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Feeding the Funnel: Turning Users into Profits
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Feeding the Funnel: Turning Users into Profits

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Web businesses all have to feed a funnel that takes users in the top and squirts profits out the bottom. ...

Web businesses all have to feed a funnel that takes users in the top and squirts profits out the bottom.

At the Casual Games Forum, I explained how to optimise the funnel to maximise revenues, make a happier team and buy a Maserati

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  • Nicholas are you assuming that CPA is part of your variable cost or it's not included at all in the profitability graph? In which case we could consider it an 'investment' in order to be able to generate the profitability level that covers the fixed costs?
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Feeding the Funnel: Turning Users into Profits Feeding the Funnel: Turning Users into Profits Presentation Transcript

  • Feeding the funnelTurning users into profitsNicholas LovellGamesbriefwww.gamesbrief.com
  • Who am I?
    Founder, www.gamesbrief.com
    Clients include Firefly, Huddle, Rebellion and others
    Non-executive director, nDreams
    Strategy director, ChannelFlip
    Former CEO, GameShadow
    Former CFO, ShopSmart.com
  • What am I talking about?
  • The funnel
    Users
    Profits
  • How most people start
    1% convert = £1,000.00
    1% convert = £10.00
    Say each costs £0.10
    Only if the average user stays for 100 months!
    I’ll get some visitors
    Some who visit will register
    Some who register will subscribe
    Subscribers will spend an average of £10 per month
    I’ll put my Maserati on order
  • The funnel
    Unique users
    Registered users
    Active users
    Paying users
    Profits
    Revenues
  • Feeding the funnel
    Marketing
    PR
    SEO
    SEM/PPC
    Unique users
    Harness users to create virality:
    • Referrals
    • Facebook Connect
    • Importing contacts
    • Twitter
    Cross-promote from other titles
  • Converting the funnel
    For your business:
    Draw the funnel
    Reduce to as few steps as possible
    Know the conversion rate for every step
    Tweak, iterate, test until you know exactly how your funnel converts
    Unique users
    Registered users
    Active users
    Paying users
    Revenues
  • Adding friends - Foursquare
  • Finding the levers
    Users are not the only metric
    The others depend on your business, but might include:
    Page views
    Video views
    Game downloads
    Purchase of a virtual item
    A metric that you can’t influence is no good
    Focus on LEVERS
  • Digression 1: Calls to Action
    On every page, you should know what you want your users to do
    Then SHOW THEM
    e.g. Register/Log In/Buy/Subscribe
    But also:
    Tell a friend
    Play a game
    Connect with Facebook/Twitter
  • Great homepage design
    www.shidonni.com
  • Monetizing the funnel
    There are many sources of revenue
    Virtual goods / microtransactions are flavour du jour (and my favourite)
    In your own business, focus on ARPPU
    Advertising
    Virtual Goods
    Revenues
    Subscriptions
    Downloads
  • Digression 2: what users buy
  • Making profits
    Profitability
    Assumption: Variable cost = 10% of sales
    Any profit can be spent on acquiring customers (CPA)
  • The equations
  • Why the funnel matters
    The funnel matters because it is your entire business
    To emphasise that, we need Equation I
    CPA < LTV = good business
    CPA > LTV = trouble
    Where:
    CPA is cost to acquire a user
    LTV is the Life Time Value of a user
  • Harnessing virality
    A viral business can be an insanely profitable business
    CPA is close to zero, so even if LTV is low, your business is great
    Time for Equation II:
    Viral coefficient = A% x B x C%
    Where
    A% = Percentage of your users who invite a friend
    B = Number of friends they invite
    C% = Percentage of friends who accept the invitation
    If viral coefficient > 1.3, time to order the Maserati
  • But what if I’m not viral?
    For most Web businesses, the choice exists between:
    Viral: low CPA, low LTV
    Monetized: High CPA, high LTV
    Either is fine, or even a blend, but keep focusing on the conversion rate
  • It’s all about the levers
    Find the metrics that have the biggest impact on the bottom line
    Try to reduce the metrics to one!
    Three is more usual
    Make sure they are LEVERS
    Laser-like focus on pulling and improving these LEVERS
    The result will be a better business and a happier team
  • Glossary and contacts
    ARPU - Average revenue per user
    ARPPU - Average revenue per paying user
    CPA - Cost per acquisition
    LTV - Life time value
    Nicholas Lovell
    @nicholaslovell / @gamesbrief
    www.gamesbrief.com
    nicholas@gamesbrief.com