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.

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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Feeding the Funnel: Turning Users into Profits

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

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