Category Archives: business

So here are some harsh figures that will make you cancel your ad spending for your indie game.

In the last 8 days my figures show me this…

For every 100 visits to my index page for D3, 48 people will proceed to the register page. Of those, 11 will hit the buy button, of those roughly 1 will buy the game. That earns me about $22.

so the maximum cost per click that makes sense is $0.22, or £0.13, which is practically unachievable.

So how can ads make sense?

The beauty of ads is that the person who comes and buys the click is just one factor in the equation. There are many other factors, and the problem is they are hard to quantify.  Here are the ones I think matter and the rough guesses.

  • The life time value (LTV) of the customer has to include every other game they buy, including DLC. Assume D3’s DLC adds 10% to total income, and assume a 20% chance of buying another positech game eventually  so LTV factor is 0.3.
  • The virality of the customer has to include friends that he persuades to buy the game. This is hard to tell, but lets say it’s pitched at roughly 20%. So one in five people will eventually lead to another sale, either directly or indirectly through a forum post or tweet about the game, so this includes people they have never met. So this is 0.2
  • The untracked sale. This includes people who visit the buy page at work/school, then buy at home, or view it on mobile but buy on desktop. I suspect that is around 10% so another 0.1.
  • The delayed / wishlist/ bargain hunter. I crunched the numbers once for Democracy 2 and found roughly 33% of revenue was from sales, so thats 33% of income not being tracked here, or earned here, but stored for later, so lets say 0.33.
  •  The impression that wasn’t a sale. This is a big thing. Some people used to say you needed to see an ad 5 times before it worked. Other research claims even 1 impression has an impact, and >5 can still help. Because click-through rates are pretty low, we are totally disregarding the impact on brand awareness. Essentially you visually prime a customer with your logo to ensure subconscious recollection when viewing a review, portal listing or whatever else. Personally I think this is a big factor, lets say at least 25% to be cautious.

So if we add that up, we get 0.3 + 0.2 + 0.1 + 0.33 + 0.25 = 1.18, so an extra 118% of income generated by that sale. In other words our 0.22 is really 0.48. That *is achievable, although still not easy. What should be immediately obvious is that we have a LOT of fuzzy numbers and guesses in here that really cannot be tracked. Putting hard numbers to some of them would help a lot.

Looking at it the other way, we have to take into account the fact that a big chunk of site visitors are not ad related but coming from reviews, portal links, tweets etc. Ideally I need to deduct that traffic to get a better picture (which would make my figures much worse).

So for now, lets assumed that we break even at $0.48 per click, what are the possibilities for making an ad-based strategy work?

  • Target traffic more cleverly so the people who arrive are more suited to purchasing. That would push up that 48% who go to the register page.
  • Increase the lifetime value of the customer. More games. Cross-promotion. Maybe more DLC, or sequels, there are various strategies here, but I’m already doing most of them
  • Reduce leakage points. Find out why people don’t hit the buy button, or then hit the actual order form buy button. A/B testing to improve both stages.
  • An ad that more clearly prevents non-buyers from clicking, and thus targets better. I don’t want people who expect a free game, or a mobile game. Luckily adwords lets you analyze each ads performance. I should do this…

Fun fun fun…

 

 

 

Fun with stats: Buy Pages

October 12, 2014 | Filed under: business

So welcome to another exciting episode of ‘fun  with stats’ with your host cliff harris.

Lets examine some stats for changes that are under analysis (using random sampling) with the buy page of a fictional pc political strategy game. Lets assume it sells for $20 to make things simple, and to take into account occasional discounts.

Lets also imagine (theoretically) that the game sells on portals which take a 30% cut and that it has a direct sell option which (theoretically) takes a 10% cut. So a portal sale earns $14 and a direct one earns $18.

The raw before and after the change stats are heavily skewed due to traffic variations, but basically we have this:

3rd October onwards (old buy page)

Direct buy button clicks 427
Buy page hits 3203.
Portal buy button clicks 152
direct sales share = 13.3%

8th October onwards (changed buy page)

Direct buy button clicks 194
Buy page hits 451.
Portal buy button clicks 23
direct sales share = 43%

So far, all this does is say that the percentage of buyers who choose the direct option has gone up. Because we get email details + a higher percentage of the sale, then we can assume this is a boost for us, but it’s not ‘free money’ We are not getting new sales, just converting portal sales to direct ones. So the difference is really only to be found in that 20% difference. To work out the actual difference we need to guess total portal and direct theoretical (assuming all clicks are sales, they really aren’t…) income, and compensate for traffic variation…

3rd October onwards (old buy page)

Portal income $2,128
Direct Income $7,686
Income per visitor from portals: $0.66
Income per visitor from direct: $2.39
Income per visitor overall: $3.06

8th October onwards (changed buy page)

Portal income $308
Direct Income $3,492
Income per visitor from portals: $0.68
Income per visitor from direct: $7.74
Income per visitor overall: $8.42

Holy crap. Have I done this right? And this is with A/B testing so actually only HALF the visitors are getting the new buy page, so the effect is actually double this. Assuming my maths is correct, the percentage of people who visit my site and THEN buy on a portal is actually fairly low, meaning that encouraging them to buy direct (but still having multiple portal options displayed) seems to have very little downside. The income from portals actually even rose very slightly $0.66 to $0.68, which is a statistical irrelevance. That change from $3.06 to $8 is not though. It’s real.

So obviously I need a lot MORE data to prove I’m right, so I’m going to leave my experiment running a few more days. I have some D3 ads running now which will drive in a bit more traffic which will help. You can’t really extrapolate anything from under 1,000 clicks on anything. But it looks promising.

BUT THE FUNNEL…

What this means is that getting someone to my buy page now earns $8 not $3. Now as it happens, the actual; abandonment rate is fairly high, because many people see the price (only on the buy page..) and then don’t buy, but there is value there in the stored intent and later discount-purchases, or second-thoughts and return buyers. Lets assume an abandonment rate of 80%. That makes a visitor now worth $1.68 rather than $0.61. The problem is not everyone gets to the buy page, home page to buy page hits happen at  35% so real values are old system-> $0.21 per visitor, new system -> $0.59.

The difference between the viability of an ad campaign or PR campaign targeting $0.21 and $0.59 per visitor is huge. It’s hard getting $0.20 CPC. It’s easy to get $0.50 CPC.

This is why I care about this stuff. Plus I’m a stats head and I enjoy it :D

 

Various things going through my head today…

Firstly, the UK government gets to build a nuclear power station near me. That doesn’t scare me *as such*, although I’d definitely prefer it was a few hundred miles further away thanks. What pisses me off is that people are not prepared to discuss the facts, and risks. Even just RIGHT NOW on the BBC web site, there is news of new cracks in an existing reactor, and a ship carrying radioactive waste is drifting out of control. I mean…FFS, can we not even sensibly discuss the risks without being daubed as ‘anti-science’ and ignorant. I get that all the time because I’m very sceptically of nuclear power and it pisses me off. It’s possible to be informed, educated, sensible and still very wary of risks of these things thanks to the precautionary principle.

Anyway, I’m SURE that now we have guaranteed the french-owned nuclear station 30 years of a £92.50 strike price for nuclear energy we will get the same for solar generated by UK citizens right? The Feed-in-tariff is currently 6.38p/kwh for standalone solar PV. thats £63.80 guaranteed for 25 years, with no government implied insurance backing (nuclear plants are never insured), waste disposal or safety/security concerns. So….. err no.   I’m aware that solar has downsides due to indeterminacy and land-use, but rooftop solar has no land-use downside and the distributed nature of the energy source makes it more efficient due to lower power-line losses. Nukes have to be by the sea. Solar can be anywhere. Solar can be community owned, closer to the people and more democratized.

This is all in my mind as I’m looking for very-long-term investments for Positech Games. I’d ideally like to diversify a bit from games, and my dream project is a solar-farm or wind-farm. Ideally wind, but this is VERY expensive (there are huge economies of scale with turbine size, you really want 6MW turbines, which cost millions each), so more likely solar, which means buying land, which is hard to find. In both cases, planning is a nightmare because people somehow think solar panels in a field they can’t even see are somehow a problem. The thought of arguing with such people drives me nuts.

What I *could* do, what *everyone* in the UK does, is buy some cheap flats and rent them out to people who can’t afford to buy them. This is the default pension plan for middle and high income brits. I kinda hate it. I don’t want to leverage my financial position to squeeze ‘dead-money’ in rent from people on a lower income. That kinda sucks. I’d like to set up a business that generated renewable energy instead, but our politics in the uk is moving against the environment, and can I really trust a government feed-in-tariff promise anyway?

In unrelated news, getting new games to feature on showmethegames.com is like pulling teeth. A lot of indies sell only through steam. Not just only through 3rd party portals, but exclusively through one. This amazes me. I LOVE steam, but my attitude to any business is like Han Solo and Lando.

“Can you trust him?”

“No…but he is my friend…”

I don’t know who might buy valve next year, or in ten years time. Nobody does, not even Valve. Hedging your bets is good. You don’t stick your entire stock portfolio in one share, it’s too risky, however safe a bet it looks. BigFishGames started off paying devs 70% royalty as I recall. They ended up with  around 20%. Businesses can change. It seems I’m the only one who realizes this.

So these ‘indie’ devs (I can’t really call them independent), can’t be listed on SMTG because it only lists devs with a direct purchase option, and increasingly this isn’t the case. Add to that people who take the hilariously catch-22 attitude of not wanting to be on SMTG because it has relatively low-traffic.

Again..I’m trying to do the right thing…use my own money to run a site that promotes other indie devs FOR FREE. But nobody is that interested.

So maybe it’s time to close SMTG, spend the money (and any solar-investment money) on buying up a bunch of buy-to-let properties so I can squeeze young people off the property ladder in the UK even more. Apparently that is what sensible people do.

Bah.

So apparently you get extra brownie points from google’s ranking now if you have an SSL certificate. I know more about cake-baking than SSL. (Always minimize time between mixing and putting it in the oven kids). I bought an SSL cert for positech.co.uk, and apparently my host installed it, but I don’t really know what is going on. They told me my IP changed as a result, but for what?  just web? FTP? cpanel? who knows…

What it now means is that this address is valid:

https://www.positech.co.uk

Whereas this still isn’t:

https://www.cliffski.com/ and of course none of my other domains are either, by positech is the most popular one anyway. You are probably at it right now.

Which is fine, and the positech address gives lots of nice green ‘this site is trustworthy(ish) reports in chrome and IE, and even very slightly in firefox:

ssl

So that’s just lovely, but  does it mean I should add a redirect in htaccess to redirect all http://www.positech.co.uk traffic to https://www.positech.co.uk? Is that what people do?

I know NOTHING. But I do know that if something makes my site more desirable to traffic for $50 a year I’m doing it :D

PR and the 3 tiers of game developers

September 19, 2014 | Filed under: business

Things are pretty tough in the mid-tier, as an indie game developer. I see a huge disparity between those devs that have been called ‘triple I’ indies (sorry paul!) and new entrants making their first game in unity. I also see a big gap between those III indies and the AAA developers. It seems game development is collecting into several bands, and I suspect a lot of it is PR related.

tier1

At the bottom (financially speaking) you have those indies making their first game, and selling a  few hundred, maybe a thousand copies. They have zero PR budget and Zero marketing. They probably have coder art, and are doing literally everything themselves. They make up the majority of games still stuck in steams Greenlight pages, or have an app on the app store. A lot of them may be working on their games part-time, or are students, or very young. their living costs are young, they are idealistic, and presume their game is about to take off and make money. Statistically speaking, they probably wont, but a combination of youthful optimism and relentless confirmation bias means they are still working at it and are still assuming they will stay in the industry. The only PR they do is on twitter and reddit personally, trying to get people to play their game. The ROI is zero. These people lose money.

tier2

In the middle (again, only speaking financially) are the established ‘III’ indies with a few titles under their belts, or the ones who had a proper art and PR budget. They are probably migrants from Triple-A studios, with years of coding experience. They are aged 25+. They may have a small team, be working full-time, and are probably self-funded. They have some actual advertising budget, might hire a PR agency now and then, they attend trade shows with proper booths (not a laptop and a self-printed poster stuck to the wall), and have professional looking trailers. Their games sell 20-200,000 copies. Some of them are millionaires. A lot of them make a pretty decent living, and are likely to weather any coming game-crash or storms. They use google ads, reddit/twitter/facebook promotions etc. The ROI is pretty good, 200-300%? My company is in this tier.

tier3

At the top (purely financially :D) are the AAA developers. Their games cost millions to make, and sell millions of copies. They have full-time PR companies, with print-media ads, huge booths with people dressed up as game characters. They have massive site-takeover ads and streaming video ads. They have billboards in the streets, on buses, ads on TV, and their PR people guarantee these are the games that get written about in national newspapers and magazines. They get mentioned on TV in geeky segments in the news. The owners are multimillionaires. The staff are paid whatever they can get away with. The ROI is very good here, maybe 400%?  Activision is in this tier.

Ok, so what’s my point?

My point is that it’s getting hard to move from one to the other. Yeah, minecraft is the mega-exception that proves the rule. I know a lot of people in the middle tier, and I’ve yet to see any of them break out of it in a big way. The gap between them and the AAA is huge. Maybe it’s just that the sheer money involved requires a different mindset? Rather than spend $100-200,000 on a game (I’m calling that mid-tier) then you have to spend $2,000,000, and the likelihood is you don’t have that cash sat there (some do…). That means borrowing, which means proper big investors, VCs, people wearing suits… proper accountancy rules & board meetings blah blah. Maybe it’s too much hassle, or not what those devs want to do.

The good news is that going from bottom to middle isn’t as hard. I think it can be done by angel-investor style funding, or the real plucky confident people who remortgage their house or sell everything they own. I think you probably need to spend $100-200k to make a game that pushes you to mid tier. That either sounds like a good deal, or terrifying depending on your risk-attitude. The good news is there are some indie devs who can fund games to that level, if you make a very good pitch.

It’s hard but I think middle->top is harder still. I pretty much know why I’m stuck in the middle. it’s manpower. I need to find people I’m prepared to hire full-time, or at least on long term full-time contracts. I haven’t done that. Yet.