Building social platforms: A conversation with Chris DeWolfe

Transcript

[Music] thank you thanks for joining us uh you've had a really interesting and non-linear path from social to gaming and now to crypto um I'd like to start with Myspace what were some of your early stage learnings and what do you think you could have done differently or would do differently today yeah so so for me it's always sort of been thinking about macro economic Trends so for many of you that probably don't remember this and in 2003 2004 was around the time where every phone began to have a camera

Broadband started to become ubiquitous people were more comfortable socializing online there was less of this stigma with that people were mostly communicating with I am and email and none of this was fun like I am an email it wasn't fun sharing your photos on ohphoto or Shutterfly you know with your grandparents isn't Fun and so it was sort of all of those macro factors that we thought would be really interesting to put together and so that's that's kind of how I look at it it's not so much of

hey let's start a company this year let me find another partner and what would be a good company to start it it's kind of there in front of you where you recognize things that are going on and then test out the the product think about what the product might be to to meet the market demands and so that's really how we got involved with that and before that um I was with a company called one of the co-founders of a company called xDrive which was uh like all of the opposite of what I just mentioned it was a cloud data storage company for individuals and people didn't really need it because everyone

had laptops and it would store all their files on their laptops and it never really went anywhere I've heard you attribute the fall of Myspace to monetizing too early if you were to go back in time what would you have done differently and then on the flip side looking ahead what is the future of monetization and social look like to you yeah so anytime you're selling your company or taking money from a company need to make sure that you're incredibly aligned with your partners so we started Myspace in 2003 we sold the company to new scorp which then became fox in 2005. we were this Growth

Company um you know way bigger than YouTube way bigger than Facebook we got to be bigger than Yahoo the number one site uh in the world and one day out of the blue um Rupert Murdoch goes on on a CNBC or maybe was during an earn Excel said hey Myspace is going to do a billion in revenue and 250 million in ebitda like without without talking to any of us and and so it was like okay that's that's the new Milestone and that's the new North Star and it wasn't the right thing for the company so they had a Growth Company there's nothing sorry they had um like a profit-based company we had a

growth company and there's nothing wrong with either it's just they weren't aligned or they weren't compatible whereby if you and so what the what the result was is we ended up doing a deal with google that year where they paid us 300 million dollars a year um we ended up doing about 700 million um within a couple years in in Revenue very profitably but we had to like jam in all of these ads that um made Pages load slower it made the user experience more junky there was no quality control on the type of advertising um that was posted and meanwhile like if you look at Facebook at that time they were they had no ads they had a pristine

user experience um any of the any of the user functions were very optimized so if you wanted to accept a friend request that was one stop versus um on MySpace like do you really want to accept this like are you sure congratulations you just so it's like four pages instead of one and that was because of the ad based monetization yes because you go to the finance department and you say like okay I'm going to knock out 40 million dollars this year because this is absolutely ridiculous it's not a technical feat to take four steps to one or a user interface uh feed it was just more of a financing and so there was always like a lot of

push-pull there um so that was that was certainly one issue um but not to say all bad things it's like um a lot of people probably hate Rupert Murdoch but he's like an amazing entrepreneur and he makes decisions incredibly quickly he's very decisive and there was a lot a lot I learned from him um but yeah those were like the The Profit motives when you're a year and a half into like a social business or like an entertainment business that um is is a function of driving as many people as you can through um Word of Mouth you know geometrically

uh is just was not consistent with that and then I think the second thing um that I would say is like you know you become the biggest website in the world from like a unique visitors or visitors perspective and you're the biggest social network and how big were you guys at the time um I know like billions of page views um I bet he couldn't have imagined that it could get bigger than that yeah right yeah um yeah yeah I don't think anyone thought like what uh really really knew exactly what what mobile would do right to all this but um like I think it's easy to get caught

up in yourself I'm like oh we're so far ahead of everyone else that no one else can catch up and you know we don't have to worry about you know certain cleanup from like user experience to like what I'm talking about like on the ads to trying to develop too many features at one time like we had the biggest music service in the world we had a video service we had we just kept adding tabs like television um there's this thing called Craigslist back then so we I found my first apartment on Craigslist yeah which was awesome but like you said like okay we have a big bigger Network than them let's just add a tab and um so yeah focusing on like a real super

core experience I think is something that I would have done differently versus trying to go super wide and leverage everyone in the network position from social then to games yes um how did your learnings from Myspace inform the way that you built and then monetize Jam City what was what was what was like what held and then sort of what changed yes so towards the and uh it's a bit maybe about half time halfway through my time at my space so let's call it 2006 2007. I left in 2009.

um we began to have a platform on MySpace so if you remember like Facebook had their platform and Zynga emerged um with like all these casual games that you could play with your friends and it was a huge eye-opener because um games were largely relegated to like a much younger demographic that would play on a console and this completely Democrat democratized the ability for anyone to play games and like it said that you could make money on casual games which was incredibly interesting to me and it showed like how the social piece of it really fit in so that got me excited and then I would

also say that during that time around that exact time we had a joint venture with SoftBank and masioshi-san in Japan for Myspace Japan and we go out and visit all the the consumer companies there and like over half of all of the consumer companies that we visited there um they had said like half of their traffic was going through mobile which is very like you know maybe 10 percent here in the United States so it kind of became clear that everyone would have a console in their pocket and that could get super interesting it's interesting that today like even now Asia still leads a lot of the the metrics in web 3 gaming too and you know

it's sort of they've led the charge um with Plato earned gaming last year and the year before um and and sort of like the West still has is is starting to catch up um I I want to talk about the history of gamertainment so I think it's become pretty clear that it's no longer enough for an IP Universe to win on just one medium you have to win across all mediums or at least multiple mediums like the game is really like an attention game now um which is something that has made gaming really attractive to nft projects over the last two years you were one of the early Pioneers in the game entertainment space and you made a bunch of really smart Acquisitions um early on in your time at Jam City which I think was then called sgn

um that reflected this Vision how is your thesis on gamertainment um changed over the last 10 years and then how do you see it shifting over the next five perhaps because of web 3. yeah so so early on um when we developed our first mobile games at Jam City so like when I was kind of deciding what to do after Myspace it was like oh should it be music video or games um what gets me personally really excited is seeing people use any product that our team makes and seeing it out in the wild whether it's on a plane or I don't know at a restaurant or whatever and games became the number one my number

one choice because again there was this underserved crowd that was out there and everyone was beginning to be able to play these games on mobile but when we came out with our first you know two top 20 in the world Hit games that were just you know crushing it each of them were doing like I don't know we were a startup and they were each doing well over 100 million dollars a year in revenue and um but then there was only like three or four hundred thousand games in the App Store now there's probably three million then back then you could see that in Cal the majority of these games came from

California or Europe so China the the Chinese market that we're building games and exporting them here didn't quite have the same graphics and Fidelity and same thing with Eastern Europe and as basically all the regions in the world have caught up to where we are here and um have been able to do it much less expensively uh there's now like millions of apps in the App Store where everything's become way more competitive you have to have a much better product everything is a function of we call live operations so creating fun fast fresh new content literally every day which is very very expensive

and so once you have a great game that's out there it's it's it could be almost Evergreen if you do a good job and live operations and continually managing the economy and increasing so we had like several metrics that we went from one was like D1 retention D7 D28 you know D60 D90 um one-year retention and then average revenue per Daily user probably not that much different than the type of metrics that you guys look at um but like always trying to increase those by a little bit and you know testing out different pricing models always having new events um

messing with the economy doing uh bringing in different IPS like Harry Potter we brought a Harry Potter game in that's done very very well this is all it all at Jam City but yeah I think I think as a lot of that consolidation happened and we generated a lot of that consolidation we acquired a lot of different companies we had deep expertise and a lot of different genres it still became prices were High and um UA or marketing or the amount of money that you spend on Facebook the margin started coming down on the amount of uh

we called return on ad spend uh made it so it was like a less interesting Market where we're spending all this time and money constantly updating everything every day and it became clear to me like kind of going back to my days at my space and thinking about social and why games weren't more social um that like if you if you created a shared economy um with your players or with your users which is where you want to call them digital assets or nfts um people don't like the terms don't seem to like the term nfts anymore so you call them digital assets but essentially

the same thing where people have been spending thousands and if not hundreds of thousands of dollars playing games like over many many years but they have nothing to really show for it from an ownership perspective and it's more fun to play a fun game like and own your assets in the game and have something a little bit at stake to make it more fun so some people call that web 3 gaming we are personally just making an awesome metaverse with an amazing AAA game as a central sort of hub for this metaverse and like adding digital assets uh within that

space so maybe time to talk about play you co-founded Jam City and yet you decided to leave now to start play um why did you spin it out why web3 specifically for play can you walk us through how you made those decisions sure I think approximately every 10 years something really interesting happens it gets me excited so like I mentioned earlier um during the Myspace time it was more of a collaborative sharing like interactive Community um and I'm talking about like YouTube and Myspace and Facebook and Instagram [Music] um and that got me really excited it was

it was a huge sea change um and then I don't know call it eight or nine years later Ten Years Later mobile became mainstream where again everyone had a console in their pocket and you saw like everything from e-commerce to dating apps to like what I thought gaming would be gaming like to add companies completely transform and new companies came in and the old ones sort of got washed away that couldn't um that couldn't keep up so like Yahoo kind of went away match.com went away a little bit and Tinder came in and so that was a very special time for me and I think there's something very similar is happening now

with both web 3 and AI I think from a web 3 perspective a you have the whole ownership aspect of it you have more control from I don't know if you want to call it Big Tech or you know whatever you want to call it you have ownership things are decentralized and um it just makes a lot more sense um and then from an AI perspective it's really democratized the notion of what a content creator can be I've seen it with um you know art uh for sure and images for sure and chat GB GPT and so we have a consumer-based app that we're rolling

out that's a social app that's all based from generative art Ai and that's that's launched about a thousand people right now and we're going to roll it out to probably ten thousand and then hopefully it'll go very viral and hundreds of millions after that or not so we'll see so okay you're somebody who is like built networks for the last several decades and you had a front row seat to the design choices the network design choices that created the business models that we take for granted today I'd be curious to hear you know sort of your retro on how different network design choices um materially affected your ability to

monetize and then how you think about Network building today or maybe protocol building today which I think is something that's probably useful for a bunch of the builders in this room yeah I think it depends like where you're trying to build build because we see like a lot of different networks today you see more utility-based networks like a signal or a telegram um which have you know much more of a closed type of network or a control type of network where both people sort of accept a notion that they're going to be communicating with each other in a more private type of environment and those serve a specific need um but then like I think there's the

more entertainment um type of user or customer where you need to keep it more open or allow those creators to have the choice to do so to have like a very open architecture that allows them to open up their work to everyone or you know keep it to a really small group of folks um I want to talk a little bit about um like how you think about the path to finding product Market fit in crypto I know that you have like a a very systematic um like heavily indexing on pre-production and early user testing

approach um to building games and like finding product Market fit for games um how do you think about that for crypto does crypto change the the strategy there there's obviously you know a token-based incentive Loop that a bunch of games have sort of capitalized on over the last two years how do you think about your unique method for finding yeah so sorry so my point is um in a very long-winded way we're not chasing after what I would call like a web 3 gaming audience I think that audience right now is probably less than a million uh unique wallets uh per month and when you're looking at like many

many billions worldwide so I think we're marketing it a little bit differently and we're hoping that people that love to play really fun games whether it's World of Warcraft or you know any RPG MMO that's out there will want to play Champions Ascension champions.io more than other games because of the decentralization because of the ownership I also think the community is super interesting we were able to build our audience through Community which is very different than the way we did it mobile it's it's completely different than mobile we're still able to do the same kind of testing and have smaller

groups uh try different features but we're able to get a lot of information I want to Pivot a little to talking about deal making do's and don'ts because you're known for your business savviness um do you have any tips here for the group what do you think crypto companies should know when engaging with big brands or Partnerships right so it's a big Brands and Partnerships can be great I think it's like you want to think about hey does that Big Brand fit what you're doing the brand of your particular product um I don't know like we used to think that Mickey Mouse would be super interesting and then there's like three Mickey Mouse

games came up and they all they were all terrible um so like that wasn't necessarily a good bit but and then um but you know Harry Potter was because nothing had come out on Harry Potter it was multi-generational there was massive lore around it that was untapped and that game has done great for us and we did all of our own writing it was a it was the first lore that had been written for 10 years on it and it did really well so there's like I would say like how how much have they exploited it if they've exploited it too much it's bad if it's not a good fit for your demo

um it's probably not great then you also need to look at like who you're working with like some brands are notoriously difficult to work with so like yeah like a Star Wars is pretty picky to to work with and things can take a little bit longer um and there's other brands that are very what's the best way for entrepreneurs to like find out this information I think networking um like I don't know like you could call like any game company that has done for sure any game company but basically anyone that's done any kind of Licensing deal from IP and you know seeing how it's worked for them you can look at uh I don't know if you've heard of like

app Annie or sensor Tower but these are I'm sure you guys have um yeah we've got a bunch of these uh prescription subscriptions to those but like you can see which games are doing well which ones are growing you can go play those games you can enjoy whatever other experiences they have but yeah I think it's a function of networking and then looking at data that is just out there is other brand studies that you can find online that are out there um I think the there's a lot of things the other thing is um like is your is your game um primarily in the US or are you looking for a global reach because there's a lot of Television brands for

example that are very us-based or very US and Canada based that like the like The Simpsons a lot of people haven't heard of that for example or maybe it was Family Guy one of the two they hadn't really heard of that in other countries so like you have to sort of Tamp down your expectations there and then finally um the financial commitment which there's usually like um what they call an mg or a minimum guarantee we have to pay a certain amount of money and then you recoup against that minimum guarantee so maybe there's uh let's just say there's a 10 rev share so for 10 of all my money and I let's say I have a minimum

guarantee that I'm paying Disney of five million dollars um I'm paying 10 back until I get to the 5 million bucks and then then I recoup my minimum guarantee and then after that I need to pay them 10 on an ongoing basis and then the other question that you need to ask yourself is like like what is the definition of the revenue share is it before or after marketing expenses have these like terms shifted over time um like either in favor of game developers or you know Partners um away from the IP or toward the IP like sort of how is the power shift happened so so for games I think there have been

viewer and fewer games that have the expertise to build a really big service or product and brands do care about that because they don't want to waste money on like bringing you have Disney I don't know what they're having like let's just say it's like 50 billion in Revenue like they don't really care about bringing in a two million dollar guarantee they want to know that this can be super profitable franchise over the next 10 to 20 year period of time so they're really looking at who they're working with and that's how they're making their decisions and I think there are so would you say they've become less focused on minimum guarantees over time and are

more interested in like the Rev share um The Rev share and the people and the relationships so as soon as you can get in there and start creating those relationships and um with some things like good pretty decks don't matter I would say with those types of folks good pretty decks matter a lot and a lot of thought process in terms of what the game mechanics are and how it's differentiated matters a lot and how that because that reflects on their brand at the end of the day awesome I think that we are at time and so so I'm gonna open up the floor to questions if anyone wants to ask her some

questions hi Brandon uh great talk thanks for all the information especially sharing some of the insights from Myspace I think we hear a lot about successes but it's also very valuable to hear about learnings from things that maybe didn't work out um I think to me it seems like games are the perfect Arena to demonstrate the utility and the value of digital assets from your perspective like why isn't there a race for everybody to do this you know what is the uh what's the hold up yeah so there are very few companies relatively few companies like a16 that are continuing to make investments um that had the confidence in where they think the future of games are going

um and so quite frankly there's less money out there that that's being invested I think there are also a lot of folks out there that were making nfts and said I'm going to make a game and making a game takes deep expertise to do so and so if if you want to make a game make sure and you haven't made one before make sure you have a partner that has made a game before or a group of people that has made a game before and the digital asset piece of it like fits in really well with current game design and current game economy it just makes everything a lot more fun but I think like the whole notion again of nfts and

the sort of dark winter that we've been going through just Tamp down investment in the space without any really good reason so we're super happy to be in this space we're very bullish about it um I think we're we're looking for more as many web too folks that haven't experienced a web 3 type of game or owning digital assets and we're going to be targeting a lot of those folks because we believe the quality of our experiences are such that they'll really enjoy it yeah thanks so much I mean to me I I joined the Webster gaming room yesterday and it was fascinating to think some of

these things that people traditionally do as mods or like customizations of weapons and things like that it would be so cool to be able to transfer those items through a permissionless layer you know it just seems like it's the right thing to do so a Kudos and all the work and totally excited to see thank you thanks Chris Matt from narvel here uh I'm curious how you're thinking about With Champions the onboarding and the ux around the crypto pieces since you're focused on a lot of like mainstream appeal then yeah how are you thinking about your wallets and your assets are you abstracting all of that like crypto complexity or are you trying to like teach users about it yeah so it's a great question so people

we think in the in the medium term shouldn't even necessarily know that they have a wallet so we will be providing them with custodial wallets right now we're giving them the opportunity to participate in the Champions experience through a wallet list login for right now it's uh we're going to be integrating custodial wallets and that's how we think it scales really quickly it's very important to have like an open protocol before you before you create tokens which is very different than how things were three or four years ago awesome thank you all right thanks I hope that wasn't too confusing it's

all very confusing hey Chris uh Pierce I actually am think I'm the first a16z crypto employee to ask a question but your perspective is just so valuable I couldn't help myself um you know Chris we'll talk about the three years of the internet and we focused on it day one of the cohort last week and you really eloquently touched on it in your journey through your different experiences you talked about match.com kind of going away when Tinder came around in 2007 2008 time frame as we enter this third era of the internet are there things you're bringing with you from that 2007-2008 mobile era that are helping you navigate the web3 landscape whether it's from like a

regulatory perspective whether it's from finding product Market fit like what what are some of the golden nuggets from your experience that the folks here might be able to take with them as they move into this new iteration of the internet yeah so some things I think we did really well um in 2004 2005 we went like we built a web we built the website like in two months like we went really really fast because we knew that there was going to be a lot of competitors um because the world was changing around us and I think it's similar right now so um going fast is important um

we're a lot I'm a lot more focused on UI ux so I sit in all of our product meetings and we talk about very specific like UI U acts like why isn't there a more prominent invite uh button here um what is it automatically take you to the top of the page like why aren't your friend like I know it wasn't the comment button bigger um just like a million different things like that are I know like how many invites should we give per person should we try and create scarcity should we start out with like a younger demographic it's

I I have the hypothesis that I think for example for the app that we're building it's going to be you know 13 to 30 year old year olds like should we start with just 13 to 30 year olds should we start with um you know just in the LA area um within high schools and colleges around here or people that went to high schools here kind of like how Facebook did with the Ivy Leagues or you know Snapchat did with like younger folks versus going super broad right away so those are all things that I'm thinking about a lot more and yeah I'd say I like speed to Market definitely took with us

um I think the new thing is like back then there wasn't the relationships with the app stores that are incredibly important and like we that's something I've learned in the gaming days it's like uh those folks that run the app stores can make or break you and if they get to know exactly what you're working on and they give you a big feature above the full like this hero feature like it can literally jump start you and um yeah change the trajectory as your company I'd also say the app stores really love it when you use proprietary technology that they're coming out with so having

an understanding for what that is like what's Apple's next new big technology that they want to push out to their developers and let them know that you're somehow incorporating that in what you're doing um yeah appreciate it thank you yeah I would say I would say also um you know from a hiring perspective I think what we've all learned from the kova days was like and kind of where we are right now is to try and do more with less um because we don't really know what's going to happen in the next couple years and we don't know how well we're going

to be able to monetize over the next couple years people aren't giving away as many free grants anymore um there aren't as many Venture companies um so like as Founders we can all pitch in and do the work a lot of the work ourselves and be shoulder to shoulder with our employees which I'm sure you guys all all are but uh yeah don't over hire we think we you know we went through the whole coveted time period and we had 25 percent bump and we thought like everyone else like you know we're up 20 we're going to be up 25 you know every year for the next two years like forever and just didn't end up being that way so that's why

you're seeing a lot of laughs right now thank you hi Chris um I really enjoy your talk and I'm Ling long from blogcast and we are building a Webster gaming platform and so one of the common things you mentioned about the opportunity that website brings in for the games but one of the major problems we see for the games especially the big game studios that they want a user to log in to their platform they want all the assets logging because they don't want to lose all these players and so I want to ask your perspective or what kind of opportunity you foresee that the web3

unlock for the gaming industry through like interoperability and compatibility yeah it seems like we're still a ways away from that at least with the folks that I've talked to um where so for example you can have your game on a lot of different platforms but in terms of any kind of nft transactions or digital asset transactions they need to happen somewhere else um still and so none of the big gaming platforms really support that right now um epic is talking a lot about it um

Xbox seems to be enthusiastic about it Google seems to be enthusiastic about it but no one's really jumping in Unity just um launched integration with metamask um but that's more on the developer side of things versus like a customer facing distribution thing yeah um yeah metamask is is just like I remember the first time I tried to install it took me like an hour to figure it out and like even walking people through it after that it was just it's incredibly complicated yeah totally um another question I uh I have is you mentioned that you are designing like open protocol I wonder what's the major considerations during the product design

for like a gaming industry was like major elements inside of it sorry in Plano when you design the game the protocol inside of the gaming space right so one of the protocols um I spoke about earlier which is the guild protocol and that's going to benefit like every game that's out there every player that's out there and every Guild owner that's out there so it'll be an open protocol for any game to adopt um as well as any Guild owner to adapt and what that allows you to do there if everything is decentralized you have

multiple people that adopt your protocol a lot of your competitors and other folks can use is is a smart thing if you want to ever have your own token call it and then how do you think of the mold kind of like the yeah the defense dispensability on the protocols yeah so from that perspective we are developing our Guild specifically for our needs and for the largest guilds needs so like it's going to have the best fit with us and with those guilds that like adopt our game called it thank you um the other way that we're thinking

about Protocols are from the app perspective and the fact that AI image generation or video generation takes a lot of gpus and um we're part way through the architecture and Outreach of creating a decentralized network of gpus that we can then sell via token and do that processing work for cheaper than other people can so big mode um as opposed to like you know probably pay 20 20 cents on the dollar versus

what you might pay at Google or Amazon for that processing hi there thank you for the chat this is Cynthia from underport we build infrastructure for digital assets that interact with the physical world my question goes around I bet you have a really good perspective or point of view when it comes to social media and end user data so what would you like to see happening in web3 when it comes to this interplay of social platforms and end user data social platform and end user data I'm sorry I'm not can you like um make the question a little bit more

specific yeah for sure so I mean traditionally with two it is assumed that the end user data is utilized to pretty much monetize through advertising which typically may not necessarily benefit the end user so web3 gave us the opportunity to build more complex systems that pay into account like each end user give like rewards for certain actions but I'm wondering like is there any thoughts that you have had around data privacy or end user data management that you haven't seen it with two but you would like to see in web3 yeah I mean there's obviously going to be a lot less data from like an advertising perspective and what through three the monetization from our perspective the way we look at

modernization and web3 and this is a little bit different than our app but like if you look at Champions it's a shared economy with our partners thanks hi I'm Greg from Naval um we are we're building a multiplayer wallet platform so we are we enable organization like yields for example um to decide who can do what with their assets and so delegate usage of the assets or the wallets um I know that uh that you know building great games is very difficult and complex uh when you add a web free layer around you know managing a whole economy it becomes very difficult and so I wonder what's your framework and how do

you guys decide about you know what things you want to build internally versus partnering with you know third party providers how do you make those decisions yeah like a I think if there's anything that is a commodity that's out there where um you can rent it and like you should do it if there's three or four companies out there that have something you should never build it yourself you know I don't think we're gonna start a new secondary Marketplace like there's great companies that are out there that do that I don't think we're going to start our own um wallet company like right now um we're not going to start our own

payment rails company right now because those are all Commodities they're you know charging whatever two percent and maybe it would cost us one point seven percent you have to hire like it's a total scale business so all those things that take scale and specific expertise that have been commoditized we don't want to deal with thank you thank you hey Manuel from Shield so you mentioned this um the societal impact of the merge between mobile and gaming and how that kind of led to the democratization of of you know gaming across different age groups so looking at blockchain and the intersection that

we're seeing with gaming now what are some of those like broad societal shifts that you see happening uh big picture yeah unfortunately I think it's going to start with a more core audience so I think most web 3 games will start with a more core audience so probably more male and then like as as mobile became more mainstream the web 3 part will become more mainstream um and there will be a wider demographic but I think the adoption right now in terms of in my opinion in terms of the games right now um it's definitely going to be more core

because because mobile doesn't really support it and I think when I was talking about mobile before um that's the whole notion of games going on to mobile and mobile becoming the biggest sector of games is what democratized the demographics or game players and mobile doesn't currently support web3 yet that's primarily uh PC based and soon like console based and then then mobile thank you thanks awesome well thank you Chris thank you guys [Music]