Last month, I wrote a post about how many game companies do not dedicate enough resources to retention. Another area that most game companies, other than the top mobile gaming companies, are also under allocate resources to is live services. The live services team, however, largely drives success in the gaming space. A strong live services team is a key part to having an LTV that justifies marketing (and thus growth).
During the MAU conference in April, there was an interesting session on why the top social casinos were successful. The speakers were from the leading social casino publishers, Playtika, Zynga and Play Studios. All of them credited live services as the key to their success, with one attributing 80 percent of their success to live services. Also, if you look at the recent surge in Zynga’s stock price, it is largely driven by the performance of recent acquisitions. Zynga’s ability to improve the live services at these studios is the key driver of this positive performance.
What are live services
The textbook description of live services are changes that are made to a game or app that do not require a new build (development work). Live services product managers are focused on optimizing retention or monetization KPIs, rather than the PMs or designers driving new content or features.
There are many types of live services initiatives, ranging from optimizations to full programs. Some that have strong impact include:
- In-game events. In many mobile games, you will see daily or weekly (sometimes hourly) special events, such as a one-day race to the top. The event may include a special leaderboard for players who get the most combinations or kill the most of a certain type of enemy in a specified period. These events serve multiple purposes. They create a sense of excitement outside the core game loop. They provide a reason for players to replay a level or a machine. They drive more engagement as players compete to get higher on a leaderboard. They provide variation, a way of introducing new content without having to build more content. Events are one of the strongest drivers of both retention and monetization KPIs in the gaming space.
- Economy optimization. A key to keeping a free-to-play game successful long-term is managing the economy, an incredibly complex task. Managing the economy of a social game (or real money poker) is very similar to what Jay Powell, Chair of the Federal Reserve or Mark Carney, Governor of the Bank of England, must manage. Powell and Carney must regularly adjust interest rates, quantitative easing (asset purchases), reserve requirements, borrowing levels, etc. to manage inflation, demand, unemployment and the asset (stock) markets. If Powell or Carney gets it wrong, inflation could get out of control, unemployment could rise or asset prices (stocks and real estate) could plummet.
It is the same in games. The Live Services team must ensure that the in-game economy stays in sync and is a good experience for all players while encouraging spend (keeping up the value of assets). They need to ensure prices for goods or bets in a casino are at a price level that gives players a fair return on their investment and keeps them engaged. They need to build a balance between the main and premium currencies. They need to ensure the spin speed of a slot creates a good experience without draining a player’s wallet. They need to guarantee that a new player has a good experience but elder players are still having fun. All of these initiatives are connected and a failure in one area could create the gaming equivalent of Venezuela.
- Purchase package optimization. Related to optimizing the economy, the live services tem must ensure continuously players are getting appropriate value for their purchases. If packages are priced incorrectly, a customer might not get sufficient value when they make a purchase (for example, five minutes of gameplay rather than one hour) and thus become less likely to make future purchases. Conversely, they may get so much value that they never have a need to make additional purchases.
- Challenges. One of the most engaging features in games are challenges. Challenges are usually offered on a daily or weekly basis, helping direct gameplay. They are useful for keeping players engaged, encouraging them to test new content or features or play more. The live services team should create effective challenges and structure them (rewards, timing, amount of effort required, etc.) to optimize the impact on KPIs.
- Sales and promotions. Just as in the retail space, sales and promotions are a valuable driver of monetization. If not structured properly by the live services team, the sales could end up cannibalizing purchases or negatively impacting the economy. When done well, they encourage higher sustained revenue.
- Subscriptions As I have written recently, subscriptions are a great opportunity for game companies. Managing the pricing and options available for the subscription model sits with the live services team.
This list is a subset of some of the projects that are driven by a good live services team. Strong live services product managers will proactively identify other areas of optimization that will improve retention and monetization.
While I previously said that the live services team drives improvements that do not require development work, that is often the case in theory only. Many games are not architectured in a way that these changes can be made without development, especially older products. The need for development work should not be a line in the sand on whether these initiatives are pursued by the live services team, the benefits of launching events or optimizing the economy persist regardless of any need for development. Additionally, most successful live services teams also impact the product development efforts, for example ensuring the pricing of a new feature enhances the existing product.
Where’s the love
Just like it’s cousin retention marketing, many companies do not allocate sufficient resources (financial and people) to live services. Most of the resources end up going to product development instead. This allocation occurs because the development side is on the face of it easier to measure and sexier. A new feature under development might have a projected impact of a 2% lift on revenue after six months of development. That 2 percent uplift would be incorporated in the financial projections and when the feature launches and the revenue accelerates, everyone is taken to dinner. The PM who designed the feature can then create a Powerpoint that they use to brag to their colleagues.
Live services is not as glamorous. Economy improvements might improve revenue 0.5% every month but over the course of the month, not overnight. The live services PM probably won’t be taken out to dinner for the 0.5% increase (especially as it does not happen overnight but gradually over the month) over a given month. Over the same six months that it took to develop the larger feature, however, the economy improvements generate over 3 percent uplift (assuming the improvement is compounded monthly), a 50 percent larger increase than the new feature. Additionally, it does not require the development resources (and costs) that the new feature absorbed.
The other factor inhibiting allocation of sufficient resources to live services is the cross over with marketing. Many of the live services activities described above fall under marketing at some game companies. As marketing is often focused on acquisition, it is not prioritized on the marketing team’s agenda. Even when it is, live services need to be integrated with the core game experience to succeed. The expertise to design and optimize live services is usually more consistent with Product Managers than Marketing Managers.
Live services is critical to managing your LTV
I have written many times about lifetime value (LTV), and as I have said before it is the lifeblood of any app or game. Products are successful when their LTV is greater than the cost of acquiring a new user (CPI), only when this happens can a company afford to market. Without marketing, products eventually wither and die. Most companies, particularly in the social gaming space, are fighting a perpetual battle to find acquisition channels where LTV is great than CPI. Live services drives continuous improvement of LTV, thus allowing products that would otherwise not justify acquisition thrive. It is often the big difference between the game companies that can maintain their franchises (see Words with Friends, Slotomania, Clash of Clans, etc) to the ones that rise and then burn out.
Key takeaways
- Live services is the key to the success of the largest mobile game companies (Supercell, Zynga, etc.) but it is an area often over under resourced at other companies.
- Live services projects include in-game events, economy and purchase package optimization, sales, challenges and subscriptions.
- Live services often get fewer resources than product development because a new feature that takes six months to develop and generates a two percent revenue uplift is sexier and easier to visualize (and put in a P&L) than improvements that add 0.5 percent a month, though the latter leads to a 50 percent bigger impact.
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