{"id":617,"date":"2012-06-27T00:20:10","date_gmt":"2012-06-27T00:20:10","guid":{"rendered":"http:\/\/www.dfcint.com\/dossier\/?post_type=qav1b&p=617"},"modified":"2018-07-05T17:37:33","modified_gmt":"2018-07-05T17:37:33","slug":"economics-social-games","status":"publish","type":"post","link":"https:\/\/www.dfcint.com\/dossier\/economics-social-games\/","title":{"rendered":"Ayzenberg Interview Economics & Social Games"},"content":{"rendered":"
\"\"

Steve Fowler.<\/p><\/div>\n

JUNE 26, 2012 \u2022 DFC Intelligence recently published the report The Market for Browser and Social Network Games.\u00a0 This report looks closely at not only growth prospects for the segment but also key business model issues such as development costs, customer acquisition issues and marketing and distribution challenges.<\/p>\n

Getting a grounding in the business of social network games can be equally daunting for companies with retail game publishing experience, and studios with no prior game business experience at all. Issues like how much should be spent on acquiring consumers, and what media to spend marketing funds on, is a moving target<\/p>\n

To answer some of those vital questions, DFC went to Steve Fowler, general manager at [a]list games. This venture of the Ayzenberg Group has wholesale access to the resources and services critical to successfully launching a video game on new and traditional platforms \u2013 including market research, asset creation, video production, ad creative, and media buying \u2013 all of which made Fowler the perfect person for us to talk to.<\/p>\n

DFC: What is the typical cost today of acquisition per user for a browser game\/social network game?\u00a0 How does it vary for a social network game such Zynga’s Mafia Wars versus a browser game such as Bigpoint’s Seafight? <\/span><\/em><\/p>\n

Steve: Cost per acquisition or CPA varies based on many factors.\u00a0 In general the less friction to the user during the sign up process and the bigger the buzz around the game, the lower the CPA.\u00a0 So while Zynga\u2019s Mafia Wars has a very low barrier to entry (low friction), it is a dated game with a declining consumer interest.\u00a0 Seafight on the other hand is a bit newer but does have a more detailed registration process (more friction).\u00a0 So I would expect the CPA for these two games to be quite similar.<\/p>\n

\"\"

Mafia Wars has a very low barrier to entry.<\/p><\/div>\n

Also there are two ways to look at CPA.\u00a0 Overall CPA vs. Paid Media CPA.\u00a0 The cost for paid media CPA, where a media company will sell you advertising space (for example on Facebook or ad networks) is obviously going to be a higher number than your overall CPA. The key to good acquisition-based marketing is to leverage all of the resources at your disposal to attract users.\u00a0\u00a0 Cost efficient means to drive down CPA such as PR, social\/community building and creative asset development go a long way towards boosting marketing spend efficiency.<\/p>\n

DFC: Is that user acquisition cost number rising or declining? <\/em><\/span><\/p>\n

Steve: We see CPA rising over time as more and more competition enters the digital games space.\u00a0 Specifically, ad network costs, search costs and online display advertising rates are rising.<\/p>\n

DFC: Is there an economy of scale involved?\u00a0 For example, does the cost per user decline if you spend $1 million versus $250,000? <\/span><\/em><\/p>\n

\"\"

The more users you have, the more expensive it becomes to acquire new ones.<\/p><\/div>\n

Steve: Simply put, no.\u00a0 In fact it might actually rise.\u00a0 The more users you acquire the more you\u2019re stripping the pond, meaning there are fewer of them that exist who might be interested in your game.\u00a0 That will make it more expensive to find new users as time goes on.\u00a0 This makes retaining users even more important.<\/p>\n

DFC: When a new a new social publisher launches its first game, is the cost of acquisition significantly higher?\u00a0 For example, does a Zynga or Playdom have a significant advantage over a new publisher in launching a new game?\u00a0 One would assume that a mailing list of millions of players would be one large advantage. How significant is it, really? <\/em><\/span><\/p>\n

Steve: It\u2019s a huge benefit.\u00a0 It\u2019s why you have traditional game companies trying to mimic what Zynga, Bigpoint and even Steam have.\u00a0 EA is really pushing Origin.\u00a0 GameStop is trying to get Impulse off the ground. Ubisoft has U-Play, which they launched a few years ago with Assassin\u2019s Creed II.\u00a0 Activision-Blizzard has Call of Duty Elite, and I think it\u2019s in character for them to stay gingerly about digital and build their platform around a tent pole IP.<\/p>\n

\"\"

Publishers like Zynga who were successful early have an advantage.<\/p><\/div>\n

You\u2019re right in drawing a line between the marketing mailing lists of old and these consumer networks, which is exactly what they are.\u00a0 It used to be that you built a player community.\u00a0 Now it\u2019s about turning that into a social play platform.\u00a0\u00a0 If you\u2019re successful in building a robust network, you have an accessible audience that has, at minimum, tried out one or more of your products and hasn\u2019t opted out of your network.\u00a0 Of-course it\u2019s going to be a lot easier to engage that audience in what you have to say, whether it\u2019s to get them interested in a new game or give them an offer to come back into one where they might have churned out.<\/p>\n

For new companies, they\u2019ll be well served by having a strategy for building their player community with the launch of their first game.\u00a0 We stress to our partners how that involves sophisticated engagement techniques that go beyond player community management.\u00a0 You do that with your first product, then have a strategy as you release more games for growing that community into a social play platform, for instance implementing universal currency or social activities such as leaderboards and content sharing.<\/p>\n

DFC: How big a marketing spend is necessary to get a new game really moving? <\/span><\/em><\/p>\n

\"\"Steve: It\u2019s going to be relative based on the type of game, the platform, the benchmark for success.\u00a0 As an example, assume the usual Facebook fare is going to have much higher churn than, say, a browser-based fantasy RPG.\u00a0 The latter could benefit from more upfront spend to generate early buzz that engages a potentially dedicated and vocal core.\u00a0 On the other hand the Facebook game should probably plan to keep spending over a period of time to attract new players as old ones churn out.<\/p>\n

Overall, there are a couple of notable advantages when it comes to allocating marketing spend for digital games.\u00a0 Most of these games can and should spread what budget they have, certainly over a greater period of time than traditional games.\u00a0 The goal with packaged games is to build as much interest as possible while targeting a massive set of people, and do it all with a hard stop date in mind.\u00a0 That\u2019s more or less the few weeks where it sits on store shelves.\u00a0 If the approach sounds buckshot it\u2019s because it can be.<\/p>\n

Digital games are different.\u00a0 They can be rolled out slowly, and they have development milestones that are very useful for early phase marketing that can start on the cheap.\u00a0 For instance, beta testing phases can do wonders for building buzz, and there are very suitable PR tactics and outlets for pulling in that early audience.\u00a0 Even at launch the goal is rarely massive growth.\u00a0 Rather it\u2019s usually about targeting different sets of players.\u00a0 A fantasy RPG can focus all of its marketing communications on that core audience to begin with then look to incremental growth by identifying what other categories of players would be most receptive to that type of game.\u00a0 This automatically leads to more calculated spending.<\/p>\n

\"\"The second advantage is perhaps the most exciting aspect of working on digital games from a marketing standpoint.\u00a0 The way digital games monetize users paves the way for very deep analysis of the entire acquisition funnel.\u00a0 What percentage signed up for a game versus logged in versus actually played.\u00a0 Then how many of those players actually paid, how much did they spend, and what did they buy.\u00a0 All that data is useful in planning marketing on a granular level that simply isn\u2019t possible with traditional games.<\/p>\n

For instance, when you know how much each new player registration is monetizing, you can implement cost-per-acquisition ad campaigns that can have virtually guaranteed ROI.\u00a0 Or, you can evaluate the effectiveness of one program over another with minimal upfront spend, whether it\u2019s one marketing channel, piece of creative, or special offer that\u2019s outperforming the other, then reallocate budget and resources to the one that\u2019s working.<\/p>\n

DFC: If a new publisher wants to enter the market, what are his best bets for marketing?\u00a0 Online ads?\u00a0 Spending a lot on ads?\u00a0 Going for guerilla efforts instead, or in addition? <\/span><\/em><\/p>\n

Steve: The reality is that just because games can suddenly reach consumers outside of those closed-garden consoles, or don\u2019t need to fight for limited real estate inside a brick and mortar, that doesn\u2019t mean it\u2019s suddenly not a hit-driven business.\u00a0 That\u2019s the nature of entertainment.\u00a0 It\u2019s also the driving force behind every decision made by those of us in the industry.\u00a0 If we think we have a blockbuster on our hands, we\u2019re going to go for it.\u00a0 It comes down to the product.\u00a0 If it\u2019s good enough, the answer might be, \u201cYes, all of it.\u201d<\/p>\n

\"\"But we\u2019re still talking about digital games, right?\u00a0 Even if the product screams throw buckets of cash at it, let\u2019s go back to what we see as a huge leverage for marketers in digital.\u00a0 It\u2019s no longer about taking the steps to build a solid forecast – audience segmentation, comp analysis, SWOT, etc. – and sometimes tack on a little prayer before deciding the budget and how to spend it.\u00a0 It\u2019s not a fire and forget product.\u00a0 We\u2019re not building up to a launch window.\u00a0 Once a digital game succeeds and pulls in enough players to stick around, it essentially becomes a service.\u00a0 And that\u2019s the approach, to be prepared to market it as a service.\u00a0 The way to do that is essentially what we outlined above, preparing for a carefully allocated marketing spend that helps the game get a foothold at launch, then grows its audience based on analysis of its performance and consumer behaviors.<\/p>\n

DFC: Are offers \u00ad\u2013 i.e. try this product\/service\/take a survey\/et. al., or get game gold \u2013 still a significant tool for engaging players? <\/em><\/span><\/p>\n

\"\"

New ways are needed to reach potential users where they are.<\/p><\/div>\n

Steve: Absolutely.\u00a0 Adding incentive to a marketing message is a major driver of improved performance and reduced CPA.\u00a0 There is much to learn from the direct response marketing world.\u00a0 As cheesy as they are, the Sham Wows ads and QVC\u2019s of the world have a lot of good tactics that can be incorporated into acquisition marketing in the games industry.\u00a0 For instance we recently ran an acquisition-based campaign for the re-launch of APB Reloaded that incorporated a virtual good offer of a free car or gun with a limited time.\u00a0 We saw a considerable improvement in performance with these offers than the prior campaigns we did without any offer.<\/p>\n

DFC: Should a new game publisher use offers as a main marketing tool? <\/span><\/em><\/p>\n

Steve: An offer may or may not make sense based on the type of title and the makeup of its audience.\u00a0 We see an offer as a final call to action.\u00a0 An offer will not gain you brand loyalty, awareness or purchase intent.\u00a0 The offer on its own will only help in the conversion of a user who is already aware, interested and fond of your game.\u00a0 We use offers as the final message to gain a conversion.<\/p>\n

DFC: How often does a client take a social network campaign and adapt it for Facebook in various markets like Europe, Latin America, and North America? <\/span><\/em><\/p>\n

Steve: Actually we see very little localization of marketing efforts into other languages.<\/p>\n","protected":false},"excerpt":{"rendered":"

JUNE 26, 2012 \u2022 DFC Intelligence recently published the report The Market for Browser and Social Network Games.\u00a0 This report looks closely at not only growth prospects for the segment but also key business model issues such as development costs, customer acquisition issues and marketing and distribution challenges. Getting a grounding in the business of […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[137,110,94,143],"tags":[388,88,130,115],"_links":{"self":[{"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/posts\/617"}],"collection":[{"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/comments?post=617"}],"version-history":[{"count":36,"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/posts\/617\/revisions"}],"predecessor-version":[{"id":16407,"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/posts\/617\/revisions\/16407"}],"wp:attachment":[{"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/media?parent=617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/categories?post=617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dfcint.com\/dossier\/wp-json\/wp\/v2\/tags?post=617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}