Storm8’s journey from a Facebook gaming startup to a $300 million acquisition

Storm8‘s years of making mobile games paid off this week when Stillfront Group agreed to buy the Redwood City, California-based company for $300 million in cash and stock.

The deal says a lot of things about the value that a small team can create in the $100 billion mobile game industry (well, at least according to AppAnnie’s forecast). For Stillfront, it represents yet another bet on mobile games after the Swedish company’s acquisitions of Kixeye and Goodgame Studios.

Storm8 has 70 employees, smaller than its peak of more than 240 people before 2017’s layoffs. But the company has proven a survivor, and its fortunes picked up with the launch of last year’s Property Brothers Home Design, one of the company’s games that targeted women.

Perry Tam got a job at Facebook in 2007, when the company had less than 500 people. He and other former Facebook employees founded the company as a social game publisher on Facebook desktop, and they made the transition to mobile games over time. As mobile becomes bigger, it is also becoming the domain of giant companies, and it’s probably a good thing that Storm8 becomes part of a bigger entity. I talked to Tam and Terence Fung, chief strategy officer of Storm8, about the deal this week.

Here’s an edited transcript of our interview.

Above: Storm8 leaders (left to right): Terence Fung, Perry Tam, Laura Yip, Chak Li, and William Siu.

GamesBeat: I wanted to go back in time to remember some things. How did you get started at Storm8? Was it seeing things develop at Facebook and then leaving to jump into social games?

Perry Tam: You have a good memory. That’s absolutely correct. I have a CS degree, so I came out to Silicon Valley and started as a software engineer. I worked at big companies and small companies. I was working at Facebook back in 2007 through 2009. I was tapped to do a payments project, integrating payments in the Facebook platform, so I had to look into where the money was going. All the money was going to games at the time, so that’s how we learned that gaming is a great business.

It happened that Apple had just opened up their platform around the same time. The iPhone came out and Apple opened the App Store platform for developers to come in and make apps. My co-founders and I were saying, “Hey, why don’t we give this a try?” We understood that gaming was a good thing. We were all gamers ourselves. We hadn’t made games before, but we thought it would be a fun thing to do, so we got started.

One thing led to another and we eventually quit our full-time jobs. Three of the four co-founders came from Facebook, including myself. We started doing this full time in 2009. That’s how we got started. If you recall from back in the day, in-app purchases didn’t even exist at the time. That’s how early we were. We were selling premium apps.

GamesBeat: How old were you at the time, when you started at Facebook?

Tam: In 2007 I would have been 25 years old.

Above: You can design your fantasy home in Property Brothers Home Design.

GamesBeat: 2007 for Facebook was pretty early, too. Did you hear about Facebook from a particular source, or was it an obvious job to apply to by then? How did you get started at Facebook?

Tam: When I first came out here after graduating college, my first job was at Oracle. I joined Oracle in 2004. I met a bunch of friends there, great people, great friends of mine. We stayed in touch after that. One of the people I met at Oracle moved on to some other jobs, and eventually he landed at Facebook. He referred me into Facebook in 2007. That’s how I got in there. When I joined Facebook it was still pretty early. They had fewer than 500 employees. Obviously I’d been a user of Facebook, but I didn’t know all the details about it. My friend talked me into interviewing there and I got in.

GamesBeat: What kind of perspective do you have on selling to Stillfront today?

Tam: We were a really early developer on the smartphone platforms, as I say. That’s given us a lot of perspective. When we started there was really nothing there. No payment methods. Total users were in the millions.

Fast forward to today and we’ve learned a lot in the last 10 years. We’ve seen the growth of the mobile platforms. We’ve seen the changes in usage, how people have become more and more entrenched in using their mobile phones and other devices. We’ve made many different types of games, ranging from casual games to puzzle games and everything else. We’re still very excited about the overall gaming market, but one thing that I think is important to know is we’re in a very different time now. We have far more sophisticated competitors, competitors with scale, coming into the market. We’re certainly conscious of that.

One of the motivations for joining forces with Stillfront is to increase our scale. The other thing we’re looking into very much is the cultural fit. We feel that Storm8 and Stillfront have a very good cultural fit. We’re both very entrepreneurial. We’re committed to creating greatness. We’re meshing very well together on those fronts when we talk with Stillfront.

GamesBeat: Have you ever added up how many downloads Storm8 has had altogether?

Terence Fung: We haven’t counted since we passed the 1 billion mark several years ago. We’re probably over 1.5 billion by now.

GamesBeat: What kind of potential did you see in Storm8 when you joined, Terence? How many years ago was that?

Fung: I joined more than five and a half years ago. I’d echo Perry’s sentiment. What was most exciting about joining Storm8 is that it was, and continues to be, entrepreneurial. It’s a people-first organization, driven toward greatness. What we see in Stillfront is a bigger version of us, with multiple studios. It’s a great fit.

Above: Property Brothers Home Design goes after the same market as Glu’s Design Home.

GamesBeat: You left Zynga at the time. Was there something that you felt was untapped in Storm8’s potential?

Fung: At the time, if you recall, Zynga had just completed the NaturalMotion acquisition, which went through an integration process. The road map at that point was being developed, and the company was on the path toward moving fully off Facebook. Joining Storm8 — it’s a very focused organization. Again, entrepreneurial, much smaller, with more opportunity to focus on mobile, without any of the distractions of Facebook.

GamesBeat: How do you feel about running independent mobile game companies today? How challenging is that, given how big everybody has gotten in this space now?

Tam: We’re in a very luxurious position at Storm8 in a sense. We’ve been running as an independent studio for more than 10 years. We’ve been profitable all this time. Another thing that’s unique about us is we’re self-funded. We don’t have any outside investors. That put us in a pretty unique camp, especially in Silicon Valley.

Running an independent studio is great in a sense. You can control your own destiny. You can do business in the way that you like. But in this case, combining forces with Stillfront, we’re excited, because from what we’ve learned by talking to Stillfront, all the studios they’ve acquired run independently. They have full autonomy of operations. That’s the secret to why they’ve been so successful all this time, in my opinion, after acquiring so many studios and becoming so big.

From our perspective, we believe that by joining forces with Stillfront, we’ll continue to run very independently and autonomously. In that regard our situation won’t change all that much. I’m excited about that.

GamesBeat: I wondered how the casual game and women-oriented game market has developed, given the rise of things like hypercasual games. That’s not really your thing. I don’t know whether that’s affected your business or made you think in a new way about the market.

Fung: The global gaming opportunity on all fronts is as amazing as ever. The market blew away the global box office market a couple of years ago, and it continues to be one of the fastest-growing entertainment segments. If you look at the market, whether it’s hypercasual or triple-A cross-platform games like Fortnite, it’s all indicative of a growing global market opportunity, with different genres where different players can be super successful.

For us, we’re experts at casual, women-oriented games. We believe that category continues to grow. We believe we can be one of the top publishers in that field. That’s our main alley. For Stillfront, that’s one of the cornerstones of the acquisition, the diversification of the mid-core and hardcore focus at their existing studios.

Above: It’s a warm and fuzzy game logo.

GamesBeat: AppAnnie had an interesting number last week, where it said that mobile game spending should top $100 billion in 2020. That was 2.4 times the spending for PC and Mac games, and 2.9 times the spending for console games. The opportunity is that big, but there are still people who say that mobile gaming is too competitive, that it’s a very difficult market. It’s interesting to me that it can be so big and yet so challenging.

Fung: Like any of the top markets, you have to be a leader. For Storm8, I think we always strive for greatness. We didn’t want to be in the middle of the pack. It’s a competitive market, and we acknowledge that. We strive always to be the best.

GamesBeat: What are you going to do to celebrate?

Tam: [Laughs] First and foremost, we want to congratulate the team. We just had an all-hands internal meeting to break the news and talk about it. Everyone’s excited. We popped a lot of champagne. But shortly after that everyone just got back to work. That’s how we do things, I guess.

GamesBeat: How many people are at Storm8 now?

Tam: I think it’s about 70 now.

Above: Brothers Jonathan and Drew Scott are the stars of Property Brothers.

GamesBeat: What are the top games at Storm8 now?

Tam: The top two are definitely Home Design Makeover and Property Brothers Home Design. As you know, over the years, we’ve built many games, so we also have a long tail of other live ops games, but those two are newer, and they’re gaining more revenue share through the growth that they drive.

GamesBeat: You’re not as big as you were back in 2017, right? How have you been operating with that number of people?

Tam: As you said, we had a restructuring back in 2017. We went down in size. But at the same time, I think we also–by virtue of having a smaller studio, we found more focus. That’s why we were able to continue to produce great hits like that Home Design Makeover and Property Brothers Home Design. We’ve seen that in the last two or three years.

We had to part ways with a lot of great talent, but the people we have today have more than seven years of tenure with us by now, even though the company is only 10 or 11 years old. A lot of the people who remain with the company are very senior, and they have a lot of experience not just in gaming, but with Storm8 specifically. That’s allowed us to do the great things we can do. The bonds we’ve formed in the last seven or eight years are important for us to do our work well.

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