab. There’s also Steam Workshop and Mod.io and a few others.
But we have a few things that set us apart from other platforms. Our main differentiator on the mods front is that our service is the only service that allows creators to monetize from day one. All our competitors take a lot longer to monetize. We're also free — our product is only based on future revshare if you even end up charging users at all. We also already have 20 million monthly active users, so you get access to the resources, community, and discovery of all of them plus 30,000 creators. Finally, we also don’t just give technical tools, we give the full end-to-end solution. The trouble with building elsewhere is that you have all these services on the side: LiveOps, payments, curation. We’re already doing 15 billion downloads a year on these mods, so we have the ability to offer these things without the hassle.
Working as a Developer with Overwolf
Talking about those game developers, if I’m not mistaken, Call of Duty recently removed your access to their game. Could you talk to us about how developers and publishers look at what you're building and if there are different sides there?
The good news is that we're back supporting Warzone as of a month and a half ago. What happened there is that one of the apps in Overwolf did something around match-making that we didn't really understand was problematic. Since we didn't have a direct relationship with Raven, the creators of Warzone, they provided what was the path of least resistance. Basically, a way for them to block Overwolf.exe.
When that happened, we reached out to the people that we’re in contact within Activision, and then got in front of the right people at Raven, and went through all of these discussions on what went wrong and how can we prevent it from being wrong in the future. After about a month without support, we brought support back up under their approval. Removing support was because a creator did something that they weren’t supposed to do, from the game developer's perspective.
The ideal solution is that they would just email me or one of the team members at Overwolf, and we would just reach out to the developer. All these developers have pure intents. They just want to improve the game experience. If we send them an email and say, "Hey, we got this email from Raven, and they're asking you to remove this feature, because of one, two, three," the feature's going to be removed within 12 hours. If it won't, we'll remove the app ourselves. We also have a kill switch for every app.
It goes back to one of the things we talked about in the beginning, which is, with user-generated content, there's amazing things that could happen, but there's also the dark side, the cheats, the things that game developers don't like. This is exactly our role. We want to be the sheriff and be very clear that we're 100% consistent with the way game developers see things, first and foremost. If they don’t like something around their game, it's not going to happen, because it's their game. As facilitators, it's our role to support them in that sense. As the community grows and matures, I'm hopeful that we know more and more people, and if they have any issues, they can just email me.
Let's say I'm a game developer and I want to allow for mods and apps inside my game, and I want to work with Overwolf. Practically, who would I have to approach this? Who do I reach out to? What are the steps in that process?
I'll divide it into mods and apps. If you want to do apps, then you can reach out to us either directly to me via email, to our biz development team, to our support team. What we would then do is look at your game, understand what type of apps can be built around it, and then send you a package for real-time telemetry that you might want to integrate with your game. It's a very small C# or C++, or whatever library that you ship with your game, that fires real-time client side events. Integrations like this usually take around two days. Every now and then there's ongoing maintenance of adding more and more features. It's a client-to-client communication between Overwolf, if it's installed. We translate it to the app developers in the game. This is the only thing you have to do. The advantages are people will start creating onboarding tools, stats apps, highlights apps, and anything else you would want to encourage the creator community to develop.
If you want to do mods, you go to core.curseforge.com, or, again, if you want, you can email me. In core.curseforge.com you can apply to start having conversations around mods for your game. Once you do that, we'll have to look at the game. Not all games are created equal. We need to understand how the game is built from a technical perspective -- are you planning to have a map editor or a creation kit, or do you expect people to build it themselves? Is it a Unity game? Because for Unity there are already existing tools that allow you to create the mods themselves.
Once we figure out the technical part, we'll talk about vision: what do you envision people will create around your game, is this going to be cosmetics, is it going to be maps, is it going to be overall mods, is it going to be anything in-between? Once we understand that, we think about how to go to market: is your game even launched, are you still working on it, or you want to launch it in a year? If everything I said doesn't make sense, the short answer is you either email me or you go to core.curseforge.com, contact us, and we'll walk you through the process.
I believe that there's a new generation of gamers growing up right now, people playing Roblox and Minecraft, that are used to endless customizations and possibilities. I think that user-generated content, apps and mods, they're going to have a meaningful part in the future of the games industry. If you're a game developer and you're not thinking that it's important, then I humbly think you might be missing an opportunity to build something bigger from whatever it is you're building. Obviously, it's not a fit for everybody. Obviously, timing is always an issue, and you have to be very clear on what you want to do and when.
Just to give an example, we recently made an equity investment in a game studio. Those guys from day one said, "We're shipping the game with a creation kit. We want from day one to start seeing what the community creates." For us, this is the ideal partner, because they already have a plan and we're just there to facilitate LiveOps and some backend work.
What are some other things that developers can do to create a thriving ecosystem around their game of mod and app creators?
The first and most fundamental thing is just to create an amazing game that's fun to play. This is where things start. If you think about, "I'm going to have an amazing creator community," and then you build a shitty game, then you're not going to have an amazing creator community. It all starts with just having an amazing game. If, from the beginning, you can think about those elements inside the game that are going to be fun to customize, whether it's a lobby experience or cosmetics, then you have a shot at having a thriving creator community around your game. These are the only two things you have to do as a game developer. One, to build a great game. Easy to say, hard to do. Two, think about what's going to be and under which sandbox you're going to allow creation to happen around your game. Once you have these two, we'll help with the rest.
Mapping the Future of Overwolf
I read that the last funding round was different from the ones before that. Could you tell a bit more about how that was?
I told the story of 2013, all that mess. I probably talked to 50 different investors that didn't understand what the hell I wanted from them until I found this investor that said, "Maybe," and we were able to turn that Maybe into a Yes. That was really difficult. However, when we decided to do this funding round back in Q4 last year,, we reached out to a handful of people with whom we've talked in the past, and we had interest from all of them. Within 3-4 weeks we received our first term sheet which we ended up going with. That's a correcting experience, based on past experience that I’ve had doing fundraises. It's obvious that the company is on a great trajectory. We have not only what I think is an interesting story, but also proof that there's room for that. It made things a lot easier. At each stage you have to find the right investor to believe in your story. Sometimes it might be just a presentation, sometimes it's an MVP with some traction, but sometimes it's a good mix of both, and then it makes things a lot easier.
What's on your roadmap and how do you think about scaling the company?
On our roadmap is making the game creator community as a profession. That's super high level. Our strategy is we're going to listen to what creators want, what game developers want, to prioritize and to build as fast as we can. Then to help put some more fuel in the bonfire and help it burn faster and greater.
We plan to announce a fund of around $30 million. The goal of that fund is to build a creator community. It's going to be the first fund in gaming, at least that I know of, that's going to invest only in this vertical — directly in game studios or in creators themselves. We'll be flexible with our structure. We'll do both grants and equity investments, or community investments, and we want to work with studios that want to join our mission to build this as a profession.
Just to give an example, let's say you're a studio. You know that you're not going to build everything yourself in-house. We could be a great partner that provides not only tech infrastructure, but also funding. If you're not interested in us being a shareholder in the company, great. Maybe we can find other ideas. For example, do all those hackathons and fund those hackathons to incentivize creators to come to your game and start building high quality content.
If you don't want to do both of these things, but you have a great game, maybe we can find existing creator communities around your game and see how they can double down on scaling them with some sort of an official relationship with you. There are so many modding communities right now that are huge that are doing it without direct connection to the game developer. We can scale structure, procedures, culture, and communication. Broadly speaking, this is what we want to do with the investment we received.
What is in your opinion the gaming industry in general underestimating when it comes to the future of modding?
I think that a lot of game developers understand quality, and they think that the community can never get to the level of polish that's required for content to be successful. From the get-go, they're saying, "There's no way I see this working, there's no way I see this meeting my quality bar, so we're not interested."
My answer to them is: a quality bar is something that can be managed. For one, you can manage expectations. You can call it a Beta, and the expectation from someone that goes to explore these things is, in advance, you're going to see some different things. It doesn't have the quality stamp of the game developer. I think it's legitimate, especially if you're creating a single player game that has 50-60 hours of gameplay, especially. If you're planning on doing sequels, why not allow creators to build something on top of that? I don't see the reason why not to, as long as you manage expectations the right way.
For others that see the value and don't have problems with quality bars or setting expectations, it's just the headache. They're saying, "There's no way that we're going to manage that." This is exactly why we're here. I'm having a lot of conversations with studios early on, and they're saying, "I don't care about the creator community. I just want to build a high-quality game for people to play." They're right. That's the number one thing they should focus on.
But if they could put just a bit of thinking on how this could pan out, because we're able to provide them a UGC as a service type solution, then it's not going to be such a great headache for them. I think it comes down to the quality bar and just worrying that it’s going to be one of those good ideas that’s never going to work, so I don't want to waste cycles on it.
Bethesda’s culture went really deep on providing an amazing creation kit for the community to build stuff. Even though Skyrim is 12 years old, people still create content for Skyrim. I would argue that this is what made Skyrim what it is today. This is what's going to make the Elder Scrolls 6, whenever that comes out, very successful. I guarantee that Bethesda will release it with an amazing creation kit, and they probably have some really cool integrations with the Microsoft marketplace, post-acquisition. It's going to be amazing to see people that have created content around the Elder Scrolls for years and continuing to do this with the next title.
What's the best piece of advice that you've received on building a company in the games industry?
Focus on quality. Three words that actually have two pieces of advice in them. One is focus, the other one is quality. It really is the only thing that matters.
Could you share a bold prediction about something in the games industry?
My prediction is that having a creator community around your game is going to be a standard in five years. We're obviously trying to make it happen, so I'm speaking from my own position. I really believe that in five years it's going to be a very prominent thing in the games industry.
Uri, thank you for being on the show.