February 2015 – The Business of Social Games and Casino

Creating that Aha moment

There was a great blog post on the Mode Blog, “Facebook’s Aha Moment is Simpler Than You Think,” which provided a straightforward strategy to creating Aha moments. Aha moments when a player or user understands the value of your product are widely considered the key to growth.

The key point of the post was that you create the aha moment through simple math and strong messaging; it is not a complex task that requires advanced analytics. Take Facebook’s self-defined aha moment, acquiring seven friends in ten days. In practice, this is not a binary. Some people may fall in love with Facebook after getting three friends in a week; others may need to get twenty friends in thirty days. This fact does not take away from the aha moment, it is actually the point of the aha moment. The blog post states, “Facebook’s decision to define their ‘aha moment’ in such simple terms suggests they weren’t trying to optimize it to be precise as possible. Other “aha moments”—30 follows, 1 file upload, 2,000 messages—follow the same pattern: they emphasize simplicity over science…. Because “aha moments” aren’t about precision, but about defining a core principle and a quotable rally cry for the entire company. “

Defining the aha moment

To create a useful aha moment, you need to tie it to a metric that defines customer value. Keep in mind that it is not one “moment,” Facebook’s aha moment is over ten days and requires seven different actions (friending seven people).

The most useful metrics for quantifying your aha moment are based on retention. Customers who find value come back. If you identify which actions separate retained customers from lost ones, you will know what drives customer value and then have your “aha moment.” Continue reading “Creating that Aha moment”

It is NOT going to be different this time

One phrase has wiped billions of dollars off the balance sheets of individuals and companies: “This time is going to be different because….” It is how people often rationalize jumping on a trend or bubble, even when past experience shows it will not last. The rise of Trivia Crack (which I play frequently), and the commentary accompanying it, is the latest example of this phenomenon.

The housing crisis

During the height of the US housing market bubble, I remember seeing multiple experts explain why the steep run-up in prices was not the same as past bubbles. They explained that it was due to changing demographics, realignment of wealth, new consumer behavior that favored home ownership over other asset classes, and other arguments that made them sound very smart on CNBC. Years earlier during the dot.com boom, experts (many of them the same) explained how that was not a bubble and companies would no longer be valued on profitability (but on market share) and how the economics have changed.

In each of these boom times, experts and laymen alike refused to look at past history, such as Tulip Mania, and picked facts to justify a difference where none existed. Turns out these arguments, while factually correct in some cases (i.e. demographics have changed in the US) were simply noise and did not truly impact the underlying asset value.

Trivia Crack

This same phenomenon is evident in the technology and digital game space. A game becomes very popular and immediately the entire industry thinks there is a new formula for success. The company behind the game may sell for millions and literally hundreds of companies try to “fast-follow” or add the mechanic to existing products. Continue reading “It is NOT going to be different this time”

It is about creating a monopoly, not winning

In Peter Thiel’s hot book, Zero to One: Notes on Startups, or How to Build the Future, he makes many interesting observations (some I agree with, some I do not) but one in particular is particularly valuable. Thiel asserts that great companies are not great because they beat their competition, they are great because they do not have competition. Although he does not quote Blue Ocean Strategy, it is very consistent with their thesis and data that shows that companies that create new markets have much higher economic returns than those who come up with new strategies to defeat their competition.

Basic economics

Thiel’s point about the benefits of creating what he refers to as a monopoly, what I call a blue ocean opportunity, resonated with me as he use basic economics to prove the point. At its core, classical economics shows competition will drive out excess profits. That is why although Exxon makes a lot of money, they do not make a higher return on investment than another oil company. Whatever you are doing, somebody else will copy.

Thiel points out that, “Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away. The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.“ Instead he advocates building a virtual monopoly, a company so good at what it does that no other firm can offer a close substitute. Continue reading “It is about creating a monopoly, not winning”

Individuality is the Key to Winning 1,000X

I often learn things from sports that are very applicable in business and Duke Basketball Coach Mike Kryzewski’s (Coach K) 1,000^th victory provided one of those moments. In all the post-victory analysis, one theme kept resonating: Coach K treats every single player differently. He takes the time to understand the player and then uses that understanding to get the most out of them (and help them develop).

The Battier story

Shane Battier, whom I have written about before, told the story that most resonated with me. When Shane Battier was at Duke early in his career, Coach K kept probing to determine what was important to him, and it was not how many points he scored. When Coach K asked, “are you ready to lead this to team and be an All-American,” that motivated Battier. Battier went on to be an all-American that year (2001) and Duke won a national championship.

The lesson

Many books on leadership and coaching extoll a strategy of what to say to employees to motivate them, but it is not optimal to pursue a one-size-fits-all strategy. A pep talk may work great for one employee while a cynical employee may get de-motivated. Motivating by financial incentives can work great with some people while others will then just do the minimum needed to get the financial incentives. A laid back approach works fantastic with certain employees while others will take advantage and spend all their time playing Trivia Crack.

If you want to be as successful as Coach K, you should spend time with every individual employee and get to understand them. Then work with them to build a plan that works for them and optimizes their contribution to the organization.

Key takeaways

Duke basketball coach Mike Kryzewski’s (Coach K’s) incredible success is largely due to treating every player differently.
What motivates one person may not motivate somebody else.
The best way to lead is to understand each individual and build a plan for each that optimizes their contribution.

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Examples of bad profits

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My definition of spam

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The secret to success

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What is the Net Promoter Score?

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The Ace Rent-A-Car story

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Defining the aha moment

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The housing crisis

Trivia Crack

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Basic economics

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The Battier story

The lesson

Key takeaways

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