While the focus and glory is on an ability to quickly pivot your business model, a more important skill for entrepreneurs is being able to pivot inside your business. We encourage and fête leaders who change their business model to deal with changing market conditions or adjust their original plan when it meets reality. As important to growing your company and reaching an exit (or more important), but often unseen and unsung is the ability to change the way you do business, your processes, technology, etc. The success of my first company, Merscom, is often attributed to our pivoting from value core games (CD-ROMs sold at stores like Target and Best Buy) to casual downloadable games (e.g., hidden-object games downloaded from sites like Big Fish) and then pivoting to social (i.e., Facebook) games. Equally important—but more difficult—was pivoting from licensing content to creating content, pivoting from using external developers to building an internal team and pivoting from a European-focused marketing strategy to a domestic strategy. It was the latter pivots that paved the way for Merscom’s sale to Playdom and subsequently through Playdom to Disney. While all the attention and board meetings are focused on whether or not to pivot your business model, you should spend as much or more time analyzing how you are doing business and whether it needs to change. Continue reading “Pivoting is not just about business models”
There are many conversations, articles and even books on how to optimize in-application purchases (IAP) in social games but most neglect the most important element. Rather than focusing on adding friction, tweaking price levels, running sales, etc., there is one aspect that does not get enough attention and can make all the difference between success and failure: Continue reading “The most important secret in monetization”
There has been a development recently in the social gaming ecosystem that has generated very little buzz but probably will have a major impact moving forward, the fact that two of the top social gaming companies are now publishing third party titles. In the last few weeks, Playdom licensed Triple Town from SpryFox to publish in English on Facebook (Playdom announcement). Even more significantly, last week Zynga announced it was publishing Slingo (Washington Post article on Zynga’s move).
These moves are significant because for the first three years of the Facebook game business, the only publishing option for developers who could not or did not want to self-publish on Facebook was 6 Waves (now 6 Waves/LOLApps). With Zynga and Playdom both moving into third party publishing (though for Playdom, it did try some publishing in 2010), and the way the social game business is almost defined by fast following, it is likely smaller developers will have multiple publishing options on Facebook.
The Risks and Downside of Soliciting a Publisher
Before you rush out the door and try to find a publisher, I wanted to highlight a few of the risks. First, there have been a few big stories lately about companies allegedly “borrowing” ideas from developers. A few weeks ago I blogged about 6 Waves/LOLApps allegedly copying Triple Town while in negotiations with Spry Fox (my blog post). Earlier this month, a federal district court refused to throw out the lawsuit from SocialApps against Zynga claiming Zynga used confidential information obtained while negotiating to license myFarm (Zynga/Social Apps article).
A second reason not to rush into a publishing relationship is the foregone revenue. In the social gaming space, I have seen many publishing deals pay the developer up to 50 percent of revenue, especially if no advance or guaranteed payment is involved. In the traditional core game space, the royalty back to the developer is usually in the 15% to 35% range (i.e, the developer gets paid 15 percent of the revenue its game generates). So you are looking at foregoing from half to more than three quarters of your revenue, which could be a huge cost if the game is a hit or even keep you from breaking even if the game is mediocre.
A third concern with using a publisher is how much mindshare and resources the publisher will devote to your game. When you are negotiating, they will tell you how much they love you and will treat it just like an internal title. That claim is worth about as much as a politician’s promise during an election campaign. Now the first few games a publisher licenses will probably get a lot of attention, as their publishing model matures you will be fighting for resources with all the third party titles (and not even be in the conversation compared to first party titles). If the game comes out of the gate strongly, they will probably continue to promote it. If the game, however, stumbles either in terms of monetization or overall adoption, you are likely dead. Once the publisher moves on to another game, they will not revisit yours regardless of the changes you make (despite what they say). In my experience, contractual marketing commitments have little value. Publishers will either ignore them or fudge the numbers. At the end of the day, if the game is not hot they do not worry about losing the rights.
Reasons to Consider Using a Publisher
Although there are some significant drawbacks to using a publisher, there are still several major reasons to consider this option. Most importantly, it costs a boatload of money to launch and market a social game. The major Facebook game publishers spend well over $3 million per month per top title just on Facebook ads (with some spending much more than that). Those companies that claim to generate most of their installs organically (cross promotion, virality and other free channels); well see my comment earlier about politicians during an election. You may be able to get traction and grow a game slowly and steadily without a huge marketing spend, but if you want to acquire users quickly (important if you are worried about being cloned), you need access to deep pockets. If you do not have the resources on hand, a publisher can be an appropriate choice.
A second reason is cross-promotion. The major social game companies have millions of monthly users that they can direct to a chosen title (in Zynga’s case, hundreds of millions). For a company launching its first title or one that does not have a large user base, the traffic a publisher can bring is a huge advantage.
A publisher can also give a developer expertise in does not have. Small developers, especially if they are on their first social title, may not have the understanding of monetization, analytics, game services (customer support) or marketing/user acquisition, which a proven publisher does. These competencies are often the difference between success and failure for a social game. Depending on the type of relationship you enter into, access to the publisher’s expertise could be more valuable than anything else they bring to the table (and may have a greater long-term benefit to your company, as you can then learn and leverage these skills on future titles).
When to Use a Publisher
Unfortunately, there is no clear cut rule as to when to use a publisher or when to self-publish. It is not just an issue of size, even some of the largest publishers license to other publishers outside their core markets. The thing you must do is look at the situation objectively and weight the benefits and costs.
You must also do your due diligence on the publisher so you can minimize those costs and risks. See how they have treated other developers. Understand how your product fits into their portfolio. Learn how they will market your game and what their key indicators are for continued support. Go past the first phone call and dig deep to understand exactly what they can and cannot do for you. Then, once you have made your decision, get behind it fully and do everything you can to succeed.