This blog post was published in Gamasutra and builds on previous articles I've written and talks I’ve given. It gives more background information and context on how Scientific Revenue thinks about the evolution of IAP monetization, leading up to a brief discussion of annuities. The goal is to convince you that the future of IAP monetization involves highly differentiated offers and offer types. As part of this, annuities are briefly described. In a subsequent article, we’ll discuss, in detail, how to design annuities.
How to get commitment from your players
We tend to think of retention as the way we measure commitment (in the same way that temperature measures heat). Ultimately, what you're looking for is for people to feel like the game is their game, and that the game is an extension of their identity. When you see a 10 year old boy walk up to another boy, ask "What do you play?", and get back "I play Clash Royale" ... that's when you know you've gotten commitment.
Once you have commitment, players are more comfortable with making in-app purchases (IAP). At this point, game developers can then begin to think about pricing as way to better monetize their mobile game. But, first you need to have good retention.
In thinking of retention as commitment, there are four very clear mobile game trends:
The continued rise of daily rewards systems. They've been around a long time (6 of the top 7 mobile apps had them in 2012, for example). But I'd venture to say that fewer than half of the games out there right now have a daily rewards system, and I'd be willing to bet it clocks in at 80% of new games by the end of 2017.
The emergence of annuities. Here at Scientific Revenue, more and more of our customers are using annuities. The idea is simple: sell the daily login reward, rather than give it away. But it works astonishingly well, and it increases the user’s commitment (after all, now they've spent in the game) while giving them a reason to return on a daily basis. More on how annuities can be useful in increasing F2P mobile game revenue and retention can be found here.
Companion videos. Twitch has been around for years, and YouTubers have been chronicling games for years. But, 2016 was an inflection point. At this point, whenever a significant mid or core game does an update, the first thing most players do is head to YouTube to learn more. There isn't a large-scale endorsement system yet, but it's only a matter of time before Molt has a Nike sneaker he can sell to his 2 million subscribers. And it goes without saying -- the existence of large-scale and popular YouTube communities and coverage more than doubles the time the player spends thinking about the game.
The Creative Reuse of IP. We've seen franchises for a long time. Madden N+1 will follow Madden N as surely as night follows day. But the way Clash Royale reused the characters and IP from Clash of Clans was a bit of a revelation. Not only did it simplify acquisition for Clash Royale, but I'm willing to bet that Clash Royale measurably improved Clash of Clan return and retention rates. Simply put: every time you play Clash Royale, you get a little more invested in the same universe as Clash of Clans (and Supercell, by cross-releasing new characters and experimenting with long form videos like Clash-A-Rama, is accentuating the trend).
The above four trends help players to demonstrate their commitment to their favorite mobile game. This increased commitment then leads naturally to increases in actual playing time as well. With greater retention, you can now better monetize your players with in-app purchases or in game advertising.
Here at Scientific Revenue we enjoy sharing what we learn. We usually do this in the form of interacting with customers, writing articles for industry publications, and speaking at industry events. It is extra special when we are invited to give a colloquium talk at a major university.
On November 11, 2016, our CEO Bill Grosso spoke at the University of San Francisco Seminar Series in Analytics, where he presented “Getting to Continuous Optimization.”
This post was originally published in Gamasutra
By now, mobile gaming has mostly transitioned to free-to-play. But while most games are free-to-play, it’s still the case that free-to-play games, and the free-to-play business model, are often misunderstood. In this blog post, we’ll examine some of the mythology around one of the most common complaints about free-to-play games: that they are "Pay to Win."
What is "Pay to Win"
One of the most common objections to the free-to-play business model centers around the idea of "Pay to Win" (hereafter pay-to-win). For example, a person making this objection might say
Free-to-play multiplayer games tend to favor wealthy players that will simply "pay to win", buying up all the power-ups or items they need to edge out the players who can’t afford to compete (or who don’t want spend). Ultimately, most of the players feel the game is unfair and get "crowded out," thus making it hard to build a long-lasting community for free-to-play games.
There’s a lot in there, and it can be hard to tease apart. But it boils down to the following 4 claims:
- Wealthy players will spend more in a game.
- Spending more gives people a significant advantage in multiplayer games.
- The most successful players are the players who have spent the most (which is unfair and it discourages new players from playing or participating).
- Therefore, when you avoid pay-to-win, you wind up making a game that either doesn’t monetize well, or isn’t very interesting.
If these were always true then, taken together, they would imply that multiplayer games which are strongly free-to-play don’t build long-lasting or large-scale communities. Since that’s not true (there are free-to-play games with very strong monetization which measure user lifetimes in years), it’s worth examining these claims a little more closely and talking about how to use the free-to-play model effectively without destroying the gameplay.
Our own Ted Verani, VP of Business Development, moderated an excellent panel of experts on Designing Mobile Games for Optimal IAP at Casual Connect USA in San Francisco.
While the vast majority of mobile game revenue is earned through in-app purchases, designing games for optimal IAP remains a major challenge, requiring deep knowledge of UX design, virtual economy tuning, pricing economics, and many other disciplines. Featuring experts across these fields, this panel gave attendees concrete and proven advice for designing free-to-play, IAP-driven mobile games which consistently drive IAPs without alienating the player base.
Ted was joined by game design experts: Christian Calderon, Chief Revenue Officer for Ketchapp, David Bisceglia, Co-founder and CEO for The Tap Lab, and Tadhg Kelly, Game Design Writer and Director of Developer Relations for VREAL. Panelists shared what worked and didn’t work, and offered some insights into future for mobile games.
If you were unable to attend this panel or want to see again you can check out the complete video here.
The launch of Pokémon GO saw it race to the top of the charts at unprecedented speed. It seems like everyone and their uncle are playing and talking about Pokémon GO.
One would naturally surmise that this monster hit would have a negative impact on other mobile games. However, according to App Annie that is not the case. Instead, they report that “Pokémon GO’s success has not come at the expense of other mobile games or apps,” and conclude that its impact has been additive to overall usage and revenue. This analysis covered all games and so included games at the top of the charts, which claim the lion’s share of overall revenue.
What about direct impact to games further down the rankings?
Scientific Revenue Economist Isaac Knowles analyzed three very different mobile games in our system and shared his findings in his Gamasutra post “Pokémon GO's Impact on Smaller Developers.” He found that there was an impact on smaller game developers. He also noted that there are things that developers can do to protect themselves when faced with the next massive mobile game release. Read his Gamasutra post for more details.
We have lots of conversations with game publishers. Oftentimes, those early discussions about dynamic pricing turn to a discussion about data what they’re seeing in their analytics. They’ve got dashboards filled with “the standard KPIs” and now they’re wondering: what do those KPIs mean, and how do they act on them.
The challenge is that most analytics tools people use are just measuring big picture results. While it is good to have fingertip access to metrics like ARPDAU and conversion rates, they don’t deliver actionable insights or help guide decision-makers trying to improve game performance.
To help address this, Scientific Revenue CEO Bill Grosso wrote an article in Gamsutra on Why Industry Standard Game Metrics Don’t Matter (Enough). In it he explains why some of the more common analytic metrics used are not sufficient for making good decisions, and provides tips for what can be helpful.
We will be following this up with a series of blog posts around Key Performance Indicators that we think game owners should be looking at regularly. Stay tuned.
At Scientific Revenue, we apply machine learning to very hard problems (namely pricing) and we frequently find ourselves on the bleeding edge of machine learning techniques. As a result, we like to collaborate, and we love going to conferences like NUCL.AI, which features a mix of leaders from both industry and academia, all focused on artificial intelligence in gaming and the creative industries.
As PocketGamer's Jon Jordan is reporting today, we are very proud to release our first mobile game monetization benchmark report. It draws on in-depth surveys of leading game developers and publishers -- most with millions or hundreds of thousands MAU -- along with Scientific Revenue data and recommendations. A free copy is now available to everyone in the industry: Click here to download and read.
"The Science & Craft of Designing Daily Rewards" is the latest post on Bill Grosso's Expert Gamasutra blog, where Scientific Revenue's founder and CEO explains how free-to-play games can optimize this mechanic to increase retention, while also providing background on the behavioral economic principles at work. For instance, here's Bill on optimizing a consecutive reward feature:
"Want to Increase Your Free-to-Play Game Revenue & Retention? Experiment With Virtual Currency Annuities" is a new featured Expert Blog post by Isaac Knowles, a resident staff economist. A PhD candidate at Indiana University under virtual economy pioneer Ted Castronova, Isaac argues that annuities are a revenue model capable of growing both revenue and engagement:
Join Scientific Revenue’s Bill Grosso at the invitation-only GamesBeat Summit 2016, an exclusive event on May 3 and May 4 at the scenic Cavallo Point Lodge in Sausalito, California. Bill is an advisor for this Summit, which will feature plenty of networking with leading game industry execs, investors, and developers, with speakers from companies including Google, King, Marvel, Twitch and Nexon. Bill Grosso, our CEO, is attending it again this year because, in his words, "some of the most interesting conversations in gaming happen there."
Click here to register, and use the special Scientific Revenue promo code "SciRev20” to get a 20% discount on registration.
Want to chat with Bill about game monetization, at the Summit, or just before/after in the Bay Area? Drop us a line and we’ll try to schedule a time to talk!
nucl.ai is the largest conference devoted to the use of AI technology in creative industries, and we're proud to say Scientific Revenue CEO Bill Grosso will be speaking there, joining other game industry leaders in lovely Vienna to explore the use of AI and machine learning to create better, more successful games. And thanks to the conference moderators, you can use our special discount code to get 40 to 100 Euros off the regular ticket price.
Click here to register, and use the promo code "16NCL-SciRev". Click quickly, as the discount expires at the end of April 25th, Pacific time!
Decoding Silicon Valley: The Insider's Guide is a new book by Michelle Messina and Jonathan C. Baer, and we're proud to say one of those insiders is our own Bill Grosso, interviewed alongside Valley stars like Ann Winblad of Hummer Winblad, Dave McClure of 500 Startups, and Joe Kennedy of Pandora. The authors were nice enough to send us a glimpse of Bill's interview (above), in which he explains his philosophy for earning new customers. We think it's great advice whether you're working in mobile games, dynamic pricing, or pretty much any other industry:
"When it comes to talking to potential customers, I use a low-key sales pitch. I don’t go to a potential customer and use hyperbole or make outlandish claims. I make it educational — so that when they talk with me, they get valuable information regardless of whether they buy or not."
Mobile game developers, please help us take this anonymous 5-7 minute long survey on your monetization strategy.
When our mobile game partners ask us about the best strategies for monetizing through in-app purchases, we often recommend connecting IAPs more directly to in-game power-ups (e.g. designing power-ups with monetization in mind). While the term "power-up" is well-known in game design, there’s actually no standard ontology for power-ups (there have been some academic papers on the topic but very little terminology that’s been widely adopted by the industry).
Just published on VentureBeat, our CEO Bill Grosso predicts the following seven mobile game industry trends for 2016:
Google Play goes back to China, and Android games thrive
Hampered by mobile, global console sales less than expected
Boosted by mobile, PC game sales fail to decline
Mobile game revenue goes (more) global
Evolution toward refreshable & extendable mobile games
Rapidly rising CPIs for high-ARPU Genres
Pre-order provokes rise of traditional marketing on mobile
When mobile game developers think of apps which monetize well, they tend to name three categories:
- Games with a natural power-up or items-based strategy to generate in-app payments. (I.E. Clash of Clans, Candy Crush.)
- Games with high engagement and traffic over time, but little or no opportunities for IAP, earning revenue from ads. (I.E. Flappy Bird.)
- Premium download games with a strong consumer identity or branding component. (Fewer and fewer these days, though they sometimes do well for traditional publishers.)
There’s another type of app which doesn’t neatly fall into any of these categories, but is important to monetization: Popular free apps which are simple but highly polished and engaging. Because their gameplay is so simple, there are usually few places to add natural hooks for IAPs, while ad-based monetization would probably feel intrusive, angering players and hurting viral growth (not to mention sending players to other games). Viewed properly, however, apps like these have the potential to be an important component in a network of games strategy.
At Scientific Revenue, our first conversation with new game developer partners focuses on improving the design of their in-app purchase paywall, because it’s crucial to the success of their games. Here are some of the starting insights we typically share.
This is the presentation that our CEO Bill Grosso gave at the Silicon Valley Technology Innovation & Entrepreneurship Forum last weekend on mobile game revenue in the era of big data. Cowritten with Joost Van Dreunen of SuperData Research, the deck vividly illustrates how drastically mobile gaming has changed within just 3 years. For instance, premium paid download revenue dominated in 2012, but by 2015, has become just a tiny sliver, with IAP now accounting for 60% of total revenue, followed by advertising with 33%. (Scientific Revenue's internal data and research indicates that paid downloads are now just under 7% of the revenue pie, among other revenue streams.)
I often tell mobile game publishers that they need to think about how their games can be monetized not just in their top 5 markets, but throughout the entire world. Here are a pair of images which illustrate the point. The first shows a daily density map of user payment activity from an Android game, showing where the most in-app purchases for it are being made -- in Europe, Africa, Asia, and the Pacific Rim:
Scientific Revenue is proud to announce that Chris Carvalho has joined our advisory board. Chris spent four years as Kabam’s COO, guiding it from 25 people to 700+ employees and over $360M in revenue. Prior to Kabam, he was Head of Business Development at Lucasfilm, running the company’s Internet division and StarWars.com.
Nucl.ai is the world's leading conference on "Artificial Intelligence in the Creative Industries." What that really means is that it's a three day blowout on how to use the last 50 years of cutting-edge computer science to build better games.
Our CEO, Bill Grosso, keynoted the data mining track.