Delivered at Casual Connect Europe 2017. A relatively small group — tiny, really — of dedicated customers often generates an unexpectedly large percentage of total revenue for a mobile app or game. As an app publisher, Amazon has a unique perspective on power-users in aggregate. Here we share observations and data from our appstore on what motivates top spenders and what is currently working best for cultivating new and existing power-users, keeping them engaged, and maximizing their revenue potential.
2. A B O U T
Mike Hin es
Amazon Appstore
@MikeFHines
Founder @ 2 Financial Services Startups
Founder @ 2 Software Startups
QA Engineer @ Now Software
QA Manager, Product Manager @ Microsoft
Evangelist @ Amazon.com
Mentor @ GameFounders, Dev Bootcamp
Games Judge @Casual Connect Indie Prize, White
Nights, and Pocket Gamer Very Big Indie Pitch
Speaker @ GDC, GDCE, Casual Connect, Pocket
Gamer Connects, AnDevCon, White Nights, CES,
PAX Dev
5. POWER-USERS ARE
NOT NEW
Well-Known across Industries
Mobile Apps isn't the first industry to
recognize the importance of highly
engaged customers.
6. THEY SPEND ON THE
THINGS THEY LOVE
Substantial Spenders
When it comes to their passion (whatever it
may be), power-users spend more money
than the average fan.
7. KNOWN EARLIER AS
THE 80-20 RULE
The Pareto Principle
In 1941, Joseph M. Juran generalized the
concept of the "vital few," which he named
after Vilfredo Pareto.
8. CASINOS DEFINED
COMMON TERMS
Whales, Dolphins, Minnows
Monetization strategy is segmented, based
on different customer experiences at
different price points.
Freemium:
• Minnows = 90-98% of users
• Dolphins = 50% of revenue
• Whales = 3-4% of paying users (<0.1% total)
Source: GGV Capital, Feb. 2013 — http://bit.ly/1Ldu5Fu
9. THE NUMBERS VARY, BUT…
We All See Similar Segmentation
• Newzoo: 3.5% of U.S. mobile gaming customers generate
33% of sales
• Google: 1% of U.S. customers generate 14% of monthly
sales
• Kongregate: 0.1% of U.S. customers generated 53% of all
time sales
Top 1% of customers who spend on mobile
Sources: Google, Casual Connect July 2014; Kongregate, GDC March 2015
10. EVERY CUSTOMER HAS
VALUE
The Vital Few and Useful Many
Juran originally defined the Pareto Principle
as "the vital few and trivial many," but later
realized that even non-spenders are
important.
They can be:
• Potential power-users
• Influencers and advocates
• Eyeballs for advertising
11. POWER-USER VS. WHALE
"Whale" Has a Negative Connotation of Exploitation
Nicholas Lovell, author of The Curve, differentiates:
• Ethical: Customer spends because they love what you do
• Unethical: Customer spends because of who they are
We prefer the term "power-user" to describe the avid hobbyist
who loves your work.
13. WHAT DO THEY LOOK
LIKE TO US?
Amazon Appstore Power-Users
• Spend $50/month or more
• On average, spend >$200/month
• Are concentrated in US, Japan, UK, and
Germany
14. POWER-USERS ARE
LOYAL TO A FEW APPS
Focused Passion
80% of customers who spent $1000 in
January, 2015 spent 75% (or more) of that
on just two titles.
15. POWER-USERS LOVE
ALL KINDS OF APPS
Candy Crush Saga
MMOs are traditionally associated with
power-users, but King has expanded our
view of what is possible.
16. POWER-USERS LOVE
ALL KINDS OF GAMES
Game of War: Fire Age
Similarly, Machine Zone has had success
in a completely different genre.
18. NOT ALL IMPORTANT
METRICS ARE
COMPLETE
ARPU & ARPPU
Averages are most useful when data has a
normal distribution (Bell curve).
For example:
• Human life-span or blood pressure
• Number of petals on a daisy
• Cloudy days in Seattle
19. APP REVENUE HAS HIGH VARIANCE
Data Points Can Be Very Far Apart and Spread Out
Best-described by a power law,
in which one value (such as
revenue) varies as a power of
another (such as rank).
Revenue
User Rank
Revenue by User
20. REVENUE
DISTRIBUTION
INFLUENCES ANALYSIS
Impact on Other Metrics
Optimize the funnel, but look for emergent
behavior among power-users and tune
those pathways.
• Prioritize features according to
monetization segment
• Design separate A|B tests
• Identify highest-impact flows
22. WHAT YOU BUY SAYS
SOMETHING ABOUT
YOU
Personal Expression
The media you consume expresses who
you are, and your emotional connection
inspires the willingness to pay.
23. KRITIKA: THE WHITE KNIGHTS
GAMEVIL Offers Avatars that Appeal to Collectors
24. CONNECT WITH WHO
OR WHAT YOU ADMIRE
Stand Out, or Fit In?
Go big: Identify with someone, a broader
community, or something that inspires you.
Go small: Establish yourself as part of an
elite tribe.
25. TELL THE WORLD WHY
YOU'RE GREAT
Status Update
Highlight your accomplishments or social
status. Purchases act as a badge of
achievement, or a uniform commanding
respect.
26. UNDERSTAND THE
CONNECTION
Emotion & Spending
Knowing why they buy is critical to making
your app attractive to power-users—and
more importantly, worthy of them.
28. DESIGN FOR YOUR
POWER-USERS
Before
• Foster early engagement
• Message at the right time
• Keep them in the app
• Keep them coming back
• Use server-side accounts
29. LET YOUR CATALOG
SUPPORT THEIR
DESIRES
During
• Self-expression / aesthetics
• Ability
• Status / collection
• Money for time
• Price distribution
30. Source: Amazon Appstore, March 2014
31%
29%
7%
12% 11%
5%
3%
1%
14%
11%
6%
3%
16% 16%
11%
9%
0%
5%
10%
15%
20%
25%
30%
35%
$0.99 $1.99 $2.99 $4.99 $9.99 $19.99 $49.99 $99.99
% of Assortment % of Sales
ASSORTMENT BY PRICE POINT
Total Marketplace
32. GROW WITH THE
CUSTOMER
After
• Understand price sensitivity
• Expand your catalog (keep it fresh)
• Limit price points to clarify value
• Treat all customers well!
33. 0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1 4 7 10 13 16 19 22 25 28
Source: Amazon Appstore, July 2013
Days Owned
+60%
average
selling price
REGULAR CUSTOMERS SPEND MORE
Price Sensitivity Declines over Time
34. GROW WITH THE
CUSTOMER
After
• Understand price sensitivity
• Expand your catalog (keep it fresh)
• Limit price points to clarify value
• Treat all customers well!
36. GROW WITH THE
CUSTOMER
After
• Understand price sensitivity
• Expand your catalog (keep it fresh)
• Limit price points to clarify value
• Treat all customers well!
37. Conversion Rate
INDEX: Average = 100%
DON’T CONFUSE YOUR
CUSTOMER
OFFER VARIETY,
BUT NOT TOO MUCH
Source: Amazon Appstore, March 2014
147%
101%
52%
0%
50%
100%
150%
200%
1-5
Price
Points
6-10
Price
Points
11-15
Price
Points
38. GROW WITH THE
CUSTOMER
After
• Understand price sensitivity
• Expand your catalog (keep it fresh)
• Limit price points to clarify value
• Treat all customers well!
45. POWER-USERS
The Upshot
• Plan for them
Engage early; don't distract; keep them coming back
• Support their (emotional) choices
Self-expression; collecting; status; advancement; optimization
• Grow with them
Keep catalog fresh; clarify value; offer several price points
My name is Mike, and I’ve done the startup thing, the big company thing, and now probably my favorite thing, flying around the world talking to developers about what is working well for apps and games in the Amazon Appstore. And today, that means talking about how to retain and attract uses who spend a huge amount of money in you game.
Amazon has over 700,000 apps and games for sale in 236 countries and territories worldwide, and Amazon attracts the big spenders best. When looking at games in US, UK, GER and FRA, not only do 62% of the customers in the Amazon Appstore eventually spend money on a game, but they spend more money in Amazon than any other Android appstore.
And it’s easy to get your Android app into the Amazon Appstore…
Definition
Not the first
You may have some definition in your mind that you associate with the term "Power-users", and that's fine;
I'm going to offer my own anyway, just for the purposes of this discussion, but my guess is it's probably pretty similar.
And I guarantee that we—as in the Mobile Game Industry—we're not the first ones to think about power-users as a group.
Concept 100 years old
First major paper 1890s
Cross all industries
Concert groupie
Sports Fan
I love this guy's hair. That's how I'd do mine, if I had the curl for it.
The concept is actually more than 100 years old.
(Maybe even more; I think the first major paper I could find on the subject dates from the mid-1890s.)
So no, power-users aren't new—they appear across all sorts of industries; they have all kinds of interests.
Think about the sports fans with season tickets, or the ones who spend thousands to go to championship games.
There are music fans who follow their favorite band on tour, so they can see every show.
Collectors
Power users spend more. Significantly more.
Collector Story
Think about the collectors, whatever it is they collect.
They spend more money than most people on whatever it is they're really passionate about.
My aunt loved anything with a pig on it.
If it had a pig, she bought it.
1896 paper Vilfredo Pareto
80/20 rule – land in Italy, idea from peapods
1941 Joseph Juran
Now the 1896 paper I just mentioned didn't talk about Power-users directly.
Vilfredo Pareto developed the principle of the "80-20 rule," showing that 80% of the land in Italy was owned by 20% of the people.
He got the idea to investigate this kind or relationship from observing peapods in his garden, 20% of which held 80% of the peas.
Then in 1941, Joseph Juran (a management consultant) refined the concept and named it after Pareto—leading to a common rule of thumb in business:
That "80% of your sales come from 20% of your customers."
Juran had a name for that 20%: He called them the "vital few."
(The rest he called the "trivial many," at least at first—he changed his mind about that, later; we'll see why in a moment.)
Gambling coined term Whales.
Also named other tiers of spenders
GGV capital applied to Freemium
Whales small % of Players
Later, the gambling industry coined the term we usually associate with these big spenders: Whales.
Casinos also had names for the mid-level and small-time spenders. These were dolphins and minnows, respectively.
The casinos offered a different experience at different price-points.
The terminology stuck, and has been adopted by people in lots of industries, including app & game developers/analysts.
You can even find statistics using these terms. E.g. GGV Capital has done some analysis of Freemium games, using these terms.[[ x ]]
Minnows (those who pay nothing) on average account for 90–98% of the players in a free-to-play game
Dolphins usually represent about 50% of the revenue generated by a game.
Whales typically represent 3-4% of the paying users (or less than 0.1% of the entire userbase)
Others have reported similar results for the broader Mobile Industry for apps using other monetization models.
The exact percentages vary by source, but everyone seems to agree that a small proportion of customers accounts for a relatively large share of sales.
Data from other sources
Agree top 1% of payers
[[ x ]] In 2014, Newzoo estimated just 3.5% of mobile game customers in the US were responsible for a third of all sales.
[[ x ]] Google saw 14% of its monthly sales coming from just 1% of its customers in that year.
[[ x ]] Kongregate had even more dramatic segmentation in 2015, with 0.1% of US customers generating more than half of their sales.
If we want to fix on just a single number, [[ x ]]
then for simplicity, let's say 1% of users may be classified as power-users.
Juran change of heart
Recognize role 80% play
So I mentioned that Joseph Juran changed his view on the importance of the—what shall we call them—non-power-users.
Originally, he thought of the Pareto Principle as "the vital few and the trivial many."
He really didn't consider those 8 out of 10 non-spenders as significant.
But that changed. He realized that every customer had value—even those who don’t spend [[ x ]]
First and foremost because they are potential converts who may become Power-Users
They may also influence others to try something new (helping it go viral, to use the modern term) the more who try, the better your chances of reaching your potential Power-Users
And of course they provide eyeballs for advertising
Term is pejorative – exploitation
We want to emphasize the customer-first aspect of big spenders.
Lovell research
We prefer Power-User
Why not use the common term in this session—Whale—like everyone else?
The truth is, some have always considered the term pejorative,
It has a connotation of exploitation
Even if it's just a reflection of a very practical, segmented monetization strategy.
Nicholas Lovell, author of The Curve, described a simple test to identify exploitative revenue generation.
[[ x ]] You can generally assume no exploitation if a customer spends because they love what you do.
[[ x ]] If they spend because something in their personality causes them to spend no matter what's on offer, that revenue's questionable.
We follow Lovell’s example and define Power-User this way.
[[ x ]] They're the customers who spend money because they love what you do
Not because they can't help themselves
As an app publisher and Appstore, Amazon has our own perspective on Power-Users. Here’s what the term means to us:
We define them this way:
[[ x ]] Power-Users spend $50 (£32) /month or more, and
[[ x ]] On average they now spend >$200 (£130) /month
[[ x ]] Most are in U.S. and Japan, followed by the UK and Germany
No country or region has a monopoly, though—we see power-users from all over the world.
Power Users are Focused on 2 apps
What would you do differently to build or market your app knowing this?
We also see that power-users tend to focus their attention and spend on a small number of apps.
Two, in fact.
8 out of 10 customers who spent $1000 (£650) last January spent at least 75% of it on just two titles.
Now $1000 (£650) a month seems like a lot for an individual to spend in an appstore—or maybe not, I don't know how much you spend—I don't spend that much
But you obviously want that individual using your app, rather than someone else's
Knowing that power-users tend to concentrate on such a small number of apps, is there anything you would do differently in how you publish or market yours?
Hold that thought…
Traditional wisdom wrong.
PU love all genres
Power-users on our store use apps in many genres.
Traditional wisdom, going all the way back to, say, 1998—we're talking last century—held that you had to be an MMO to attract power-users.
MMOs (massively multiplayer online games) were the only apps with the depth to support engagement at true power-user levels.
King proved, with Candy Crush Saga, for example, that power-users also like casual games.
I think King's success—and the success of others; they weren't the only ones—opened a lot of eyes and generated a lot of excitement, as game makers started thinking,
"Hey, maybe I can make that work in my game, too. I guess I don't have to be an MMO."
Other apps followed suit, and not just games. There are productivity apps and social apps and lifestyle apps;
think about Evernote, Trello, Flipboard, Pinterest, Facebook… people engage with these apps DEEPLY
Game of War: Fire Age, by Machine Zone, is another example of a power-user magnet.
Note: also not an MMO.
You can talk about traditional wisdom, but Amazon prefers metrics-wisdom,
And according to the metrics, power-users will not be constrained by genre.
Ok, so we know Power-Users are more engaged and spend more than regular users,
We even have a ball-park figure for that means;
We know they like to focus on just one or two apps, at least when it comes to spending their money;
And we know that their interests aren't limited to a single app category or genre?
So what?
Well, a second ago I asked how you would change your marketing strategy given this information.
As a first step, maybe we should take a look at the basic performance metrics we use to gauge our success.
Let's see how power-users figure in.
It turns out, some of the most important and widely used statistics are heavily influenced by power-user behavior.
If you don't account for them, you risk having holes in your understanding of how your app is really doing.
Averages like ARPU & ARPPU provide useful insights, but are most meaningful when the data being analyzed is normal.
That is, when it follows a Bell curve.
There are lots of examples of this kind of data, like: [[ x ]]
Biometric stats,
Flower petals
Seattle rain
App revenue, though, can have extremely high variance (data points can be very far apart and spread out), and it is usually better described by a power law graph like this one.
Here I'm plotting revenue for every user, sorted by their contribution rank.
So the spike up front here is the user who spent the most; trailing off to the long tail of users who spend next to nothing.
(Other examples: city size versus rank, income distribution in the U.S., or circle packing, which is the number of small circles you can fit inside a large one.)
Power law graphs have a few interesting characteristics, most notably: no useful mean
There's a median, but that's not usually what you want. Knowing the median revenue per user, for example, doesn't seem that useful.
That just tells you the midpoint between the highest and lowest amounts earned.
The mean gives a better "feeling" for what each user spends,
But power law graphs don't offer that, so if you have power-users in your customer base, the "averages" you compute
May actually obscure the health of your business. Your revenue stream may be fragile because of a dependency on a small group of specific users.
In reality, how your revenue is distributed can be as important as how much is generated
[[ x ]] Understanding which users spend more helps you decide which features to prioritize (the ones they use most).
A|B test results might differ by monetization segment—design tests accordingly or run multiple tests
Gameplay, workflow, or other behavior may also vary between user segments
does one workflow lead to more profitable users, or do more profitable users naturally adopt a specific workflow?
You're always trying to optimize the funnel, of course, but be on the look-out for emergent behavior that may predict power-users,
Then optimize those pathways.
[NOTE] Could have this up-front in section 1 (the why), Who are they, why should you care about them? (After slide 8)
Lurve. Power-Users buy emotion, not just content
The media you consume expresses who you are, and your emotional connection goes to the root of how much you are willing to spend
Nobody buys a Seattle Seahawks Superbowl jersey because they need a practical reminder of who won in 2014
(By the way, the Seattle Seahawks won the Superbowl in 2014, using equipment inflated to regulation values.)
You don’t follow One Republic on tour just because you think Counting Stars, you know, "has a good beat, you can dance to it"
These are things people do because they feel emotionally connected.
The same is true of mobile apps, believe it or not.
Game-ville knows this. They designed special rare, collectible avatars for Kritika: The White Knights.
They're super cool, and are a perfect example to demonstrate how scarcity contributes to their desirability.
They also appeal to the completionists out there—the users who take satisfaction in filling a complete set of… whatever it is their collecting.
Users also spend money to express their personality.
Maybe they purchase a specific character shader to identify with their favorite magician's guild.
They're connecting with something larger than themselves, something that they find inspiring.
Or maybe it's more clique-ish—equipment or accessories only worn by their team, music of an obscure band—
They're setting themselves apart.
Sometimes the emotion is wrapped up in the status they've achieved. I mentioned TripAdvisor earlier.
They buy items in order to advertise what they have accomplished, or where they have been, what they've explored, etc.
“I have this thing and you don’t,” or, “I have more of these than anyone,” or, “I have one of every kind,” etc.
These are ways for users to garner respect for their prowess, worldliness, experience, intelligence, etc.
All of these are ways that emotion can play into a customer's purchasing decisions.
Understanding the connection between why people spend and the
Emotion they are trying to achieve is fundamental to making your app (or any product) attractive to power-users.
More importantly, it's what makes your product worthy of their devotion.
So let's talk about some practical points to keep in mind, with respect to power-users, as you
Plan, Publish, and Maintain your app.
At the start, as you begin to design and develop your app, make sure you plan for Easy entry and early engagement.
Have you heard of Flow? Getting in the Zone? Try to encourage that kind of focus; don't distract the user, for instance, unless it's important.
In the same way, you should design in such a way as to minimize context switches and keep them in your app (e.g. don't drop to the browser to display a help file—show it directly).
Give them a reason to come back, whether it's a timed reward, some user interaction they find pleasant or interesting… Give them something they can only experience in the app itself.
And finally, server-side storage makes it easy to move between devices; their data is accessible from anywhere, so they can use whatever device is at hand
My colleague, Mike Hines, is going to provide some fascinating statistics on timing and engagement just after the break, so definitely stick around for that.
When you are ready to publish your app, make sure your catalog has items that power-users find appealing.
This means there are accessories that allow for self-expression and personal taste;
Power-ups or buffs that expand their skills or complement abilities they already have;
Collectible, rare, or award-type items that convey elite status or satisfy completionist yearnings;
Short-cut items that allow users to trade money for time
And finally, balance the price points of your items according to the revenue they generate.
For example, most in-app purchase items, across the entire Amazon appstore—are concentrated in the $0.99 and $1.99 categories.
But… [etc.]
The most successful app and game developers, however, make sure to distribute items across the price spectrum… [etc.]
[Talk about the small deltas between bar pairs]
And finally, after your app is live in the marketplace, don't forget about it!
Understand that users become less price-sensitive over time, meaning they are willing to spend more in your app or game after they grow comfortable with it.
(Stands to reason… [example])
Make sure you continue to provide new and interesting content (keep it fresh). The more content, the better.
Make it very clear what value is available at each price point. A confused customer typically will not complete the purchase.
Again, Mike Hines will share some analysis and provide some hard numbers to keep in mind as you set up your catalog.
Above all else, treat the customer to an interesting, engaging, and enjoyable life experience! That's what everyone is looking for.
Just to illustrate the price sensitivity… [etc.]
And finally, after your app is live in the marketplace, don't forget about it!
Understand that users become less price-sensitive over time, meaning they are willing to spend more in your app or game after they grow comfortable with it.
(Stands to reason… [example])
Make sure you continue to provide new and interesting content (keep it fresh). The more content, the better.
Make it very clear what value is available at each price point. A confused customer typically will not complete the purchase.
Again, Mike Hines will share some analysis and provide some hard numbers to keep in mind as you set up your catalog.
Above all else, treat the customer to an interesting, engaging, and enjoyable life experience! That's what everyone is looking for.
Similarly, just to show the effect of catalog size… [etc.]
[NOTE] don't undersell
[NOTE] rearrange sections to emphasize recommendations
[NOTE] make a list: what does this mean wrt PUs
And finally, after your app is live in the marketplace, don't forget about it!
Understand that users become less price-sensitive over time, meaning they are willing to spend more in your app or game after they grow comfortable with it.
(Stands to reason… [example])
Make sure you continue to provide new and interesting content (keep it fresh). The more content, the better.
Make it very clear what value is available at each price point. A confused customer typically will not complete the purchase.
Again, Mike Hines will share some analysis and provide some hard numbers to keep in mind as you set up your catalog.
Above all else, treat the customer to an interesting, engaging, and enjoyable life experience! That's what everyone is looking for.
And finally, after your app is live in the marketplace, don't forget about it!
Understand that users become less price-sensitive over time, meaning they are willing to spend more in your app or game after they grow comfortable with it.
(Stands to reason… [example])
Make sure you continue to provide new and interesting content (keep it fresh). The more content, the better.
Make it very clear what value is available at each price point. A confused customer typically will not complete the purchase.
Again, Mike Hines will share some analysis and provide some hard numbers to keep in mind as you set up your catalog.
Above all else, treat the customer to an interesting, engaging, and enjoyable life experience! That's what everyone is looking for.
One aspect of working with Amazon that helps devs stay above the app poverty line is that Amazon attracts the big spenders best. When looking at games in US, UK, GER and FRA, not only do 62% of the customers in the Amazon Appstore eventually spend money on a game, but they spend more money in Amazon than any other Android appstore.
And it’s easy to get your Android app into the Amazon Appstore…
We’re in 236 countries and territories worldwide, and we’re there, in front of millions of customers not only on our on family of devices like Fire Tablets and Fire TV, but also as the default app store on Blackberry devices and pre-installed or available for install on pretty much every Android device in the market.
But we’re not just the same as any other appstore…
Amazon Appstore gives you more ways to monetize your apps and games. From the traditional Premium, Freemium, ad models, to Underground, where you get paid for every minute that every user is in your game, and Merch by Amazon, where for no money out of pocket, you can create and sell t-shirts featuring your app or game graphics on it’s very own page on Amazon.com. How cool is that!
So what do we take away from this?
[[ x ]] Power-users drive revenue
[[ x ]] There are no "trivial few"—every customer is a potential power-user can help you reach one
[[ x ]] Emotion is the primary reason they purchase
So how do you engage your power-users and encourage regular customers to join their ranks?
[[ x ]] Plan for them
[[ x ]] Enable purchases that scratch an emotional itch
[[ x ]] Adapt to changes in their purchase needs
Thank you very much!
Here are some important links to keep track of.
Take a screen shot of this or watch the replay once it’s posted.
If you want to learn more about getting paid for every minute that a user is in your app, go to bitly/indieundergroiund.
To learn how to request a feature on the amazon Appstore, go to bitly/marketingtipsforapps and read tip #7
To learn how the top apps in our appstore do IAP differently than the rest of us, go to bitly/top50iap
To see what, if anything, you need to do with your APK to get it on the amazon appstore, spend 90 seconds and drag and drop your apk to the control on bitly/appstoreapptesting.
Now for some Q&A: