Gabe Leydon, chief executive of Machine Zone, made some news this week as he renamed his company MZ and announced he would license the company’s core infrastructure for running mobile games.

In a new strategy, MZ is licensing its RTplatform, a platform that can enable handle many millions of people to communicate and interact in real-time. MZ built the platform for its Game of War: Fire Age and Mobile Strike games, but now Leydon wants to use the technology to enable the “many-to-many Internet,” where millions of people connect with each other in billions of interactions. The RTplatform can help customers scale up to handle enormous amounts of communication.

The platform launch revealed that MZ isn’t just a game company. It’s also a technology creator. Matt Marshall, founder of VentureBeat, interviewed Leydon on stage on Monday at our Mobile Summit event in Sausalito, Calif. Here’s an edited transcript of the conversation.

Above: MZ wants to enable the many-tomany Internet.

Image Credit: MZ

VB: Gabe, thanks for joining us. We invited Gabe because he had some interesting comments to share at a ReCode event about the industry. We’ll get into more details about Machine Zone, but basically it’s the biggest vendor of advertising out there in gaming as I know it. It spent about $ 1 billion last year to promote its games. A very sophisticated player, and the games industry is on the leading edge. But before we go into that, I think you had some news?
Leydon: Today we announced that we acquired the MZ.com URL, and we announced our new RTplatform, which is a massive scale service focused on high fan-out and extreme data processing. We hope to enable the next generation of many-to-many applications.

Most people don’t give Game of War enough credit. It’s an extremely technical application, the largest concurrent application in the world. It can support a million players in the same universe at the same time. Our new platform is about 100 times bigger than that. This is a new way of looking at large-scale real-time applications. I hope that, for Machine Zone’s legacy, it brings about the many-to-many internet, the internet everybody uses at the same time.

VB: That sounds very interesting, and I want to make sure we take a step back and look at it in context. Facebook has a billion people on its platform. Can you provide some context about how this compares?
Leydon: They’re not in the same space. Everyone’s in their own space. With Game of War, we tried to make a game the whole world could play at the same time. We ran into a lot of issues – some technical issues, some UX issues. One of the solutions was our real-time translation service, where we’re translating 32 languages in real time in parallel, so we could try to create an environment everyone could coexist in at once.

The backbone of that is our RTplatform, which allows all of this activity to go on in the same place. Game of War is a real-time economic simulation where hundreds of thousands of people in any moment are interacting with each other, fighting with each other, chatting with each other. This is a totally different way of looking at internet applications.

Right now the internet is completely lonely. There are 3 billion people online right now and you don’t know it. There’s nowhere to go where you can feel that. As primitive as it is, Game of War is the closest thing out there that helps you feel how big the internet is. This platform will allow you to build applications to get even closer to that ultimate goal of putting everybody in the same place at once.

VB: One of the more interesting strands about your platform is that real-time translation. When you play the game, you see a chat coming through, and because it’s in English you assume it’s an English speaker, but really it could be from anywhere in the world. Can you talk about how that works?
Leydon: That was a feature we had to do. It wasn’t something we set out to do. But as soon as you try to put everyone from around the world in a social situation—we didn’t want a Polish player to feel out of place if there are only Americans around him. We wanted a singular experience for everyone, too, so everyone could play with each other.

That thinking unlocked a lot of technology advances. It grew into a very sizable team. It bled into our marketing technology and it’s bleeding into more of the apps we’re building that have nothing to do with gaming or marketing. This is infrastructure that lets you do some interesting things in real time at extremely large scales.

Above: Matt Marshall and Gabe Leydon of MZ at Mobile Summit.

Image Credit: Dean Takahashi

VB: Can you talk about the industries that will be using this?
Leydon: Not yet. But it’s radically different from gaming or marketing.

VB: What do you think is the size of the market for this sort of thing?
Leydon: If you apply this to existing applications, there are lots of use cases for it, particularly around real-time analytics and so on. But where it shines is when you start thinking about applications in new ways.

Machine Zone is collapsing into a single data feed. Everything we do happens in one place and applications are built around that. It’s a different way of thinking. You can publish an extreme amount of data and you don’t have to worry about it. Then you can read it all very fast and build applications around that. It provides a level of efficiency where we get to operate Machine Zone, from its marketing to its game operations to analytics to live operations, through one single console. We can run our entire business in real time.

That requires a lot of thinking about the server in the beginning. I want to be able to change everything on the server in real time. I want to be able to change anything on the client in real time. But what we end up with is an entirely real-time stack that can move incredibly fast, because we have to.

We’re spending a lot of money on marketing. That can go wrong. It’s not always a good time. Sometimes there’s a lot of fraud, a lot of questionable activity. You need to be able to change direction fast. We buy at a big scale, and if something doesn’t go right we need to be able to change that at any moment. The way that we look at our business, we want to be able to operate in the stream itself, do everything in the stream itself, without waiting for anything.

That’s a different way of thinking. We’ve had to deploy a lot of money and manage a lot of traffic. You have to think about your application and your business in a different way. I don’t expect this thing to take over the world instantaneously. But it’s going to challenge the way people think about app development in general.

Above: Arnold Schwarzenegger stars in the new ad for Mobile Strike from Machine Zone.

Image Credit: Machine Zone

VB: You mentioned that technologies you were developing bled into marketing and other activities. That’s interesting, because one of the things you’re known for is sophisticated marketing compared to a lot of other companies. Can you talk about that process?
Leydon: You try to make a game that the whole world can play at the same time. It follows that you have to market that game to the whole world to get them to play it. That’s hard. The kind of marketing we do for Game of War as far as mobile strategies just hasn’t been done before. There’s a reason for that. There’s not a lot of infrastructure for handling the kinds of things we’re doing.

One way I look at the platform, it’s like high-frequency trading infrastructure that’s easy to build things on top of. It’s not exactly like high-frequency trading, but they’re cousins of a kind. When you apply it to games, you can see people fighting and chatting and doing all these other things. When you deal with marketing, you have hundreds of channels of impressions and clicks and fraud and installs and these other things coming in.

What happens very quickly is you’re deploying more and more money, and you need to be able to put the brakes or the gas on at any moment. Things can go wild. But once we build that software set we can use it in our games. It’s the proper way to run a service, in my opinion. We can do a lot of things a lot better. But to run a service—if we have latency in Game of War iterations that’s obviously a problem. We need to move as fast as possible. That means our tech stack needs to move as fast as possible.

The platform appeared out of needing that for our own applications. We needed something where we could build marketing applications and operations applications and gaming applications. We needed an easy way to interface with that technology.

VB: Can you access this technology for the marketing components, or is it just the community layer?
Leydon: You’re not getting an app. You’re getting a networking layer. You would have to build the marketing app.

VB: I find it interesting that you mentioned the game wasn’t viral. This is the biggest app out there right now, or one of the biggest. Can you talk about how you did it without going viral?
Leydon: We launched in 2013. We were already a large marketer for the time. We started in 2008. As we grew we were working with Tapjoy and the like. I was one of the really early guys. I was running QA personally. I didn’t have any data. Didn’t hardly know what I was doing. But I was doing that for a couple of years. It turned out that it was so cheap at the time that we still made money on everything, despite having no clue what we were doing. This was pre-Facebook.

Game of War came out around the same time Facebook opened up. You had these huge wells of traffic that came online all of a sudden in 2012 and 2013 – Facebook, YouTube, Google started doing more. Everybody started doing more right around that time. There was this moment where it was all beta. Nobody was using this stuff. It was very new. There weren’t even app installs at the time. We had a product that people liked, though, and it was something we could market. The channels appeared around the same time, so there was a lot of serendipity there.

The situation we had in 2013 is gone. If you look at the prices between 2013 and now, they’re radically different.

Above: Mobile Strike is Machine Zone’s latest game.

Image Credit: Epic War

VB: That brings us to the next point, which is, is that why you’re pissed off?
Leydon: No, no. We’re doing fine. The ReCode interview—I just thought people were going think I was some ranting jerk. Normally when I rant it’s usually in response, but this time, the anger is so much bigger than I even realized.

We market our games. We do a good job. But it’s a lot of work. It’s a tremendous amount of work. And it’s a lot of work for no good reason, sometimes. Sometimes it’s because of fraud. Sometimes people are shaving money. Sometimes people are playing games. It’s a lot of work.

In the beginning you go to Facebook, because it’s clean. They have a lot of data, a lot of engineering support. But as you grow, Facebook will only grow with you so much. They have two million advertisers. So then you go to YouTube or Google, the next guys. Then you run out of room to grow there. Now you’re going to the 298 other guys, and you’re getting down into affiliates and so forth. It becomes really nasty.

That’s okay, because everything has its value. You can buy any kind of traffic, as long as you’re paying the right price for it. Except for fraud. Can’t pay for fraud. But the anger of dealing with this is so immense—I thought I was going to just leave the stage and that was it. I got hundreds of emails. I still get probably 50 a day, even from people who work at the kinds of places I talked about. They agree with me. “We’re tired of this too.” Some of the biggest buyers in the world reached out.

There’s a panic, I would say. No one’s talking about it because it’s not the right people talking about it. It’s usually a marketing manager or someone like that. Who wants to go on stage and say, “All my partners suck”? They don’t want to say that because they have to go back and deal with them. But I’m the CEO and I’m writing big checks for now, so I can say it. They’re not gonna say, “We don’t want Machine Zone’s money anymore.” People know I’m telling the truth.

My takeaway from the experience, which I’m still going through, is that the networks and the ad tech guys need to be careful. They’re not stable. They’re very unstable. They don’t know how unstable they are. It’s kind of reflected in their valuations and their multiples. The market understands.

One thing that was glossed over in that interview was the concept of a 1X multiple. That’s just ravaging the advertising industry. If you have a 1X multiple on your business, you are a straight up sales organization. You can’t help it. It’s the only thing you can’t help. You’re not an infrastructure company. You can’t be an infrastructure company. Which takes away the incentive to do any infrastructure.

One of the fun things I thought about afterward was how to look at what your experience will be like working with an ad network. I have a quick and dirty ratio for you to think about. What is their sales to engineering ratio? Ask the network. “How many salesmen do you have and how many engineers do you have?” Facebook has about 20 salespeople and a thousand engineers. A lot of these smaller networks have the split going the other way – 20 salespeople and five engineers.

That blend of employees is going to affect your experience when you work with them. They won’t make new features. They’ll try to push monetization harder and harder. It’s something we all deal with. It’s a shortcut for a buyer when they approach a new partner.

VB: What drives them to do that? What is about the multiple? WPP is one of the largest agencies out there. Why can’t it invest in–
Leydon: Yeah, they have 30,000 employees collectively. WPP, I can’t speak for them, but agencies in general—engineers don’t work for agencies. They’re competing with Facebook and Google and Machine Zone where we’re doing really cool stuff. They don’t go to work for ad agencies. It’s just not that interesting. Especially when your co-workers are 90 percent salespeople.

The best thing about having higher multiples is you can invest in infrastructure. You want to keep your customers around for a long time. A lot of the networks churn and burn because they constantly have to justify themselves. That’s the hardest thing to deal with. Their investors need them to sell more advertising, quarter after quarter. There’s no time to invest in infrastructure because there’s no money in it.

The typical life cycle of an ad network—a couple of engineers get together and they have a good idea, something nobody’s ever seen before. They work on it for about six months. Get some money in it. They slowly stop running on engineering and start hiring salespeople. They raise a B round and then it’s over. At that point you have to grow as fast as possible. You need to sell $ 100 million, $ 200 million. And where it ends up, fraud is always easier than sales.

This is where you get the perverse behavior. You start seeing a lot of panic around growth because they’ve raised too much money, gotten bigger than they should be, and they stop thinking. The salespeople start pushing harder. That creates a culture at the network that we see a lot. Machine Zone has to be the cops. Stop, stop. Try this one, try that one. We’re doing it on a massive scale. The financial incentives for them to do the right thing just aren’t there.

Things need to change, and unfortunately the only people who can change it are the people spending the money. You have the big stick. You think, “How can they keep doing that?” Because they do it to everybody else! 99 percent of the people who pay for it don’t know what’s happening. They pay through licensing. An agency wants to push as much money around as it can, so they’re all just paying for it with no idea what’s going on, until every once in a while someone who has a clue about what’s happening comes around and says, “Stop!”

Above: Kate Upton in Game of War: Fire Age commercial.

Image Credit: Machine Zone

VB: So you’re okay with not going along with them because you know your competitors are getting duped. [laughter]
Leydon: No, it’s too much work! There’s no way for us to know. It’s too much work.

VB: You’ve heard from a lot of people. I’m sure some of them are from the bigger game companies who want to use this thing as well. Can you talk about why there isn’t a concerted effort to wipe some of these networks out?
Leydon: The networks want the buyers to compete with each other. It’s a divide and conquer strategy. The whole thing is set up in such a way that we’re all supposed to hate each other and beat each other up all the time. It’s weird, when you think about it. Why is this happening? But it is happening. It’s just the way it is right now.

VB: A lot of people in the room here are thinking about ad-blocking. What do you see happening with it this year?
Leydon: The way that we look at buying, we care a lot about price competition. When we work with every single network, from good to bad, the worst of the worst to the best—we work with absolutely everybody because it’s the right thing to do as an investor. “Buyer” is really the wrong term. We’re a media investor. Nobody’s buying media to just buy it. It’s an investment in your business, and you want a price break.

We don’t scale up on any one program, so I’m not too worried about having to work with everybody. There are certainly users who will opt to use ad blockers, and the potential for networks filtering out other networks. We don’t know. It’s a new thing. But from my perspective, as long as you work with as many partners as possible you’ll be the least affected by those changes.

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