Polish developer Ten Square games have been an increasing presence in our headlines over the past year. Whether that be their stake in fellow developer Gamesture or their release of an eco-friendly and educational mobile game in partnership with green search engine Ecosia. Although the company has a broader reach than just in mobile, they continue to grow in all directions, and the smartphone market is no different. So it's perhaps no better time than now to check in with CEO of Ten Square games Maciej Zużałek about what's next for the company, and what's been leading up to now.
First of all, can you tell us about yourself, your role and your time in the industry?
I joined TSG 5 years ago as a Chairman of the Supervisory Board. One of my responsibilities was to work on the IPO. I also co - created the company's development strategy alongside the founders and the TSG management board.
Two years ago, the company's founders asked me to become the CEO, and I've been in that role ever since. Since the management transition, during Covid pandemic, the business has grown in terms of revenues 20 times. Moreover, during this time we have expanded the team from ca. 200 to over 500 people. Previously, 99% of employees were from Poland, now we also hire ca. 120 people from abroad. The last two years have also seen two acquisitions expanding our profile with the flight simulators and RPG genre. And last, but not least, we’ve established our key games - Fishing Cash and Hunting Clash as niche leaders with more than 95% market shares in these segments.
Before I joined Ten Square Games, I have spent most of my career, a good 15 years, in the private equity and private venture investment sector.
Privately, I can say that I spent my free time and money as a teenager in arcade saloons, which were very popular in Poland in the 1990s, playing pinballs and arcade machines... Then I got the ZX Spectrum, on which I played, e.g. Jumping Jack. Later, I focused on education and career, but games, to a greater or lesser extent, have always been present in my life.
What would you say has been the biggest change in the industry since you entered it?
Without a doubt, one of the biggest changes, which turned out to be a challenge and an opportunity at the same time, was the outbreak of the COVID-19 pandemic. Overnight, the entire company switched to working remotely, which we had not practised before.
Fortunately, the company was ready for that in the sense of IT infrastructure capabilities. When the board met and someone asked what would we need to be able to start remote work, the CTO simply replied “Nothing, just go home and start working from there.” The change was smoother than we expected it to be and it also allowed us to work on an international scale. Otherwise it would be quite difficult to get everybody to work from our office in Wroclaw. While technological adaptation was quite natural, we are now facing new challenges, still adjusting to our hybrid model. We observe that working in an office fosters creativity and delivery. Nevertheless we have some very talented people on board, who thrive working fully remotely.
Another major change was restricted access to The Identifier for Advertisers (IDFA) on Apple devices, which was an extremely important source of knowledge about those playing our titles. After the change, we were cut off from information, which was the basis for both the development of the game and the creation of promotional activities aimed at new and existing players. The whole industry has had to deal with this problem. We are facing a new reality but we stay optimistic - we believe that we will find the solution to overcome this obstacle.
Speaking of changes, I think that the rise of TikTok and the change in the social media ecosystem is also worth mentioning. TikTok is currently the fastest-growing social medium with almost 3.5 billion users, many of which are our target audience. This platform is changing the approach to social media and the marketing activities related to them. As of now, there is no definitive way how effective marketing should look like on TikTok, but I am sure that those who figure it out, will thrive in the next few years.
Did you see the above mentioned change coming? If not, how did you adapt to it?
The pandemic could not be predicted, but it could be responded to quickly. In the first step, we switched to working remotely, and in the second step, we made the bold decision to invest a record amount of money in our marketing. As a result, we acquired many new players and significantly increased revenues, so our agile approach to business has been proven successful, in the moment of unprecedented challenge.
People were confined to their homes, lost access to many other entertainment activities, so they had more time, and resources, to play games. Importantly, advertising prices also fell at that time, so by analyzing predictive models we’ve decided to put a very aggressive user acquisition effort - we spent $10 million in March alone, and as the results showed, it was a good move, as we acquired players we would have otherwise bought over the next 18-24 months and Fishing Clash became one of the 40th top grossing games in the Google Play store in that period, with monthly revenue increasing from $2 million to $7 million per month.
However, our predictive models showed that we couldn't maintain this level of spending, because within a few months we would run out of funds to continue operations, expecting the money we would earn in the future.
As for TikTok, of the platform's 3.5 billion users, as many as 500 million are in our target group - those aged 35+. We have no doubt that there is huge marketing potential in this platform, where consumers behave differently than in traditional social media channels, and we are working hard to understand how to use it to our advantage.
Thinking back over the past couple of years, what is the biggest hurdle you've faced?
Two years ago, we were discussing how TSG should develop further, whether we should stay where we were, which was a very comfortable place, or maybe leverage our past success to acquire know-how outside of Poland and bet on aggressive development. After analysing all the opportunities and challenges, we decided to scale up and diversify the business.
Thanks to this decision, we have grown into an international organisation with over 500 employees. Moreover, in the past two years, through mergers and acquisitions, we bought Rortos (Italian company) and shares in Gamesture (Polish company), expanding our portfolio of games to include the flying simulator and RPG genres.
It was a big effort, during which we expected a lot from our team, but thanks to their hard work we managed to scale up well, for which I am grateful. I can proudly say that we have a great team of professionals. We still need to work on the integration of new assets and learn from that process, but the most important thing is that we have opened new opportunities for the company, by diversifying our games portfolio.
2022 has been quite challenging for our company so far. The war in Ukraine, post-lockdown trends, and the Russian player-base being restricted - all these factors had an impact on our financial results. However, despite still-present market uncertainty, we are performing well thanks to our dedicated teams, which can be seen especially in Q3 results. At the end of the day, we can only work within given areas and can’t change our surroundings or sentiment. We only have influence on how our games are developed and this remains our focus in these uncertain times.
Now, in the ITwiz Best100 report, we were recognized as the 5th largest exporter of IT products and services in Poland, and the 7th largest IT company with Polish capital selling its own products and services in 2021. Moreover, according to the PocketGamer report, we are among the top 50 mobile game makers in the world.
Many app/game developers have moved away from in-app purchases in favour of subscription models. How do you feel about the current state of monetisation in the industry?
Subscription model is one of the most recognized and demanded revenue models in the tech industry. It provides stability and predictability of the revenue base.
Still, in our flagship titles, Fishing Clash and Hunting Clash, we focused on a free-to-play model with in-app purchases, where we have a good track record. Fishing Clash, for example, in its best months reached $10 million in revenue per month, five times more than our largest competitor. Hunting Clash has about $4 million revenue per month - twice as much as our largest competitor.
Nonetheless, the subscription model is very interesting, and we have one title in our portfolio, Real Flight Simulator by Rortos Studio, based on it. The desire to test the monetization possibilities of this model was one of the reasons for the Rortos acquisition.
We are constantly looking at the benefits associated with this model and evaluating whether we can use it on a wider scale, by introducing seasons into our titles, for example. From our portfolio perspective and the nature of our games we will stick with the in-app revenue model, while testing some of the subscription components such as battle- or season passes at the same time. Subscription models can be attractive in games with millions of daily active users (DAU), but not necessarily for the mid-core games with hundreds thousands of DAU. I also think that in the current economic environment, fixed payment services will be more difficult to implement and could potentially create a risk of increasing churn rate.
Where do you think the mobile gaming industry is headed in the next few years?
There are many trends, some are controversial, like NFTs, others, like AR, are getting bolder and bolder, but there is one core question - what will the future growth of the channels look like. I’d say consolidation with accumulation of know-how is the most important topic right now.
It's also worth mentioning that in the mobile gaming market, because of solidification of know-how, if someone wants to effectively monetize their product, there is an increasingly high barrier of entry. There is less and less room in the market for a title created by a single developer to become popular globally, but the support of a larger player, with their data analytics, and machine learning systems supporting the growth of the game is necessary.
While the mobile gaming industry is very eager to move AAA games from other platforms we choose to focus on the free-to-play model and I am not afraid to say that when it comes to the mobile market we are experts in the category of competitive simulation games with deep meta. While we will continue to focus on this, we are also looking at different genres in which we would like to support the growth of the other studios, so definitely we will have to stay on our toes in order to look for the future growth channels.
Technologies like AR and location-awareness are becoming increasingly mainstream. Which, if any, technology excites you most?
The technologies you mentioned are undoubtedly interesting, but the most important thing is the need of the customer, so we are excited about everything that is data driven. We can see what players are doing in our games and we look for new ways how this knowledge based on data can be used to improve our products and user experience.
So everything related to user data, whether to make business decisions or to apply it to the game creation process, is exciting for us.
Our industry provides incredible access to player data. We can analyze player behavior in great detail, and we can make decisions about product changes based on it. With data analytics becoming more and more comprehensive, further automation of decision-making processes using machine learning or AI will be the basis of future operations. All of this is fascinating and we will explore and work on these areas in the future.
Can you tell us more about Ten Square Games’ studio acquisitions, such as Rortos?
Before we bought Rortos, we had reviewed 60 different companies as part of our due diligence process. We didn't just want to acquire another studio, but we wanted to get a partner where our know-how and ability to acquire users, use of data, game monetization , and development, could be applied.
As a result, we knew that Rortos' portfolio of flying simulators would be an ideal field for our activities, because their target group overlaps with ours, that is men aged 35+, and we know how to reach and attract them.
In practice, the merger was hard work, and the integration took a long time. As an example of the challenges coming from the merger, I can mention one of the Rortos’ title - Airline Commander. At this point, the number of Airline Commander players is similar to the number of Hunting Clash players. But in terms of revenue, Airline Commander results are 7-8 times lower than in Hunting Clash. We want to leverage our know-how in order to improve the game’s KPIs but it requires changes in processes on both sides. People from Rortos are top class experts in flying simulators and we know how to monetize games. I am sure that this mix of competencies will be successful in the long-term.
What’s next for Ten Square Games?
We need a balanced portfolio of games and our key objective since mid-2020 is to achieve that. That is why we are working hard on building the next clash games, like Undead Clash, taking an attempt at building new fishing themed games, like Fishing Master, and investing in Rortos and Gamesture to add flying simulators and RPGs to our portfolio.
Fishing Clash used to account for 95% of revenue; now, after our acquisitions, it's down to 70%. Since our aim is to operate a sustainable, diversified and growing portfolio of games, we want to develop new games inhouse, but also invest in order to acquire partners who, on the one hand, can benefit from our platform and, on the other hand, will be able to strengthen our know-how and diversity.
Is there anything else you’d like to add?
Free-to-play mobile is still a young industry, with the first signs of maturity, but there is still much to be achieved, and it will continue to grow and with the growth will come changes. To use the basketball analogy, the game is on and we are only finishing the first quarter.
What's more, with access to user data and the ability to use it to improve content, the sky's the limit for our industry. Gaming is the second largest entertainment segment and the demographics will improve and bring new players in. Our job is to focus on creating exciting content for our players.
In all of this, we must not forget the reality around us, because business is one thing, but social responsibility is just as important.
Due to the subject of our main games we engage a lot in social actions dedicated to protection of the environment. Recently we organized the Fishing Clash event - Save the Oder - which raised funds for the restocking of a Polish river affected by an environmental disaster. We don’t only work on a local scale, TSG was also involved in global actions to save the Amazon river and support Tanzania in their environmental efforts. Furthermore, since the beginning of Russian aggression in Ukraine, we decided to block players from Russia and Belarus, who accounted for 6.5% of our revenue. We believe that sanctions like this can truly increase the chances of resolving the conflict, thanks to the increase of internal pressure within Russia.
So now we have an idea where Ten Square Games are going, we can think about their present a little more. The studio made it's entry to our Top 50 Game Makers of 2022 list at #42 specifically because of their expansion into China, rising growth and their work in partnership with Ecosia.