If engagement in games drives monetisation, what drives engagement? Who has the Truth?
Following on from Part 1, the second part of the day was all about Analytics, Metrics and Monetisation. Once again, the themes that linked everything were around the value of information and the need for creativity. The second section rambles a bit more, adds to part 1, and, eventually comes to a conclusion.
Business Models
- Free to Play games are making everyone uneasy. As I said in Part 1, there are real moral, economic and creativity issues that just have not been addressed. If you just follow the data you run a risk of building the Ford Edsel
- Subscription games really only work for young age range and very deep engagement models (Moshi Monsters v Eve)
- Pay what you want – like the Humble Indie Bundle (hurrah!)
- Pay-mium works for a few types of game
- Episodic content – which so few have found a way to use
- Paid is so hard to deliver, because it brings a huge cost of customer acquisition and discovery
All of the paid and part paid models are at huge risk from plagiarism and piracy. If you make a good one, you have only a few weeks before clones (or outright stolen copies) are flooded onto the free market place, killing your market. Despite the issues, these problems will be solved because of the huge influx of new talent and the very low barriers to entry for mobile entertainment and for desktop gaming. That talent will, by a winning combo of Darwinism and statistical shuffling eventually come up with some thing really good. The question is: “will it be you?”.
The Time Is Now
This is about to be the best time ever to be a games developer, or a games player.
- The number of gamers is now immense and growing. The barriers to becoming a gamer have fallen from “$2000 and a Phd” to “$20 and a thumb”.
- The market is now around 30% of the human race – around 2bn smartphones can play mobile games (up from around 1 million home computers when the gaming industry started to grow)
- The number of hours that people can play games is up from ‘a few hours in the evening’ to ‘anytime’
- The barriers to getting started a developer have fallen from a peak of “20 people + $3m + 3 years + a studio + $2m of hardware” to just “2 guys in bedrooms + 3 months + a couple of laptops”.
- The amount of money flowing in the games ecosystem is huge and rising rapidly.
Despite the cult of analytics, despite the froth of sequels, despite the lack of game innovation that is apparent on first view, despite the cloning and piracy, it is still the best time to move into the games space. Because underneath, in the smaller studios, in the “skunk works”, in the student competitions, in all of those there is real innovation and creativity. Wonderful, novel, beautiful entertainment content bubbling up to allow us all to find and enjoy new game experiences.
To steal a phrase from Noah Falstein – this is the Cambrian Explosion of the gaming era. I quite like this analogy, as it is likely that improved ‘vision’ and information handling probably drove both things.
Discovery – how can I find things I want?
So, with 2bn potential users, playing for hours, anywhere, why do so few games do well? Simple answer: people are really lazy, and rarely if ever look for games beyond the top 10 charts or a word of mouth recommendation from a friend. The problem of discovery is really serious.
Fortunately there is even innovation in discovery, for instance via “gamer channels” on YouTube and the deep integration of YouTube API with games technology. That enables gamers who love your game to share it instantly and in a friction free way from a mobile device to YouTube, from where other people can rate it, rank it, share it and promote it.
The underlying power of the huge Google Knowledge Graphs (built on the massive Google Cloud and all of the things that are inside that – Big Query, etc.) is there for you, as a game developer to use in your game, around you game, in promoting your game or just to record your game.
The deeper value of “Author Ranking” is being automatically embedded in game platforms, Google+, YouTube Live (live gameplay streamed into YouTube), because that enables the ‘author power’ of an individual to promote a game or feature for you.
Plugging games into social media for ranks, scores, reviews, +1s and so on really helps promote your game “virally” (I hope you read my earlier comments on what Virality really means and what it implies in the longer term?) All of this makes your mobile or desktop game a lot more discoverable, easier to find, and more likely to find its way towards people who might play it and pay for it.
The Dark Side of Success
When a game does hit the top ten, it is not all gravy. Your game will go from 10,000 downloads a day, to 1,000,000 users a day. Retention figures will soar. Return figures will soar. And your servers are going to melt. Your game may go dark.
And that is a bad thing.
Can you cope with 30,000 Server Requests per Second?
The answer to that is complex, and it starts with “should you plan for this at all given only around 0.2% of games will experience this?” The answer is yes – you really should, because all the value is at that point. That is where you can filter out the Krill to find the Whales. That is where you can actually make money. You can build the backend yourself, or build it on Amazon, or in Azure, or just go get a package solution from Google App Engine and the Google Cloud. Stories abound of teams building beta versions of 50m player game back-ends in Google App Engine in a weekend.
Making Money
The beauty of delivering the backend of your game through the Cloud is in the finance – you can just work out what you can afford and throttle it to that. Your accountants can quickly check that your revenue from daily average users > support costs + cost of customer acquisition. If you know that, you can make sure you are likely to run profitably. And it is at this point you can start to make real use of Analytics – because you can start to find out the likely lifetime customer value. The tools exist now to quickly and easily work like this:
- see that users are falling off in France
- see that most people play on the way to work
- define a targeted reactivation campaign
- set up A v. B messages to be pushed out at the ‘journey to work’ timeslot
- measure the delivery, update and response of each message
- breed the effective messages and be even more effective next time
Add to that proper use of Analytics Tag Engine, Segmentation and Cohort Analysis and you might just be able to find the thing that your gamers are actually finding fun. And are willing to pay for.
How To Stop Users Hating AdMob So Much
Mobile ads are widely regards as horribly intrusive, ugly, inappropriate and distracting by mobile gamers. On the other hand, if you have a Free To Play game, you have to eat, and the advertiser support is rather helpful. Add that to the fact that advertisers love gamers, and you have a recipe for persistence of things like AdMob into games for a long time to come.
A lot of effort is going into making in game adverts less objectionable for the user, and more valuable for the game developer (and not just Google). And not just advertising support: Google predict that In App Purchase is going to be around 95% of the online game revenue in just a couple of years.
So they are pouring effort into making Ad Mob drive In App Purchases for developers. The last piece of the puzzle is understanding what the 97% of people who do not buy In App Purchases are doing and how to extract value from them. Which means integration with Google Analytics.
The horrible truth of most advertising in games is that most developers believe that it used to come from OTHER DEVELOPERS and PUBLISHERS who were trying to get their games in front of your players. This is not only parasitic, but rather unsettling for developers who wonder how that can be sustained.
The good news is that there has been a real drive to quality in the bidders for mobile ads and there are now around 1 million bidders for In Game Ads, and that includes almost all the major global brands (McDonalds to Lionsgate Movies). That is coupled with more attractive and more interactive ad formats (reactive and interactive video) that are perceived as far less intrusive by players, while being far more effective (in terms of “eCPM”) for the advertiser.
I cannot quite shake my feeling that it is not healthy for games designers to get sucked into making design decisions based on potential advertising revenue. It feels like an unhappy fit. What will be less uncomfortable is using data to work out where adverts will be more effective and less disruptive to the users by way of segmentation of users with that data. (And yes, you can filter out competitor ads properly now)
Going in Blind
Games developers no longer need to go in blind to a game design or market – you can get HUGE amounts of market research from Google Ad Mob and Analytics upon which to base your marketing strategy. That alone will quickly help weed out the well managed from the lucky, I hope.
One view of the Truth
Lots of technologies are coming to early maturity that will allow games developers to make money from great games. We are still going to need GREAT GAMES, but we should be able to make money from them far more easily. Having a huge amount of data does not automatically make your games better. It probably will not improve your games design. It won’t make you rich just because you have it. But having one view onto the truth makes it more likely that you will be able to at least find the truth. After that, it is up to you to respond to it properly and effectively.
You can measure all the key things:
- Reach (getting your name to me – by google.com usually, or another search engine)
- User Acquisition (getting them to say … “yes”…on any device, to any device)
- Conversion (getting them to pay)
- Engagement (getting them to play)
- Retention (getting them to stay)
- Reacquisition (making them come back today)
- Re-engagement (selling them the next game, okay?)
Having measured them, you can structure an effective method of using all of that to make money.
And, after all the one view of the truth I can subscribe to is cold hard cash is the metric that it is hardest to game.
🙂
davidjwbailey dot com 
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