I recently read about Lloyd’s of London’s (no relation) contingency planning in case of a full Euro collapse and realized social game companies should be doing the same. There is a real possibility that by the end of June Greece will leave the Euro and bring back the drachma, I would peg this scenario at greater than 50 percent, but as I believe few of you have significant Greek exposure the greater risk is that a Greek withdrawal of the Euro either brings down the entire currency or forces other at-risk economies (Spain, Portugal, Italy and Ireland) also out of the Euro. If it happened, and economists peg the possibility at between 10 and 25 percent, it would happen quite quickly, possibly over a weekend, leaving game companies little time to react. Rather than reacting to what happens in Brussels and potentially losing key revenue for weeks, it is better to plan now. There are several key issues you should consider.
Have localized payment pages ready
One key step is to prepare iFrames or payment pages for your major markets that could be easily converted into local currency. If Italy is a significant market for you and they withdraw from the Euro, you do not want to present them with options denominated in Euros as they no longer will have access to them; instead their options should be in Lira (or whatever currency they emerge with). This is the same for other markets that have significant impact on your revenues (Germany, France and even Ireland). If it takes you several weeks to create monetization pages for these markets, you could see your European (non-UK) revenue go to zero.
Adjust for currency fluctuations
National currencies are likely to be much more volatile than the Euro, especially initially as currency markets try to grasp the overall situation. The drachma may fall 75 percent in its first week, so your initial price level set at the currency’s launch price may effectively be generating only one-quarter the revenue for premium currency or items that it was a week before. That said, you need to price to local market conditions and not be fixated on charging Germans and Italians the same price for an item. The goal is to optimize revenue from each territory, not have a monolithic pricing policy across all markets. Keep in mind that you will have to adjust these prices regularly, though, to keep up with changes in the most volatile economies.
Prepare for inflation
Related to the point above, many currently Eurozone countries are likely to experience significant inflation if the Euro collapses (or they withdraw). I have written previously how important it is to adjust price levels inside social games regularly to adjust for inflation (my blog post last June on adjusting price levels to keep up with inflation). If there is double-digit inflation in a particular country, failure to adjust price levels may not only cost you significant revenue but also throw the game out of balance, allowing players to cheaply acquire everything or play through levels too quickly.
Target
These issues all add up to a much more complex environment to service the European market. As there is no reason to believe that revenue will increase to compensate for this complexity and the added resources it will require, you need to ensure that it is still smart to support all the Eurozone markets you previously supported. When you factor in localization and support costs, you may decide that it only makes sense to create German and French versions of your games. You should revisit each market and see how the crisis affected profitability. As the situation is likely to remain volatile for a while, you probably should revisit the analysis monthly.
Conversely, you may want to refocus some of your efforts, even now, on territories that are not part of the Eurozone. I have written previously about how promising I see Turkey and Poland, and both those countries give you European exposure without the Euro risk. Obviously, non-European economies can also help with international diversification while limiting your exposure to the Euro.
Summary
Hopefully, Europe will avoid a collapse of the Euro or keep it isolated to Greece but you should not plan your business around hopefully. Even if the crisis is limited to the periphery economies of Greece, Ireland, Spain, Portugal and Italy, one or two of them might be significant sources of revenue If you create a thorough strategy for dealing with all significant possibilities. It is always better to be too prepared than to be caught off-guard.
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