Maybe, just maybe, social casino, movie and iGaming will continue to rise post lockdowns

Most people, myself included, believe that the spike in iGaming, social casino and streaming revenue over the past few months will revert back to pre-pandemic levels once casinos and cinemas reopen, however, we may be in for a surprise. Rather than lose the 20-50 percent revenue growth these three sectors have enjoyed, a return to normalcy may actually continue to accelerate revenue.

There are two principle drivers, somewhat related, why companies in the social casino, iGaming and streaming media spaces may be pleasantly surprised: the power of triggers and the weakness of cannibalization.

Triggers are a central driver of activity

The key to building a successful product is creating something that becomes a habit for your customer. Habit-forming products change user behavior and create unprompted engagement. The aim is to influence customers to use your product or play your game on there own, repeatedly, without relying on overt calls-to-action such as ads or promotions. The master of creating habit forming products is Nir Eyal, author of Hooked, who created a model to show how to create such products .

Hook Model

The first step of Eyal’s Hook Model of retention is triggers. Triggers cue the user to take action. There are two types of triggers: external and internal. Habit-forming products start by alerting users with external triggers like an email, a website link or the app icon on a phone. An external trigger communicates the next action the user should take (for more on triggers and how to build them, please see this post).

Triggers show how the reopening of casinos and cinemas can help iGaming and online social casino as well as streaming entertainment, respectively. Going to your favorite casino may trigger in players a desire to continue gaming online. Seeing an advertisement on television for Las Vegas or the local Native American casino will not only create interest in going to the casino but also will remind you to go online to play. Same for movies, going to the cinema to see the latest Disney release may encourage you to spend more time watching Disney+.

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Cannibalization or not

I find cannibalization one of the most over-hyped concerns, and it relates to how the social and online gaming spaces are impacted by the reopening of casinos (same for cinemas). Industries, and the economy overall, are not a static pie but a dynamic system that grows (and contracts) based on the interaction of numerous factors. I have been in multiple situations where my company cancelled or throttled new products to protect their existing business. What they ended up learning was that the new products growth actually helped the existing products or competitors came into the market and stole the audience that would have gone to the new product.

The casino space is rife with this thinking. When I first entered the social casino space in 2013, it was virtually impossible to form relationships with land-based casinos. They feared their players would flock online and it would cut into their revenue. Over the next year or so (2013-2015), more and more data showed clearly that land-based casino customers who also played online (in that situation, with social casinos), became more valuable to the land-based casino, not less. Land based casinos became very anxious to form relationships with social casinos because the players not only played both but were the most valuable customers. The MGM-Play Studios relationship behind MyVegas reflects how this attitude evolved.

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I saw a similar phenomenon in the real money online gaming space. Players who played for both Real Money and Play Money were one of the most important segments of the ecosystem. Rather than trying to move the Play Money players to real money, companies realized that it was valuable to encourage continued playing on the Play Money and social products.

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A similar phenomenon may occur as land based casinos re-open. Rather than the customers now playing online shifting their spend to land based, these customers may turn into VIPs for both land-based and either social or real money online casinos (depending on the geography).

We just do not know

I am not in the business of predictions and the Coronavirus pandemic is such a unique situation it is impossible to look into the past to know how it will play out but it is worth considering both triggers and cannibalization to understand one future scenario. Rather than seeing the movie or casino market as set at a certain amount with closures and re-openings just shifting where revenue goes, the dynamism of the market could help both sectors grow.

Key takeaways

  1. The re-opening of casinos and cinemas may not hurt online gaming (social and iGaming) or streaming entertainment but continue their momentum due to triggers and the realities of cannibalization.
  2. Triggers, cues for the user to take action, are central to creating habit forming products; land-based casinos and cinemas could serve as triggers for customers to consume more gaming and movie entertainment online.
  3. Cannibalization, one product taking sales away from another, is over-hyped in the casino space and rather than online gaming hurting land-based casinos, past experience shows they help each other.

500th Blog Post

WordPress alerted me that this will be my 500th post, so I felt it was an opportune time to reflect on my blog. I hope this reflection puts my posts into perspective and helps you decide if blogging would be useful for you.

A brief history

I started this blog in December, 2010, at the request of my boss at Disney. He thought it would be a great way to increase our local presence as virtually nobody knew that Disney had a social gaming operation in North Carolina (unfortunately, it no longer does). It took a few months to find my “voice,” but over time I discovered what topics interested me and my readers and how to explore them.

While I have tried to blog regularly, with summer breaks, work and family do sometimes impede my capacity. I get the most views when I post twice a week but I think the content suffers, so I have settled on one post per week plus additional posts if there is an exciting topic I want to comment on.

For many years, Wendy Beasley, helped proof read this blog. Without Wendy, it would have been far less readable. Wendy not only edited the blog but offers suggestions on how to make it better.

Why do I Blog

The first question I asked myself when I saw this was my 500th post was “Why?”. My blog does not generate revenue, nor did I ever plan on using it for income; I have no advertising (I actually pay a fee to eliminate WordPress serving ads). I am not a consultant, so I do not use it to attract new business. Given that most of my posts are 3-5 pages in, blogging takes up a fair amount of my team but I would not be doing it if I did not derive value from the effort. In retrospect, my blog helps me in several ways:

  1. It provides a great way to clarify my thoughts. When I consider a topic important, writing a blog post allows me to organize my thoughts around the key issues and explore these issues further.
  2. It helps me analyze third party material. Many of my posts are taken from books, articles and other blogs that inspire me. By blogging about them, it forces me to pay attention and focus on the key points the author is making.
  3. It provides an archive for topics important to me. I will often go back to my blog to remember best practices or analytic techniques and tools. Also, when I start a new position, I will go back to my blog so that I ensure that I can convey all of my learnings to my new team.
  4. It provides a history for my team. While I use my blog when starting a new position to remember the key ideas I want to convey, I also find it is a great way to explain concepts to my colleagues. If we are planning to build a leaderboard, rather than reinventing the wheel, I would point my team members to my post.
  5. While I do not know if my blog has helped or hindered my ability to get new job positions, it has helped ensure a good fit. Having blogged over eight years (I started my blog December 2010), I have stated positions on most standard interview questions. Thus, when I discuss a topic with a potential employer, they can see I have held the same belief for years and am not just telling them what they want to hear. They now what they are getting and if my approach is consistent with their goals.
  6. Blogging makes me an open book when hiring. Potential employees understand my philosophy and priorities and it thus helps reduce bad fits.

It is also satisfying

While I blog for the reasons above, blogging and speaking also provide an avenue to give back to the industry, which is quite satisfying. One of my fondest memories is when I was talking to the CEO of a top-10 social casino and he told me that prior to starting the company he attended a bootcamp I gave on social gaming and entrepreneurship. He may have started the company regardless, but knowing that I played a small part in his decision and helped set him on the path for success is incredibly satisfying. Not only did it help him, but he now has over 400 employees.

The future

Without you, this blog would be is a notebook, so please keep reading. If there are any issues you want me to cover, please ask. If you have suggestions on how I could make it more relevant, again let me know. Most of all, thank you for reading.

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Lifetime Value Part 27: How to know if your advertising is working (with benchmarks)

The key to any successful product, particularly a mobile game, is for your CPI (cost per install) to be less than your LTV (lifetime value of a customer). As long as it costs less to acquire a new customer than they are worth, you have a healthy business. Once the cost of acquiring a new customer exceeds the value of that customer, your product or company will languish and eventually die.

The challenge of computing LTV

While virtually nobody would argue the logic behind using LTV to drive your marketing, implementing it is not always easy. Many companies do not have a reliable LTV formula for all of their products or a data scientist (or team) to create one. New products also do not have enough data to calculate LTV.

Even when you have a reliable LTV calculation for your product, every cohort of user will have a different LTV. Players acquired one month will not have the same LTV as those acquired a different month. Players acquired through one marketing channel will not have the same LTV as players acquired through a different channel. Same can be said for country, marketing creative, platform and many other factors.

You will also not have enough data early in a campaign to calculate LTV reliably. However, you do not want to spend on unprofitable campaigns and you want to support good campaigns with more resources.

The answer to measuring campaigns reliably

The best proxy for understanding if your CPI is below your LTV is ROAS (return on ad spend). ROAS measures how much revenue a certain cohort of users generates over the first X days of acquiring those players (with X normally measured after 3, 7 and 30 days).

While it sounds overly simplistic, short term ROAS tracks very closely with your long-term return, thus whether CPI < LTV. You can be very certain if your 30 day ROAS is performing ahead of target, your acquisition is profitable. Moreover, I have found that even 3 day ROAS is very indicative of long term profitably. I have not yet come across a situation where ROAS has indicated a campaign is profitable for it to falter when analyzed after months or years. I am now very comfortable relying on 3 day and 7 day ROAS metrics to decide whether to continue, increase or decrease spend for a product, specific vendor or campaign.

Benchmarks to target

Without benchmarks, ROAS numbers would be useless. You need to know what numbers to target. As I have been in the social casino space for about five years, I am only comfortable providing social casino benchmarks. When evaluating a product or campaign, I target a 3 day ROAS of 5 percent, 7 day ROAS of 10 percent and 30 day ROAS of 20 percent. For other genres, such as hyper-casual (where you generate most of your return early), your targets would be very different so understand your space before making decisions (actually before launching a product).

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What to do if you are missing your benchmarks

As with all metrics, ROAS provides guidance, not black and white answers. If your ROAS is slightly below the benchmarks, you may not have a problem, it could be noise. If one agency is outperforming another by 1 or 2 percent, again it may not be indicative, it may be luck (one caught an extra VIP). Conversely, if you are missing even by a little, it could be indicative of a deeper issue. A small miss also means that you should adjust conservatively until you see your 30 day ROAS numbers.

If performance is significantly behind ROAS benchmarks, then you need to find the cause. If it is across the board (all campaigns), then your product has issues. You either need to address these issues and improve retention or monetization (the key drivers of LTV and return) or not invest in the product. If the performance is worse on a particular platform, you need to dive deeper into your technical performance on that platform versus other platforms and how the user experience (CX) differs on the underperforming platform. If the underperformance is with a partner or channel, you should adjust your spend to focus where you have a stronger ROAS.

Key takeaways

  1. While the success of any product or company long term is ensuring its cost for acquiring a customer is lower than the value of the customer, it is difficult to calculate in the early days of a product or marketing campaign. ROAS (return on ad spend) based on the first 3, 7 or 30 days of a campaign provides a good proxy for whether the campaign is successful.
  2. In the social casino space (other genres may be different), the benchmark target ROAS is a 3 day ROAS of 5 percent, a 7 day ROAS of 10 percent and a 30-day ROAS of 20 percent.
  3. If your ROAS is underperforming significantly, you need to evaluate if you should continue investing in the product overall or in the specific marketing channels, while adjusting your marketing mix to optimize ROAS.