In Madrid we meet Alexis Bonte, the CEO and co-founder of eRepublik labs. ERepublik labs develops and distributes massively multiplayer online games (MMOG).

Alexis shares some insights on his professional background and why he founded eRepublic. Furthermore, he describes the business model and uniqueness of the game and his plans for rolling out different mobile MMOGs in the future. Lastly, Alexis shares some advice for first time entrepreneurs.

 

Interviewer: Hi. Today we are in Madrid with eRepublik. Alexis, who are you and what do you do?

Alexis: My name is Alexis Bonte and I am the co-founder and CEO of eRepublik labs.

Interviewer: What did you do before you started this company?

Alexis: That is a complicated thing. I started my first company when I was 21, straight out of business school, it was called Tradeok.com. I tried to do eBay in Europe, but at the same time as OLX, this was 1998, it was a complete failure, didn’t work out. I actually raised some funds and all that, but it didn’t work out. I was very lucky because then a friend of mine was raising funds in Argentina for another company, and I told him South America is a bit risky and all that sort of stuff, I’ve an idea, let me come and see your investors, convince to contribute more money, and I’ll give you what I’ve got left of my company, then you’ll have an office in Europe as well. And he said, okay, let’s try and do that. So I had 500,000 left, so I took a flight to Argentina, convinced his investors to raise a million dollars instead of $800,000, I got 5% of his company. I lost my company, I lost everything, but I traded for some of his company, I didn’t go bust. And five years afterward the irony is that the European office of that company saved that company, and, then the company was bought and it was a huge exit. So that’s how I got started.

And then I worked in Lastminute.com, which is a big travel company, I met a wonderful person called Brent Hoberman who asked me to help me out to basically found and start Lastminute.com. I was not the founder but I was part of the team in the beginning. And that was a crazy story for six year with the IPO, and then the company went down really badly, then we managed to rebuild it and we sold the company in 2005 for $1.1 billion to Sabre.

Interviewer: When did you start with this gaming industry?

Alexis: When I was 16 years old my friends used to make fun of me because I would write business plans about the games company I would have one day. So I would write down the games and all this stuff I wanted to do, at the time I think it was Formula One management game, something like that. So after Lastminute.com I did a bit of angel investing. My wife is Spanish, she wanted us to move to Spain, so I moved here. I started with new things in Romania and all that, and found some developers for different things. I’ve always liked a game that was called Civilization, which is a famous PC game, and I thought it would be great if we could have Civilization on the PC but online, with everything on the internet, with user-generated content and all that, and I found somebody in Romania who was a programmer and he said that could be interesting as well. So we started like that. We didn’t know what we were doing really.

Interviewer: How long did it take until the company kept growing a little bit faster.

Alexis: For six months the company was just six people. I basically put the money for it to get it started and we built the product. I designed the game and that sort of stuff. After six months I was like, This is pretty good. It wasn’t really ready but we launched it anyway, and I remember it was in the beginnings of Twitter and I was one of the first people on Twitter – thanks to Loic le Meur who showed it to me – so I tweeted, hey, I’ve just released this social strategy game called eRepublic.com where you can be a real citizen in a real country. And I thought let’s see what happens. Within a week there were 30,000 people playing from all over the world. That’s how we started. One month afterward we competed on the web, we presented in on the web, we won the special jury prize in the web and things just got started up.

Interviewer: So was it more PR driven?

Alexis: I think when you’re starting and when you’re an entrepreneur – I was lucky because at Lastminute.com I wasn’t the founder, so I didn’t have the gravitas that the founder had, but I did have the contacts, I did know a lot of people, so that gave me access to different influencers. Also I was very lucky when I moved to Madrid here to meet a wonderful man called Martin Varsavsky, who very kingly invited me to – he used to do an event called Menorca Tech Talk – and he invited me to that event and I went. So I showing the game to people who were influential. And then I got those people to retweet my tweet and start talking about the game, I got Julio Alonso, who is a Spanish guy here who has the biggest blogs, to start playing the game so that people who like Julio Alonso will also play. So it’s not PR, I would call it more social networking and then making that work. We didn’t get a lot of press in the beginning, almost no press, then when we started having millions of users and all that we got the press.

Interviewer: So basically focus on the key influencers and then just having them disseminate the message?

Alexis: Yeah.

Interviewer: The business model of eRepublik, how does it work right now?

Alexis: At the beginning it had no business model, because the game was free, we didn’t know how we were going to make, we thought we would do the advertising. But no, we wanted to first put it free to play. This was seven years ago. Actually the Germans were the ones who were doing this in the beginning. I think it was only game free to play, so we looked at what they were doing, and we decide to introduce a currency in the game that you could purchase. With that currency you could basically buy advantages in the game and all that, and that’s become our business.

Interviewer: How many users do you have currently at eRepublik?

Alexis: In the past seven years we’ve had five million user who’ve registered to play the game. And that’s the official number that we disclose, but it’s a smaller number of players that are actually active on a monthly basis, but we don’t disclose that number.

Interviewer: By which channels do you acquire the customers or users today?

Alexis: Today we only rely on organic, reality still. There was a time when we did some marketing campaigns like AdWords and all that, but those became quite expensive. So we stopped doing it and we put more viral elements to the game and all that. And that’s what we do. Also what we’ve realized is the organic traffic is usually a lot better than the acquired traffic.

Interviewer: The conversion rates of signing up…

Alexis: The conversion rates, the second day return, the three day retention rate, the marketization is much much stronger. So we try and rely on organic as much as possible. But there were times when we were spending a lot of money on marketing.

Interviewer: Can you give us some more insights on the KPIs you’re tracking and how they help you perform better?

Alexis: One KPI we look at is if you’re looking at the marketing channel of course you look at the acquisition cost per registration or per install, if you’re talking about mobiles that’s the first thing you look at. We never never pay non-performance advertising, we never do that. Then what we do get is the percentage of people who complete what we called the on-boarding, the tutorial. So if you’re below 60% you’re in trouble, that means that is a warning you should change it. Then we look at the percentage of people who come back on the second day. So that’s what we call the second day retention. So clearly you want to be at 50%, not lower than 40%. And then we look at seven day retention and three day retention, and ideally you want to be around 20-25%. So 100 players that install or register in your game after a month if you have about 20-25 still playing. For core games, most core games are actually around 10, but if you’re below 10 you’re really in trouble. And then obviously monetization, how much revenue can you get? And that really depends on the game. A game like ours, eRepublik, monetizes quite late because it’s very hardcore. But mobile games will monetize in the first week, so it really depends on the game.

Interviewer: Because you have the purchases of the app or in-app purchases that they monetize better?

Alexis: Because you have in-app purchases and because on mobile the lifetime of a user will be shorter, it will be two months, three months, four months, six months if you’re very lucky. In games like iRepublik.com you can actually have a much longer lifetime, so we have an average lifetime of close to two years, which is very long by the way, it’s probably one of the longest in the industry.

Interviewer: And in terms of the revenue model can you split this via desktop and mobile and how you’re earning money on both of these devices?

Alexis: Right now for eRepublik it’s quite bizarre we did a web mobile version within the application of eRepublik, because eRepublik is a browser game, and what we’re seeing right now is that about 15-20% of our traffic is mobile, which is very low, it should be higher. It will be much higher when we do an app, but right now what we’ve decided to do – because eRepublik is such a complex game, it is a seven year old game, we’re adding things every month – is to do new games, so we are launching ‘Tactical Heroes’, that’s the next game we’re doing. We are self-launching on 26th of June in Spain, and we’ll have the global launch sometime in September. I’m very happy because we’ve had that first review today. Some journalist managed to find our self-launch in New Zealand, indeed he did a review of the unfinished game and we got 8/10 for a game that’s not finished yet. So we’re very excited about that. And then we’re doing another game called ‘Age of Lords’ which we will launch sometime next year.

Interviewer: Can you tell us a little bit more about your future plans for these games, because as you said you’ve got one game now, you’re planning to release two further games. Can you tell us a little bit more about the strategy behind it, whether you’re expanding it into different kind of games segments or different platforms or geographic regions?

Alexis: The game eRepublik is played all over the world, it’s very strong everywhere in the world, except in Asia. We actually decided to continue focusing on strategy games, because it’s working now and that’s what we love. But what we’ve decided to do is actually to pivot the company towards mobile games, because this is where all the growth is right now. In browser games they’re declining about 15-20% year on year, mobile games are boom! Also there is a lot more competition with mobile games, so you need to know what you’re doing. So this is the reason.

Actually we have two game studios in the company. We have a game studio with about 35 people in Romania, and that game studio is divided into two game teams, one game team that covers eRepublik.com, and another game team that takes care of the new game ‘Age of Lords’. And we actually had to open a new studio here in Spain, which is where I live, to do ‘Tactical Heroes’. And we needed to have a mobile games team for that, and that was the hardest part to do, so we had to acquire a company. So we made a small acquisition of a company called ‘Alien Flow’ which had a team of people who were experienced in doing mobile games.

And another thing we’ve done is we’ve spent almost a year just building the team up. Getting people from Gameloft and companies like that that really have experience. So we now have a very strong team, about 27 people, here is Spain that allows us to compete here, to compete in games. It’s all about the team.

Interviewer: How do you convert the users from eRepublik to the new games given that the hard fact that it’s a different kind of genre and different kind of platform that you use. And also in terms of marketing channels, it’s different way of acquiring customers for a mobile application as opposed to the desktop?

Alexis: The one thing that we’ve in common is that it’s a strategy game, it’s multi-player, and it’s competitive gameplay. We know that we have players who like that, we have a database of five million core gamers who like those kinds of games that we can market to, because we regularly market to all these people. And so we’ll be able to cross-promote. But we know that when we cross-promotion from email to iPhone install it’s not usually the best one. So we’ve tested it now with our Indonesian community, because we’ve self-launched in Indonesia, and that has given us I think about 200,000 players in Indonesia, and that’s given us a few thousand installs. So we know that from five millions users we should get a decent amount of installs which clearly won’t be sufficient.

So what we’re doing, a very good thing, is to basically learn what marketing channels work on mobile, is it Facebook, test them. And even if it is with 50 Euros, 100 Euros, very little, start testing them, start having the matrix, start measuring everything. So we’ve been running campaigns in Indonesia for two months with 20 to 30 viewers a day, but we’re learning. And the other important thing is, if you can, try and get Apple to support you. Apple will never promise anything but you should definitely try.

Interviewer: In terms of corporate strategy what do you need to do now in order to remain relevant and grow the business? What is the competitive advantage in the online gaming industry?

Alexis: I would say probably now three or four years eRepublic.com was at the forefront, and then we missed the boat, we missed the whole Facebook games boat, because we were so focused on eRepublik. It was growing, we were on the rocket ship, and we were just trying to keep the rocket ship going, and when you do that sometimes you miss opportunities. And I remember we actually knew about the whole Facebook program and all that from the moment they launched, and we were like we don’t have time for that. And we missed the whole Facebook thing. So we decided we don’t want to miss anymore. So from a strategic point of view what we’ve done is although what is easy for us is to keep investing in eRepublik and keep going along with that, we said of both the teams we have we are going to reduce the team that is focusing on the eRepublic.com, we’re going to do that acquisition, we need to be good at mobile, we need to understand mobile. And so that’s the big strategic decision that we’ve done. ERepublik.com was a profitable company for the past few years and we said now the train is leaving the station, it’s going fast, we we’re going to invest, it doesn’t matter, we don’t need to be profitable for one or two years, we have accumulated reserves, and we’re going to just invest to make sure that we get on the new rocket ship.

Interviewer: This is a very good bridge for talking about the market development. As you said there seems to be some shift over the past few years from normal browser games to more social related games, using Facebook for virality, and now mobiles. Can you tell us a bit more of what you think the future will be in terms of gaming? Obviously desktop will not die but maybe the proportions will change or the type of games that are played on different devices will maybe change?

Alexis: That’s a very good question. By the way, Facebook is a good platform, and I think there will still be social games being played on Facebook, there have been very good successes on Facebook recently, so that’s a really good platform and one that we’re looking at and talking to. Then basically the desktop games our team is doing very well, and I think this is the really really core games on PC. I would think e-sports is really happening on the PC. So the ones I will be more concerned about is the consoles, the consoles are struggling, even the new generation and consoles but the PC games I think will still be there.

I think browser games are going to continue to decline. But two games that are in my opinion are still going to go well especially the tablets. I think phones and all that is going to be strong, but the tablets are going to be very strong. But the types of games have to be slightly different, the biggest difference is the time of the session, how much time you spend playing that game. For example on PC you could have a game that is designed to be played for hours and hours, same thing on the console, on the mobile phone it’s a few minutes, it’s what you call the snack, the snack experience. On the tablet it’s between both.

Interviewer: Because you’re coming from this core gaming industry and seeing Diablo III for example, it’s a core game which is distributed online and making quite a lot of revenue, have you ever thought about going into this kind of subscription based core games?

Alexis: We don’t believe in subscription.

Interviewer: Interesting. Why?

Alexis: Free to play is much stronger, because free to play is more fair, you get to try the game for free and if you like it you pay. Subscription is the same thing they usually give you 15 days, but I just don’t believe in the subscription model. I think different games have different values for different people. I might use Diablo III five or six hours a day, and you might use it half an hour a day, why should we pay the same price?

Interviewer: With Entrepreneurial Insights we always try to teach or give advice to first-time entrepreneurs. And I think you’ve learnt some quiet cool lessons over the last 10 to 15 years being an entrepreneur. Maybe I can ask you to share one or two stories.

Alexis: When they first start a company, the one thing I tell them is the first three years of your life as an entrepreneur are going to be hell. It’s going to be horrible. You’re going to learn tons, you’re going to think nothing goes right, it’s going to be very very tough, and don’t expect to have profits in the first three years. And people need to understand that. It’s not like people see this glamorous entrepreneur because people only write about successes and successful entrepreneurs. Very rarely do we speak about failure. And the first three years you’re just going to fail over and over and over and over. It’s how you fail, how quickly you fail, and then building up on those failures that eventually will make you reach success. But the most likely fact is that it is going to take like three years. So that’s the first.

The second things is actually looking to the first thing. It’s about persistence. You have to be super damn persistent. I’ll tell you Lasminute.com, which was the first company I was part of where I wasn’t the founder, but I remember it was about selling flight tickets in the beginning. And if you’re going to sell flight tickets you need have a deal with the airlines, and the first deal they tried to get was with Alitalia, it took 35 phone calls for Alitalia to answer. And then we started selling Alitalia and Lastminute.com was then the biggest travel company here.

More recently in our case we are moving to mobile. Although we are an established company in browser games, nobody knew us in mobile, and it is very hard to do well in mobile if Apple doesn’t look at you, doesn’t talk to you, Google doesn’t look at you, doesn’t talk to you. And I remember at the beginning six months ago I’ll go to conferences, and I know all those people because I’ve been an entrepreneur for a long time, and I knew nobody at Apple that could help. The people at Google I knew had nothing to do with the Google people. I was completely stuck. So I started asking friends, calling, it took me three months, three months of really finding out who the right people are. The people with who have the connections they don’t give you the connections. And now we’re in a situation where we are talking with these people, they’ve notice us, they know we’re serious, they’ve seen the game, they realize they’re getting a lot, but it’s months and months and months, and it’s not something I gave to the marketing people, it’s not the marketing people that make it happen, you’ve got to make it happen.

Interviewer: Thank you very much Alexis.

Alexis: You’re welcome. Thank you.

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