Hitting the jackpot: Clawee is the next stage in gaming

In the heart of the drab Petach Tikva industrial zone stands a huge warehouse filled with constantly humming motors. The surreal scene inside resembles a futuristic horror movie: dozens of claw machines, just like those that were once a popular attraction in shopping malls, arcades, and fairs, operate 24 hours a day, and try to grab toys. Yet not a single person is actually in the hangar itself. Have the machines developed independent intelligence and started running by themselves? Don't get excited just yet – the answer is no. People thousands of miles away from Petach Tikva are operating them and controlling the machines’ pincers via the Clawee game app.

Welcome to the next crazy stage in the evolution of gaming. Once upon a time, children went to the backyard or park to play basketball, or to a shopping mall to try their luck at the claw machines. Then they switched to virtual basketball, and tried operating claw machine games on their phones or PlayStations. Now, perhaps because they miss the physical dimension, and have gone back to playing something real on a physical machine – but they control it remotely without leaving their homes. Clawee users simply tap the touch screen, and the app operates a claw machine for them in an entirely different country. The machine grabs a toy for them, which is later delivered to their home via international mail. The classic playing field experience is now beckoning to screen-addicted children of the coronavirus (Covid-19) era.

This virtual playground was created by Gigantic’s two co-founders: CEO Ron Brightman (48) and Oded Frommer (39). "We call it 'connected reality,'" Brightman explains. "It's a game with real machines operating remotely in real time. Using digital technology, you can play on an actual machine, and after a while, you also get the real prize delivered to your home. It closes the gap between reality and virtual reality."

What attracts people to a real game that can be played digitally?

"The game experience is more captivating than with a virtual game. People quickly realize that when they click on their phones, they're operating a machine somewhere in the world. They see their actions on a live broadcast, and that gives them the feeling of an authentic game that they believe in. It's the closest you can get to the experience of playing at a real arcade."

But people also go to a real arcade for the social experience.

"With Clawee, the players can also view each other playing in real time through the app, and that adds a certain social element to the game. People our age may find it hard to grasp, but young people, particularly Gen-Z, really like watching others play. My young son plays a lot, but he spends more time watching others play on YouTube. We estimate that a million people are watching each other play on claw machines through the app."

Is there any gaming element here? Most claw machines are like slot machines - that's not gaming. 

"Our machines are based solely on skill, not luck," Frommer emphasizes. "They aren’t like the machines in shopping malls, where the machine owners can determine the success rate. With Clawee, every round is completely identical, and the players' abilities are the sole factor that determine success. It's really critical that the machines’ outcomes are based on ability; otherwise, they fall under the slot machine category, and are subject to much stricter regulation."

400 machines within four years

Brightman and Frommer first met 13 years ago, when they started going out with a pair of sisters whom they later married. "About six months after I met him, I said to him, ‘How about developing something together?’" Brightman recalls. They both worked in marketing: Brightman was VP Sales & Marketing at eToro, and Frommer was an independent marketer, so they shared common ground. "We founded an online marketing company called Performance Revenues, and at a certain stage, we started focusing on marketing mobile apps," Brightman says. "That's how we got to know about endless apps from all around the world, including types you don't see in Israel. After a while, we became enticed by the idea to move over to the other side and become app developers, because it's more fun than just providing services."

It’s also a much bigger headache. 

"Right, and that's what worried us – we saw that most of the apps we were serving were failing. The successful ones were made by big companies with lots of money, know-how, and employees. We thought, 'what chance do we have to be just as competitive in this sector?' The games sector has become very complex. Behind even the simplest game are people who know how to analyze data, manage the gaming economy, etc."

They realized that they had to find a competitive advantage in order to stand out in the saturated gaming market. They encountered a strong trend in East Asia, where players would use claw machines through the internet to gain prizes. They became entranced. The next stage was simply to wait.

"One of the things I learned from other entrepreneurs is when you have a good idea, don't do it right away," Brightman explains. "You put it aside and see if it still excites you the same way after a month. So we put the idea aside for a month, and it still seemed to us like the best thing around. We felt the same way after two months, and after six months as well. So we decided to go for it."

Brightman and Frommer still had a big problem ahead: they had no idea how to implement their idea. "We didn't know how to develop an app, how to control a claw machine remotely, how to broadcast the video live, or how to send prizes all over the world via mail," Brightman reminisces. "The only thing we knew how to do was market apps. Nevertheless, we simply decided to go ahead with it. We invested a lot of our own money and bought a secondhand claw machine."

"Calling it secondhand is too flattering," Frommer interjects, and Brightman admits, "It was actually closer to seventh-hand."

How much did it cost you?

"The machine was supposed to cost NIS 4,000 ($1,250), but since we had no idea how much these things cost, they charged us NIS 7,000 ($21,800) for it," says Frommer. "And then we called someone to hook it up to the internet."

Who operated it? You didn't possess the know-how yet.

"We published an (non-fungible token) NFT, where nine companies in Ukraine developed a basic app for controlling the machine. Then, when we saw that the machine was working well, we purchased three more and launched the app in Israel."

Was it an immediate success?

"The truth is it was. We woke up the next morning, and discovered that people were playing on our machines, and even paying for it. When large companies launch a new game, they don't expect the players to pay for it right away; they measure other parameters – usually player retention. But with Clawee, people paid for our service immediately. So we said to ourselves, 'okay, maybe we’ve got something special here.'"

The next stage was raising capital to move the company forward. "It was easy for us to raise money, and faster than they told us it would take," admits Brightman. "People probably realized that there was something of interest here."

Gigantic raised $2 million during its first financing round, mainly from angel investors, among them former Playtika Senior Vice President Elad Kushnir, who currently sits on Gigantic's board of directors. During the company's second financing round in December 2020, in the middle of the coronavirus crisis, it raised $7 million from Gigi Levy-Weiss' NFX fund and VGames investment fund managing partner Eitan Reisel, among others.

Gigantic, which was founded in 2018, and started out with four claw machines, has since grown to 400 machines. The company employs 100 people, among them software development personnel in Israel and Ukraine, as well as an operations and maintenance team to monitor the machines 24/7. "The most difficult part of the operations is delivering the prizes," says Frommer. "We have 500 different prizes at any given time, and we change most of them every month. We have partnerships with Nintendo, for example. We produce special machines with their own prizes, like Mario or Pokemon dolls. We buy a lot of dolls from them, and in exchange, they let us use their brand. This gives us a lot of power, because players love seeing brands they know."

How many prizes do you deliver a month?

"Over 220,000 prizes a month leave our warehouses in the United States and China."

If I grab a doll in a machine in Petach Tikva, then you send me an identical doll - not from the slot machine - but from a warehouse in China?

"Right, but that doesn't detract from the actual game experience. It's like being attracted by a product in a display window and then being given an identical item in the store, except that here it comes from a warehouse."

Delivering 220,000 packages by mail generates a lot of environmental pollution.

"It's a difficult problem, so we also let players win virtual products, such as online coloring books and making donations, like donating meals to a dog shelter. The bottom line is that it's unavoidable – people like getting their products delivered to their homes, especially during the pandemic."

From NFT to the Metaverse

During its four years in existence, Clawee has achieved 16 million downloads, and 1.5 million people play it each month. This success has whetted the co-founders’ appetites to expand to additional games. "We see that there are a lot of people who like to play on machines, but don't cash in their prizes. Instead, they convert them into tokens that will allow them to continue playing in more rounds. In other words, they like to play, but not necessarily in order to win prizes. This gave us the confidence to say that we're ready for the next stage."

And what's the next stage?

"An app for a game between two players. This is a huge segment in the industry – machines that simulate games we are familiar with from the real world, like basketball, for example. We’ve managed to produce a launcher that fires a ball at the basket, and we're building a game like that.”

How does a basketball game supposed work in connected reality?

"For example, you can have two players who hold a basketball shooting competition. Each of them gets 10 shots, and the winner is the one who scores the most baskets. This kind of game is completely different from claw machines, and much more competitive. This is a very diverse area – there’s basketball, bowling, football, and golf."

The world is full of digital games like that between players or groups of players.

"Yes, all of these things exist, but they’re virtual. We make it possible to play them with real machines."

Gigantic is also working on expanding Clawee's reach to the field of blockchain. "The hottest thing in the world right now is NFT," says Brightman. “They’re a kind of official ownership certificate for a virtual item, like a photograph, video clip, or computer game images saved in a blockchain network. "People from this field called us and said, 'instead of putting in a Harry Potter doll, put in an NFT.' So we're considering doing that now."

NFT is a totally virtual product. Isn't that the antithesis of what you're doing?

"It's not designed to replace what we're doing right now; we want to expand our target audience. As of now, it’s a niche within a niche, but something in it has really caught on. Five years ago, people bought 10 Ethereum tokens, and all of a sudden, instead of $200, they're worth hundreds of thousands of dollars. So they're looking for something to do with all of this money, and the NFT sector has suddenly given them that option."

Another sector that is now generating a revolution in gaming is the Metaverse vision – a 3D virtual world that people are transported to every morning through virtual reality glasses in order to work, play, buy, and sell, and even live. "We're already there," Brightman says with a confident smile. "There's still a long way to go, but we're the closest, because you're actually playing in reality. You can look at a little phone screen to play Clawee now, but the Metaverse will enable you to do the same thing differently – instead of just holding a device and scrolling down, you could use all of your body movements."

How does it work? 

"Think about basketball, for example – when you put on virtual reality glasses, it’s like really being on a basketball court. You’re holding a virtual ball in your hand, but you make a real shooting motion, and the ball flies toward the basket."

So in your connected reality version, I’d control a robot that holds the ball, and I’d shoot at the basket with its help?

"Right. We already have control of the reality part. All we need now is enough people to really enter the Metaverse. The amount of money invested in the Metaverse is still small, so we can't make that our main focus. Once it attracts more attention, however, we'd be the best address. It’ll be a real hit. Everyone will want to be on the basketball court, the football field, or the golf course. Especially golf – all of those huge, hilly courses are far away and too expensive. It's much easier to just put VR glasses on."

Isn't it simpler to go to a court and shoot hoops?

"Maybe, but there are advantages here that you can't get on a real court. For example, connected reality enables a player to enhance their physical abilities. Think about it – I'd probably trust a robot arm more than my real arms, and I'd have much better coordination that way."

As parents of young children, aren't you worried that these developments will do away with physical experiences in the real world? Instead of leaving the house to play basketball with the neighbors, won't kids just stay in their rooms?

"No, because we believe that games on digital platforms are just a supplement for games in the real world, not a substitute for them. The virtual FIFA didn't kill off real soccer, and neither will we."