Category: business

I have a growing fear that the games industry, specifically the way indies are handled, treated, and reported, may be leaving a group of people behind. There are more indie devs now than ever before. I personally think we have an indie game crash coming. I see a lot of indie games that are unmarketable, unsellable, not viable as a commercial endeavor that supports a family. Yup, its great to be 20 years old and young and hip and hanging out in coffee shops with a laptop, and only needing money for coffee and wifi, but thats not a career, thats a hobby..

But regardless of inevitable indie crashes, I’m more concerned that game development, or rather indie-game development has become incredibly narrowly focused. If I was paid to enforce stereotypes for a tabloid newspaper, I’d probably say that all indie game developers are white, late-teens to twenties, english-speaking, liberal hipsters with iphones, who love breaking bad and game of thrones, who wear ‘ironic’ glasses, and spend a lot of time on social networking sites. They spend 25% of their time tweeting about cool game developers they have met and the other 75% of the time re-tweeting political/activist rants and memes.

They are developing a mobile game, or an ipad game, and its a platformer, or a puzzle game, or a walking simulator. Their marketing budget is of course zero, because they are *that* anti-establishment. They wouldn’t dream of charging > $5 for their game, and they are sure that somehow they will become a millionaire by age 25. They have spent a lot more time hanging out with other indies or going to conferences than they have, or ever will do programming. Obviously they code in Java or C# or something even higher level, and obviously they use unity. Their business plan on PC is ‘steam’.

Now obviously that isn’t *that* true, it’s a stereotype, but it’s a bit more-true than is comfortable. And the reason this matters at all (I have nothing against platform games, twitter, unity, or anything in that list), is that any group that can be described like this immediately becomes a group that repels outsiders.

Oleg is a 52 year old divorced ex-welder from Minsk. He taught himself C++ from books, and does not know anyone else who is a programmer. He lives alone, in Minsk. He does not speak English. He is very hard working, and very good at business decisions. He is an exceptional programmer, and has a fantastic eye for game design. He has never been to the USA. His project is a highly innovative strategy game that is better than anything else currently available.

The problem is Oleg doesn’t stand much of a chance at indie parties, and more worryingly, I suspect doesn’t stand a chance in the indie press. The indie press have decided what indies are like, and Oleg isn’t one, or at least not one that they will write about, and they sure as fuck aren’t going to fly to misnk to meet the guy, nor are they likely to ever hear about him, and more importantly his amazing strategy game.
Why?

Because Soooooo much press coverage comes from game shows, where indie devs show and ‘pitch’ their games to the press. That relies on them being Charismatic, friendly, extrovert, confident English speakers. That is A TINY TINY TINY subset of humanity. (Also it doesn’t help that Oleg is fictional…). I figure your chances of getting attention for an indie game if you are a white liberal english-speaking 21 year old guy in san francisco are 100x that of oleg. Am I wrong?

Journalists, prove to me I am totally wrong. Show me all those big articles on amazing indie games by people who don’t speak English. I bet there are some fucking amazing games out there we aren’t hearing about.

 

So what is the michelin guide? well wikipedia tells us that it is…

“a series of annual guide books published by the French company Michelin for more than one hundred years. The term normally refers to the Michelin Red Guide, the oldest European hotel and restaurant reference guide, which awards Michelin stars for excellence to a select few establishments. The acquisition or loss of a star can have dramatic effects on the success of a restaurant.”

Basically it’s the go-to book for foodies. A michelin star restaurant is pretty pricey. A restaurant with two stars is VERY pricey. A restaurant with more than 2 stars is stupidly pricey. With the price, hopefully comes quality. It is basically THE goal for a chef to get his or her restaurant in the guide. In short, it’s a guidebook for very expensive high quality restaurants. And what does that have to do with marketing and selling your games, indie or otherwise?

Fuck all.

But…it is very applicable when you look at the motivation. Michelin make tires. You can’t eat tires, they don’t go well with food, there is no obvious synergy there. You don’t order a confit of duck and a side order of all-weather snow tires. There is apparently no clear link… But there is. There are two of them, neither of which is apparent.

Link one: The indirect market. When the guide was introduced people had cars, but there was frankly not much motivation to use them. The train was the preferred method for long distance travel. Michelin made tyres, so they wanted people to buy more cars, and also…use them more. That means they needed a way to persuade people to travel more. A travel guidebook is one thing, but the michelin guide is much cleverer because it introduced a ranking system. Restaurants were no longer ‘good’ or ‘not bad’, but ranked in a very specific system that was based on the top-end. The chances of your local pub or restaurant having a michelin star were practically zero,m but LOOK! here is a list of all the ones that are great, some distance from you, and here is a scientific sounding accurate ranking that persuades you that they are so good, it isn’t worth traveling to! get in the car! Don’t forget to check your tyres!

It’s genius marketing, because it is so indirect, and so subtle. On the face of it, that nice michelin company are giving away (they later charged for them) a free guide to restaurants! whats not to like! clearly they just love food and want to give something away! In those days, the technology was pretty simple, but a cynical 2014 version of the guide would probably use cookies to encourage you to go to the furthest restaurant from your house :D

So what is link two? Well if you read any of those neurosciency advertising books I like you already know, but it’s this: Association with quality. In the world of food the word michelin == quality. People struggle for years to be awarded the honor of putting ‘michelin’ next to their name, because michelin means quality…michelin means quality…. ooooh do you need new tyres? what brand are you interested in sir?

So bringing this back to indie gaming, how does it help? Well firstly it explains a bit how clever some ads are, and secondly, it shows how subtle and long term and in what roundabout ways clever marketing people think. Most indie devs will not even consider advertising, or sponsoring something, or doing *anything* that doesn’t lead to a click and a sale *right here* *right now*, but thats not how marketing works. The michelin company were prepared to start a whole sideline in promoting good food to hopefully build up a motoring culture that would indirectly boost their business. Thats really clever thinking, thats really long term.

We should be more like that when planning strategy.

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…

 

 

 

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