Digital Chocolate is one of the many, successful mobile app developers which can trace its heritage to the days before Apple launched its App Store. The company was founded in December 2003 by Trip Hawkins, the games industry veteran who was also founder of Electronic Arts, and who remains CEO of Digital Chocolate.

A search through the company’s archives shows a number of interesting milestones. In June 2004, it acquired European mobile content publisher Sumea, which had partner relationships with companies including Vodafone, O2, Orange, T-Mobile and AT&T. By 2005, it said that growth in its distribution channels had made it “one of the top 10 independent mobile publishers in terms of global market reach.”

In addition to its mobile products, which have seen more than 100 million downloads, the company has also generated some success from its move into online social gaming, stating that in 2010 it became “one of the top five global games publishers of Facebook.”

Earlier this year, Digital Chocolate picked up US$12 million in Series D funding, in a round led by Intel Capital with participation from previous investors Sutter Hill Ventures and Bridgescale Partners. At the time, it noted that the cash would be used to “support our vision of publishing leading social games across different devices and platforms.” Before this, the company had raised US$43.8 million in three rounds.

From mobile to social
While many of its biggest rivals have moved into mobile from console or PC gaming, Digital Chocolate started with a mobile-first strategy, moving into the market before smartphones had become mainstream. According to Jason Loia, the company’s Chief Operating Officer (pictured): “Digital Chocolate learned early on how to make engaging short session, small screen game experiences on feature phones. We did this for years, perfecting the art of game design on tiny screens which had to be optimised and deployed across thousands of different devices and hundreds of different channels and billing systems.”

“Furthermore, we focused on creating our own original brands, treating the mobile device as the lead platform upon which we created first-rate game content versus relying on a known brand from the big screen to entice the consumers to download the game on their mobile device.”

The company has now identified social gaming as a significant growth sector, offering its first products for the Facebook platform in 2010. This sector has different requirements to mobile, which has led to something of a learning curve.

“In contrast to the mobile platform where game design depends heavily on a finite-session, microbursts of intense solo gameplay to satisfy the user, gaming on the social networking platforms required more focus on designing games that would draw continuous investment from the user to level up their position in the game, require less intensity from the user since they often are multi-tasking while playing (ie, they’re playing at the office) and, more importantly, create a comfortable setting in which the user could interact with their friends on a daily basis. This required a tremendous amount of rethinking in our studios on how we went about building games, but the principles of easy-to-pick-up, simple but satisfying game mechanics still applied,” Loia said.

Managing fragmentation: a competitive differentiator
According to Loia, the ability of a developer to manage fragmentation in the mobile industry is “an issue that can become a competitive advantage, or one that can easily sink an unsuspecting company looking to build a global mobile content business.” While much of the attention has been placed on fragmentation between device operating systems, there are a number of other areas where companies need to address multiple options, including app stores and advertising networks.

“Regardless of how much effort is put into reducing fragmentation, it will just never be as simple as one-size-fits-all. From varying billing systems to assets and memory sizes, to device capabilities and performance to lag in specs and implementation, the best one can hope to do is apply as much technology leverage to the problem to make it an efficiently managed issue, versus a disastrous margin killer,” he notes.

An ongoing power struggle
For the foreseeable future monetisation on mobile will be “a power struggle between app store owners, device makers, retail apps, network owners, and everyone else in the ecosystem,” Loia said. The current model creates a conflict between the various parties attempting to own the billing relationships, with attempts to cut out alternative payment methods and tightly manage distribution platforms, in order to gain a tighter control over the value chain.

“The light at the end of the tunnel is that at some point very soon in the future, consumers will demand that their service or be available unabridged on all the platforms that they own, period. This may take an interim period where the winning model is HTML5, or simply a realisation that everyone will make a whole lot more money opening up cross-platform access to content and services,” Loia said.

Tablet growth
The rapidly evolving mobile device market is also creating opportunities for Digital Chocolate, with Loia asserting that “without a doubt, tablets will soon be the dominant mobile gaming platform and transform the way that we play games.”

“Like the Wii which opened up a whole new segment of gamers previously not addressed, tablets will do the same on a much, much larger scale. Tablets are embodying what the perfect web browsing, casual productivity, and mobile gaming experience can and should be. It has all the computing power to hang with the consoles, yet a more convenient UI and form factor to win a permanent place in the brief case and the living room. iPads, Android, and Windows tablets will all lead to dust layers on the home consoles, it’s just a matter of time.”

 

Steve Costello