Silicon Valley Mobile Game Companies Can't Compete

It's too difficult to build an A-class mobile game development company here in Silicon Valley:

1. Extremely good mobile game talent is too spread out

2. Salaries are way too high

Anecdotally, I have more than a few friends here in Silicon Valley whose companies have had open reqs for mobile game developers especially server side developers for over 6 months. On top of that, most of the key talent has already been absorbed so getting new extremely good developers is very difficult. One company I know had to interview 100 candidates to hire 3 engineers.

There is only one key advantage of being located in Silicon Valley: information.

Knowing the economics of mobile games in the early "Tapjoy Mafia" days and how to do Tapjoy distribution in those days rocketed all of the early guys to success. Having knowledge of the latest mechanics, key trends, targets for success, user acquisition tricks, etc. can make a critical difference between success and failure.

Today, however, much of the early information advantage is getting out.

So what makes a mobile game company successful?

1. Game design capability

2. Development execution

3. Distribution

Information advantage helps inform #1 & #3 but in my opinion Silicon Valley is getting killed by #2.

Here's how we got here:

1. In the early days the majority of mobile games were primarily client-side architectures for cost and because client-side is more responsive

2. With the transition to mid-core and especially PVP as a primary contributor to monetization there was a sudden mad rush to acquire server side devs and more games shifted to server side architectures

3. In addition, the mobile game industry overall grew rapidly as social game companies, console game guys, media companies, and foreign companies especially Japanese all jumped into Silicon Valley

4. We're also recently seeing another new trend towards 3-D and standardizing on Unity as a platform causing a client side talent crunch.

Silicon Valley is at a major disadvantage. To illustrate this point, let's take the example of comparing Supercell to a typical Silicon Valley mobile game startup:

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Supercell's founders came from the Finnish studio Sumea (acquired by Digital Chocolate here in Silicon Valley) but they were able to develop Silicon Valley relationships via Digital Chocolate and by having a local guy in place. Hence they were able to get all of the Information advantage of Silicon Valley and all of the Team and Cost Structure advantage of Finland.

If it takes twice as long, costs 2x as much, and is 3x harder to put the team together to build a game than it does a company like Supercell (or Rovio or King.com) how can Silicon Valley compete?

I don't think it's an accident that the top mobile game companies now are not from Silicon Valley. The examples of successful companies in mobile gaming are all from the 1st and 2nd generation of mobile game companies. Companies like Funzio also hired shortly before the talent crunch and cost escalation here (while taking advantage of the information advantages). Further the early Silicon Valley mobile game that achieved success are now having a lot of difficulty being competitive and have largely dropped out of the top 50 grossing.

In my view, we will continue to see foreign companies dominate by using the Supercell model: foreign talent with local bus dev and relationship guys to learn and send information back to the mothership.

UPDATE: This post was updated on 6/21 based upon feedback from Eric Seufert of Grey Area Labs. Thanks Eric! Supercell's founder history and labor comparison details were revised.