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

1. Feeding the funnelTurning users into profitsNicholas LovellGamesbriefwww.gamesbrief.com

2. 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

3. What am I talking about?

4. The funnel Users Profits

5. 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

6. The funnel Unique users Registered users Active users Paying users Profits Revenues

8. Facebook Connect

9. Importing contacts

10. TwitterCross-promote from other titles

11. 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

12. Adding friends - Foursquare

13. 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

14. 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

15. Great homepage design www.shidonni.com

16. 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

17. Digression 2: what users buy

18. Making profits Profitability Assumption: Variable cost = 10% of sales Any profit can be spent on acquiring customers (CPA)

19. The equations

20. 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

21. 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

22. 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

23. 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

24. 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