The Innovators

The Game Changer: Digital Chocolate's Trip Hawkins

The last time this entrepreneur matched up against an industry giant, things didn't end so well. But it wasn't game over.
The Game Changer: Digital Chocolate's Trip Hawkins
Image credit: Photo © Jeff Clark
Trip Hawkins

The Innovators


WE CELEBRATE AND ENCOURAGE INNOVATION.

Innovators push the boundaries of the known world. They're change agents who are relentless in making things happen and bringing ideas to execution.

Trip Hawkins is running late for his interview at the headquarters of Digital Chocolate, the social and mobile game company he founded in San Mateo, Calif., but that's OK, because the delay gives me time to try and beat Hawkins at one of his own games: Tower Bloxx.

The goal in Tower Bloxx, one of DC's most popular downloads for the iPhone and Facebook, is simple but addicting: Stack as many building blocks as high as you can without toppling them (and see how you score against your friends). The catch is that both the blocks and the tower are swaying randomly across the screen. With persistence and some finger-to-eye coordination, I finally, successfully drop the 68th block. A cheesy photo of Hawkins boots up on the screen and a congratulatory message proclaims, "This guy might be in the Video Game Hall of Fame, but he's no match for you."

The Hall of Fame is just one milestone of Trip Hawkins' gaming legacy. Three years before Apple introduced the iPhone, he was pimping something he called "social apps." In a speech at a 2005 wireless industry event in San Francisco, he predicted that these apps would become a multibillion-dollar opportunity that would bring sweeping changes to the entire industry. But back then, with Facebook strictly a college phenomenon and Twitter still a year from inception, no one paid much attention.

Obviously, times have changed. A recent report by market research firm NPD Group found that nearly 57 million Americans (approximately 20 percent of the country) over the age of 6 have played a game on a social network, but the real kicker is that more than a third of those were new to gaming.

All of that action is keeping Hawkins, Digital Chocolate's CEO, busy these days. When he arrives for the interview--lanky, tan and dressed casually in a loose-fitting button-down and a pair of jeans--he quickly settles into a chair across the conference room table and gives an easy smile, ready to get on with it. It's early afternoon, and he's already attended to a couple of visitors, run several errands, jumped on three conference calls and processed about 100 e-mails. "I've outgrown the need for assistants," he quips.

An Experienced Underdog
To fully appreciate the irony in that statement, one would need to be familiar with Hawkins' résumé. In the early '80s, he left his post as director of product marketing at Apple Computers to start Electronic Arts, the video game giant known for mega-hits like Madden NFL, The Sims and Rock Band. Under his direction, the company transformed games (at the time, often cartridges sold in plastic bags) into the high-budget products that grace retail shelves today. The "E for Everyone" rating? Cover art and liner notes? Putting games on CDs? That was all him.

Hawkins left EA in 1994 to create a new video game console called 3DO. Later told by EA's board that he couldn't be chairman of both companies, he stuck with The 3DO Co., "the child in intensive care having open-heart surgery." Ultimately, that venture couldn't compete with the PlayStation and Sony's superior budget and, after a few lackluster business moves that only prolonged the inevitable, 3DO went bankrupt in 2003.

Still, Hawkins wasn't done. "I had an appetite for entrepreneurship," he says, and so that same year, he rounded up some venture capital ($44 million to date) and founded Digital Chocolate. The private company now employs more than 300 workers around the globe, but compared with EA's thousands, it means Hawkins is back to being one of the little guys. And that seems to suit him just fine.

"I've never been content with a straightforward job," he says, "and I think you've got to keep that sense of urgency, even after you've experienced some success."

"It's an incredible thing," says Scott Steinberg, founder of tech and video game consulting firm TechSavvy Global in Seattle. "After sitting on top of the world, [Hawkins] is paving his path to success all over again, learning as he goes and trying to figure it out like everybody else."

Upping the Score
If Digital Chocolate's 2010 progress is any indication, Hawkins is well on his way to figuring it out. He reels off some impressive stats: 50 million-plus iPhone downloads last year, almost 10 million users on Facebook and cracking the top five list of game developers in number of users (alongside Zynga, Playdom, Crowdstar and EA). In fact, since DC started a push on Facebook in February, its revenue run rate (daily revenue) is better than it has ever been in the past six years, he says.

A reason DC is succeeding in a chaotic market, Steinberg says, is Hawkins' ability to constantly reinvent himself--an important trait for a guy who has a tendency to arrive at markets years before everyone else.

He doesn't stay fixed on a single business model," Steinberg says. "Facebook is completely different from mobile phones, but he pursued the opportunity aggressively, essentially creating a new line of business."

In fact, Steinberg adds, probably the only reason DC hasn't gotten the accolades it deserves is because it hasn't had a hit like Restaurant City or FarmVille.Ironically, that's only because Hawkins was ahead of the game on that, too.

"The same year I talked about social apps," Hawkins says, "I pitched this multiplayer game idea about farming, where you had plots of land to plant crops on and you could go to your neighbors' plots to water theirs. The investors laughed so hard they convinced us we were crazy."

Pay to Play
Decades in the gaming industry has led Hawkins to this theory on why people play: Everyone has an inner gamer, and people play because it's healthy and socially rewarding. "You can elevate your status for much less money and far less effort than in real life," Hawkins says. "The only difference now is that there are so many more outlets than online poker and fantasy baseball."

The Gaming Race

Trip Hawkins' Digital Chocolate is rapidly catching up with the top developers in terms of users--its growth rate p0wns.

Zynga
March 2010 users (millions): 238
August 2010 users (millions): 233
Growth rate: -2.1%

EA
March 2010 users (millions): 51
August 2010 users (millions): 55
Growth rate: 7.8%

Playdom
March 2010 users (millions): 39
August 2010 users (millions): 44
Growth rate: 12.8%

Crowdstar
March 2010 users (millions): 34
August 2010 users (millions): 43
Growth rate: 26.5%

Digital Chocolate
March 2010 users (millions): 1.8
August 2010 users (millions): 10
Growth rate: 455%
Source: appdata.com

Nowhere is that difference more obvious than in the incredible growth of virtual economies, which some experts predict will be worth $6 billion by 2013. Already, NPD reports, 10 percent of social gamers have spent money on games, and 11 percent say they plan to do so in the future.

"Monetizing virtual goods is the way forward," agrees Mihir Shah, chief revenue officer of Offerpal Media, a company based in Fremont, Calif., that helps developers like Zynga and DC monetize virtual currencies and special items. The freemium model allows more people to play and get hooked, he says, and since it's now so easy to make micro-transactions of just a buck or two, gamers will pay for a deeper experience.

Shah says DC is fortunate with Hawkins at the helm. "He really understands social gaming mechanics and how to get new users, and there's secret sauce there," he says.

But if you ask Hawkins about that secret sauce, it doesn't seem like much of a secret. He'll come right out and explain it to you.

"A really good game is one that makes you sincerely want to play with your friends, and not because one of you is spamming the other," he says, pointing out examples of addicting games across various mediums, like Texas Hold 'Em, Trivial Pursuit and Guitar Hero.

A great social game will be original, multiplayer and browser-based, running on a quality platform like Facebook, he adds. And, it should provide players with some kind of emotional connection. He cites Nintendo's Pokémon card game as an example. "When you go adventuring with a Pokémon that keeps bailing you out, you can get attached," he says, "and that's why people willingly spend thousands of dollars on a single card."

New Ways to Play
Hawkins is acting on that by developing NanoVerse, a virtual goods platform that currently supports two strategy card games, NanoStar Castles and NanoStar Siege. The idea is for players to buy NanoStar packs, or groups of different characters that can be played across a range of games, so that players develop connections with the characters as though they're companions or teammates.

Hawkins is also positioning DC toward platform independence. He's often stated that the most successful games will be cloud-based, because "omni-gamers" will want access to the games they paid for on any platform, console and mobile device. And with companies like Google, Disney and Yahoo! entering the field, interoperability is the logical conclusion.

"Sure, there's a lot of blah blah blah about ownership now," Hawkins says, "but if you look at the past, how silly was it that at one point you couldn't send SMS texts to people on other wireless carriers?"

Some skeptics have referred to Nano-Stars as "Trip's Folly: The Sequel," but he shrugs it off. "Entrepreneurs will always be surrounded by people who think you're nuts," he says. "In high school, even my mom said to me, ‘I'd always hoped you'd do something more socially redeeming than games.' I wasn't bothered because I had faith in my ideas and confidence in my creative capacity."

He says he felt the same way while making countless sales calls to retailers during the first years of EA. "The number of obstacles is infinite," says Hawkins, "and if you don't have that degree of faith, you should just not bother."

He's always done better with the long term in mind, he says, and it's no different with DC. "I'm committed to making this a bulletproof company that doesn't need to raise any money," he says. "But I also look forward to the day I can have a diverse personal life, where I don't have to carry a company on my back."

As for when that might be, Hawkins pauses for a beat and recalls the moment he realized EA had made it. "I was driving my car, and I said out loud, ‘You know, I don't think they can screw it up, even if I'm not there.' I have a great management team at DC, so we could be in the same place in a few years."

 

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Jennifer Wang is a staff writer at Entrepreneur magazine in Southern California.

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This article was originally published in the November 2010 print edition of Entrepreneur with the headline: The Game Changer: Digital Chocolate's Trip Hawkins.

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