Chess is a business that has, without a doubt, been supercharged by linear media and has been booming since COVID-19. As one of the most tactically complex games ever designed, Chess has over 700 years of retention and history.

But what is it like to build a chess empire? Chess.com, purchased by Erik Allebest and his co-founder for $55K in 2005, has built a web and mobile platform with over 170M raw accounts, 50M monthly active users, and 5-7M daily active users.

Join our host, Alexandra Takei, Director at Ruckus Games, in a discussion with Erik that covers growing a team of two to 600 over 20 years, the monetization and engagement of a Chess platform, an overview of external acquisitions the company has made, and growing rapidly via what Erik calls a “great meme game”. We also discuss the pros and cons of not owning your IP and where the future of online Chess is headed! Checkmate! 

Also, big thanks to ZBD for making this episode possible! ZBD provides a plug-and-play API and SDK for seamless integration of instant, borderless, and low-fee payments using the Bitcoin Lightning Network. Want to better engage and monetize your global user base? Start for free at http://zbd.gg/https://grid.gg/?utm_source=naavik.co&utm_medium=media&utm_campaign=Naavik

This transcript is machine-generated, and we apologize for any errors.

Alexandra: What's up, everyone, and welcome to the Naavik Gaming Podcast. I'm your host, Alex Takei, and this is, of course, Interview and Insights.

Today, we're diving deep into the world of web browsers and the most OG of games, chess. Chess has its origination date back in the 1400s and is one of the most tactically complex two person games in the world. called the Mindsport. Chess is one of the world's most popular games. In 1956, 13 year old Bobby Fisher beat international master by the name of Donald Brine, which kickstarted a huge influx of memberships to the U.S. chess federation.

Chess, due to its mind sportedness, is also played a huge role during the cold war, a symbolic mental landscape of warfare clashing between the Soviets as anybody who has known if you've watched Queens Gambit featuring Beth Hartman. But although in person physical chess is on the rise, we're here to talk about its online companion.

Online chess has been absolutely booming since COVID, and one of the most popular websites of arrival is Chess.com. Last year, Chess.com reported that 12. 5 billion games were playing on the platform, roughly 35 million games per day. In February, Chess.com reported 150 million members with 100 million plus in revenue.

Chess.com is played on either your mobile phone or web browser, a classic HTML5 game. And today we're going to talk a bit about, about what it's like to build a chess empire, monetization, engagement, and growth of online chess, and some of the challenges associated with building a business around historical IP that you do not in fact own.

And many more things, of course. I'm also very lucky. I have the perfect person to talk about this with me on air. Erik Allebest, the CEO of Chess.com, is joining us today. Erik has been the CEO of Chess. com for almost 19 years. Holy cow. And I'm going to let him tell us all about his journey with Chess.com. But I'm very excited to host him. Welcome to the pod, Erik.

Erik: Thanks so much for having me. I'm excited to talk about any and all these topics and wow. You've reminded me just how long this has felt.

Alexandra: So I was, yeah, I was like, dang, he's been running this. He's been running chess for 20 years.

 That's terrific. And also for those who don't know I said HTML5, but I think HTML5 games have never really been written in HTML5, they're just mostly written in Java or JavaScript, but for some reason, HTML5 game sticks, so here we are. But, okay, so I have been trying to find a time to get you on air for a while, ever since we talked during that media entertainment class.

Alexandra: And I know that you shared your story about becoming the CEO of Chess. com then, but I would love if you could share with your audience how this all came to be for you.

Erik: Yeah, happy to do it. I just want to thank my mom for teaching me chess at age eight. I still remember that green carpet we laid down on and played our first game of chess together in Southern California.

Taught me how to play. She said I won the first game and like, we didn't play a lot after that. It's probably just mom lore. Not sure, how much is true there, but I did pick the game back up again in high school, a little bit with friends and with my grandpa. And then when I went to college freshman year, I was just, playing chess and I met this guy walked by, just happened to live on my floor and he was like, I want next game.

And. His name was Jay. He kicked my ass and I was like, there's something to this game. I got to learn. And we became friends and he taught me chess. And then we went on to do business together, including founding chess. com. But that was actually my third chess business. My first chess business was in 1998.

I started doing chess clubs in schools all around the university. And that was my first chess business. And then my second chess business was starting A couple of years later to do e commerce and I was importing chess equipment from, all around the world and selling it online long before Amazon was selling everything.

So that was my second and then chess. com started in 2005 as an idea. Bought the domain name then and then worked on it while it's at Stanford Business School uh, in 2006. Turned down a couple of jobs that in hindsight, you know maybe financially weren't the best decisions, but then in 2007, as I graduated in May of 2007, we launched chess.com out into the world and then thought, is anybody going to show up? And people did. And basically ever since then been mostly focused on this. There was a short detour. In 2010 to 2012, I was running chess.com and exercise.com. Crazy story, . I'm not sure we're gonna get into that. But it was short-lived and I was like, ah, I didn't, I don't really love this business.

I'm gonna go back to doing chess, but I did pick up exercise a wonderful habit in my life. And basically we've been doing that. We started out really small. We were self funded, all the venture capitalists told us it was a dumb idea. And so basically self funded a little bit of a loan from a friend's mom and.

We just went after it and then, work to get profitable as soon as we could. And basically been self sustaining and profitable ever since, 2009. And, have grown at basically at the speed of cash. Every time we get money, we just hire more people, invest in the product, hire more people, invest in content, invest in people, product, content.

And that's been what we've done until now. And we went from two people working at just. com to, over 600 we actually just had our first company kind of layoffs. That was really painful really hard to say goodbye to some people at our team and, So anyway, basically I went from a solo entrepreneur to like building this company and I'm just, this is like my first job.

And so I'm making this up as I go. I'm learning a lot. It's ups and downs. It's painful. It's beautiful. It's a lot. And I'm just grateful that I have an opportunity to do this and an amazing team to work with.

Alexandra: That’s awesome. It's amazing that you're still at your first job. I think that not a lot of people can say that.

And I love, I want to bring this back to chess club before we talk a little bit and double click into this aspect of, building this chess empire that you've done over the past 20 years. I noticed that you wrote on your LinkedIn with regards to Stanford GSB had a great time, 10 would recommend turn down several offers in big tech to do this chess thing.

You also started the GSB Chess Club, but you were the sole attendee, so you had to cancel the club. Having gone to GSB myself, I don't find that surprising, but can you walk us through a little bit of your mindset of how you had the fortitude to come out of school like that and just pursue a career?

chess. I think for a lot of people, that's a very scary and daunting task, and you've obviously been incredibly lucky and fortunate to be doing this thing for 20 years, but rewind the clock and tell us a little bit about what were you precisely thinking?

Erik: Good question. I'm rewinding in my mind as I look up, I guess that's where people look when they're going back in time.

Alexandra: That's what Beth Larson does in the show too.

Erik: So she looked at the ceiling and all the pieces move around. So all my history is up there. So I, it wasn't my first job but if coming out of business school, it was my only job but I had done a couple of ventures before that. And I had also had one job for a very short time coming out of undergrad.

And I think I, the company like downsized and I got laid off within like six months and First of all, I hated that job. And then while I was at Stanford business school, I did a bunch of uh, kind of mini internships at a couple of different places, venture capital, big tech, this big tech, that I knew what kind of the consulting and banking route, I'm like, I'm not really cut out for any of this. It just didn't resonate to me. Like everybody in the big tech that I went and met with, I was in Stanford business school. I'm like, Oh, I'm going to go to this big tech company and I'm going to meet with a GSB, alum who's working there as like a manager or whatever.

And I would go there and I would talk with them and they're like, Wait, you've done entrepreneurial stuff. Tell me about that. And I'm like I'm here to see what you're doing. And they did not want to talk. It was like, they didn't seem happy is all I can say. And I'm like, okay, I'm not destined for that.

And so, coming out of business school, I've been working on chess. com as a side project. And I did a lot of side projects while I was at school. There, there were a lot. I think the time that other people were spending, maybe socializing more or doing. Other types of events.

I was just like side project. I was. Like I did a little project for like Eventbrite and then I did this thing on uniforms. com. And then I was over at this venture firm looking at deals. And then I was creating these SEO sites on my side. And then I was like, I was just like busy doing work stuff.

And I also had kids at the time. I had two kids. My third was born while I was at business school. So I was like dad at home doing business stuff, some social stuff, but I was like very much. Cutting my teeth on doing things. And that's just my mode is I'm just hyperactive and I do things.

And so my mom taught me how to play chess. But my dad taught me how to get stuff done. He's got 20 different things going at any given time, even now in his mid seventies. And so it was those things drove me together and I have all my classmates who are like big tech job, consulting job, maybe like two people who were like, Oh, I'm going to go do my own thing.

Maybe more than two, maybe there's like four or five. And I was like, I'm going to go do that too. And then I asked all my classmates, Hey, anyone want to do it with me? And it was like crickets. And I'm like, all right, fine. I guess I'll go do this all by myself and with my co founder Jay. And, Jay wasn't Stanford's, engineering or, Berkeley, this or MIT, he was San Jose state.

And I'm like, awesome. Like he's a doer, he's a grinder. And we just like, we're like, right. the two of us, we're going to go do this. And our wives were like. All right. We trust you like good luck and we saw positive signs early. So it was easy to stick with it.

Alexandra: Got it. That's incredible. And I think that's actually a perfect segue to start talking about the empire that you and I guess Jay built together.

So we talked a little bit about where you started and it's time to catch up the audience as to like where you are today. We're going to address how you built this chess building empire in two ways. One from the internal side. So building a team from scratch with your co founder slash The domain buyer Jay, and from the external side, you've also been buying up a lot of rival chess sites, and I'm curious as to, whether or not you've done actually any external financing, though I think it sounds like you haven't.

But let's start with the internal side. You bought chess. com the domain for 55k in 2005. It seems like you're really into coms, exercise. com. Whatever else you said, there's something, there's another dot com in there chess. com, et cetera. So you're sitting there, you've got the domain name.

You bought it every day, five K. What is the first thing that you guys did?

Erik: We made some wireframes and we had a vision for what we wanted to do. And our first vision was we want it to be the MySpace of chess. So that was kind of that, so profiles and forums and, just identity.

There were more niche micro communities online back in this time. It wasn't like everything was a Facebook group or an act or a feed or something like that. It was more communities. And so that's what we wanted to be. And we started, I would build wireframes in Microsoft Word of all places.

There was no Figma back then. Come on. I'm just making wireframes and then Jay is like coding it out and we just started to build some stuff and that's how it started.

Alexandra: Got it. And then can you tell me about how you grew that team? And so I think obviously the difference is that, chess.com, HTML5 game is a lot different than maybe some of the other founders that we have on air from the mobile business, triple A console, VR, etc. What was the breakdown, especially in the early days, Between engineers, business and design. I think the other thing is that you don't have to design the game of chess.

The rules of chess are known. So tell me a little bit about how you started staffing the team maybe in the first like two to five years.

Erik: Yeah. So first of all, I don't think we made a business hire for like, Five years. And then we had like one and he did everything like books and marketing. And we're just like, that doesn't, that's not important.

What really matters is like product. And it was just all, that was all that mattered. Now we have a larger business department, but I think it was literally like five years, like there was nothing like that. I was like literally reconciling QuickBooks and bank accounts myself for five years.

 Knew we wanted to build chess and the game, and it was going to be JavaScript because we were going to do it in the browser. And so we had this active site where people were coming and creating profiles. And then chatting in forums and we're like, we just put up job posts there. Hey, does anyone do JavaScript and wants to make a chess board and help us on this game?

And this guy named Matias from Argentina was like, Hey, I've always wanted to do that. Let me join your team. And then we also saw this guy from Poland who had built something like it online. His name was Piotr and I reached out to him. And I'm like, Hey, you guys build this, build some chess stuff.

And they're like, great. And so it's Clay Piotr and Matias and Matias still works for us. To this day and Piotr is a close friend and he worked with us up to a couple of years ago, and now he's focused on doing some other fun stuff. And we're still close friends. But we hybrid recruited them out of the forums from our community and said, let's build some fun stuff together.

And they did. Yeah. And then we added like a customer service kind of community person. And then we added like, but it was basically me and Jay and a couple of engineers and one community person that was it for a pretty long time. And then we, Oh, we need another engineer. Oh, we need another engineer.

Now we need a designer. And we had like one designer at our company for eight years or something. And it was, so we just went slow. I think that's something that may be really different. Now you get like these teams that like, how they like, they already know how to do this. They're like, we need four PMs and we need eight artists and, nine data people and this business thing.

And we're going to do this game loop with this microtransaction attached to the, you can do this stuff now with a playbook and there's new playbooks being written and new chapters, but it's more clear as to I'm going to do a game and I'm going to do it this way. And this is our UA plan.

And this is all the stuff like there are playbooks for that, but we were just two chest dorks, just trying to build something. And it was just all organic as to how we did it. We didn't have this playbook. The only gaming sites out there was like Pogo and Yahoo, and then there was, that was it.

And then for chess, there was like the Internet Chess Club, but it, none of this infrastructure, none of these playbooks existed.

Alexandra: And, okay, got it. So very scrappy early team. How big is the team today?

Erik: It's 600 people. 600 people.

Alexandra: All right, got it. So that's huge. Um, when was that?

Erik: I can explain. It's very, like So first of all, like how do you get to 600 people? First of all, you get a couple of hundred engineers because now you're building systems. That have to underlie all of this stuff. And now you've got separate mobile game development teams because we don't use unity or, across platforms.

So we're building for web, for native iOS, for native Android. Then you have customer support because we got, tens of millions of members. Now we've got 25 designers. We've got 10 project managers. We also do content. We're a media company now too, because we trade content and socials, and we also do that in multiple languages.

You add that all up, you can get to 600 people.

Alexandra: Yeah, I know. I believe it. Yeah, for sure. Plus you also have, I think one of the big I guess artifacts. This is typical in a lot of video games, but in chess, my understanding is that there's a lot of like cheating bots and stuff like that.

So you need a lot of management to make sure that. People aren't using bots to cheat and predict moves and stuff like that. So I totally, but it's, that's a, that's an incredible journey to grow from a squad of 20 to a squad of 600, to 20 years later. And in reality, it's probably felt wild and chaotic, but it's, it is 20 years.

So it does, Make a lot of sense. But so we talked a little bit about this on the internal side, and I also know that you guys have bought a bunch of companies as well. In 2009, you bought Chess Park. In 2013, you bought Chess Vibes. In 2022, you bought Play Magnus. What are all of those, and why did you buy them, and what was the positioning?

Erik: The acquisition of Chess Park was stupid. It was another chess site that had started to come up. They got some users, they created a platform and then they died off. And it's to this day, still don't really remember why we bought them. It was basically buying like a user list of people and it was horrible.

It was like the dumbest thing. I like looking back, it was really very little value add and just a waste of money. Chess Vibes was basically a blog and an author, and it was more of a talent acquisition Hey. You're creating all this chess news on your site. Why don't you just bring all your content over and do your content on chess.

com now? And so it was less of a big acquisition and more of like paying someone a big retention or a big signing bonus to come work for us. It's more what that was. Now play Magnus is a different story. Play Magnus is interesting because we had a relationship with Magnus Carlsen before Play Magnus.

Had it was a separate company and we had a relationship where, he's a big name and he, wants to use that name to like build things. And they made a company that built an app that was playing with Magnus around his name and they built up an app and. It had some users and some revenue, but it was mostly losing money.

And they came to us and said, Hey, we want like Magnus Carlson, plus this app and the team will join your company. And we'll take a third of the new company. And we're like you're losing money. We're making money. We are 10 times bigger than you. This math doesn't pan out. And they're like if you don't do this, we're going to compete.

And we're like I guess you're going to do whatever you're going to do. And so they then you started, they raised more money. They went out and then they went on the acquisition spree. They bought chess 24, which was the chess kind of viewing and education platform. Then they bought chessable, which was a chess education platform.

They bought, Silver Knights, which was like kids in schools learning chess and they bought publishers so they could then do the rights for the digital. And then they had their apps and they made more apps and they bought other apps and they bought another like marketing they, they put like 13 companies together in a basket called the play Magnus group.

And then they created a chess tour where Magnus was playing and they had sponsor dollars. And they like had a vision to Bri to put all the other, it was like chess.com and then the nonprofit Lee, US and then all the other companies, they were gonna put into one basket. And then that's how they were going to play.

And they were going to figure it out. Are they going to try to merge with chess. com? Are they going to partner with Lee chess? What are they going to do? And basically they were unsustainable. They were in a constant fundraising cycle and they were, no one was using their core product, which was the play stuff, but they did have Chessable and they did have Magnus Carlsen, and they did have the tour.

But their place server was never going to be anywhere. Anyway, they cobbled together this revenue and I don't mean that in a negative way, but it really was like 500, 000 here, 800, 000 here, a couple million here, a couple million there. And they had a viable company, but they were still losing money.

And then eventually we came together and we said, look. Sorry, this is a deep explanation, but I'm just going into it. Like it, it was like, we wanted to just stop fighting in some ways on this and like unite the professional community to not have people playing in different places. I'm like, we have the biggest platform.

Let's get your content in front of the platform. And so it made sense for us to do, was it the best, probably financial outcome for us? Probably not. Was it, probably, and we don't know the future. Maybe they would have raised more money. Maybe they would have turned profitable. We don't know, but.

For everybody who was involved in that and how we've come together, like it's been very positive internally for all the people who joined now, again, some people did lose their jobs. It was a hard transition. And acquisitions are always really tricky, especially inside the community who feels like, Oh no, we have fewer options.

And I get that perspective, but really what you had was more resources trying to build great stuff for the community. That's my take on it. And I stand by that.

Alexandra: Awesome. Yeah. Okay. Play Magnus was a competitor, but now turned friend. And I think that's a great opportunity to talk about the platform.

Let's talk about the engagement and monetization of chess. And so chess obviously is one of the most replayable games in the world. And now it seems like you've combined and turned in all of this other content from Play Magnus and, a bunch of other sites, chess park or sorry, chess vibes.

And you said Chess park was a doozy, but here you are. But Chess is one of the most replayable games in the world. It's truly a system that probably any game designer would be insanely envious of. We've had like 600 to 700 years of retention here. Like League, World of Warcraft, Fortnite, Apex are absolutely toddlers in the wake of Chess.

However, Chess has also been rather indigent. The players are usually playing at a pecuniary loss just for the love of the game. There's no big prize money. And when it comes to your site being online chess the monetization of chess is still nothing compared to something like a fortnight.

And so I want to talk a little bit about, the business model around how you guys have been operating. And I read online that when you guys first launch, you guys weren't free to play, you were a subscription model and now you're free to play today. So walk me through the shifting from being a premium sub to being free to play.

When did you make that switch and why?

Erik: First of all, just to be factually correct, we've actually always been free to play. Okay. And still are free to play, but we are then pay to learn and improve. And so we have multiple products. And this is also different in gaming. Most games you monetize the play.

And education is not quite the thing about it, but chess has a, it has a depth to it. That's different. And so we combine those tools and it's really the tools for improving your game where we try to innovate and then charge money while the slaying remains free. Always got it.

Alexandra: Okay. Got it. So it's the coaching tools that are paid.

Okay. And is that, okay. Got it. Keep going.

Erik: And so it is challenging though. Like not only do we not own chess, but it's free to play. You can play anywhere. There's, thousands of places you can actually play chess and apps and all the different things. What people really want is a good, clean experience where they can get matched with someone quickly and play really, whatever time control they want and feel like it's a fair game.

And so we work hard to deliver that service best we can. It's challenging to make a global game with one user base where, you know, two people on opposite sides of the planet can play a game in real time and do that. We put a lot of resources into that and into keeping it fair.

We have a large fair play department that works on algorithms and analysis to just make sure that, it's all fair there. And then, you know, the other side is we're constantly trying to evolve the education game. Because chesses are different. There's a lot of games that are like, very much set up for You actually don't get better, but you just get more access to power ups or something, right?

Take a game like Royal Match or whatever you're just matching stuff together. Candy Crush, you're just matching, but you get these power ups, and if I get money and this coins and cards, I unlock more. So levels get harder, but you're actually not necessarily getting better, or you might a little bit, but who knows?

Who cares? It's more about the powers, but chess is fricking brutal. Chess is the most brutal game out there because there's no luck you lose. You're expected to lose about half the time. It's absolutely brutal. And I think that is the beauty of it. And why keep people keep coming back? Because it is truly a test of how well you do and what you can see.

There's no luck. There's no power ups. You are toe to toe with somebody at your level. And when you, and because the pain of loss can be so great, the joy of winning is so great also, there's nothing like getting winning chess and like a really great move and a really great sequence. And it's really what keeps people coming back is there's that little, you just, it's like golf in some ways that like golf is such a hard game, but that really great shot keeps you coming back.

And so there's a bit about that around chess as well. And other games might look at that and say, Oh, that negativity or that, not winning every game and all these things. It's not a good game. You won't have people coming back. But I think people are in some ways, you're a little bit tired of like, You know, or at least there's a segment of the population that's a little bit tired of the mindless games or constantly winning through power ups and really wants a truly skill and effort based game.

Alexandra: Yeah, and I think that's a, that's, it's a huge core component and a core pillar of game design is just mastery, but I think in chess you obviously flex that a little bit more. And so what you're telling me is that the way that you monetize mastery right now is through a subscription that you pay for coaching.

Do you do anything else to monetize your chess platform? But do you sell chess cosmetics or different chess sets or what are like the, are there, is there any kind of that like MTX cosmetic system that you might find in a free to play mobile game or a free to play PC game?

Erik: This is like the most commonly like postulated thing, either you have it or should you, or all these things. When you're playing a shooter game, or something else where you've got cosmetics you have your own character, and then you have the other person as an independent character, and maybe their gun is gold, or maybe they're wearing a bunny suit, or whatever, it doesn't impact your gameplay, and you can do that.

In Chess is so much about visual recognition about the pieces and your comfort with what's just purely going on. You could never really do it where like someone could just randomly choose their chess pieces, right? Like you need a set that's consistent for your pieces and my pieces and then I should get to choose the chess set that I want.

I don't want to see half the board looks like your set, half of it looks like mine. And it's never really made sense. However, we have an interesting thing we're testing now. Which is before the game, there's the two players, I'm on the bottom, you're on the top, and for the, right at the beginning of the game, for a second, you show me what chessboard you're using, I show you which one I'm using, then it goes back, and then we play the game, and then whoever wins, the board gets taken over by the winner's theme.

Ah. We don't know if people will care about this. Some people were testing it and some people are like, turn this shit off. I don't want to see this and we're like, fine, there's a setting over here and other people are like, Ooh, I get to show what cool chest that I'm using. So we may edge into that. I don't think we will ever get to the point where we're like for 20, you can own this exclusive set as a consumer.

It feels yucky to me. But, we might say, if you achieve this level of thing through this action or this learning tool, then you unlock this thing that you can then use in your thing. So we're trying to get to cosmetics in a little bit of a roundabout different way.

Alexandra: That's pretty interesting. As I never really thought about, in chess, there's so much focus.

So having different cosmetic pieces or, my horse actually looks like this kind of horse and your host looks like something else. And I've actually, physical chess sets or sometimes they look different. Yeah, that would be distracting from the tactics of the game because there's so much of that yeah.

Background calculation of what you're doing. You need to have that instant visual recognition. But at the same time, I feel like there's so many great opportunities for IP integrations. Like I could totally see you making a Harry Potter chest set, like from the sorcerer's stone and like that being a vibe.

But I guess I'm just curious cause it sounds like you're testing it right now, but I, monetize different boards and different chess sets.

Erik: I think you're right, we're gonna test it. But chess players are a little funny. If you ever walked into someone's house, And you see a chessboard, I'll just tell you, the more, the simpler the board, the probably the more sincere they are as a player, the more ornate the board, probably the less they actually play chess.

Alexandra: I'm a very bad chess player, so this is all lining up so far.

But yeah, but you know your core demo, right? And I think like that's what you're talking about is your core demo doesn't appreciate those things. I think one of my other questions was that I presume that your players have very different expectations from a mobile free to play player or a PC gamer. And it sounds like there are tons of lines that you guys as chess.com don't really want to cross. Because that's your core player is somebody else.

Yes and no, we're trying to grow the game. We don't want to just have a core player. We want to serve the core audience, but we want to grow the audience as well. So there's opportunities for us to do IP deals and we have done these before.

Erik: For example, we don't want to do it when you're playing against another human. You need maximum focus, but we also have a lot of people who play versus computer and the bots. And so we did an activation with An NBA star, for example. And when you go to play against that AI version of an NBA player, we made the chess board look like a basketball court and the pieces look like basketball things.

And it's like, Hey, you can kind of opt in to playing in this weird way with this, the other environment, because it's a unique thing that you're doing, but it's not like where you go to hardcore play chess to do it. We are trying to push and learn and grow and do all these different things.

But chess does present constraints. It is an 8x8 board with dark pieces and light pieces. And you, and the rules are set and you can't monkey with any of that. And so you got to get really creative around how you do it. Got it.

Alexandra: And I guess you just talked about, this was another question that I had, which was what game modes are people mostly playing on chess.

com? Are they playing PVP against each other, against the computer? Are there. Any other kinds of chess game modes that you guys have come up with that are like blitz chess or smaller board chess or yeah tell me a little bit more about that.

Erik: So most common is just like two people pvp Five or ten minutes per side, is like, what people like to play, and that's the default.

On mobile, a lot of people play daily chess, which is more like words with friends, where there's not really a clock. You make your move, then you go do your homework. They might make their move tomorrow. And it's an asynchronous correspondence day. We call it daily chess. It's really popular among friends and family because you don't have to be online at the same time, but you stay connected and you chat and you do that stuff, right?

That's very popular as well. Then there's a lot of people who like to play against the bots because There's not a clock as well. If you make a mistake, you can take it back and you can do it differently. It's a little more open and a little more free and you don't have the pressure of am I going to lose to this human?

And does it hit my ego? And it doesn't, yeah, it's just the computer. It doesn't matter. But mano y mano feels different. Playing computer is different. There's also other modes. Puzzles are super popular because it's always a winning position. You're always set up with move to win.

Ah, that feels great. Then we invented something called Puzzle Rush on top of that, where it's it goes from super easy to harder and harder as you go. And a lot of people enjoy playing Puzzle Rush because you're just solving puzzles that get harder and harder as you go. We've tried some other things like solo chess, where you play against yourself on a board.

We've tried. We tried a bunch of different things, but these are really the game modes that people like the most. There's also a ton of variations on chess. I should say that. If you go to chess. com slash variants, it's like you could play four player chess, you can play fog of war chess where you can't see the other board because there's clouds, you can play fairy chess, you can play Mixed up chess.

You can play like atomic chess, loser's chess, 960, king of the hill. It's just crazy how many different plays that people can variate on the rules. But it's not that popular compared to regular chess. It's a bit more novelty or really niche.

Alexandra: I see. Makes sense. Okay, that's awesome. Yeah, I guess and I figured there are so many game modes and I think that question was edging towards what are the pillars of growth and what is the expansion strategy, right?

Because you could expand horizontally or you could expand vertically or, new geos, etc. And I think I remember you saying that there's 150 million members, or maybe I said that. Are those raw accounts, MAU daily active users?

Erik: Raw accounts is I don't know, maybe 175 million or something.

No. Got it. Got it. Monthly actives. We could say somewhere around 50 million daily actives, five to seven million, depending on week time, day of the week, et cetera.

Alexandra: You just need to get some ARP down in there. That's a lot of people to, you're selling cosmetics. You got to sell cosmetics. If you just add a two star.

Sorry, that's me going back to like my gaming PM background, like, but that's okay. So got it. So you have a lot of people playing and I guess that's another question. There's a lot of people playing chess already. And you said that a lot of people are playing on their phone. They're playing daily chess.

Is it evenly split between web browser and Android and iOS or is there, is it more skewed towards mobile?

Erik: It's more as you term mobile. I remember the shift when it happened. It was 90 percent web. You it was a hundred percent web when we launched. And then eventually, the iPhone came out and then it was, percent and then it was 20 and then Android.

And then you're, and now it's about 30 percent web and about 35 percent iOS and 35 percent Android. It's pretty, pretty closely split. Interestingly, our monetization, because we're a subscription product, our monetization actually is closer to. The opposite, about two thirds web. So it's interesting in that way.

And that is also changing though, over time. But one thing I would say is what's our, when we started, we're like, look, there's a certain number of chess players in the world. We're going to try and capture as many of those people as possible to come play on our service. By serving the community with the best product and content possible.

So how do we serve the community? That was really our core mission. . Then Covid came along and then Queen Gambit from Netflix came along and expanded the market. And we were like, wait, we thought that the market was already there and we couldn't grow it, but they said, they showed us that you can grow the market.

So then we changed. Our focus. And we said, we can grow the market of chess. And we did that. We did it through content. We did it through media. We did it through getting sued for 500 million in a very public lawsuit. We did it in a lot of different ways. But we've grown the market that the TAM for chess is just getting bigger and bigger because the, be through media and word of mouth, which are our primary drivers, more and more people are like, yeah, I want to get into chess.

Alexandra: Yeah. So it's really fascinating. That's awesome. And I guess that was the other thing is like, where does most of your UA come from? How are you mostly finding your users and who are your users? And it sounds like you started with this very core, hardcore chess demo. And now it's every single person that's ever watched Queens gambit will play chess.

com. And so where do you mostly what channels are you mostly using to find users? Like where do you advertise? Where, how do you do UA?

Erik: We don't advertise. Word of mouth. Word of mouth, product, memes, media.

Alexandra: Okay no, that, that's advertising. Okay, so you've got a, you've got a social media memes game strategy.

Erik: We're, we are good at the memes. We are good at the YouTube and Twitch. We are good at the short form content, the tick tocks, the reels, and the shorts, we are good at the word of mouth. Invite friends and do that. We're getting better at that actually too right now. And so that's really our playbook is invest in the content and in the And we, again, the first wave of chess came from COVID and Queens Gambit and then Pogchamps and the media.

The second wave of chess in 2023 came from the media, the lawsuit, which was media the memes and the short forms, which was across all of our channels and our partner channels. Kids in schools, word of mouth, every kid in high school and junior high was playing chess. And a ton of stuff around the product that we did to flywheel that.

So 2021 big, 2022 flat, 2023 bigger than 2021, 2024 flat, 2025 is going to be bolder. It's going to be, no, I don't know about the moon, but the reason it's big is there, the number of projects in the media that we know of right now that are associated with chess is massive. There are multiple books, there are multiple movies, there are multiple TV series.

And there's multiple streaming content providers who are investing right now in chess media that is coming out in 2025. And we have, it is actually pretty crazy how many projects are going up.

Alexandra: That's really interesting. I think there's such a big debate, I think, right now. In video games about whether or not transmedia TV shows, movies, et cetera, if there's something like fallout is actually contribution margin positive to the product.

And should you invest in it? It's is it, should it be part of your gaming strategy? And. It's a little bit like up in the air. There are some people who are like, Oh, I, we, Dow went up, we shifted a couple of million units that we wouldn't have, but this is like such a glaring IP is super charging your business in a way that you actually aren't even paying for at all, which is amazing.

And I actually wanted to ask a little bit of about a question about. What was the atmosphere like at chess. com when Queen's Gambit came out? I noticed that you guys were ready for the launch with Beth Harmon bots that folks could compete with.

Erik: No, we were not ready for that. That was a hundred percent reactive.

And we actually got, we got legally threatened and had a very uncomfortable conversation with Netflix when that happened. That's another story.

Alexandra: I was about to ask, walk me through that partnership. Was it coordinated? And so I guess it wasn't. All right. But what was the atmosphere where you it sounds like at the company, you're like incredibly excited, all of a sudden.

Was it just like all of a sudden, all of a sudden people are just like Dow spikes. Lots of people are logging in.

Erik: Yeah, Dow spikes team is going crazy. Servers are crashing, like all chaos white knuckles all day, every day, trying to keep up with it. Exciting, terrifying, Netflix lawyers emailing us server alert, text messages flying into my phone it was total chaos.

I can't believe I stayed with it all but we came out the other side stronger and bigger and having learned a lot and upscaled our capacity and our team and what we were doing and came out of it with some new ideas around what we could do to change the game. So absolute.

Going through that as a person, going through a hyper growth stage, just really nothing, it's such a unique and rare experience and I'm grateful for it and traumatized by it in some ways.

Alexandra: Okay okay, so the chess is growing. A lot of it's driven by the popularity of chess as a game that's been supercharged by linear media.

Do you have any avenues of growth that are, like, geographically oriented maybe for new platforms, console are you guys thinking about any of that?

Erik: Yeah let me take each one. Platform chess isn't great to play on a console. Let's just straight up. It's just like, awkward. Had to ask. It's, It's perfect for playing Madden and for driving and, console's good for adventure games.

PC is good for shooters and it's good, you know, but we don't need to be in the steam store, right? We don't need to do it. We can just go to chess. com. We, and so we don't need to be in those places. We tweet around with the idea for a little while, but we just don't need to be there. It's so good on your phone.

It's so good on, on web. So that's that in terms of geographies. We are pretty agnostic product wise, like chess can just be played in any language. And so it's really more the content and instructional tools that we have in like 10 to 15 languages. All the core languages you could imagine that are most popular in the world.

Interestingly, like somewhere like India. 95 percent of people who come to chess. com, either mobile or web from India have English as their language. And so they're already prepared for that. And so even there, we're like we don't need to do a lot of indie content. We do on socials, but we don't need to do it.

And India has like a ton of languages, it's just one of them. And so the only, there are two countries that are weird for us. Obviously there's some sanctioned stuff with Iran and North Korea there, where they have trouble getting online. But, Russia's now a problem for us we, people can play, but we can't take payments, and the government has banned Chess.

com because we came out against the war and so we were public about that, so they tried to ban Chess. com, everyone uses VPNs anyway, mostly inside of Russia. It did result in a death threat against me, which was pretty uncomfortable when the FBI called, but that's a separate story. But China is the weird one because the current world champion of chess is Chinese, but China as a country just doesn't pay attention to chess that much and their great firewall makes it really hard for us to do chess there.

It's really slow and it's a thing. And I've tried five different avenues. And everyone I've talked to, you're like, Hey, I'll help you get in China. And talking to people there and lawyers and companies. And then they all they never get back to me. I'm like, I don't know what's going on.

Maybe there's something political there. But we can't break into China. It's just very weird. And they, the restrictions that they have to have if you're going to have a gaming service in China, you have to use store your user data here. We need full access to it. And it's like, Hey, we're not into that.

We're not into that. So I'm sorry. We were not doing chess in China.

Alexandra: Got it. So you're very similar to a lot of video games. You can't get the Bahama, the license and it's difficult. Okay. Makes sense. I want to spend the last 10 to 15 minutes of our chat here talking a little bit about the challenges of chess.

com in the beginning of the episode, we mentioned that we would talk about building a game around a historical IP that you don't own, but before we get there, I want to ask who does own chess?

Erik: Nobody. It's just game rules and game rules can't be, game rules cannot be owned. That's actually, you can own artwork.

You can own naming. You can own a board design, but you can't own rules to a game. It's like a well established that is not copyrightable. So game mechanics can't be copyrighted. Interesting.

Alexandra: That is really interesting because it's the systems that can create game mechanics can be copyrighted. But I guess you're just saying like the rule itself cannot be copyrighted.

Oh, wow. That's really interesting. Okay.

Erik: Like Settlers of Catan, for example, you can't copyright a hexagon. You can't copyright the idea of building a settlement at the corner of a hexagon. You can't.

Alexandra: Interesting. Okay, so given that I was gonna ask what it was like working with a group or abiding by some of the bullying lanes of someone who owns this IP, but it sounds like no one does.

 So you can't stop anybody from creating copycat chess modes because nobody owns chess. What is, Tell me a little bit about some of the challenges of not owning this IP then. It sounds like you don't have anybody telling you that you can't do things, which is convenient. Is there anything that you haven't been able to do because you don't own the IP of chess?

Erik: Nothing that we've wanted to do that we can't do. I don't know. It's not really been something that we think of just because it's not a constraint that you can relax. Because not only does nobody own it, but it's just also not really a changeable game in that way. People have expectations of what it means to play chess.

So sure, we can make some variants and it can be fun, but there's really nothing to do there other than try to create the best possible service. And so we're, are, we have to be the best stewards we can of the game to make it fast and pure and good, fair play. And all the things we talked about with a good internet connection and a product that people like and it feels good and looks good and they can connect and the sounds are good and the haptics feel right.

It. But none of that is related to the IP whatsoever. You, tomorrow you could launch, we had, we've had tons of competitors come out. Chess 24 was tried to do a, a competitor. There was a site called immortal game. It was like the next level of chess with crypto and all the achievements in the world.

And there's probably three people playing right now on immortal game.

Alexandra: It's based in Paris, right? Founders of Paris.

Erik: Yeah. And I'm sorry, but it's very hard to do. You don't own the game, and people are pretty happy using chess. com or the number two site out there, LeeChess. People are happy.

They're not looking for something else, so it's very hard to get into it. And, but people will try. But I think they're going to have a really hard time because the market is already really well served. And, our site and leach us, we're very good yin and yang. And we keep, they keep us in, in, in check because they're there and they're open source and they're their own community and they.

Try to offer everything that they can with their resources. And we try to offer everything we can with our resources. And, it creates an ecosystem that is in balance. And I'm very happy with that.

Alexandra: Interesting. Yeah. Cause it sounds like there's actually. There's a ton of upside to not owning the IP.

You're not dealing with a lot of that governance hurdles. You can change it any way you want to, but at the same time, you can't do what you get to compete on is no longer the core game design. It's no longer I'd be able to create this world that I own the IP to. So there's nothing to stop a new entrant except for the fact that you already have entrenched market power.

Erik: And so the one challenge for us, though, is that we don't own the championship. So Riot can own the championships and the leagues and all of that stuff. But we don't own the FIDE World Chess Championship. It's like FIFA soccer, but it's chess. And we don't own that. And they own that title and that thing.

And we've tried to do deals together. And we have a bit of a dance that we do together. But they own the professional title and the professional over the board in real life rating systems. And we don't. And we kind of stick to our online lane and they stick to their lane.

Although I think they're trying to stick less to their lane. I don't know. We'll see. But that is the part of the game that we could never we can't, we have to partner with them because they own the name of like world champion.

Alexandra: I got it. Okay. Makes sense. I see. And then for a competitor like Lichess, which seems like it's open sourced what do you think are the main differentiating factors if it's not obviously the game of chess, but it's what else?

Erik: We compete on product stuff. We compete on technology. We compete in, in different areas. They they try to make chests as free and open as possible. That's their goal. And they do it through, some donations and they do it through their community and through their technology and stuff.

And they do a great job at what they do. We try to innovate on product. They then try to take our innovations and put it into their systems. We just coexist in that way. And there's, people who use both services for different reasons. Some things just cost money, like making content, putting on events doing R and D for products.

Building things out costs money and they don't have money. And so we do a lot of that. And, but then they have their kind of core things that they do well, but they can within their sphere. And it, and look, if you're a chess fan, that's awesome. You get to choose what you want to do in this ecosystem and you win.

Because you can play this kind of game there. You can do this learning tool here. You can do this content there. If you're a chess fan, it is so great. You get all the things you want in any way you want to enjoy it. You can learn on YouTube. You can play on chess. com. You can do a thing on lead chess.

You can do whatever you want. And it's just there's so much chess content and so many chess services.

Alexandra: All right. We're almost at the end of our time, but since you are from the GSB, I'm going to conclude our episode with a view from the top lightning round. And the first question that I'm going to ask you is if there was one thing that you could have right now that CEO of chess.com easier, what would it be and why?

Erik: I think that. If the ad, if the world of ads and advertising would get its shit together and actually provide quality ads with privacy and not scammy spammy like fake button bullshit and they actually provided ads that consumers thought were of some value to them, or at least not super negative, then I would be so grateful because the ad business is like a constant pain because some consumers don't want to subscribe and I respect that, but to then put them into this other thing where they then get ads.

From what is just like, it's a problem. There's just, it's bad creative. It can be obnoxious, always advertisers, or people trying to sneak stuff in. So if you, if someone would clean up the ad industry, it would be so positive for businesses and consumers alike.

Alexandra: Fantastic. Very much noted.

Everybody on this podcast is listening. That works in ads. Take notes. All right. Favorite chess piece.

Erik: The pawn. It's our logo. It's the everyman. It's ultimate potential.

Alexandra: Excellent. It could be anybody. That's right. All right. Favorite historical chess player.

Erik: Historical.

Alexandra: Or they could be alive. They could be alive.

Erik: I love I, I'm just a huge fan of Hikaru Nakamura. Can I just say that? Magnus, if you're listening, don't be mad. I'm just a huge Hikaru fan. I love his play. I love. I know him personally and I've loved watching him and his career that went up and then down and now back up and I'm just a huge Chikara fan.

Alexandra: That's it. Excellent. Alright, favorite spot on GSB campus?

Erik: Oh man, you are going to make me cry, but the courtyard over there at the the married family, the married housing over on homestead court where I lived, that's where my kids grew up and I watched them and, um, that's my soft spot.

Alexandra: Fantastic. And then finally, one word to describe how you're feeling about the future of chess.com today.

Erik: Overwhelmed. There's so much to do and next year's going to be so busy. So I'm overwhelmed.

Alexandra: It's going to be exciting and chess is like we said going to the moon. All right, everybody.

Erik, it was such a pleasure. That's our show. There's clearly so much opportunity in chess. I'm super excited to have had you on to talk all things chess monetization, chess engagement, chess growth. And what it's like not owning the IP for a game that you fundamentally build on top of.

If there's anybody in the audience that wants to reach out to you for any reason or obviously visit chess.com, chess.com how can they get in touch?

Erik: Yeah, I'm on LinkedIn, pretty easy to message it's not hard to find my email address, [email protected], feel free to shoot me a message. So, Yeah, awesome.

Alexandra: All right. As always, friends, if you have feedback or ideas, please hit me up at [email protected]. I'm always open. And with that, that's our episode. See you next time.

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