How to use nano-marketing to grow your game or app

One of the constant challenges developers face is user acquisition, as costs seem to increase much faster than revenue per user. This issue is not limited to game developers as more companies see digital and performance marketing as their premium-marketing channel, the competition for eyeballs drives up costs. It is a constant challenge for everyone in growth or marketing to understand the newest techniques for finding the best and most effective channels. No longer can any executive run television ads and then hide behind ambiguous results. The issue is magnified when trying to reach millennials, who spend most of their time (free time or not) in the digital world.

A recent article in the MIT Sloan Management Review, The Right Way to Market to Millennials by Jay Sinha and Thomas Fung, does a great job of presenting the idea of nano-marketing, one of the most promising new growth mechanics. Nano-marketing is using micro-influencers to market your product or build your brand. This approach is evolving into one of the most effective forms of advertising.

Who and what are micro-influencers

While we are all familiar with the personalities who have huge social media followings, the Kim Kardashians or Gwyneth Paltrows, the people with smaller followings are proving most effective. Micro-influencers have between 1,000 and 100,000 followers. Although their following is relatively small (Kim Kardashian has over 100 million followers), they have a category specific following and much more engaged audience. Micro-influencers also build more personal relationships with their fans, as they can engage with them one-on-one. They are also frequently considered experts in their fields (something you may not say about a Kardashian).

People also often consider micro-influencers more credible. When LeBron James tweets his support of a shoe, most people assume he is getting paid for that tweet. Conversely, a micro-influencer who promotes your game will believe he is a fan and give him the benefit of the doubt. Even if people assume the micro-influencer was paid, they also assume that the personality has a true affinity for the product.

Not only can micro-influencers drive sales, but they can contribute to your brand building. Sinha and Fung discuss how Coca-Cola leverages micro-influencers to develop compelling brand narratives. They also discuss how start-ups, such as sock retailer Stance Inc., have used micro-influencers to grow into major brands.

How to leverage micro-influencers

Working with micro-influencers is different than working with celebrities or other marketing channels, it also requires a personal approach. There are several keys to building a successful micro-influencer program, with may of them highlighted by Sinha and Fung as well as a VentureBeat post on how micro-influencers are essential. The elements of a successful program include:

Use micro-influencers to target highly segmented audiences. This channel is not the right option to reach millions at once. Instead, micro-influencers are a great way to amplify a feature that largely appeals to a niche or helps you recruit a specialized segment.
Understand who you want to reach. There are millions of micro-influencers, you need to understand exactly who you want to target and the goal(s) of your campaign. Once you have a clear understanding of your target, you can then find the micro-influencers who reach that audience.
Look at micro-influencer work as a long-term investment. Build a long-term relationship with the most appropriate micro-influencers, so they can continuously weave your brand into their stories.
Effective micro-influencers integrate their personal narratives with the brands they endorse. Rather than trying to foist a message on the micro-influencers, use their story-telling ability to create a compelling message.
Avoid heavy-handed or aggressive push-marketing and instead have the micro-influencer give their audience a gentle nudge.
Before approaching micro-influencers, follow and engage with them. As VentureBeat writes, “this helps you better understand their personality and interests so you can determine their fit with your brand. It also helps you approach them with a more personal request, which is more likely to get a positive response.”
Allow the micro-influencer to create compelling content rather than directing them. As Sinha and Fung write, “young, creative micro-influencers are good at producing innovative content that features the brands in an interesting way. They know their audience would want to be educated about new offerings, while being entertained at the same time.”

By following these steps, you can build an effective micro-influencer program that will support your marketing initiatives.

Key takeaways

Marketing continues to evolve quickly, with it increasingly difficult and important to find effective advertising channels. Nano marketing is one of the most promising of these channels.
Nano marketing entails working with micro-influencers, people with between 1,000 and 100,000 followers, to promote your brand or products.
Micro-influencers are particularly effective because consumers consider them more genuine and they have much greater focus than celebrities who have huge followings.

Finally, a new approach to monetization in free-to-play games

I am excited that the latest gaming phenomenon, Fortnite, is not only a hit game because of its content but also because it has brought a unique monetization mechanic to the mass market. For over ten years, people have been optimizing the free-to-play model, improving monetization primarily through in-app purchases. We have all talked about finding new or additional revenue mechanics but there have been no dramatic changes. Many companies have gotten better at getting players to pay more (or more players to pay) but nobody had changed the paradigm. Yet, as I have written many times, the real opportunity for growth is to find a blue ocean, do something your competitors are not.

Why Epic

Epic Games has overcome this challenge with Fortnite, creating a monetization mechanic previously seen only in niche titles. Initially, I have to admit I was particularly surprised this innovation came from Epic, as I frequently wrote that traditional game companies ( most recently Nintendo) could not succeed in the mobile space because they were too wedded to the old monetization model of discrete purchases. Epic is definitely a company that has benefitted mightily from the old model, from Unreal to Gears of War to their other hits, they have made billions of dollars from selling great games in pretty boxes. Now, though, they have disrupted the free-to-play space.

In retrospect, it is not that surprising that innovation did not come from a mobile game company. Just as traditional game companies could not embrace the free-to-play model fully, the “what are now” traditional free-to-play company cannot discard their in-app purchase (IAP) optimization strategy fully. Thus, Epic, which did not have the IAP optimization baggage, could look holistically at the opportunity and come up with a new approach.

What Epic did

Fortnite’s Battle Pass system is a unique approach to drive monetization that is showing great results. According to a recent article by Adam Telfer and Joseph Kim, Fortnite has generated $126 million in revenue, including $5.3 million mobile revenue in its first 10 days.

The Battle Pass is a mechanic that avoids pay to win (spending to get a competitive advantage over other players) but finds a way to get players to pay significantly for cosmetic benefits. Traditional thinking in free-to-play is that cosmetic accessories (avatars, skins, emotes, etc.) can only generate limited incremental revenue. With Fortnite, however, they have made the cosmetics the only way to show success and progression, so players are motivated to acquire (and show off) more and better items, and subsequently monetize to get the great cosmetics.

Battle Passes are largely a challenges mechanic, and even in traditional IAP games challenges are a proven monetization mechanic. They are a great way to drive player activity, guide them to specific activities and provide a sense of completion. It’s not surprising that the evolution from challenge systems to Battle Passes yields a new monetization mechanic.

The first key element is that there is not a leveling or stats system. Thus, you cannot show others how skilled you are by pointing out you are level 5,274. Instead, status is conveyed by how great your cosmetics are. The more, and better, cosmetics, implicitly the better Fortnite player you are.

The second key element is the Battle Pass, a series of challenges to earn cosmetics. The Battle Pass is a series of challenges with each one providing cosmetic rewards.

The third key to the Battle Pass is offering multiple paths. In addition to the free path is a premium path that provides significantly more rewards. Epic is also very loose in providing rewards for the premium path, players feel they are getting an incredible value.

Fourth, each Battle Pass only lasts a season. Each of these seasons has its own cosmetics, so if you miss a season you never get them. This creates an incentive for the player to play each Battle Pass so they do not miss any content forever.

Fifth, and a key difference with traditional IAP models, players can pay to skip ahead in tiers. Since tiers are not levels, players are not actually paying to win anything, just to get to higher value cosmetics.

Sixth, if you fail at a challenge, you need to start the entire path again unless you monetize. Critically, if you die during a challenge (which happens to most players of Fortnite), you have to start at the beginning of the challenge. Thus, there is a strong incentive not to lose your progress (and plays to people’s loss aversion). People do not want to start from zero repeatedly.

How you can use Battle Passes

Battle passes effectively change monetization from the core game loop to the challenge mechanic. By eliminating levels and points, you can move monetization from interrupting gameplay to super-charging it. Challenges work in many genres but the Battle Pass takes it to the next level. Zynga credits much of its current success with Zynga Poker to challenges. Virtually any PvP game, and even some single player games, can integrate a challenge system. The key to success though will be recentering monetization on this system rather than the traditional IAP model, making it the source of showing progression and providing a VIP path.

Key takeaways

Fortnite is one of the biggest gaming successes ever, and it is being driven by a monetization system previously not seen in mass market free-to-play games, Battle Passes.
Battle Passes allow players to earn cosmetic rewards, which have a high value because they are the only way players can show progress in Fortnite.
By centering your monetization on a challenge system, you can develop a similar mechanic as Battle Passes.

How to avoid misleading data, aka Fake Analytics

Someone I respect recently posted an article from a news source that I also respect, but the article actually highlighted how data can mislead, either intentionally or not. An article on the Guardian.com, Amazon Prime Video’s growth outpaces Netflix in UK, tells the story of how Prime Video is growing at a faster rate than Netflix. The sub-title stresses that, “cross-promotion to Amazon shoppers and new on-demand series rank it top in 2017.”

The article goes on to point out several reasons why Amazon is top in 2017:

New series of the Grand Tour and Transparent are fueling growth
Hefty cross promotion of Prime Video to regular Amazon shoppers is also contributing
Prime Video increased its subscribers to 4.3 million in 2017, representing 41% year-on-year growth
Netflix only grew 25% in the same period.

If you stopped reading the article there, and who reads an article until the end these days, you would think Amazon is doing a great job in the video market and Netflix should be very worried. If you worked at Amazon and get a similar report from your analytics team, you might high-five the head of Amazon Prime in the UK. If you were at Netflix and got a similar report from your analytics team, you might panic a little and divert resources to the UK.

The problem is that although the data is accurate it is misleading. The key figure is that Netflix added 1.6 million new subscribers in 2017, while Amazon added 1.3 million new subscribers for Prime Video in the UK. Thus Netflix actually extended its lead over Amazon by 300,000 customers in 2017. Netflix is in 8.2 million UK households (at the end of 2017), versus 3 million for Amazon.

How different would the story have been if the headline was Netflix extends lead by another 300,000. How different would the reception be at Amazon and Netflix respective headquarters if their analytics team presented data in this way.

The mistake

The mistake in this case (and I will be generous and assume the Guardian was not click-baiting) is comparing growth rates (or any other rates) while neglecting the size of the relative base. It would be the same in football if you looked at Messi’s goal scoring versus a second year player. The latter may be scoring twice as many goals as he did as a rookie while Messi may have been flat or added a few. Thus the young player is growing his goal scoring 100% while Messi is adding only a few percent to his lifetime numbers. That does not mean that the second year player is either having as good a season as Messi or closing the gap.

The same happens in the mobile game world. Your slot game may be growing 100% month on month while Slotomania is growing 10% (not real numbers), but because their base is so high they are adding millions in revenue while you are still not profitable.

The key is only comparing trends when you are comparing apples to apples. Trends mean something if you are looking at two products or companies of comparable size in the same stage of their lifecycle. Looking at two auto companies who launched an SUV the same year in the same market makes sense, comparing growth rates of two automakers, one who is new and has no dealer network with one that has been around 100 years is worthless.

The answer

You need to look deeper into the numbers. Look at the absolute numbers. Look at the pricing. Look at the target market. Look at percent usage (in the Amazon case, how engaged are Prime users who may have bought it just to get free shipping versus Netflix users). The key to using data effectively is look deeply at the data and understand what is driving the results. You also need to make sure your analytics team does the same. It is very easy to make conclusions based on obvious trends. Avoid superficial analysis and, more importantly, superficial conclusions.

Key takeaways

A recent article implied Amazon Prime Video was doing better than Netflix in the UK as it grew 41% versus 25% by Netflix.
The article is misleading as Netflix actually added 300,000 more customers than Amazon. This obfuscation shows how data can mislead if you focus on trends but are not comparing comparable companies or products.
The key to using data effectively is look deeply at the data and understand what is driving the results.

How to balance your publishing or development portfolio

Most investors know that to optimize the expected value and risk of their financial portfolio they need the right mix of domestic and international stocks, bonds and cash. Many game companies, however, fail to heed the core principals of diversification when building their portfolios and deciding what projects to green light. Ironically, very successful companies often amplify this mistake by replicating (i.e. cloning) their hit.

Mistake 1: Copying your hit

The most common mistake successful game companies make is re-skinning or cloning their biggest game. The logic behind this decision is that it is quite difficult to create a hit game so copy what you know. Most frequently, however, the clone fails to reach expectations and the company is left relying on the original hit.

The flaw in this strategy, leading to a negative result, is that the new product appeals to users who are already highly engaged with your company. Since the existing product is a success, players are not looking for an alternative. They already love what they have, why give them the same thing in a different wrapper. I recently wrote about how challenging it is to steal VIP customers from a competitor because they already love the product, it is just as difficult to steal them from yourself.

In the social casino space, you often see this mistake by companies that have a hit slots product, just change the feel of the casino, keep the same slots, and then the new product does not perform as well as the original.

Mistake 2: Appealing to the exact same market

If you base your new product on one of your existing products, you will appeal to the same customers. By appealing to the same users, you are not expanding your potential market but can only increase your share of wallet.

Again, using the social casino space as an example, there are different types of slots players. If your existing game is appealing to players who enjoy land based casinos, rather than creating another product for this target market you can build off of your success by creating a product that appeals to recreational online-only players. Thus, you can still monetize the land-based players with your core product, and increase monetization by improving that game, but you open up a new market.

Mistake 3: You are not creating a blue ocean opportunity

The core of the issue in creating a copy of an existing product is you are not creating a blue ocean opportunity, that is moving to a market space where the competition is not relevant. I have written frequently about Blue Ocean strategy, and rather than repeat it the key is that you have a higher ROI by pursuing a blue ocean strategy than competing in a red (bloody competitive) market.

Blue Ocean strategy is incompatible with cloning your existing product because a new product needs to fulfill four criteria to create a blue ocean:

Raise. You need to raise some of the elements of value you are currently competing on.
Eliminate. You need to eliminate some features or aspects that you compete on.
Add. You must add new features or attributes that other products do not have.
Reduce. You have to reduce some of the features that the industry relies on.

By definition, if you are copying an existing product you are not doing any, let alone all, of these changes needed to move into a space where the competition is non-existent.

Mistake 4: No new VIPs

VIPs are the lifeblood of a successful mobile game. Less than one percent of players normally drive over 80 percent of revenue, thus it is critical to have a strong VIP base for a game to be successful. When you re-skin or clone an existing game, it becomes virtually impossible to build a strong new VIP base. Your existing VIPs already love the old product, hence why they are VIPs, so they have no reason to move (and you probably have no benefit in moving them). New customers were already exposed to the same mechanics in the existing product and chose not to become VIPs, thus it is very unlikely the new product will generate a different reaction.

What you should do

The easy part of the game industry is recommending what not to do, the challenge is how do you grow your product base. There are many different ways to run a good green light process, assess market conditions, etc., and that is not the purpose of this post (please see my post on how to create a mobile gaming hit). Instead, I recommend you build out a strong green light process that looks at the market, the competition, your strengths and gaps in the market and build your product strategy from there. If you already have a hit product, rather than start from scratch, see how you can leverage key elements of that product to expand into a different segment of the market or create an entirely new space.

Key takeaways

While it is tempting to try to replicate your successful product by re-skinning or cloning it, such a strategy is likely to fail as it will not expand your market.
Cloning a product is the inverse of pursuing a Blue Ocean strategy (which requires focusing on four core elements: Eliminate, Raise, Add, Reduce), and Blue Ocean generates a higher long-term ROI that traditional strategy.
If you have a hit, rather than start from scratch see how you can leverage key elements of that product to expand into a different segment of the market or create an entirely new space.

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The Business of Social Media

How to succeed on mobile and social platforms by Lloyd Melnick

Month: May 2018

Who and what are micro-influencers

How to leverage micro-influencers

Key takeaways

Like this:

Why Epic

What Epic did

How you can use Battle Passes

Key takeaways

Like this:

The mistake

The answer

Key takeaways

Like this:

Mistake 1: Copying your hit

Mistake 2: Appealing to the exact same market

Mistake 3: You are not creating a blue ocean opportunity

Mistake 4: No new VIPs

What you should do

Key takeaways

Like this: