We’re thrilled to welcome Stash, a new kind of direct-to-consumer platform for games to our upcoming Pocket Gamer Connects San Francisco event later this month. Head of product Archie Stonehill and co-founder Justin Kan from the company will be joining another 70+ speakers at our conference.
Kan [left in our picture] is an American entrepreneur and investor and co-founder of Stash having previously co-founded Twitch, a company which spun out of Justin.tv, a company that started when he strapped a camera to his head and streamed his life to the internet 24/7. He has since founded half a dozen companies which have raised over $500 million in venture capital and invested in some of the fastest growing startups around, including Reddit, Cruise, Rippling, SendBird, Scale AI and more.
Stonehill [right] was previously engagement manager and senior expert advisor in games at McKinsey before becoming a principal at Makers Fund, working closely with founders to invest in the next big studios. As a hardcore gamer himself, Archie is deeply passionate about the impact direct-to-consumer (D2C) will have on player experiences and industry innovation.
Appearing at Pocket Gamer Connects San Francisco!
Pocket Gamer Connects San Francisco takes place on March 18 to 19 and features all the usual PGC goodness: a track full of insightful sessions, roundtables where industry professionals can air their views on hot topics, networking opportunities (like Publisher SpeedMatch, Investor Connector and more), the Journalist Bar, The Very Big Indie Pitch and much more.
We caught up with the Stash team to find out more about their talk entitled “The D2C Iceberg: How Top Games Hit Record Profits Despite the ATT Crash (and How You Can Too).”
Tell us more about what you’ll be doing as part of PGC San Francisco
Stonehill: “We’ll be speaking about what we call the ‘D2C Iceberg’. There is much more to D2C than meets the eye – hence the iceberg. Many game developers don’t realize that D2C makes up 25%+ of some top studios’ revenue, and has done for years. In fact, D2C is the reason why some of the biggest studios were able to offset revenue losses in previous years, post covid, ATT, etc, and actually turn profit while most others struggled.
It’s important to “expose the secret”, so the game industry understands just how deep D2C goes and has gone, and give them a chance to replicate the success. We’re going to be diving into the numbers and sharing what’s worked and what hasn’t.
If you could give other mobile games companies one piece of advice, what would it be?
Stonehill: Don’t underrate the importance of distribution and go-to-market strategy in achieving success. Many game developers, especially startups, get caught up in the excitement of creating something new, like mixing genres or inventing unique game mechanics. Building a great game, however, is only a part of building a successful game – often the biggest successes are those whose strategies combine product and G2M innovations. Especially in a post-ATT era, where developers cannot rely on traditional programmatic marketing strategies to scale new games, incorporating go-to-market into your thinking throughout the product development process is essential to succeeding.
What leaders in games do you find inspiring?
Stonehill: Epic Games and Riot Games and their founders immediately come to mind. Both companies not only transformed the games industry with groundbreaking products but have also managed to maintain an edge across product categories and over time.
Taking Epic first: Well before the word ‘metaverse’ had expanded beyond the pages of Snow Crash, Tim Sweeney was building up Epic Games, Unreal, and Fortnite into the most ‘metaverse’ company around, disrupting every part of the games industry in the process: content, go-to-market, business models, and technology.
Fortnite brought F2P to console, drove cross-platform compatibility, and built a cultural phenomenon and social platform that is unprecedented in its importance for a generation of games.
At the same time, Sweeney turned Unreal into the preeminent AAA-quality games engine, again by adopting an innovative licensing model that provided developers with free access to technology that was previously only available to the biggest companies.
I admire Sweeney in particular because he did all this while helping developers of all sizes, most notably in his efforts to make digital markets more open. Epic has done the industry a big favor by fighting for a more equitable digital landscape rather than taking a sweetheart deal.
And even before Fortnite brought F2P to console, Riot Games brought it to the West and set the standard for a D2C games company. Riot went head-to-head against the top AAA developers – Valve, Blizzard, etc. – and won, turning League into one of the most successful games in the world. They have also managed to expand their product lineup while maintaining the highest standards for execution – whether that is in Arkane, their TV Series, or their esports ecosystem. I found Valorant to be brilliant. A beautifully thought-through strategy that carved out a space in a highly competitive gaming category by identifying the gaps and opportunities amidst Overwatch, CS:GO, Rainbow Six: Siege, and Team Fortress.
What developments do you think have been undervalued by the mobile games industry?
Stonehill: The surge of direct-to-consumer (D2C) channels, with web shops leading the charge. The shift towards D2C, accelerated by the challenges of Apple’s ATT, has been a lifeline for some developers. The most sophisticated studios have not only weathered the storm but thrived, reaching record levels of profitability by building direct relationships with their players, capturing higher margin, and gathering first-party data.
The scale of D2C in the industry, however, remains largely undocumented by mainstream industry metrics because it is hard to size from the outside. Very recently, the implementation of regulations like the Digital Markets Act in Europe and court cases like Epic Vs Apple have drawn more attention to the D2C opportunity, and while these changes definitely unlock major new opportunities, this misses the fact that D2C has already been a major strategic priority for the largest developers for years.
What is the most overhyped trend from the last 12 months – and why?
Kan: The D2C pie is only going to get bigger. The anti-competitive regulations opening up Apple and Google are a big part of that. But beyond the new policies, the trend toward cross-platform, widespread user acquisition and tracking struggles, and the return of HTML5, make 2024 a great year to explore D2C.
The biggest benefit of D2C is of course increasing margins and paying lower fees on IAPs, which naturally has a huge impact on LTV. However, owning the player relationship, getting direct access and contact information, and building an experience for your highest spenders that’s just impossible in-app can hugely impact user acquisition and retention as well. Eventually, that all equals out to an increase in revenue and profit, which we’re already seeing in earnings calls from public game companies.
What’s the best piece of advice you’ve ever received?
Kan: Paul Graham, founder of Y Combinator, in the early days told all the founders he funded to go talk to customers. Talk to customers, write code, and exercise. And that’s it. And by focusing on that simple advice, we created Twitch. Now, we’re using that to build up and grow Stash too. For game developers, the same piece of advice holds – talk to your players, understand their motivations, and build what they want. Everything else will follow.
Can people get in touch with you at the event? What sort of people would you like to connect with?
Kan: Yes! If you’re exploring direct-to-consumer tools such as web shops, launchers, or payments we’d love to chat with you. D2C has major benefits for both monetization and even user acquisition – so we’re happy to talk to anyone looking to grow their game by directly selling to and engaging with their players.
Book your ticket!
Want to attend the talk and more great sessions from our fantastic roster of speakers?
You can register for Pocket Gamer Connects San Francisco right here.
Don’t forget, if you register for PGC San Francisco, you’ll also get access to the MeetToMatch platform for the entire week – not just for PGC!