Gerald Tan discussed the business model of social games. He explained that the key metrics are reach, acquisition and liquidity, retention, spenders, and revenue. Different genres have different benchmarks for these metrics. The most effective business model is freemium with microtransactions, which allows free play but charges for virtual items. User retention, conversion to spenders, and average revenue per paying user are important factors that impact revenue.

1. Business Model of Social Games
TIGA Event - Casual Games Meetup
(2012-Jan-25)
Gerald Tan
Co-Founder, COO (Head of Product)

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4. GERALD TAN
Co-founder, COO (Head of Product)
Plumbee
Strategic Advisor Hooplo Media 2011
Independent Consultant 2011
Senior Product Manager / Producer Playfish (EA) 2009-2011
Finance and Business Manager Pogo.com and EA Online
Publishing (EA) 2007-2009
Financial Reporting and Control Manager EMI Group PLC
2004 - 2007
ICAEW Qualified Chartered Accountant
2002
gerald@plumbee.co.uk
Twitter: @tan_gerald

5. Each key metric is connected
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6. Right
benchmarks
is essential
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7. Different Business Models
Subscriptions Freemium + Lite Freemium
Advertising +
(Display) Microtransactions
Freemium + MTX : Most effective business model
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8. Definitions Uses
Freemium: Freemium:
- use for free but premium - low barrier entry point
content chargeable
Microtransactions: Microtransactions:
- virtual items purchasable - pay according to what
for small amounts of “perceived” value is
real currency
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9. Users

10. Social Games
Mobile Games
Source: Mashable, Oct 2011 10

11. Funnel
Reach size of audience
Acquisition + Liquidity adding audience
Retention keeping audience
Spenders converting to spenders
Revenue bottom line

12. #1 Reach
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13. Reach
Reach
Acquisition + Liquidity
Retention
Spenders
MAU and DAU Revenue
Differs by genre
Resources Mgt Casual Gaming / Casino
• DAU big ranges (Cityville • “Real game mechanics” • “New-ish” category
peaked at 100M, • Light and easy to get • Slotomania (1.7M),
Millionaire City 2.5M, into - casual player DoubleDown Casino
Restaurant City 5M) • Bubble Witch Saga (1.1M), Bingo Blitz (0.9M)
• Competitive genre – (4.2M DAU and rising) • High ARPDAU
most games are in this • Bejeweled Blitz (peaked • Older female skew
category at 4.6M)
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14. #2 Acquisition and Liquidity
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15. Reach
Acquisition and Liquidity
Acquisition + Liquidity
Retention
Spenders
Revenue
Paid Installs
• As low as $0.1 to start
• $1 to $3 depending on segments
• Auction based platform
• Scale and spend is punished
Viral Installs
• k-factor ranges btw 10% to 25%
• Good social games with strong
viral hooks can be very high at start
• Reach close to peak within 3 to 4
months 15

16. #3 Retention
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17. Reach
Retention
Acquisition + Liquidity
Retention
Spenders
Revenue
Retention rates
• Day 2 retention rates is crucial
• Good games retain 35% to 40%
• Overtime quality installs drops
• Retention by level and on-boarding
drop offs to prevent lapsing users
Newbies and Veterans
• Day 3 - 7, D14, D21, D30, D60 –
there is a difference between
newbies and veteran retention
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18. Newbie + Veteran Average Retention
Decay curve of a social game
Only 35% and 45% of users
% returning users
Veterans
actually come back the
next day
Newbies
The rest lapse out
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19. #4 Spenders
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20. Reach
Spenders
Acquisition + Liquidity
Retention
Spenders
Revenue
Metrics
• Small % of spenders ( <5%)
• Depends on the product offering
• By genre ARPDAU is different
Price
$50 Small % of spenders will
generate most of the
$20
revenue
$5
$1
1% - 5% 95%+ No of users
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21. #5 Revenue
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22. Reach
Revenue
Acquisition + Liquidity
Retention
Spenders
Revenue
DAU ARPDAU
Conversion
DAU rate
Spenders
Spenders ARPPU
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23. Reach
Revenue
Acquisition + Liquidity
Retention
Spenders
Revenue
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25. Gerald Tan
gerald@plumbee.co.uk
twitter.com/tan_gerald
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