IG: One of your competitors, Zynga, has been dealing with some controversy over scammy ads and offers. When it comes to monetizing these games, are you at all concerned about pushing users away with stuff like this?
Kristian Segerstrale: We've focused from the start on creating a player friendly franchise on social networks. What we've done to really set us apart is focus on the depth of experience inside the games, the production values... and from our perspective, the vast majority of revenues is from direct payments from consumers. Our participation in the offer market is very conservative and small. We believe that in order to be a winner in the long-term it's all about player experiences; ultimately, if we create something our players love, they will reward us with their time and then finding things inside those games to actually pay for. When we started off two years ago, we knew that micro-transactions worked in the East, but we weren't certain they'd work in the West. But the experience we've had is that it's a very sustainable business model, so we're excited about continuing to build on that.
IG: It seems like traditional console publishers are racing to get a piece of the social games pie. Do you see your competitors, like Activision perhaps, making a move next to get into social networks?
BC: It's a space that cannot be ignored. I would think most players would try to enter it at some point. One of the reasons I think we're uniquely positioned to win in this space is we've now got a leadership position with 60 million monthly active users, and we've got the cross-platform capability with the #1 mobile, the Pogo casual online, combined with the portfolio of brand IP available for it, and the distribution; there's really no player in the space that has the leadership position and those three axis points of converged gameplay married with that IP. So I definitely expect competitors to get in, but I feel really good about how we're positioned to win.
IG: The social games space is obviously very young still. What are the major challenges ahead that you foresee for this sector?
KS: Well, one thing about social games, and this is something we've seen from the start, is it really feels like an unbounded growth opportunity, unlike traditional games when you sell them through retail or you sell them through an app store where there's a certain sense of a distribution bottleneck in that there's only so much shelf space, and guiding consumers through that selection experience is quite challenging. The great thing about social games is the discovery mechanism is social; you discover games through what your friends play and that turns out to be an enormously profitable distribution driver. So we feel that today, even though we have something like 300 million monthly actives across Facebook (and add another 300 million across other social networks), there's a huge population out there and we believe somewhere between 20-40 percent of those people will play games. So there's a huge opportunity to grow and lots of different ways to do that. The challenge for any company in our space is just growth and execution. Are we able to create the best possible experience for our players while being able to grow, and grow those experiences around the world? That's the single biggest challenge and at the same time the single biggest opportunity.
BC: Within any industry, there's always going to be changes. There are policy changes, platform evolution and the like. You saw MySpace and Facebook neck and neck, and now Facebook has gone to over 300 million monthly users. The key here is to be nimble, and I think the dynamics of what these guys have created – the core live ops team, understanding how to build value out of social gaming and monetize – is a skill set that can apply to a lot of different platforms and evolve with those policies. So it's about staying on top of it, being nimble and executing.
IG: Thanks for your time today, and congrats on the deal.
