The document discusses the importance of the sales funnel in converting users into profits, emphasizing metrics like conversion rates and customer acquisition cost (CPA) versus lifetime value (LTV). It highlights strategies for user engagement and monetization, such as utilizing virality and optimizing calls to action. The author, Nicholas Lovell, shares insights on how to effectively manage and analyze the funnel to enhance business profitability.

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

2. Who am I?Founder, www.gamesbrief.comClients include Firefly, Huddle, Rebellion and othersNon-executive director, nDreamsStrategy director, ChannelFlipFormer CEO, GameShadowFormer CFO, ShopSmart.com

3. What am I talking about?

4. The funnelUsersProfits

5. How most people start1% convert = £1,000.001% convert = £10.00Say each costs £0.10Only if the average user stays for 100 months!I’ll get some visitorsSome who visit will registerSome who register will subscribeSubscribers will spend an average of £10 per monthI’ll put my Maserati on order

6. The funnelUnique usersRegistered usersActive usersPaying usersProfitsRevenues

7. Feeding the funnelMarketingPRSEOSEM/PPCUnique usersHarness users to create virality:Referrals

8. Facebook Connect

9. Importing contacts

10. TwitterCross-promote from other titles

11. Converting the funnelFor your business:Draw the funnelReduce to as few steps as possibleKnow the conversion rate for every stepTweak, iterate, test until you know exactly how your funnel converts Unique usersRegistered usersActive usersPaying usersRevenues

12. Adding friends - Foursquare

13. Finding the leversUsers are not the only metricThe others depend on your business, but might include:Page viewsVideo viewsGame downloadsPurchase of a virtual itemA metric that you can’t influence is no goodFocus on LEVERS

14. Digression 1: Calls to ActionOn every page, you should know what you want your users to doThen SHOW THEMe.g. Register/Log In/Buy/SubscribeBut also:Tell a friendPlay a gameConnect with Facebook/Twitter

15. Great homepage designwww.shidonni.com

16. Monetizing the funnelThere are many sources of revenueVirtual goods / microtransactions are flavour du jour (and my favourite)In your own business, focus on ARPPUAdvertisingVirtual GoodsRevenuesSubscriptionsDownloads

17. Digression 2: what users buy

18. Making profitsProfitabilityAssumption: Variable cost = 10% of salesAny profit can be spent on acquiring customers (CPA)

19. The equations

20. Why the funnel mattersThe funnel matters because it is your entire businessTo emphasise that, we need Equation ICPA < LTV = good businessCPA > LTV = troubleWhere:CPA is cost to acquire a userLTV is the Life Time Value of a user

21. Harnessing viralityA viral business can be an insanely profitable businessCPA 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%WhereA% = Percentage of your users who invite a friendB = Number of friends they inviteC% = Percentage of friends who accept the invitationIf 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 LTVMonetized: High CPA, high LTVEither is fine, or even a blend, but keep focusing on the conversion rate