The verdict arrives right after the mini grilled cheese. Data scientist Tony He is pressed against the wall of a crowded bar in New York City's West Village, one hand reaching for the hipster hors d'oeuvres, the other tirelessly refreshing his iPhone.
It's a sweat-drenched evening in late July. Most of He's colleagues are three or four drinks deep, shouting to be heard over the din at this party celebrating their latest launch. Dots, a three-year-old smartphone-game studio, has just published Dots & Co., its long-awaited sequel to globally beloved Two Dots. More than a million people will download the new game within the next few hours, thanks in part to a prime spot in Apple's U.S. app store. "Are you a wizard? Because that was magical!" one employee crows, quoting the game she's spent most of the year working on.
But He can't unplug. Seven thousand miles away, 1.4 billion Chinese are starting their day. Hundreds of millions are grabbing smartphones and checking local app stores for the newest mobile games. He is checking Apple's Chinese store along with them. If the new game scores prominent real estate there, too, Dots might finally break into China's lucrative, maddening, nigh-impossible market.
"Ever since we started," says Paul Murphy, co-founder and CEO of Dots, "I've had this obsession about China."
For good reason: Next year, Chinese consumers will spend $8.3 billion--almost $23 million every day--on mobile games, according to Asian digital-games consultancy Niko Partners. Winning a morsel of that would catapult any company into the stratosphere. But real China success has consistently eluded even giant U.S. tech companies, and chasing it can be an expensive distraction.
Murphy has spent much of Dots' life pursuing the promise of China. While his company has launched three internationally popular, well-reviewed games--hiring 50 people and notching $15 million in revenue in 2015, which it's tracking to more than double this year--its CEO has methodically and persistently knocked on any door that could get him into the world's biggest digital-gaming market. "If I want to build the next great game studio," he decreed in March, "I have to be in China." Nothing Dots has done has worked there yet. But Murphy keeps trying.
It's a costly, time-consuming goal: Murphy has pulled engineers off the company's main products to craft Chinese versions of Dots games, and courted three local partners, with middling success. This summer, as his New York City-based employees raced to get Dots & Co. ready for its launch, Murphy was forced into many hard decisions about how much of their attention to deflect to China. On this sweltering night, with Dots staffers carousing all around him, he will soon find out: Has his latest gamble on the world's second-largest economy paid off?
Tony He swipes his iPhone again. And again.
"If some guy tells you he has to get into China, and mentions the market potential of the 1.4 billion people here, you just want to punch him in the face," says Kevin Chen, an American entrepreneur based in Shanghai and co-founder of Italki, an online language-education company. "Have you noticed the bodies of startups littered all over the field?"
Murphy is determined to march right past them. A trim, self-effacing presence who tends to dress in grayscale, he caught the international bug early. He grew up listening to the travelogues told by his father, whose work for French pharmaceutical company Sanofi took him far from Murphy's hometown of Doylestown, Pennsylvania.
"He would come back and tell us stories about how different things were in Europe and Asia," Murphy says. "As soon as I was able to leave, I did." Study-abroad programs in Europe led to business school in Madrid, a wedding in Ireland, and a stint working in India for Microsoft.
Murphy first journeyed to Shanghai and Beijing during business school. He was immediately struck by China's vast potential and impressive infrastructure (skyscrapers, bullet trains, high-tech subways)--and by the hurdles he faced as a white American who's "embarrassing" at foreign languages.
"I can't even show a taxi driver something in English on my phone and tell him where to go," he recalls realizing. "There are very few places in the world you can go now and feel like you're lost."
Murphy has since made six more trips to China, some while working on Microsoft Office's China strategy. Now 37, he left the software giant in 2011 for digital-photo startup Aviary, which later sold to Adobe, and then landed at Betaworks, a tech-focused venture firm and incubator in New York City.
There he ran into another international traveler, one initially more interested in Asia's modern art than its business potential. Specifically, Patrick Moberg was drawn to the polka-dotted canvases of Yayoi Kusama, a Japanese minimalist who "really played with beauty and fun," says Moberg, the creator of the first Dots game.
Moberg--slender and pale like Murphy, but tall and kinetic where his co-founder is slight and deliberate--is 30. His résumé includes an early stint at video startup Vimeo; publishing a whimsical, illustrated advice book (Lessons From a Dog); and a measure of viral fame for his art (in 2007, he sketched the "girl of my dreams" he'd glimpsed on the subway, built a website that found her, and landed on Good Morning America).
In early 2012, Moberg returned from vacationing in Japan to join Betaworks, where Murphy was a partner. As the two men worked together, they grew excited about the idea of making a smartphone game that was art-focused, and far less flashy than Candy Crush and its ilk.
"Patrick and I didn't like some of the games that were out there," says Murphy, praising Candy Crush but saying he wanted to make something different for "zoners," those who want to relax while tapping at their phones. "A lot of them felt like they took inspiration from casinos and kids' games, with a lot of bling and loud sound effects."
Murphy and Moberg also grasped that they'd be compatible co-founders. Murphy had the business background, with an amateur appreciation for art; Moberg, now Dots' chief creative officer, says his focus is on "connecting engineering and design."
"I knew my blind spots were the business side of things and a more structured approach," Moberg says between gulps of iced coffee. "But we have a mutual trust. Paul's not pushing us to add shitty things to the game to make money."
Three years after forming Dots, the co-founders have built a successful version of what they'd envisioned: a high-concept, design-focused, minimalist boutique studio with art-world aspirations. It's landed $10 million in venture capital and, Murphy claims, 100 million worldwide downloads. Two-thirds of its players are women, despite the gaming world's misogynist rep.
All of Dots' smartphone games start from a deceptively simple premise: There are colored dots on a square board. Find two of the same color next to or atop each other, and draw a line between them to make both disappear. Better yet, draw a square connecting, say, four blue dots, and make all of the blues on the game board disappear.
It quickly gets more complicated, of course; game-board obstructions include ice, fire, flowers, ladybugs, and slime. They're how Dots' free games make most of their money, by selling, through app stores, small cheats and shortcuts: Run out of moves right before you were about to win a level? Spend 99 cents to get five more! Stuck on a hard level? Infinite lives for the next hour go for $1.99. (Dots also generates some revenue from ads to players.)
The original game, Dots, is simple, graphic, and nearly free of any words that require translation. It's easy to play, soothing, and popular. So it seemed simple to try publishing it in another country, one with a thriving tech ecosystem and mobile-gaming culture, one where more than 600 million people already own smartphones and just have to click Download to become an app maker's next customers. Really, could anything keep this company from succeeding in China?
China is the "largest market in virtually every sector. It's growing at rates that people don't quite comprehend, and it has a vast middle class. The twinkly bright lights that draw the entrepreneurs and investors there are strong and seductive," says David Liu, the Chinese American co-founder of the wedding website the Knot and chairman of its parent, XO Group.
There are just a few downsides. "The government basically has an ax hanging over everyone's head--and when it wants to, it can chop your head off," says Liu, who in 2010 led a short-lived expansion of his company into China. "Americans do not have a level playing field."
For example, government regulations restrict foreigners from publishing anything online from within China, requiring special licensing partnerships with local businesses just to set up a website. Well-connected local partners are a must. But the small daily hurdles may be even worse for Western tech companies--the government's Great Firewall systematically blocks any Web services it dislikes, including Google, Facebook, and Twitter.
That's bad for those tech giants, of course, but it's also a massive problem for any company that relies on them. Think of how much your business uses Gmail or Google Docs. Or Facebook, which Dots builds into its games. (One-third of Two Dots players connect through Facebook--and the company finds they're more engaged than other users.) None work in China, unless you want to use illegal and unreliable technology to skirt the government firewall.
"Google Maps is a big part of our operation," says Ryan Petersen, founder and CEO of freight-forwarding firm Flexport. "It doesn't load in China." (Flexport is still opening an office there.)
Yet by blocking outside tech portals, the government has encouraged a thriving domestic internet ecosystem that effectively replaces most of the infrastructure that Western tech startups are built on: Instead of Facebook and its messaging, there's WeChat. Instead of Google and its maps, Baidu.
Another consequence of this homegrown ecosystem means that, rather than getting into one app store run by Apple and one by Google, Dots had to get its first game into many of China's Android-based app stores--there are hundreds of them--for any hope of success in a country where the vast majority of smartphone users have an Android-based phone. And each store requires its own tweaks to the game.
Murphy was eyeing those app stores in early 2014, when he saw what seemed to be an obvious opportunity: Alibaba, Jack Ma's giant e-commerce site, was trying to get into mobile gaming.
"We were really small at the time, but figured: They're setting up this new division. Maybe they'll work with us," Murphy recalls. A cold email won an invitation to Beijing, and Murphy returned home with a deal: Alibaba would tell his engineers what tweaks to make, and then publish a Chinese version, keeping full control over marketing and promotion.
It seemed ideal. Then the engineers opened the technical specs. "All of the documentation was in Chinese," Murphy says. "We've got one engineer who speaks Chinese--but it's been a while, and this is tech jargon. We realized, 'Oh, crap. This is going to be a lot of work.' "
Meanwhile, Alibaba soon had other priorities: It was preparing for its record-breaking IPO, one that would end up raising $25 billion. Murphy says Alibaba started losing its newfound interest in mobile games within a few months, and put less marketing juice behind the local version of Dots. (An Alibaba spokesman declined to comment.)
It might not have mattered anyway. Technically, the Dots game was now easier to sell to more Chinese customers, but Dots and Alibaba hadn't made any big creative tweaks to it. That proved unattractive to Chinese gamers, who generally tend to prefer more explanation up front than Dots provides, a less-steep learning curve, and more opportunities to spend tiny amounts of money to move through levels quickly.
Murphy didn't fully realize the mistake until July 2014, weeks after releasing Dots in China, when he attended ChinaJoy, an annual gathering that draws more than 250,000, who brave Shanghai's smog-filled, 100-degree summers to celebrate all things gaming.
Just buying a ticket was daunting: Murphy navigated long lines only to learn he had to pay with a Chinese debit card or cash, "so I had to leave and go to two different banks to take out enough money." Finally inside, he jockeyed with hundreds of thousands of people pouring through rooms that were decorated like 3-D landscapes of their favorite games. They navigated past hostesses dressed in often-scanty costumes, to watch live-action tournaments and cheer as ferociously as football fans.
"If Brad Pitt walked down the street here, he'd get the same reaction I saw to the game characters--and to the people playing the games," says Murphy. It made him realize "what a successful game should look like in China: It needs to be built on its own."
This was just after Two Dots had launched everywhere else, and the new game had become enough of an international hit that Dots was fielding "very aggressive" offers from Chinese publishers. While in Shanghai, Murphy hoped to land one in particular: Tencent, which is among the largest tech conglomerates in China--and the world. Its holdings include WeChat, that omnipresent local version of Facebook, Google, and PayPal (and other services). Tencent also controls half of the Chinese mobile-games market, according to Niko Partners.
"Tencent lives and breathes gaming," explains Murphy. He left ChinaJoy with a handshake deal, elated at the achievement Dots had unlocked. "We went out for drinks with Tencent to celebrate, and the other people invited were from King and Zynga," he says, naming the makers of Candy Crush and FarmVille. "We were on our way to making it."
A few months later, Dots got an even more promising sign: venture backing from its new publishing partner. As Murphy and Moberg were preparing to spin out of Betaworks and raise their first venture round, they made a pilgrimage to Tencent's Shenzhen headquarters. They returned with the conglomerate's agreement to co-lead a $10 million round with Greycroft Partners. (Tencent declined repeated interview requests; a company spokeswoman emailed a statement saying, "Our investment in Dots enables us to understand more about the international games market," and that it continues to collaborate with Dots.)
Dots finally had the cash and the expertise to justify committing to a separate China product. But Murphy still didn't realize what that would entail. Initially, he assigned one engineer to handle "the gruesome tech work" of navigating China's complex tech ecosystems. "It took a lot of late nights," Murphy acknowledges.
It also wasn't enough. That marathon didn't address any creative changes: Graphics had to be tweaked, energy tokens added, characters redesigned. "We massively underestimated the amount of work we needed," Murphy says. "It took five people, for a year."
That turned out to be way too much time--because, as Murphy came to painfully learn, "the last thing the Chinese market wants is a product 12 months after it was launched in the West."
The Chinese version of Two Dots wasn't completely ignored, but it was hardly worth the endless hacking and redesigning. The project tied up several Dots employees for a third of the company's very young life. It may have delayed the company's overall product development: Dots took a full two years to release its sequel to Two Dots. The result, according to Jelle Kooistra, an analyst with the Amsterdam-based digital-games consultancy Newzoo: Dots has not had "a significant performance in China. Its revenue has been minimal."
In early 2016, as Dots started to plan its summer release of Dots & Co., Murphy still couldn't give up on China. His company had finally settled on its third game idea, one that he hoped would be a more immediate fit for the Chinese market. Dots & Co.'s design would address some of the criticisms that Tencent and many Chinese players had about the first two games: Early levels would be easier. There would be more explanations for novices. There would be energy-boosting tokens and cute, animated characters, both of which are widely used in Chinese games. And Moberg had gotten some heartening news: He'd traveled to a Tencent gaming summit in San Francisco and found it "a little comforting" to hear that no other U.S. competitor had figured out a path into China either.
The rest of Dots' team was less enthusiastic about another run at China. "The second this thing starts, it starts sucking time and attention from the main product," Dots & Co. game director Margaret Robertson predicted in May. Another colleague put it to Murphy more bluntly: "If revenue's a lost cause, why are we even considering it?"
So, as deadlines bore down, Murphy scaled back, again. This time, he decided that localization wasn't worth pulling an engineer off the main Dots & Co. work. Dots would release the same game at the same time around the world, Facebook and all. In China, the game would be published only for iPhone customers, as a sort of trial balloon. If it did well in the Chinese Apple Store, Murphy could justify seeking a partner for the needed Android tweaks.
"We won't crack China overnight, but we're certainly never going to crack it if we don't try and we don't learn along the way," he said in May. "I don't feel bad about the investments we've made so far. If we give up, we're kind of acknowledging that we'll never win there."
The incremental approach was probably the right call. Dots' main market isn't China, after all. But that decision has had consequences.
"To be successful in China, you really have to be here," says Alvin Wang Graylin, a Chinese entrepreneur who's lived in the U.S. and now runs the VR unit of Taiwanese phone maker HTC. "There will be problems for international companies that want to come in but don't want to spend the time to create local versions of their products" or build local relationships and networks. "If you care about this market, you will spend the time to localize."
At the July launch party for Dots & Co., Tony He spends a solid 15 minutes loading and reloading his Chinese Apple Store. Finally, the app updates--and He's face falls. The new game is on the store's recommended list, but it didn't get a top featured spot. It will lose out on a ton of downloads. He flicks through the rival games that got more prominent play, and sees the international ones tweaked their graphics and language to be more China-specific. "They're all localized," he sighs.
Smartphone in hand, He heads to his boss's booth, where Murphy shrugs: This stings, but it's expected. A breakup text from a hookup you weren't really all that into, anyway. Really. You weren't.
"It's really hard to do it in China," Murphy tells me a few days later. "You can build a fantastic business without being successful there."
The new game wins warm write-ups in the tech press, more than one million downloads within its first 24 hours, and, says Murphy, hundreds of thousands of dollars in revenue in the first week. But it wasn't quite the chart-topper Two Dots had been: Pokémon Go dropped out of nowhere two weeks before Dots & Co.'s release and captured the public's phones.
Then there were more portents from China: In August, Uber, the insanely overfunded ride-sharing startup that had devoted two years to winning over Chinese regulators, sold its local business to rival Didi Chuxing. It was hard not to think: If Travis Kalanick, with his lobbyist army and billions of dollars, couldn't make it there, who could?
"Maybe you need to separate the financial potential of a market like China from the unique business challenges of winning that market," Murphy concedes just after the Uber news hits. "You can sink a lot of money into a market that's just going a different direction." Still, he insists, "it's worth trying."
Murphy has found a third way into China: Tony He, who grew up in Nanjing, has a buddy who co-founded a Beijing-based gaming studio called SoulGame. It will take on that "gruesome" tech work of getting Dots & Co. ready for local app stores, for a share in Dots' not-very-substantial local revenue. The deal was finalized in September, with an aim to publish Dots & Co. in China by early 2017. The payoff is likely to be negligible, and Murphy admits the move is more stopgap than solution.
"Having worked for three years in China for Chinese audiences, we realize you really need to understand and live in the market" to succeed there, Murphy says. "We need our own studio in China. But we're not ready for that yet."
Given how far off that possibility is for Dots--and how reliably impossible the market has been for virtually every U.S. tech company--why even bother paying attention to China now?
"Uber is a cautionary tale of sorts. China's a huge market--don't underestimate how different it is," Murphy says, keeping a clinical, almost academic distance. Turns out that's how he masks a fervent faith. "You still have to be in China," he says once more. "You have to be thinking about China. You'd be crazy to not be doing that."