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The Business of Social Games and Casino

How to succeed in the mobile game space by Lloyd Melnick

Month: May 2016

Try to be the dumbest person in the room

I have seen many examples of people who want to be the smartest at a meeting, or on an email thread, but the most successful are the ones who want to be the dumbest at the meeting. While it may feel that the strategy of highlighting your intelligence is important for your career or management, the opposite is true. Instead, if you focus on trying not to be the smartest person in the room, you are likely to be the most successful. You will get better input, more creative ideas and improved team performance when you allow others to be the smartest.

Shut up
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Surround yourself with the best

First, you should surround yourself with the best people available. If your goal is to be the smartest, then you are not necessarily putting great people around you. Thus, their performance is likely to be sub-optimal. Great people generate great results and you need to be willing to surround yourself with great people. It is these top performers who drive success.

Not going to learn from yourself

If you spend most of a meeting talking or trying to impress, you are not learning anything. How can you learn when you are talking. If you are trying to find the optimal solution to a problem but focus the conversation on what you are saying, you will cap out at your best solution to the problem, not the best solution in the room. By letting everyone speak and respecting their ideas, you will have the option of selecting the best one. Assuming it is your decision, you then have the option of your best idea or your best idea plus all the others that are proposed. In a worst case, you can still proceed with your idea but now you have many more options.

Everyone has good ideas

If you look at all the fantastic ideas throughout time, you will see that there was not one (or even) a small group responsible for the majority of them. While Stephen Hawking wrote about singularity, Albert Einstein built the theory of relativity, Michio Kaku came up with string theory, etc. The point is that no matter how smart any one person is, there are millions of other very intelligent people. This phenomenon exists on all levels, from the best physicists to the smartest marketers to the best product managers. While you may have some very creative solutions to improve monetization, do not think that others in the room do not have even better ideas.

Great leaders are not great at everything

If you are a great leader, there is no way you are also great at every functional area you are responsible for. You may have wonderful leadership skills, and have risen to that position by innovating on the growth team and building a Unicorn. That does not mean you know analytics better than your lead analyst or finance better than your CFO. You should defer to the experts rather than trying to tell them how to do their work.

Listen

It is not only important to let other’s talk at meetings, it is more important to listen to them. Nobody is going to be motivated to talk if you are not listening. People can tell if you are asking them to talk just to check off a box or whether you and others are actually listening and digesting what they are saying. More importantly, you are not generating any additional value by having people propose ideas or raise concerns and then not addressing them.

Don’t ignore

The above point leads to a critical element of why you want to be the dumbest in the room, you want to leverage the suggestions and ideas everyone has. This is not an exercise in getting buy-in from everyone by pretending to listen to their concerns or advise and then going with your initial idea. The goal is to get the best comments from everybody, have the team work together to synthesize the suggestions into an idea superior to anything anyone (yourself included) initially had. Come out with a better idea, not a perceived feel good exercise that really puts you in the same position.

Measure on results, not sound bites

The measure of success of a meeting, or a working group, or an email thread is not how smart it made you look but that it generated the best possible results. These results are what will also drive your long-term success, not how much you impressed the others at the meeting or on the email (last thought, you didn’t impress them anyway but made them think you were pompous).

Key takeaways

  • Rather than trying to sound the smartest at a meeting, you should aim to be the dumbest.
  • It is more important to surround yourself with great people who will bring performance to a level higher than any individual can achieve.
  • You not only need to get input from everyone but actually use the input to come up with better solutions than you are initially proposing.

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Author Lloyd MelnickPosted on May 25, 2016May 1, 2016Categories General Social Games Business, General Tech BusinessTags collaboration, Meetings, teams2 Comments on Try to be the dumbest person in the room

Subscriptions 3.0

Although most of my success is with the traditional free-to-play (F2P) in-app purchase business model, the big opportunity will be on layering additional monetization on this model. One old model that I think represents a great opportunity for casual games is the subscription model, a model that pre-dates online gaming. A recent article on Alist, Subscriptions Reborn for Gaming, does a good job summarizing the history and pointing to the future of the subscription model.

Subscriptions in gaming in days past

First, it’s important to note that the subscription model is not new to gaming. The rise of MMORPGs, think World of Warcraft or Everquest, was driven by subscription revenue. At it’s peak (2010), World of Warcraft had over 10 million subscribers (most at over $20 per month).

The importance of subscriptions, however, subsided with the growth of in-app purchases. Most MMORPGs moved to a mixed or purely F2P model. Now. World of Warcraft is the only major product that is largely subscription based, and it offers free play up to level 20.

Other online entertainment have gone the opposite way

While gaming has moved away from subscriptions, it is increasingly important for other online businesses. Amazon Prime, Amazon’s streaming media and free delivery service, with over 50 million US subscribers and about 80 million worldwide. Music has evolved from selling albums or singles to subscription services like Spotify and Pandora. DVDs sales have plummeted while Netflix now has over 80 million subscribers. Thus, in other entertainment spaces, the subscription model is driving revenue now.

Subscriptions in gaming now

While not many games are offering subscriptions, yet, many gamers are already subscribing. Microsoft and Sony both have tens of millions of subscribers to Xbox Live and Playstation Network, respectively, for access to multi-player gaming and new, free games. Electronic Arts is seeing success with its Origin Access subscription service, which for about $4/month gives players access to classic EA games as well as new games before other customers.

The opportunity for subscriptions in gaming

While there is clearly a demand for game subscriptions, one hurdle that remains is Apple’s restriction on iOS subscriptions. With Apple, to offer an “auto-renewable subscription,” that is a subscription that automatically renews rather than asking the customer to purchase it again after a set period of time, you must provide a product that cannot be used up over time, what they call a non-consumable. A consumable could be an hour-long experience point boost in a game app. On the other hand, a non-consumable could take the form of an unlocking a theme, since it could be restored again later.

If you assume that Apple will not change its policy soon, you should not create separate strategies for Android and Apple given the importance of the iOS platform, instead build a subscription model that works for both. While there is no set of best practices yet in the mobile space for leveraging the subscription model, I suggest following the plan below to test this model

  1. Look at micro-subscription, small monthly amounts. $0.99 or $1.99 is not a large burden on players but not only will it generate revenue but will get them further invested in your product.
  2. Consider multiple subscription tiers. $0.99 for the silver subscription, $4.99 for the gold. This provides opportunities for your most engaged players to get the most benefit but is also accessible for all players.
  3. If you have an in-game VIP or loyalty program, offer subscriptions for players to move up or stay at a certain level. I would pay $10/month to retain my Platinum Status on American Airlines, let other people buy into status (plus it puts a monetary reward on it for players who earned it).
  4. Decide whether it is a company wide subscription (like EA’s Origin Access) or if it is game specific. The former obviously makes sense only if you have, or plan to have, a broad range of titles.
  5. Decide what to include in the subscriptions but always test. Different options include early access to new content or games, discount on purchases (which also may include IAP monetization), special avatars or themes or a regular XP boost. The benefits are game/company specific but should be broad enough to ensure a majority of players would see value.

As the model evolves, it will be interesting to see what does and does not resonate with players. By watching the space, you can learn best practices and build from there.

Slide1

Try it

While the subscription model is unproven in casual games and there is no defined model on how to do it right, you should still try it. It is increasingly difficult to monetize mobile apps, or at least monetize at a level that covers your acquisition costs. By adding subscriptions, you may find a secret to increasing lifetime value and thus enabling growth.

Key takeaways

  • Gamers have responded to the subscriptions model since MMORPGs, though it lost favor to in-app purchases recently.
  • Other areas on online entertainment – music, film, video – are driven by the subscription model.
  • Subscriptions represent an opportunity, though currently unproven, to increase revenue and customer lifetime value.

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Author Lloyd MelnickPosted on May 18, 2016May 1, 2016Categories General Social Games Business, Mobile PlatformsTags in-app purchases, monetization, Subscription1 Comment on Subscriptions 3.0

What poker can teach you about business

Joining PokerStars last year had one unexpected side benefit, learning poker skills that makes me more effective. Shortly after starting at PokerStars, I had two of our resident ex-pro poker players give me a crash course in Poker so I can understand our products better. While I am still far from a good player, several of the principles they taught are equally important to succeeding professionally.

Blog JP photo

Don’t bluff

The first thing I was told was never to bluff. This advice is equally valuable in the workplace. Do not threaten an action if you do not plan to follow through. Once you do and the other party calls your bluff, you no longer have any credibility. Moreover, you can put yourself in a weak position if you are bluffing and the other party has a stronger hand than you believe, then they may raise (challenge you) and you will not be able to respond.

This principle does not only impact negotiating with other companies but also handling your career. I remember several years ago an employee coming in threatening to leave for another offer if we did not give him a significant raise. Unfortunately, their work did not warrant a raise and we wished them luck with the other position. It turned out that they did not actually have another offer and were left unemployed.

Don’t assume another player is bluffing

A corollary to not bluffing is never assume your opponent (or in this case a company you are negotiating with) is bluffing. In most cases, the counter-party actually has a strong position. Thus, determine your best course of action under the assumption that they are in a strong position. That may mean making a deal with them that is sub-optimal for you but still better than no deal, rather than pushing too hard and ending up with nothing because they have strong alternatives. As my Yoda said, “take the word bluff out of your vocabulary.

Be aggressive with a strong hand

While you should avoid acting like you have a strong hand when you do not, be aggressive when you do have a strong hand. That is the time to get the best deal for yourself or your company. You do not get many fantastic hands in life (the equivalent of a royal flush), so when you do you need to make up for all the times you folded because you did not try to bluff or assumed your opponent was not bluffing.

I spoke earlier of a situation of a person with a very weak hand trying to bluff their way to a higher salary only to lose their position; I also saw someone with a very strong hand play it into security for life. In the latter case, a colleague was responsible for a very successful game, one that positioned the company for success. Rather than simply smiling and accepting a nice (guaranteed) bonus check, they threatened to leave unless they got a new contract that guaranteed them financial security and creative control effectively for life. They could do this because the successful game not only made them critical for their company but meant they could go virtually anywhere they pleased. He thus used this strong hand to not only secure his future but that of his children.

Patience

The need to only play strong hands (derived from not bluffing), but play them powerfully, also creates a need for patience. In poker, you have very few strong hands, probably less than one out of five. That means 80 percent of the time you need to fold and sit back and watch everyone else play.

This patience is much easier said than done. Most people, myself included, do not like to wait. You are anxious to play, you feel you are letting yourself or your company down by not acting. Most of the time, though, the optimal strategy is folding until you have a strong hand that you play aggressively. It may not be the most fun but it is the most effective.

Don’t bet your entire bankroll

Another key principle is to never bet your entire bankroll. Even if you feel you have a strong hand, you should not risk more than 25 percent of your bank roll. Rather than a hard number, I have heard you should not bet more than you are comfortable loosing.

Launching a great new product is a good example. You may have a product that has been testing well and you believe in strongly. Rather than bet your entire company on the success of the product, you need to keep resources to support the rest of your business. Elon Musk has shown this with the launch of the Model 3. While Tesla clearly believes this is their breakthrough product, they continue to develop the Model X SUV and improve the Model S. While you may think your new product is the future, a competitive product can undercut it or the market may not react the same as it did during testing.

Information is critical

In poker, good players leverage data to optimize their chances of winning. This data can come from knowing the odds of what hands are likely, watching how other players are playing (see below) or pulling data on opposing players from various data sources. They also do not provide information when not required. They do not show what cards they have if they folded or if the other player folds before showdown. Less is more when disclosing information.

In the business world, success is also driven by information. If you are trying to do a deal with a company and know that they are about to have an important earnings call and word of your deal will help stock price, you can extract better terms than if you treated the negotiation as if it was happening in a void.

Watch and listen

The final, and possibly most important lesson, was to spend most of your time studying your opponents. By understanding your opponent, anticipating patterns in their behavior, translating their body language to future action, you can decide on the best course of action.

An example of the power of observation is a story I was told about a professional poker player who won a tournament purely based on observation. The player never once looked at his cards. Instead, he folded, called and bet based on what he saw of his opponents. Never underestimate the power of observation.

Key takeaways

  • Remove bluffing from your vocabularly. Do not try to bluff your opponent in business and do not assume they are bluffing.
  • When you are in a strong position, push your advantage.
  • Observe everyone you are interacting with and use those observations to put their actions into context.

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Author Lloyd MelnickPosted on May 11, 2016May 1, 2016Categories General Social Games Business, General Tech Business, Lloyd's favorite postsTags bluffing, PokerStars, StrategyLeave a comment on What poker can teach you about business

Using scarcity to increase revenue

I recently came across a great post, 9 Essential Ways to Use Scarcity to Increase Sales, on how to use scarcity to increase sales, something we all strive for. Scarcity is a technique used by traditional retailers for ages but something that applies to digital and virtual goods as well. By creating a perceived scarcity, customers are more likely to make a purchase quickly. It boils down to the phrase, “you always want what you can’t get.”

Scarcity promotions

There are several ways to use scarcity, including for virtual items:

  • Limited time sale. Make an offer that lasts for only a limited time. For example, players can get twice the normal amount of virtual currency with a purchase if the purchase is made in the next 24 hours.
  • Purchase countdown. Building on a limited time sale, Putting a timer or countdown within a sales context means defining some scarcity parameters. When the customer has a firm grasp on how much time he or she has left to make a decision, it adds a sense of urgency to the process.
  • Sale price countdowns. Countdowns can also be used in the context of a limited time sale price to remind viewers how much time is left to act before the discounted offer goes away.
  • Limited number of redemptions. Offer a sale that is only available for the first X customers.
  • Limited edition item. Sell a product where there are only a limited number made. This can be modified for virtual goods, there will only be a certain number of the good sold.
  • Low stock notices. While largely for retail, this can also be used with virtual goods, particularly limited edition virtual goods.
  • Limited time item. A virtual item or package that is only available for a certain number of days or hours.
  • Seasonal offers. A sale or item only available for a certain season. It can be anything from a Halloween Pumpkin latte to a Independence Day Virtual Chip bundle.

Slide1

Scarcity basics

For scarcity to work, there are several criteria that you need to meet. The first key is that it is useful. Making something that has no value scarce does not magically impart value on the item or offering. There needs to be an underlying value that can be accentuated by scarcity.

The offering should be transferable. By allowing people to share the offer, the offer filters to those who value it. Finally, you need to be able to own it, even a virtual good. One of the values of scarcity is that you can show it off and there is no way to show off something you cannot possess.

There are several reasons why scarcity works, and understand these reasons can help you create a stronger offering:

  • Scarce items feel exclusive.
  • Scarce items appear more valuable.
  • Scarce items make people feel powerful.

In the article, the authors also point to four limits on using scarcity:

  1. Test to know what works. As with anything, testing is always recommended. AB test different techniques, time limits, product limits, etc.
  2. Too much pressure is a bad thing. Give the user or customer time to make their decision.
  3. Everything in moderation. Limited edition or limited time sales work if they feel special, if there is one every day people soon realize they are only a sales tactic.
  4. Scarcity tactics are not a fix for lagging sales. If your product is not appealing, offering less of it will not turn things around. These tactics make a good product more successful, they are not a way to trick people into using a bad product.

Scarcity is a tool

Scarcity can be a very useful tool when building your promotion strategy. It is not a silver bullet but used effectively can help improve sales and conversions.

Key takeaways

  • Scarcity, or perceived scarcity, is a very useful tool for increasing sales.
  • Scarcity works because it makes items feel exclusive, appear more valuable and make the buyers feel powerful.
  • Scarcity is best used in limited time sales or limited edition items.

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Author Lloyd MelnickPosted on May 4, 2016April 18, 2016Categories General Social Games Business, Growth, Social Games MarketingTags promotions, Sales, ScarcityLeave a comment on Using scarcity to increase revenue

Get my book on LTV

The definitive book on customer lifetime value, Understanding the Predictable, is now available in both print and Kindle formats on Amazon.

Understanding the Predictable delves into the world of Customer Lifetime Value (LTV), a metric that shows how much each customer is worth to your business. By understanding this metric, you can predict how changes to your product will impact the value of each customer. You will also learn how to apply this simple yet powerful method of predictive analytics to optimize your marketing and user acquisition.

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Lloyd Melnick

This is Lloyd Melnick’s personal blog.  All views and opinions expressed on this website are mine alone and do not represent those of people, institutions or organizations that I may or may not be associated with in professional or personal capacity.

I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group/PokerStars, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.  Currently, I am on the Board of Directors of Murka and GM of VGW’s Chumba Casino

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