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How to succeed in the mobile game space by Lloyd Melnick

Tag: mobile

Why Super Mario Run was destined to fail: Lifetime Value Part 24

I am surprised that people are surprised about the lack of success for Super Mario Run from Nintendo. While I do not claim that I can predict the future, and this time of year I scoff at everyone’s predictions because if the so-called experts actually could foresee develops they would be much wealthier than they are, in January 2012 I laid out the reasons traditional gaming companies were unlikely to succeed in the free to play space . The reasons I stated nearly five years ago were also the headwinds that doomed Super Mario Run.

super-mario-run

Different businesses

As I wrote then, the biggest challenge traditional game companies face when moving to a free-to-play model (at the time it was more Facebook than mobile) is that they are different businesses. Old school game companies, be it Nintendo or EA to Take2, are skilled at creating a great product that someone buys, enjoys and finishes. Free-to-play companies are creating a service (hence the now relatively old term software as a service), something that customers use over time and becomes part of their life (like Netflix or Amazon Prime).

Building and running a service requires a different skill set than building a great game. The former needs

  • Analysts to look at customer behavior and suggest changes to continually improve the product
  • Product managers to create new features and elements that keep existing players engaged and ensure strong elder gameplay for the most committed players
  • User acquisition specialists who not only can bring in new players but can reactivate the most valuable players
  • CRM experts who can communicate with existing players both inside and outside of the product through multiple channels to increase their engagement and loyalty.

Conversely, traditional game companies succeed with a very different skill set

  • Great game designers who can create a fantastic experience, though usually of a limited nature
  • Marketing gurus who can get people to purchase a product
  • Distribution experts who can ensure the product is placed prominently in front of potential customers.

I have no privileged information in how Nintendo structured its Super Mario Run team but based on the product and how they are managing it, I would bet the focused more on the skills needed by traditional game companies than those creating a free-to-play game service experience. The game clearly has great designers and their promotion by Apple shows they still know how to manage channels.

They do not understand free-to-play LTV

What they are lacking is an understanding of free-to-play economics, primarily how to optimize player lifetime value. I have written way too many times about customer lifetime value (even wrote a book on it) but it is still a concept that traditional game companies like Nintendo fail to grasp. In summary, lifetime value is the monetary value to your company of a new player and it is a function of monetization (how much they spend), retention (how long they remain a customer) and virality (how many other customers they bring in).

In the traditional game space, this equation is quite easy. For Nintendo, LTV is largely how much a payer pays for a DS and Wii game. It does increase by downloadable content (DLC), whether they buy additional Nintendo products and if they encourage friends to buy but it is largely driven by that retail purchase of a game.

This experience is evident in how Nintendo approached Super Mario Run. The product is built so that the free element is a teaser to get a $10 purchase. It is not built to create a long-term relationship between players and the game, where they return (and often spend) daily for months or years (no exaggeration, take a look at Mobile Strike or Clash of Clans or most of the games on the top grossing charts). They are still focused on the discrete purchase, selling the razor and not the blades.

This approached doomed Super Mario Run (and by the doomed, I meant compared to expectations and potential, as it will still generate millions), even if they were seeing more traction getting the initial $10 purchase. In the world of free-to-play, $10 is largely an irrelevant transaction. Supercell was acquired by Tencent for $8.6 billion because players are spending hundreds or thousands of dollars in the game. By focusing on the first ten dollars, Nintendo missed where the bulk of free to play revenue comes from and largely capped what most players would have to spend. Thus, a player who Nintendo could have built a relationship with that would generate $20,000 is now spending $10 and moving back to a Supercell or King or Zynga game.

Core game companies will continue to flail in the free-to-play business

I said it almost five years ago and it has largely held true, traditional game companies won’t succeed in free to play. Since I wrote that article a handful of game companies have seen some free-to-play success (most notable Hearthstone) or acquired respectable free-to-play businesses but most have either failed or gone bankrupt. We still have not seen EA turn their core games (FIFA, Madden, Battlefield) into free-to-play franchises. There is nothing from Microsoft or Sony on any mobile chart. Take2, not a player in the mobile space. You get the point. It’s no longer a question of when the core game companies will successfully move into free to play (and mobile) but when they will just give up (and investors will stop expecting it) and focus on what they understand.

Key takeaways

  1. The failure of Super Mario Run by Nintendo was very predictable, as traditional game companies face many structural issues in creating free to play mobile apps.
  2. The biggest hurdle is their team structure, as they are built to create a product and not run a successful service.
  3. Core game companies also do not truly understand free to play economics, that customer lifetime value is driven by long-term retention and monetization and not a discrete purchase.

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Author Lloyd MelnickPosted on December 24, 2016Categories General Social Games Business, Lloyd's favorite posts, LTV, Mobile Platforms, Social Games MarketingTags customer lifetime value, free to play, lifetime value, LTV, mobile, nintendo, Super Mario Run10 Comments on Why Super Mario Run was destined to fail: Lifetime Value Part 24

Don’t give up, there are still great opportunities in mobile (aka make mobile great again)

Key takeaways

  1. The mobile market is far from dead. The misperception that the opportunity has passed is driven by the selective memory of a better past than existed and the current focus on copying existing successful products.
  2. The opportunity on mobile is still great, with projections of 5 billion smartphone users by 2019 and over 1 billion people on Facebook.
  3. Rather than complain or try to create yet another slot or mid-core game, challenge yourself to think outside the box. Focus on creating uncontested market space and making the competition irrelevant.

Don’t give up, there are still great opportunities in mobile (aka make mobile great again)

I doubt a day goes by without someone whining and winging about how tough the games and mobile market is today and although it is difficult, there are still great opportunities.

Why many think the mobile market sucks

There are a few reasons people feel the market is so challenging. First, there is always a selective memory of how great things used to be. I was there when the mobile market was perceived as a gold rush. And for the first few iOS games, they did great. It was, however, always challenging. I remember at Playdom all of our failed efforts (and various heads of mobile) to penetrate this market. Playdom was not alone, as many companies (EA/Playfish, Zynga, Kabam, CrowdStar and innumerable others) lost tons of money (and users) in the mobile space. I call this the “Make Mobile Great Again” phenomenon, similar to the Americans who have a very nostalgic view of the country 20 or 30 years ago.

The second reason for the perception of the difficulty of mobile is the red ocean mentality of most of the complainers. I have written before about blue ocean versus red ocean strategy, with the latter a strategy to beat established competitors in a known market rather than expanding the market to appeal to non-users. Mobile now is incredibly difficult if you are pursuing a red ocean strategy. Players have invested months or years in existing products (Clash of Clans, Game of War, Slotomania, etc.) and getting them to switch does not mean putting out a product a little bit better but creating a game that is 9 times better ( see my blog post from 2014 on why a new product needs to be 9X better to get users to switch ).

Then add to the challenge of creating something 9X better that the competition is really good these days. Even the game companies out of favor have experienced and deep teams of game designers, product managers and engineers. They also have millions of dollars they are investing in their new games (in some cases sitting on billions in the bank) to make them better, get new users and reactivate lapsed players. They are not waiting for you to launch a new game and take away their chart position (and revenue).

The bottom line is the market is very challenging if you are just trying to compete with games already on the market (but it always sucked to compete in a red ocean). That does not mean, however, that the mobile market itself is no longer a great opportunity.

The next great platform is still mobile

A recent blog post from Greylock Partners by Josh Elman, a leading Silicon Valley VC, makes the point that The Next Great Platform is the One That We Already Have.  In the world of venture capital, they also hear all the time that there are no longer opportunities in mobile (in their case, it is often that Facebook, Snapchat, Instagram, Twitter, etc. have consumed the entire market) and that they need to look at the next big thing (VR, AR, drones, IOT, insert hot new trend here).

Elman, like me, is not ready to give up on mobile. He pointed out that in 2002-2004, everyone was complaining that all of the opportunities on the Internet were over: Yahoo and AOL were the dominant portals, Google controlled search and Amazon owned eCommerce. Post 2004, however, we saw Friendster then LinkedIn, MySpace, YouTube and a small company named Facebook. So maybe the Internet was not exactly devoid of opportunity.

What is particularly interesting is that these companies (many of whom enjoy huge valuations), did not even need a technological inflection point to enter the market. Instead, they grasped the opportunity from user-generated content followed by a social and psychological shift. Even the new technologies were largely improvements on existing tech.

The opportunity now is tremendous. Billions and billions of people use Smartphones (5 billion by 2019). More than one billion people are active on Facebook and over 100 million use Instagram monthly, according to Facebook. And for those still not convinced there is still an opportunity, the chart below shows all the new apps (albeit not gaming) that rose to the top of the charts just this year.

hits-of-2016

Where the mobile opportunities are

If you are expecting me now to list some great opportunities, you have not read the rest of this post very carefully. The opportunities in mobile are not doing what everyone else is doing but understanding where you can create apps and games to reach people in a new way.

As Elman writes, “What happened in the Web 2.0 era was that some companies succeeded in creating totally new experiences, engaging consumers, and enabling them to connect with other people in a way that had never happened before online. Now that we’re in a fully mobile world, I think there is a lot of room to create new experiences and connect people. “

Rather than complain or try to create yet another slot or mid-core game, challenge yourself to think outside the box. Focus on creating uncontested market space and making the competition irrelevant. Then you can leverage the still great mobile platform.

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Author Lloyd MelnickPosted on September 28, 2016April 11, 2020Categories blue ocean strategy, General Social Games Business, General Tech Business, Lloyd's favorite posts, Mobile PlatformsTags Facebook, mobile, mobile games, Venture Capital2 Comments on Don’t give up, there are still great opportunities in mobile (aka make mobile great again)

Blue Ocean Opportunities in the Red Ocean of Social Casino

For those of you who were not at Casual Connect and missed my talk on Blue Ocean opportunities in social casino and why they are the best path forward, below is a copy of my deck. The key takeaways are

  1. Social casino is one of the bloodiest of red oceans, with excellent well-financed companies competing ferociously. The best path to success is to take a Blue Ocean approach.
  2. Blue Ocean is all about turning non-customers into customers, rather than competing for the same customer.
  3. You do this by looking at what you can remove from the existing product offering, what you can add, what you can increase and what you can reduce. This leads to a new offering that appeals to new users.

The full presentation can be seen here:

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Author Lloyd MelnickPosted on October 26, 2015April 11, 2020Categories blue ocean strategy, General Social Games Business, Growth, Lloyd's favorite postsTags blue ocean, Casual Connect, mobile, slots, social casino, social games, Strategy2 Comments on Blue Ocean Opportunities in the Red Ocean of Social Casino

Dell’s Ophelia can be the biggest thing to rock gaming since the iPhone

The unveiling this week at Mobile World Congress from Dell about their Ophelia project (thank you Jon Downey for bringing it to my attention) may have a profound impact on the game industry as early as Q3 of this year. Ophelia is a stick that turns a TV or monitor into your computer (through the HDMI port initially but there will be a USB version in the future), powered by Android. It is effectively your computer on a stick, which then integrates with Dell’s cloud services and allows you to use your apps or play your games. You can even upload and download files as if you were at your PC (or Mac).

image from CNET

Think about pulling out your Ophelia stick, plugging it into your TV and you can just start playing Bejeweled or Slotmania. Later, you plug it into your monitor at work. When you’re traveling, just plug it into the TV in your hotel room. You can play all your games, edit your documents, view your pictures, and anything you would do with a laptop or tablet. Continue reading “Dell’s Ophelia can be the biggest thing to rock gaming since the iPhone”

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Author Lloyd MelnickPosted on February 28, 2013March 5, 2013Categories General Social Games Business, Mobile PlatformsTags Dell Ophelia, mobile1 Comment on Dell’s Ophelia can be the biggest thing to rock gaming since the iPhone

What the Apple/Samsung jury verdict means to social game companies

The recent jury verdict recommending Samsung pay Apple $1 billion in damages for violating patents is likely to have a significant effect in the social game space. Although the Apple/Samsung legal battle is likely to continue for years, the jury’s decision shifts the playing field. In my experience, once there is a decision of this magnitude, the loser (in this case Samsung) is so on the defensive it ends up settling much to the favor of the original victor (Apple). The decision will not put Samsung out of business (though a billion dollars is a lot of money for anyone, and theoretically it can suffer a penalty three times that amount) and it really does not matter if Apple has more cash in the bank.

Galaxy Tab and iPad Continue reading “What the Apple/Samsung jury verdict means to social game companies”

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Author Lloyd MelnickPosted on August 28, 2012September 5, 2012Categories General Social Games Business, Mobile PlatformsTags Apple, mobile, patent infringement, Samsung, tablet5 Comments on What the Apple/Samsung jury verdict means to social game companies

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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