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METRICS, BENCHMARKS AND BUCKETS
OF MONEY
Nicholas Lovell
GAMESbrief

Game Connection, Paris, 6th December, 2011
Nicholas Lovell, GAMESbrief
            • Author, How to Publish a Game,
              GAMESbrief Unplugged
            • Director, GAMESbrief
            • Clients include Atari, Channel 4,
              Channelflip, Firefly, IPC, nDreams,
              Rebellion and Square Enix
            • @nicholaslovell / @gamesbrief
Subscribe to the blog
MAKING F2P SIMPLE
REMEMBER: It’s about the fun
25 Add friction
 o Game design is about
   taking friction out.
 o Freemium design is about
   adding friction.
 o GOOD freemium design is
   about finding a balance –
   just enough friction to
   encourage some players to
   pay, without ruining it for
   the rest of us.
It’s about the metrics

Conversion    K-factor ARPU
     DAUs                   CPI
                  ARPDAU
            LTV            Virality
CPA
           Retention
                         MAUs
ARPPU
             CAC
It’s about the metrics



                OMFG
It’s about the metrics



                 WTF
What is the point of metrics?
• To connect game development and the finances of
  making games
• To teach you about your players and your game
• To help you make better decisions




               KEEP IT SIMPLE
THE GAMESBRIEF
SPREADSHEET
The spreadsheet




 www.gamesbrief.com/spreadsheet
6 key metrics
• MAUs
• DAUs/MAUs
• Retention rate
• Conversion rate
• Split into whales, dolphins, minnows
  • ARPU


• Oh, and I have platform share but it’s not a metric
THE PRINCIPLES
1 Feed the funnel
o To build a successful games
  business, you must feed the
  funnel
o Potential customers arrive
  at the top. In the middle,
  you convert them to
  payers.
o At the bottom, they
  become long-term, high-
  spending customers.
2 ARM yourself
o A successful online game
  must Acquire users, Retain
  them (usually overlooked!),
  and Monetise them.
o All three aspects must be in
  harmony.
o You need all three to build
  a successful long-term
  business.
8 Avoid the leaky bucket
o Acquiring customers is both
  hard and expensive.
o Once you get them, focus
  on retention to keep them.
o Don’t worry about getting
  new customers until you
  can satisfy the ones you’ve
  got!
3 Make it free AND expensive
  PRICE
   Revenue opportunity


                                   Marketing opportunity



                                                   Demand
o Giving your content away for free is a marketing
  opportunity.
o You have to find your revenue opportunity.
o Draw customers along the curve by offering them
  things they truly value.
THE DATA
MAUs
• I start with 200k MAUs – an ESTIMATE
• If I were being more accurate, I would model customer
 acquisition costs.
  • Maybe in version 2.0
• You won’t get a sizeable audience without spending
 money
  • CPI on Facebook is $1.00 to $1.50. Mobile seems to be cheaper
• BUT audience isn’t your primary measure of success
  • Find a small, niche audience with great retention, conversion and
    ARPU
  • Stop thinking like traditional media
DAUs/MAUs
• Also known as engagement
• Bizarre stat
• Driven by what Facebook chooses to publish
• Odd result:
  • MAUs easier for financial results, long term planning
  • DAUs drive monetisation, more accurate snapshot
• Target: 0.15 (aka 15%)
• Ratio fell steadily through 2011
  • Trip Hawkins said “FB games are shallow”
  • I said “its just the summer”
• Facebook’s recent changes bumped the engagement
 ratio up again
Retention rate
• I have an sighting estimate of 75%
• Churn rate = 1 – retention rate (i.e. 25%)
• Duration = 1 / churn rate (i.e. 4 months)


• Zynga has a duration of < 2 months.
• Very hard to get accurate benchmarks for retention
• My view: 75% is not average, it’s great.


• NOTE: Where you calculate retention from makes a
 difference.
6 Acquisition lasts longer than you think
o The Acquisition process doesn’t end when I click
  “install”!
o 20 million people every month take a look at Cityville –
  and never return!
o You haven’t got a customer until they spend 20
  minutes playing. Make sure those first 20 minutes are
  your best stuff!
Conversion rate
• Should I look at it daily or monthly?
• I use daily
• When looking at benchmarks, try to work out what
 conversion rates they are using:
  • What percentage of daily users spent money?
  • What percentage of monthly users spent money?
  • What percentage of all users have ever spent money?



• Tiny Tower: 3.8% of users in the first six weeks
• ngMoco: 2% of DAUs
• Anything from <1% to around 20% is feasible
Whales, dolphins, minnows
   PRICE
    Revenue opportunity




                                                   Demand
• An approximation of the power-law
• Minnows: spend the minimum ($1), 50% of spenders
• Dolphins: a “middling amount” ($5), 40% of spenders
• Whales: spend a lot ($20), 10% of spenders
The importance of the power law
                            Revenue
                               ($)     (%)
            Whales          $ 36,000   44.4%
            Dolphins        $ 36,000   44.4%
            Minnows         $ 9,000    11.1%
            Gross revenue   $ 81,000

• Whales are 0.5% of your users; 44.4% of your revenue
• 89% of your revenue comes from your higher spenders
• Across the whole business:
  • ARPU: $0.41
  • ARPPU: $4.50
HOW TO USE THE
SPREADSHEET
DISCLAIMER
• Your business will not look like this.
• You will not make $2,946,789 in year one
• Do not rely on this spreadsheet as an accurate financial
 predictor
The practical use
• All game developers have too many ideas to improve their
    game
•   You need to prioritise
•   Use the GAMESbrief spreadsheet to get a snapshot of the
    headline areas of Acquisition, Retention, Monetisation
•   Identify which are below benchmark
•   Work on those areas for the next sprint
•   Move on
•   Repeat
Conclusion
• You need metrics to make a successful free-to-play game
• They are useless unless you use them to make informed
  decisions
• And then act on them
• It doesn’t even matter if my spreadsheet is right: look for
  the improvement in the metrics over time, not the absolute
  number
• If the spreadsheet doesn’t fulfil your needs, change it


• (And if you want to, send it back to me, or tell me what
 you’ve changed)
26 Pre-register for the book
o http://www.gamesbrief.com/52-game-idea-bombs/
o THANK YOU FOR LISTENING
Thank you
   nicholas@gamesbrief.com

       Follow my blog
     www.gamesbrief.com

        Buy my books

www.gamesbrief.com/spreadsheet

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Game Connection Paris: Metrics, benchmarks and buckets of money

  • 1. METRICS, BENCHMARKS AND BUCKETS OF MONEY Nicholas Lovell GAMESbrief Game Connection, Paris, 6th December, 2011
  • 2. Nicholas Lovell, GAMESbrief • Author, How to Publish a Game, GAMESbrief Unplugged • Director, GAMESbrief • Clients include Atari, Channel 4, Channelflip, Firefly, IPC, nDreams, Rebellion and Square Enix • @nicholaslovell / @gamesbrief
  • 6. 25 Add friction o Game design is about taking friction out. o Freemium design is about adding friction. o GOOD freemium design is about finding a balance – just enough friction to encourage some players to pay, without ruining it for the rest of us.
  • 7. It’s about the metrics Conversion K-factor ARPU DAUs CPI ARPDAU LTV Virality CPA Retention MAUs ARPPU CAC
  • 8. It’s about the metrics OMFG
  • 9. It’s about the metrics WTF
  • 10. What is the point of metrics? • To connect game development and the finances of making games • To teach you about your players and your game • To help you make better decisions KEEP IT SIMPLE
  • 13. 6 key metrics • MAUs • DAUs/MAUs • Retention rate • Conversion rate • Split into whales, dolphins, minnows • ARPU • Oh, and I have platform share but it’s not a metric
  • 15. 1 Feed the funnel o To build a successful games business, you must feed the funnel o Potential customers arrive at the top. In the middle, you convert them to payers. o At the bottom, they become long-term, high- spending customers.
  • 16. 2 ARM yourself o A successful online game must Acquire users, Retain them (usually overlooked!), and Monetise them. o All three aspects must be in harmony. o You need all three to build a successful long-term business.
  • 17. 8 Avoid the leaky bucket o Acquiring customers is both hard and expensive. o Once you get them, focus on retention to keep them. o Don’t worry about getting new customers until you can satisfy the ones you’ve got!
  • 18. 3 Make it free AND expensive PRICE Revenue opportunity Marketing opportunity Demand o Giving your content away for free is a marketing opportunity. o You have to find your revenue opportunity. o Draw customers along the curve by offering them things they truly value.
  • 20. MAUs • I start with 200k MAUs – an ESTIMATE • If I were being more accurate, I would model customer acquisition costs. • Maybe in version 2.0 • You won’t get a sizeable audience without spending money • CPI on Facebook is $1.00 to $1.50. Mobile seems to be cheaper • BUT audience isn’t your primary measure of success • Find a small, niche audience with great retention, conversion and ARPU • Stop thinking like traditional media
  • 21. DAUs/MAUs • Also known as engagement • Bizarre stat • Driven by what Facebook chooses to publish • Odd result: • MAUs easier for financial results, long term planning • DAUs drive monetisation, more accurate snapshot • Target: 0.15 (aka 15%) • Ratio fell steadily through 2011 • Trip Hawkins said “FB games are shallow” • I said “its just the summer” • Facebook’s recent changes bumped the engagement ratio up again
  • 22. Retention rate • I have an sighting estimate of 75% • Churn rate = 1 – retention rate (i.e. 25%) • Duration = 1 / churn rate (i.e. 4 months) • Zynga has a duration of < 2 months. • Very hard to get accurate benchmarks for retention • My view: 75% is not average, it’s great. • NOTE: Where you calculate retention from makes a difference.
  • 23. 6 Acquisition lasts longer than you think o The Acquisition process doesn’t end when I click “install”! o 20 million people every month take a look at Cityville – and never return! o You haven’t got a customer until they spend 20 minutes playing. Make sure those first 20 minutes are your best stuff!
  • 24. Conversion rate • Should I look at it daily or monthly? • I use daily • When looking at benchmarks, try to work out what conversion rates they are using: • What percentage of daily users spent money? • What percentage of monthly users spent money? • What percentage of all users have ever spent money? • Tiny Tower: 3.8% of users in the first six weeks • ngMoco: 2% of DAUs • Anything from <1% to around 20% is feasible
  • 25. Whales, dolphins, minnows PRICE Revenue opportunity Demand • An approximation of the power-law • Minnows: spend the minimum ($1), 50% of spenders • Dolphins: a “middling amount” ($5), 40% of spenders • Whales: spend a lot ($20), 10% of spenders
  • 26. The importance of the power law Revenue ($) (%) Whales $ 36,000 44.4% Dolphins $ 36,000 44.4% Minnows $ 9,000 11.1% Gross revenue $ 81,000 • Whales are 0.5% of your users; 44.4% of your revenue • 89% of your revenue comes from your higher spenders • Across the whole business: • ARPU: $0.41 • ARPPU: $4.50
  • 27. HOW TO USE THE SPREADSHEET
  • 28. DISCLAIMER • Your business will not look like this. • You will not make $2,946,789 in year one • Do not rely on this spreadsheet as an accurate financial predictor
  • 29. The practical use • All game developers have too many ideas to improve their game • You need to prioritise • Use the GAMESbrief spreadsheet to get a snapshot of the headline areas of Acquisition, Retention, Monetisation • Identify which are below benchmark • Work on those areas for the next sprint • Move on • Repeat
  • 30. Conclusion • You need metrics to make a successful free-to-play game • They are useless unless you use them to make informed decisions • And then act on them • It doesn’t even matter if my spreadsheet is right: look for the improvement in the metrics over time, not the absolute number • If the spreadsheet doesn’t fulfil your needs, change it • (And if you want to, send it back to me, or tell me what you’ve changed)
  • 31. 26 Pre-register for the book o http://www.gamesbrief.com/52-game-idea-bombs/ o THANK YOU FOR LISTENING
  • 32. Thank you nicholas@gamesbrief.com Follow my blog www.gamesbrief.com Buy my books www.gamesbrief.com/spreadsheet