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The Business of Social Games and Casino

How to succeed in the mobile game space by Lloyd Melnick

Month: February 2018

Hypercasual, the real next big thing in mobile gaming

There is a lot of buzz now about hypercasual games, and, for once, I agree with the buzz. There is a new big thing in gaming every year – a new console, technology, mechanic, etc. – that people expect to change the industry, investment flocks to it and a few years later it becomes an afterthought and a lot of people have to send out their resumes. I am usually skeptical of these fads, if you look at my posts there is not one about VR, blockchain, 3D, etc., but hypercasual is the exception

Hypercasual, is not a fad because it taps into what is one of the strongest drivers of building a successful product, simplicity. I have written repeatedly about how people gravitate to easy products that minimize cognitive load, and often use the example of Uber’s success to show that simple and straightforward can generate tens of billions of dollars of value. Hypercasual games tap into that formula for success.

A recent article, 100 Million Downloads: How Hypercasual Mobile Games Are Rewriting the Game Design Rulebook by Tom Kinniburgh, does a great job of both quantifying the success of the genre and pointing out key rules to building hypercasual games.

What is hypercasual

The first step to analyzing the hypercasual market is defining what is hypercasual. If you do not define it, you cannot build towards it. As Kinniburgh writes, “the term ‘hypercasual’ has become a collective way to reference games of this nature. Such titles typically have a single mechanic and a single goal, yet reaching a high score can be fiendishly difficult.” Effectively the core game loop is very straightforward, do one thing, get rewarded (so you can try again) and keep repeating to get a higher score.

Slide1

The state of the hypercasual market

Hypercasual is not the next big thing that developers and investors are flocking to but an already established space in the game ecosystem with hundreds of millions of players. There are already tens, if not hundreds, of hypercasual games with over 100 million downloads. To put that number in perspective, 100 million downloads is more downloads than if everyone in Germany or France or the UK installed the app. These games include Agar.io, Finger Driver, Balls Race, Dunk and most of the other games at the top of the various app stores’ charts. The acquisition of Harpin, a one-person studio that built a solitaire game, for over $42 million also validates the hypercasual market, as companies usually do some due diligence before investing millions of dollars.

How to build a hypercasual game

The core game mechanic is even more important in the hypercasual space. As mentioned above, hypercasual games have a single mechanic that the player keeps repeating to get a superior score. Thus, the single mechanic needs to be fun, easy and compelling or else the player will not want to continue.

This core mechanic must also be easy for the player to understand quickly and provide for ever improving scores. Kinniburgh writes, “Great hypercasual are easy to grasp, but rely on players having a perfect run to succeed, and they measure that perfection with a score.”

By being easy to understand quickly, players recognize that playing more leads to better scores. If it is difficult to comprehend how to play, the score and activity would not be linked in the player’s mind so they would not be driven to keep playing. Also, if continued play did not yield higher scores, then the key incentive to more gameplay would not exist.

This simplicity exists throughout the game. Unlike other game genres, you do not introduce more features (complexity) as the game progresses. According to Kinniburgh, “great games in this genre rely on mechanics that provide everything the player needs to play from the start of the game, either with a single life on offer – such as Flappy Bird – or with multiple lives, like Ballz. In each case, however, the game ends when said lives count reaches zero.”

While the gameplay mechanic needs to stay consistent, the game must also scale so players do not get bored. If they can master the game, then the score is capped. Instead, you need to introduce variety by making higher levels more difficult (less time, bigger opponents, etc) or making the level more complex (a puzzle game with more area blocked). According to Kinniburgh, there are three ways to scale hypercasual games:

  • Changing the underlying environment
  • Changing the speed
  • Adding a PvP element

When designing, use one or a combination of these elements to keep the player engaged.

How do you make money

I, and most others, would not care about hypercasual if there was not a way to translate the popularity of these games into revenue. The most obvious answer is in-game advertising. Throughout the game space, advertising is becoming an increasingly important revenue stream. Players in games already see rewarded video as a benefit; adding watch to earn almost always increases your retention metrics. Machine learning now allows for more targeted advertising, creating a better user experience (you see ads you are actually interested in) and a better value for advertisers (you only pay to show ads to people who are really potential customers). These two forces are further driving ad revenues for game companies.

Hypercasual taps into this trend because of the sheer number of players you attract. With hundreds of millions of players, algorithms have more data on who to target with what, providing better advertiser and user experiences. And, with each player generating some revenue, hundreds of millions of players directly translates to more revenue.

In addition to direct advertising revenue, you can improve company revenue by using hypercasual as an acquisition channel. While the Harpin acquisition may be ROI positive based on advertising revenue, my guess is that the revenue it generates by driving players to Zynga Poker and other games with strong lifetime values actually is more valuable than the direct revenue from Harpin’s games. Using hypercasual as a portfolio play rather than a standalone opportunity further builds value.

Future opportunities for hypercasual

With many trends, by the time you read about it, it is too late to capitalize, but in the case of hypercasual there are still many opportunities. First, the underlying principle of a single, simple mechanic will always lead to a good user experience. My philosophy is simpler is better, and hypercasual is defined by simplicity.

Also, for those in the casino space, hypercasual has barely raised its head. While Harpin and several other hypercasual companies have built great businesses around solitaire or solitaire like apps, that is largely the extent of its penetration of the most exciting gaming vertical (social casino). There are no hypercasual games that target slot players, which represents about 80 percent of the social casino market. Same for table games (roulette, baccarat, etc), which seem to lend themselves perfectly to hypercasual.

The opportunity also is not limited to free to play casino, but the real money space can learn from it. The success of lottery products not only shows willingness to gamble on hypercasual experiences but a strong and continuing desire to do so. Also, the high customer acquisition costs in real money suggests the value of hypercasual as an acquisition tool would dwarf the benefits free to play companies get from these games.

Key takeaways

  1. Hundreds of millions of people play hypercasual games; apps that have a single game mechanic where players keep returning to get a higher score.
  2. Hypercasual games are a great opportunity in the free to play social casino market, as there is still no hypercasual games that target slots players, the biggest segment of that space
  3. Hypercasual is also an untapped opportunity in real money gaming, as lotteries show players willingness to gamble on a hypercasual experience and they provide a way to offset the very high customer acquisition costs.

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Author Lloyd MelnickPosted on February 27, 2018March 1, 2018Categories General Social Games Business, Social Casino, Social Games MarketingTags harpin, hypercasual, user acquisition2 Comments on Hypercasual, the real next big thing in mobile gaming

The ten most valuable business books I have ever read

The ten most valuable business books I have ever read

A colleague recently asked me what ten books I would recommend to him and it turned into a much more difficult question than I expected. While it is relatively easy to rank books you read in the last few month or even year, picking the ten most useful at all time is very hard, a lot of books have contributed to my growth. After much thought, I came out with my top ten books and after going through the exercise I felt the list could be useful to everyone.

While I did not initially rank the books, given everyone’s limited time, I have now ranked them from one to ten based on how much value I derived from the book. Below are my top-10, with the most valuable one first (given that this is not Miss Universe, I did not think creating suspense by starting at number 10 made sense):

  1. Thinking, Fast and Slow by Daniel Kahneman. Kahneman’s book about human behavior and decision making has influenced me more than any other work. It has helped me understand what drives others and mistakes I commonly made. The book will help you make better decision, understand your customers better, be a superior leader and create more compelling products.
  2. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Blue Ocean Strategy drives how I develop strategy everywhere I have had the opportunity. It starts by showing the superior results in creating a new market space rather than competing directly in an existing space and this leads to a framework for building long term competitive advantage.
  3. Predictably Irrational by Dan Ariely. Predictably Irrational is my favorite book on the list, reading Dan Ariely is comparable to reading a Michael Lewis or even Tom Clancy book, a true page turner. Ariely’s work is in the same space as Kahneman, behavioral economics, or why people make the decisions that they do. In effect, people are not rational (which undercuts traditional economics) but their irrationality is not haphazard, it is predictable. Like Kahneman’s work, reading Predictably Irrational will improve your decision making, leadership and ability to interact with your customers.
  4. Hooked: How to Build Habit-Forming Products by Nir Eyal. Hooked is the best book I have read about how to create truly compelling product. It provides a framework for building something that customers will engage with regularly, thus having a high lifetime value.
  5. Smart Customers, Stupid Companies: Why Only Intelligent Companies Will Thrive, and How To Be One of Them. This book highlighted the value of personalization before it was cool. It anticipated the trend of customers expecting an experience tailored to them before everyone gave it lip service and still provides compelling evidence on the value of personalization.
  6. The Signal and the Noise: Why So Many Predictions Fail–but Some Don’t by Nate Silver For those of you who are not familiar with Nate Silver, he is probably the best known US statistician because of his success predicting election results (though he did miss on Trump) and high profile sports analytics sight. The Signal and the Noise is fantastic at explaining in a very easy to understand way how analytics work, why they sometimes do not, and how you can apply them.
  7. The Ultimate Question. The Ultimate Question is effectively an explanation of NPS (Net Promoter Score) and framework on how to apply it. I find NPS the most useful KPI after LTV (and a key driver of it) and this book helps you understand how to apply it correctly as it is often the most misused KPI.
  8. Collaboration: How Leaders Avoid the Traps, Build Common Ground, and Reap Big Results by Morten Hansen. Hansen’s book made it into my top-10 largely because collaboration is so often misused to justify more meetings and design by committee, which destroys value. Hansen, instead, shows you how to collaborate to create increased efficiency and better results.
  9. Contagious: Why Things Catch On by Jonah Berger. Contagious is in the top-10 because it is the only work I have ever read that really shows you how to make a product or marketing viral. Given the value of virality in LTV, this book provides core knowledge that will help your marketing, CRM and product decisions.
  10. Moneyball by Michael Lewis. The tenth spot in this list was actually the hardest to fill, as I had to drop many other great books. Moneyball, however, changed the way I looked at the video game and digital entertainment ecosystems. It highlighted similar opportunities as Billy Beane saw in building a baseball club. And, like with Dan Ariely’s books, it was a lot of fun to read.

 

As I just wrote, there were a lot of contenders for the top ten and a lot of valuable books I would love to include. If you are looking for other great books to read, I also recommend (this time not in order):

  • Grit: The Power of Passion and Perseverance
  • The High Roller Experience: How Caesars and Other World-Class Companies Are Using Data to Create an Unforgettable Customer Experience.
  • Blue Ocean Shift: Beyond Competing – Proven Steps to Inspire Confidence and Seize New Growth.
  • 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works–A True Story.
  • Whale Hunt in the Desert: Secrets of a Vegas Superhost.
  • Essentialism: The Disciplined Pursuit of Less.
  • The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change).
  • Toughness: Developing True Strength On and Off the Court by Jay Bilas.
  • The Success Matrix: Winning in Business and in Life.

Happy reading and also please post your suggestions.

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Author Lloyd MelnickPosted on February 20, 2018April 11, 2020Categories blue ocean strategy, General Social Games Business, General Tech Business, thinking fast and slowTags blue ocean, dan ariely, Daniel Kahneman, Jonah Berger, Nate Silver, Reading List, thinking fast and slow2 Comments on The ten most valuable business books I have ever read

Becoming truly customer-centric and personalized

Focusing and organizing your company around the customer, not functions or products, is the only way to become truly customer-centric. While loyalty and rewards programs are a great tool to increase engagement, they are only one part of becoming customer-centric. Not only does David Norton’s The High Roller Experienceprovide a roadmap for building a strong loyalty program, it also shows how Harrah’s/Caesar’s casino group created a truly customer-centric company.

Put the customer at the center

Slide1

By definition, to be customer-centric, you need to put the customer at the center of your company. The leadership of most businesses build their organization around product line, business unit, or geography, which makes it quite difficult to take a customer-centric approach to running the company. The customer becomes a by-product of the organization’s design rather than the core around which the company revolves. As Norton writes, “customer centricity means that the customer is the company’s and not an individual business unit’s. It is an ability to interact with the customer cohesively and consistently regardless of which business unit the customer is dealing with.”

You also need to put the customer at the center of your data. Norton writes, “being able to truly understand the customer and present relevant content at the right moment through the right channel is the holy grail for which companies should strive in order to engender deep loyalty from customers. Data and technology can enhance the customer experience while simultaneously driving incremental profits for the company. “

To achieve this convergence of data and technology, you should build cross-functional task forces that include analytics, technology and the various functions that interact with the customer. These teams can then derive how to understand the individual customer behavior and integrate the results at each touch point so the customer gets the optimal experience for them.

It is more than loyalty

Being customer-centric is much more than loyalty. While Norton created Total Rewards, Harrah’s incredibly successful loyalty program, he writes, “loyalty is about understanding your customers in detail and interacting with them in a highly personalized way at every point of contact with your brand.” Loyalty is about more than a rewards program where customers are fixated on point accumulation and the company is primarily concerned about the cost of contingent liability. It is about interacting with the customer across their entire journey, at every interaction with your company.

It cannot be product specific

As mentioned earlier, you cannot be customer centric if you are focused on product lines or types. You need to look at the customer across all of your products. This focus also then allows you to help the customer find the products and experiences that are most likely to resonate with them.

Looking at the customer across products also enhances the lifetime value of the customer to the company. If you set up your data and organization around the customer and not product, you can predict who of the low-value masses has the potential to shop across products, largely by looking at demographic and behavioral factors. You can then target these customers so as not to confuse the individual product positioning in mass advertising.

Put the customer at the center

With customer now expecting a personalized and great experience, and getting it from the top companies (Netflix, Amazon, etc), you need to move from a 20th century company to a customer centric company. Blow up your organization and structure it around the user. Build your analytics and business intelligence so it tracks the customer journey and allows you to touch every player individually the right way at the right time. When you build your company around the customer, you build it to succeed.

Key takeaways

  • Being a customer centric organization is much more than having a great loyalty program.
  • You need to structure your organization around the customer, not along product lines or geography or channels.
  • Your data also needs to be customer centric, understanding the customer at all points of their journey and ensuring that it then feeds this data back to given the customer the best personal experience for them.

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Author Lloyd MelnickPosted on February 13, 2018January 14, 2018Categories General Social Games Business, General Tech Business, Lloyd's favorite postsTags Customer centric, customers, data, organizational structureLeave a comment on Becoming truly customer-centric and personalized

The dark cloud over social casino revenue

While projections for the social casino (free to play slots and poker) industry continue to be overwhelmingly positive and the industry has never seen a revenue decline on a sequential basis, there is an ominous KPI that nobody is discussing. While the industry continues to grow, that growth is from better monetization, not bringing new customers into the market. This fact potentially puts a ceiling on potential growth or worse portends to a future decline.

Slide1 Continue reading “The dark cloud over social casino revenue”

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Author Lloyd MelnickPosted on February 6, 2018February 5, 2018Categories General Social Games Business, Lloyd's favorite posts, Social CasinoTags Growth, monetization, social casino2 Comments on The dark cloud over social casino 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.

For more information, click here

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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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