Trip Hawkins has announced he will step down as CEO of Digital Chocolate, the social and mobile games company he founded eight years ago. The news comes along with still unconfirmed reports that the company laid off 180 employees and closed offices in Mexicali, St. Petersburg, Armenia, and Bothell, Washington. 

“For its next stage of growth, Digital Chocolate is narrowing its focus and it made sense to get more streamlined,” Hawkins wrote in a blog post confirming his departure. Hawkins said he will continue to work with the company in a consulting and advisory capacity.

Founded in 2003, when Facebook and iOS games were all but inconceivable to most people, Digital Chocolate helped build up the commercial viability of mobile and social at a time when most in games were debating whether Xbox 360 and PlayStation 3 would come out at the same time.

Hawkins has a legacy of building businesses during transformative periods–from an early tenure at Apple, to his co-founding Electronic Arts, to his predicting the multimedia entertainment box in the living room with the prophetic but doomed 3DO. Digital Chocolate helped prove there was real money to be made in mobile and social, and, likewise, their struggles may point out another serious challenge for the industry: making money from a large user base. 

The company’s most successful current game, Galaxy Life, has 1.7 million monthly users, yet the company has struggled to fund itself from money from the money its games generate, turning to venture capital instead. On the heels of Facebook’s IPO stumble, and the announcement of Rovio’s yearly revenue of $106 million for 2011, it seems that the earning potential for mobile and social games is an order of magnitude smaller than the raw volume of players its capable of attracting. 

If the bubble isn’t bursting, it certainly seems to be falling back to Earth.

[via TechCrunch] [img]