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Game Connection Paris: Metrics, benchmarks and buckets of money

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Who is making what in an online game? What conversion rates can you expect ? What is a whale and how much, exactly, do they spend.

Nicholas Lovell takes you through the ten key metrics for success in a free-to-play game, shows you how to work out exactly how much money you will make from an online game and, most importantly, teaches you how to tweak your business to maximise revenues.

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Game Connection Paris: Metrics, benchmarks and buckets of money

  1. 1. METRICS, BENCHMARKS AND BUCKETSOF MONEYNicholas LovellGAMESbriefGame Connection, Paris, 6th December, 2011
  2. 2. Nicholas Lovell, GAMESbrief • Author, How to Publish a Game, GAMESbrief Unplugged • Director, GAMESbrief • Clients include Atari, Channel 4, Channelflip, Firefly, IPC, nDreams, Rebellion and Square Enix • @nicholaslovell / @gamesbrief
  3. 3. Subscribe to the blog
  4. 4. MAKING F2P SIMPLE
  5. 5. REMEMBER: It’s about the fun
  6. 6. 25 Add friction o Game design is about taking friction out. o Freemium design is about adding friction. o GOOD freemium design is about finding a balance – just enough friction to encourage some players to pay, without ruining it for the rest of us.
  7. 7. It’s about the metricsConversion K-factor ARPU DAUs CPI ARPDAU LTV ViralityCPA Retention MAUsARPPU CAC
  8. 8. It’s about the metrics OMFG
  9. 9. It’s about the metrics WTF
  10. 10. What is the point of metrics?• To connect game development and the finances of making games• To teach you about your players and your game• To help you make better decisions KEEP IT SIMPLE
  11. 11. THE GAMESBRIEFSPREADSHEET
  12. 12. The spreadsheet www.gamesbrief.com/spreadsheet
  13. 13. 6 key metrics• MAUs• DAUs/MAUs• Retention rate• Conversion rate• Split into whales, dolphins, minnows • ARPU• Oh, and I have platform share but it’s not a metric
  14. 14. THE PRINCIPLES
  15. 15. 1 Feed the funnelo To build a successful games business, you must feed the funnelo Potential customers arrive at the top. In the middle, you convert them to payers.o At the bottom, they become long-term, high- spending customers.
  16. 16. 2 ARM yourselfo A successful online game must Acquire users, Retain them (usually overlooked!), and Monetise them.o All three aspects must be in harmony.o You need all three to build a successful long-term business.
  17. 17. 8 Avoid the leaky bucketo Acquiring customers is both hard and expensive.o Once you get them, focus on retention to keep them.o Don’t worry about getting new customers until you can satisfy the ones you’ve got!
  18. 18. 3 Make it free AND expensive PRICE Revenue opportunity Marketing opportunity Demando Giving your content away for free is a marketing opportunity.o You have to find your revenue opportunity.o Draw customers along the curve by offering them things they truly value.
  19. 19. THE DATA
  20. 20. MAUs• I start with 200k MAUs – an ESTIMATE• If I were being more accurate, I would model customer acquisition costs. • Maybe in version 2.0• You won’t get a sizeable audience without spending money • CPI on Facebook is $1.00 to $1.50. Mobile seems to be cheaper• BUT audience isn’t your primary measure of success • Find a small, niche audience with great retention, conversion and ARPU • Stop thinking like traditional media
  21. 21. DAUs/MAUs• Also known as engagement• Bizarre stat• Driven by what Facebook chooses to publish• Odd result: • MAUs easier for financial results, long term planning • DAUs drive monetisation, more accurate snapshot• Target: 0.15 (aka 15%)• Ratio fell steadily through 2011 • Trip Hawkins said “FB games are shallow” • I said “its just the summer”• Facebook’s recent changes bumped the engagement ratio up again
  22. 22. Retention rate• I have an sighting estimate of 75%• Churn rate = 1 – retention rate (i.e. 25%)• Duration = 1 / churn rate (i.e. 4 months)• Zynga has a duration of < 2 months.• Very hard to get accurate benchmarks for retention• My view: 75% is not average, it’s great.• NOTE: Where you calculate retention from makes a difference.
  23. 23. 6 Acquisition lasts longer than you thinko The Acquisition process doesn’t end when I click “install”!o 20 million people every month take a look at Cityville – and never return!o You haven’t got a customer until they spend 20 minutes playing. Make sure those first 20 minutes are your best stuff!
  24. 24. Conversion rate• Should I look at it daily or monthly?• I use daily• When looking at benchmarks, try to work out what conversion rates they are using: • What percentage of daily users spent money? • What percentage of monthly users spent money? • What percentage of all users have ever spent money?• Tiny Tower: 3.8% of users in the first six weeks• ngMoco: 2% of DAUs• Anything from <1% to around 20% is feasible
  25. 25. Whales, dolphins, minnows PRICE Revenue opportunity Demand• An approximation of the power-law• Minnows: spend the minimum ($1), 50% of spenders• Dolphins: a “middling amount” ($5), 40% of spenders• Whales: spend a lot ($20), 10% of spenders
  26. 26. The importance of the power law Revenue ($) (%) Whales $ 36,000 44.4% Dolphins $ 36,000 44.4% Minnows $ 9,000 11.1% Gross revenue $ 81,000• Whales are 0.5% of your users; 44.4% of your revenue• 89% of your revenue comes from your higher spenders• Across the whole business: • ARPU: $0.41 • ARPPU: $4.50
  27. 27. HOW TO USE THESPREADSHEET
  28. 28. DISCLAIMER• Your business will not look like this.• You will not make $2,946,789 in year one• Do not rely on this spreadsheet as an accurate financial predictor
  29. 29. The practical use• All game developers have too many ideas to improve their game• You need to prioritise• Use the GAMESbrief spreadsheet to get a snapshot of the headline areas of Acquisition, Retention, Monetisation• Identify which are below benchmark• Work on those areas for the next sprint• Move on• Repeat
  30. 30. Conclusion• You need metrics to make a successful free-to-play game• They are useless unless you use them to make informed decisions• And then act on them• It doesn’t even matter if my spreadsheet is right: look for the improvement in the metrics over time, not the absolute number• If the spreadsheet doesn’t fulfil your needs, change it• (And if you want to, send it back to me, or tell me what you’ve changed)
  31. 31. 26 Pre-register for the booko http://www.gamesbrief.com/52-game-idea-bombs/o THANK YOU FOR LISTENING
  32. 32. Thank you nicholas@gamesbrief.com Follow my blog www.gamesbrief.com Buy my bookswww.gamesbrief.com/spreadsheet

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