The unveiling this week at Mobile World Congress from Dell about their Ophelia project (thank you Jon Downey for bringing it to my attention) may have a profound impact on the game industry as early as Q3 of this year. Ophelia is a stick that turns a TV or monitor into your computer (through the HDMI port initially but there will be a USB version in the future), powered by Android. It is effectively your computer on a stick, which then integrates with Dell’s cloud services and allows you to use your apps or play your games. You can even upload and download files as if you were at your PC (or Mac).
Think about pulling out your Ophelia stick, plugging it into your TV and you can just start playing Bejeweled or Slotmania. Later, you plug it into your monitor at work. When you’re traveling, just plug it into the TV in your hotel room. You can play all your games, edit your documents, view your pictures, and anything you would do with a laptop or tablet. Continue reading
In previous posts, I discussed the importance of customer lifetime value (LTV), its key elements (monetization, retention and virality) and how to calculate LTV; but it is important to also understand that there is not a monolithic LTV for your game (or product). You may remember that the practical value of LTV is to use it as a metric to determine whether or not an ad spend has a positive return. If the LTV is higher than the cost per install (CPI), it is profitable to advertise (and vice versa).
The key to success, though, is understanding the LTV of the customer you will be acquiring as opposed to the general LTV for the game. Some low cost user acquisition channels may bring in players who are effectively worthless (they leave your game right after they click on the ad) even in a game that has a high overall LTV, so understanding the lifetime value of these users would save you from wasting your money. Conversely, there may be a very expensive advertising channel that brings in great players who all monetize well and have a much higher lifetime value than their CPI.
There are four factors that you should use to calculate separate LTVs (and in different combinations): Continue reading
The big buzz phrase in the Bay Area the last year or so has been “growth hacking,” and the ideas behind it can help significantly game companies. The underlying principle in the phrase is that modern start-ups should be focused on using the new tools available via technology to grow rapidly their user base rather than relying on older, sometimes outdated, marketing techniques. Growth—unlike marketing—usually encompasses multiple aspects of an organization, with the growth team not only bringing in users but also working with the product team to optimize the product for growth. It stresses the importance of product to growth and how the two should work together rather than having marketing set aside in a corner. The phrase itself was coined by Sean Ellis, CEO of Qualaroo and the first marketer at many great tech companies including Dropbox and LogMeIn.
What is a growth team?
A quora post from Andy Johns (currently on Quora’s growth team and one of the early members of Facebook’s growth team) described the typical people an early stage company would put on its growth team: Continue reading
Veteran entrepreneur and investor Mark Suster recently blogged about how online video will disrupt the traditional television space and this evolution with online video will extend beyond television to disrupt many industries, including social media and games. Suster describes how the Harlem Shake video on YouTube started as a skit launched 20 January that generated about 10 million views, was then popularized into an Internet meme by text from an Australian team, and then Maker Studios turned it into a video that has generated more than 17 million views. What is exciting about Harlem Shake is that it has effectively been produced by tens of thousands of people, creating 50,000 versions viewed 200 million times.
Suster makes the point that Harlem Shake is an example of the disruptive potential of a world filled with millions of people who can create great content and now have the resources to do so. Continue reading
The Wall Street Journal reported that more than 90 percent of app toys fail around the same time Activision announced that Skylanders’ sales exceeded $500 million. Among the failed app toys were Barbie Dolls and Hot Wheels cars with special conductors to control games on a tablet from Hasbro, Disney’s Cars AppMates, and a version of the Game of Life from Hasbro in which players spin a wheel on an iPad rather than a physical wheel. Yet, Activision’s physical virtual goods continue to sell incredibly well, driving Activision’s profitability. This interesting juxtaposition of news shows the value of using the equivalent of in-app purchases rather than the business models designed around retailing, distribution and manufacturing processes from the last century.
What is wrong with App Toys?
The biggest problem with app toys is that the toy makers are simply trying to move the same product to a new platform. The toy companies do not understand what creates compelling experiences on tablets (or consoles or phones, for that matter). Instead, they are replicating the same experience people have with the physical goods in the virtual world, which is not what consumers are looking for. They are competing with (thousands of) native games and products that are created to meet customers’ needs. It becomes obvious why the app toys cannot compete. Continue reading
Activision’s earnings announcement yesterday shows how attractive successfully conquering the physical virtual goods market is. On November 27, I blogged that Activision would be the big winner Q4 2012 on the strength of the Skylanders franchise and its reliance on a new business model, selling physical versions of virtual goods. I elaborated on that post earlier this month, commenting that the emergence of the Physical Virtual Goods monetization model was one of the most exciting developments in the gaming space in years .
Today, Activision’s stock rose 14 percent because earnings tripled from the fourth quarter last year (in a period in which overall video games sales slumped). Net income increased 257.58 percent to $354 million in the quarter versus a net gain of $99 million in the year-earlier quarter. Revenue rose 25.66 percent to $1.77 billion from the year-earlier quarter (unfortunately, some of that is due to my family).
This report affirms my belief that physical virtual goods are an incredible opportunity. While I do not advocate trying to copy exactly what Activision has done (I believe in blue oceans, not fast following), there are many elements in this space (e.g., product type, demographic) that represent incredible opportunities for game companies.
Mark Robinson, the Co-Founder and COO of GamesAnalytics , was generous enough to write the first guest post on my blog, getting into the mechanics of determining Lifetime Value (LTV). This post does a great job of putting many of the ideas I have discussed in my LTV series into practice. Here are Mark’s thoughts on calculating LTV.
The games industry is quickly learning how to design engaging player experiences and make money from free to play (F2P) games. The transformation from console to online has placed analytics at the heart of game design and management. There are two types of analytics. Game Performance metrics let us interpret the health of our games. Player Behavioural metrics tell us what to do about it to make things better. Continue reading
I have written several times about Moneyball and many times about customer lifetime value (LTV), so I wanted to bring the two together. Moneyball was the Michael Lewis book turned into a successful film about Billy Beane and how he made the Oakland A’s competitive by relying on analytics over intuition (for more detail, please see Lessons from Moneyball for the Social Game Industry and Moneyball Strikes Again). The same principles that help the Oakland A’s compete effectively could help social game companies compete, even against better financed firms. The same phenomenon holds with LTV, in which many of the metrics people focus on do not have maximum impact on long-term success.
Runs = LTV
LTV serves the same role in your business as runs do in baseball. Beane and his analysts realized that the success of a baseball team comes down to scoring more runs than your opponent. They thus reverse-engineered the game and its players into what contributed to scoring runs and what contributed to preventing runs. They then used their resources that maximized the delta between runs scored by the A’s and runs that they allowed. Continue reading
I will be speaking today at 11 at Groundwork Labs, the Durham-based technology accelerator, on why companies in any industry need to focus on LTV, the primary levers and its impact on success. Anyone interested and in the area is free to come by. Much of the discussion has been covered previously in this blog, but feel free to check out the presentation on Slideshare: