Casual Connect 2013: Removing the Risks from Building Games and Maximizing Profits

by Chris Dewolfe, CEO, SGN

·         Summary: Follow the analytics closely and make daily updates to the game.

·         Create a great FUE and be very analytical about the metrics. Check when people are dropping off and reduce the long load times.

·         Launch on Facebook, iOS, and Android at the same time. Look at stats and analytics on a daily basis.

·         Difficulty curve should look like a step ladder, not a linear straight line going up.

·         It’s good to monetize free users with ads if you are smart about it. Wait a few weeks before showing the first ad to the user and show the ads sparingly.

·         The biggest challenge of game development is staffing up with passionate talented people.

·         Chris started Myspace and left at 2009. There were many business mistakes with Myspace. They tried to add e-mail and classified sections and staffed up quickly to do that. The company ended up growing to 1600 employees too quickly with very little focus.

·         Be on the forefront of cross-platform development. Develop once and deploy everywhere. Zynga failed to quickly move their games to all platforms.

·         Do remarketing programs to grab users back and fix any balancing problems for all future new users.

·         Game profits are a mixture of retention and average revenue per user.

Inside Social Apps Conference 2012

The Inside Social Apps is a full-day conference that was recently held in New York. There were 8 sessions total -- 6 of which were panels, one was a fire-side chat with Facebook’s David Fischer, and one was an analytic report about mobile apps. These are the key takeaways from the conference.

There was a pretty good list of game developers and game industry people who were speakers. Among them were Davin Miyoshi (GSN Digital), Doug Scott (ngmoco), John Getze (Kixeye), Mike Lee (Happy Elements),  Robert Winkler (5^th Planet), Wilson Kriegel (OMGPOP/Zynga), Mike Foley (EA), Matthe Cullen (RocketPlay), Mathieu Nouzareth (FreshPlanet), John Spinale (Disney Interactive), Ben Liu (Pocket Gems), and Mike Sego (Gaia Interactive). These guys are all CEOs or VP of Marketing at their respective companies.

Facebook, iOS, Android: Which Platform(s) Hold the Most Opportunity in 2013?

• The #1 driver to install in the iTunes App Store is SEO.
• There are many challenges to changing platforms including the need to hire up and bring new talent, transitioning to new technologies such as Unity over Flash, going free-to-play, and fragmentation of hardware and resolutions on mobile.
• Letterpress only uses GameCenter for its social features. It arrived and quickly died, because it was really difficult to get friends on your platform. Don't put all efforts on one social platform; you need to integrate as many as possible.
• All apps are competing with each other in terms of user mindshare.
• The cost of acquisition is increasing. There is, however, a six month window in 2013 for really cheap paid acquisition.
• Microsoft is going to be a player in the space with Windows 8. Even though the technology might not be the best, history has shown that the best products never win. The most important metrics are ARPU and install base.
• iOS has more valuable users, but Android has higher aggregate users. We need to think internationally since most of the audience exist outside the United States and outside the English language.
• Games will usually kick off any platform ecosystem.
• Advice to game developers: start simple and build your app with a simple architecture. The rule of thumb is that if someone sees it and asks, "What is that?" then remove it from the game. Simplify and reduce the game to its simplest form.
• The four most important tenants of social and mobile development are install (discoverability), play (retention/engagement), share (social/virality), and pay (revenue/monetization).

Social and Mobile Game Product Design and Development

• Your business strategy should be guided by where the users are going. FreshPlanet switched to focus only on mobile development with social components. It was very difficult, but ultimately a wise decision.
• Facebook's audience is mostly only casual, but mobile also has midcore and hardcore gamers. There are more different types of audience on mobile.
• All game design is observing what's going on in the industry, but you also need to bring your own creative process into the mix. Clones don't succeed. Innovation and word of mouth is the key to getting users.
• Kongregate has real-time chat so developers get immediate feedback from their audience and it's great for clan/guild features. Facebook is lacking these features.
• The real development happens post-launch. Developer hope to have a conversation with users for months and years. Developer can't develop in a vacuum.
• 5th Planet has been in midcore genre for two and a half years. There's always room for good games and the platforms will upgrade to support richer experiences such as 3D and synchronous play.
• Zynga is declining, but Wooga and King have been increasing their user base rapidly.
• Flash was the best defacto platform for web games, but now we need AIR to develop for mobile as well. Unity is also becoming a big player in the space.
• Mobile advertising is doing really well. Free-to-play is the way to go due to its very high distribution and its constant stream of revenue from in-app purchases.
• There is a backlash against free-to-play games by gamers, and sometimes rightfully so, since some terribly designed free-to-play games just nickel and dime players. But gamers should think about it as paying for what you want and enjoy the most. This, in turn, will drive game design to build towards what people want and therefore, create a better game.
• UI on mobile is an open space to explore. There must be a better way than virtual joysticks.
• Developers need to build different experiences for tablet, mobile, and desktop.
• Facebook connected users play twice as long and are 8 times more likely to spend money.

The Future of Mobile App Discovery & Marketing

• The rising cost of user acquisition is a sign of industry evolution. Developers need to pay attention to how much they're willing to spend.
• The cost of user acquisition might flush out in the future. Apple wants to control the channel more, but TapJoy wants to help developers with incentivized discovery. Research shows that incentivized discovery has 40% returning engagement compared to organic distribution's 45% returning engagement.
• Small developers should get together and form a cross-promotion network. Gree acts like a large-scale cross-promotional network that helps small developers and do interest targeting.
• People don't know if an app is good or not since ratings are ineffective. 95% of all app ratings are an average of 3.8.
• What are some improvements that the App Store can make? 80% of people don't know what they are looking for since they don't know brands. We need an app search engine for casual users, better and more useful app descriptions, social app discovery, and more relevancy in their searches.
• There are always methods to scoot up the ranks by gaming the system to get higher search results.
• App Store icon and name of the app are very important. A/B test and evaluate all marketing materials during the beta phase to look for the highest click through rate.
• There is a very small real-estate and very small window of time to leave an impression on the user. Results tend to homogenize from a consumer perspective. A lot of developers go for similar art styles, names, characters, and mechanics to attract users.
• We need more app suggestions pushed to users and more categorical search relevancy. Searching "steampunk" only returns games with "steampunk" in the name, but not the entire genre and theme. The charts should also hide the apps that the users already own.
• Charts work for app discovery but is limited. Games crowd out non-gaming apps because they're far more popular.
• The App Store is like the grocery store. There will always be a place for marketing outside the App Store. People consume media in different ways.

Fireside Chat: Facebook's David Fisch

• Facebook wants to help with app discovery, which is currently a big problem like Web 1.0 discovery.
• Facebook really changed discovery. Friends were pushing content to you and friends were the best filters for good apps.
• Facebook wants to create value to mobile developers since mobile devices are inherently social.
• The mobile experience is much more at the moment. What you do in life happens away from your desk.
• Device fragmentation continues to grow. We need cross-device connectivity.
• Most people don't read reviews or look at ratings. We need recommendations based on what we like and what our friends like.
• SongPop has built a social app on mobile and integrated the experiences through Facebook. Logged in users are 25% more engages and also spend more money on the app.
• Facebook is a vertical platform with canvas, but also horizontal with social. Facebook is meant to be complimentary to mobile and a cross-platform social component.

Social Apps for Marketers and Brands: Maximizing Audience Engagement

• A lot has changed in the past year -- OpenGraph, Pinterest, Instagram, SoundCloud, Tumblr, foursquare. There is a re-emphasis on creating good content. The biggest change is that Facebook started rolling out mobile marketing.
• Have business goals before you start planning out your project. Monetization is a big goal this year.
• Developers can't build a small one-off app. They need to be a sustainable business and there needs to be inherent value in the app itself outside of its marketing goal. There is no point in launching an app without some paid media behind it.
• Sweepstakes, coupons, and essay contests have high participation rates, but low sharing rates. The value is to the user and they are less likely to share. Personality quizzes, however, are 5 times more likely to be shared because it allows users to display their personality.
• We need to move out of social media bubble. There are lots of other marketing channels such as e-mail.
• Some successful marketing campaigns -- write about how much you love your mom on Mother's Day, Oscar Meyer taste-imonials with Coupons.com, Washington Redskins using template gallery to build themed pages for their fans, and voting polls on Facebook and Google Plus Hangouts.
• We need templates that a community manager can put together and launch by themselves with zero budget and less than 24 hours.
• The universe of possibilities have increased but the fundamentals of marketing hasn't changed.
• LinkedIn released their API. Capture social interactions and leverage that for personalized pages.

Monetizing Social and Mobile Games

• Kixeye has been in the business of core strategy games. Their games are free-to-play, but they sell "time" and not virtual goods. They sell abilities to repair base or generate units faster.
• Make a fun game first and think about monetization later to fit the game. Monetization solves itself if you create something fun and engaging.
• The first company that innovates and finds a real estate builds the fanbase first.
• Advertisement works well with many genres, but not all.
• Monetization methods include selling impatience, gambling, betting, cosmetic items, virtual goods, premium items, virtual currency, and daily bonuses.
• Sports betting is time-based and based on real-life events, but there are challenges of downtime. You can add casino games to play during downtime.
• Authenticity and passion is what is key to success. It's hard to reach critical mass so leave publishing to publishers. 
• The future of computing is mobile with the proliferation of devices.
• It's always more valuable if you're both the developer and the publisher, because you own the IP, data, and the customers. However, it's very expensive to publish, so partner with a dedicated publisher.
• Games are a hit driven business like the record industry. All media content is hit driven.

Investing in Social and Mobile Games

• Zynga went from $12 to $2. Secondary markets have been flat or going down. Six months ago (Facebook, Zynga, Groupon, etc.) were successful but failed after they went public. The exit scenarios and evaluations for investment have changed in the last year.
• Fundraising is tough for gaming companies. Signia is one of three firms that still look at gaming deals currently.
• Supercell is making $750,000 per day with only 60 people in the company.
• Investors are looking for games with retention, engagement, and longetivity. They are looking for people who are building a business, not just an app. They need high quality free-to-play developers who are making games as a service. The three core skills for a developer to have are discoverability, marketing apparatus (acquisition, community, retention), and monetization.
• With a packaged product, you've already made your money upfront. Now you have to worry about getting people to actually play your game to monetize them.
• Kickstarter and IndieGoGo requires pre-existing fame to be successful. It's not all that interesting to the industry and will not change the ways that traditional funding happens.
• Anyone can make games now such as garage developers, but the challenge is scalability.
• Be wary of the casino space. The major players will spend money and they are ruthless about their space.

Topics to Make Your Developer Blog Interesting

At the game company that I work for, we've discussed internally about starting a new blog to build our studio brand and more importantly, attract new hires. We've had two brainstorms about topics that we think the blog should cover and as with all brainstorms, many out-of-the-box ideas came from it. Thinking about this more, I think it's not really a big secret about what makes a good developer blog.

To start, who is the target audience of this new blog? I think it can be broken down into three categories. The first are people who have talent but aren't currently in the games industry. To attract this group as hires, we just have to show them why games are the industry to be in. Thankfully, we have so many employees who are passionate about games. We live and breathe games. We should write about why games are important to us. We should show the awesome games we're working on, the amazing art we produce at the company, the fun game challenges we do, and cool tech demos of our game engines.

The second category are people who are in the games industry, but don't have that superstar talent yet. Attracting this group to our blog is easy. We have to educate them. Personally, I only ever spend time reading another company's blog if it's informational or educational. I'm a busy man so I'd only dedicate my time to reading and following a blog if I feel like I can walk away learning something new or thinking about something in a new way.

Fortunately, we have a lot of great talent in our company. Game designers should write about game design theory, dissect a game that they're currently playing, or walk through the reasons they've made a certain decision in our games. Artists should write about art techniques, or about the many iterations of art designs that a single game went through and the reasons why those changes were made. Programmers should write about programming problems they've encountered and the clever solutions they find, or introduce new tools that they started using. Analytics and revenue teams should write about how data drives game design or what kind of UI has been proven to monetize. Producers can write about their experiences with scrum or tips for managing a team.

There is such a breadth and depth of knowledge to be shared. While I understand that many things of the company are disclosed for contractual reasons, close-to-full transparency and sharing of knowledge is the best thing your blog can have. Ronimo, the developers of the fantastic Awesomenauts, has a great developer blog written by the lead programmer that is very transparent about their programming problems, art iterations, and even unreleased game concepts. I'm subscribed to over 600 blogs and this is easily one of my top five blogs to follow.

Finally, the third category are people who have the talent and are in the games industry, but they're just with another company. To attract this group, we have to show them what we offer as a company that others don't. Most certainly, the best thing about the company is that we empower employees to have creative freedom and give them many avenues to express themselves and have their voices heard.

We run a weekly brainstorm meeting where we tackle design challenges a project is facing. Every employee can attend the meeting and throw out ideas, no matter how crazy or farfetched they are. As we always say, there are no bad ideas in the brainstorm. We have an idea submission process where any employee can submit a snippet of a game idea and then a dedicated team develops a prototype of the idea in two weeks. If the idea is great, it might even turn into a full-production game for the world to play. We also run annual game jams where the entire company steps out of their everyday roles and get inspired to make off-the-wall games. Not many game companies give their employees the channels to have their creativity expressed, so that is definitely a strength of ours that we can expose.

Kickstarter Stories

With Double Fine's Kickstarter success, the website has become the go-to place for aspiring game developers to fund their ideas. This panel, held at Polytechnic University and moderated by Katherine Ibister, discusses the pros and cons of the website, as well as the process of raising funding through Kickstarter for game projects.


Introductions

• Michael Astolfi is the game designer of Blindside, an audio adventure with no graphics and played entirely with sound. The game went up on Kickstarter with a pledge of $7,000 and was funded with twice the amount.
• Michael Consoli is the game designer and developer of Against the Wall, a Unity3D game where you navigate up an infinite wall of large bricks. You can extrude bricks from the wall to jump on them and colored bricks come with specific limitations or power ups. The game was funded with $8,400 on Kickstarter.
• Alex Thomas of Stoic is the game designer of The Banner Saga, a viking-based adventure game with role-playing elements, interactive dialog, and turn-based strategy combat. Stoic is made up of former Bioware employees. They formed in January 2012 and pledged for $100,000 on Kickstarter. They overshot their goal with $720,000 in funding.
• Wade Tinney, CEO of Large Animal Games and NY chapter coordinator for IGDA, is about to launch a Kickstarter campaign for Nomsters. Large Animal Games started in 2001 and has developed over 100 games. They typically work with a publishing partner, but they want to develop their own individual IP. Nomsters is an iOS and Android game built in Unity3D by a 5-man team over the last couple of months. The game has a pinball-meets-pool mechanic with various ball-shaped characters.
• Cindy Au, community director for Kickstarter, was also in attendance at the panel. Kickstarter launched in 2009 and has recently been huge for the games community, funding up to $20 million for games. It is a good place to test ideas and find out immediately if there's an audience for your game.
• Jerry Hultin, president of Polytechnic University, provided a keynote before the discussion began. NYC gives angel funds for the right idea and about $100 million of venture money goes into technology. He believes gaming is good for education and sees big markets for it in India and China. Only 2% of India get educated and he wants engineers and game developers to solve that problem. Polytechnic University started building the Game Innovation Lab in 2006 and in the near future, NYU will move all its gaming departments to Brooklyn.

Panel Discussion

• Why choose Kickstarter? For Blindside, the developers started on PC/Mac but wanted to add gyroscopic controls, which requires an expensive license from Unity, so they turned to Kickstarter to get extra funding. Wade wanted freedom from publishers for Nomsters. In general, all panelists agree that Kickstarter allows you to see if you have an audience for your game before you build it. Use backers as a marketing tool and gauge the success of your product. Publishers usually spend money to find that out, but Kickstarter allows you to do it at almost no cost. 
• Are there additional purchasers for the games after release or has everyone who's interested in the game already contributed to the project in Kickstarter? Cthulhu Saves the World was funded on Kickstarter for $6,800 but sold 300,000 copies after launch, so there's a good chance there's an additional audience not involved in the Kickstarter.
• Against the Wall had a playable alpha build when the Kickstarter campaign started. This was to prove to backers that he can make a game, even without industry experience. The game was covered by the press, namely Kotaku, and was able to get funded.
• The Banner Saga's campaign highlighted the fact that the developers were industry professionals and they were able to get more press from that.
• What are some general tips for starting a Kickstarter campaign? Be prepared to talk openly about your project and support the campaign. Constantly updating your backers with news chews up a significant amount of time. Set up your own forums after the campaign has ended so you keep your community talking about the game.
• Do they have fears of product failures and not living up to backer's expectations? Social pressure from backers is very motivating. Also, backers can change their commitment to the project at any time.
• To run a Kickstarter campaign inevitably means putting an unfinished game out to the public. Do they have concerns of people stealing the ideas and beating them to the market? Making the game public is pretty much putting it on the market first. If you come out with the idea first, even in this manner, people would support you. It's not a big worry concerning other game developers stealing your ideas. Most developers already have a road map of games in their pipeline and it's too expensive to shift gears.
• There are instances of Kickstarter projects where the creator backs their own campaign to get through the threshold for funding. Getting covered by the press is extremely important to drive people to the campaign. How do you get press and increase discoverability of your projects? According to the panelists, the community and friends are more important to the virality of the campaign than the press. Also, having zero backers is validation that the game idea is not very good.
• If the project is not funded, you can still talk to your backers. You won't get backer reports like a funded project would, but you still have contact with your dedicated base.
• How do you put a freemium game on Kickstarter if the model is that you pay upfront for the game? The Banner Saga and Nomsters are both freemium games. Nomsters will offer backers a package with in-game currency and no advertisements.
• What are the panelists' favorite Kickstarter rewards? Usually a physical prize or the chance to be in the game. However, when you offer a physical prize, keep in mind that it would eat up a bunch of your funds. The prize that people crave is involvement in the game development process.
• What are common mistakes of Kickstarter campaigns? Overshooting and setting high goals are common mistakes. You have to be realistic about what you need and be patient. You need to frame what the interesting thing about your game is and make sure to tell a story to the audience. Present yourself; you are your greatest asset.

Re:Play 2012: Publisher Revolutions: Free-to-Play Economics

There is a fundamental shift taking place among the traditional value chain of the video game business. Developers, publishers, and retailers find themselves confronted with a changing market, forcing each of them to assume a different role. Joost van Dreunen (NYU Game Center) speaks with Stephen Ju (Credit Suisse), Gui Karyo (Atari), and Jessica Rovello (Arkadium) about major trends in the industry such as the move towards free-to-play and the emergence of social gaming.

Conversation with Joost van Dreunen

• "Companies that continue to rely on the old model as it changes before our eyes, unless they change their ways and invest in the future, those companies will eventually die off. No two ways about it." -- Peter Moore of EA
• "Global market for virtual goods will exceed $100 billion by the end of this decade." -- Trip Hawkins of Digital Chocolate
• There is a shift from the $60 retail box to $0.99 apps and the free-to-play model. The proliferation of Facebook and mobile has caused this trend. The audience is much larger and distribution is much higher on these platforms.
• Looking at a line graph depicting market value, Zynga is doing well above Activision and EA. THQ trails far behind and is about to be delisted.
• Is there a big difference between boxed retail and digital games' profit models? Jess says that the boxed retail model is not necessarily bad, nor are digital games irrevocably better. Digital games are still a very hit-driven industry. Digital distribution is not an amazing end-all panacea. For every one developer who released an app by himself and made $100,000, there are 300 other developers who tried the same thing and failed.
• Revenue models for casual/social games include advertisements and sponsorships, microtransactions, sometimes subscriptions but those are slower and more rare, and sometimes the purchase model.
• The company structure has to change to develop social games. In the case of Arkadium, the company had to shift thinking to a direct-to-consumer basis and build a games-as-service model. They added an analytics department because they needed to look at numbers and react to data at a minute-to-minute level. They added a monetization/revenue team whose job is to balance economies and think of ways to optimize user spending. The culture of the entire company changed to include thinking about numbers and metrics (ARPU, DAU/MAU, etc.)
• Core games business is still a good business, but there's just a bigger barrier of entry for developers.
• Majority of the revenue of a free-to-play game comes from certain players who pay a significant amount of money for items, much more than $60. The amounts they are willing to pay for can be shocking even to social/casual developers.
• Many social/casual games are not so different from gambling. DragonVale is basically two slot machines masked in a world with cute dragons. Many online games have inherent design elements of gambling.
• Getting the most out of a game relies on analytical data. You can make a mediocre game much better with the correct analytics. However, data won't make a bad game good, so it's still important to design a good game first.
• When your company makes a monumental shift from one audience to another, from one distribution platform to another, you must realize that it takes more time and money than you would expect it to. Large companies can often stumble when they make these shifts. "Once you make the decision to go there, you need to go there."
• Arkadium is not a first mover. They don't put all their eggs in one basket or go all in on one market. They see where the market is going first.
• EA and Zynga follow the innovation through acquisition model. EA bought Playfish and pretty much drove it down to the ground. They launched one game, Sims Social, but didn't release enough content afterwards to keep the audience engaged.
• Zynga was able to scale before "Facebook went down." But they also would acquire studios with any successful property such as OMGPop. They need to bring killer apps to their audience to keep them engaged.
• Talent is very important in game design, but sometimes, designers just need to luck out. OMGPop went through 5 iterations of Draw Something before it became a success.
• The difference between the web and mobile is everything. For Draw Something, drawing with the mouse wasn't fun, but with touch, it was intuitive, engaging, and attracted the audience that it has now.
• Angry Birds is a great merchandising and licensing property. It has great character designs in which the aesthetics lent itself easily to merchandising. The birds has simple shapes and were bright and colorful. They were very appealing to kids, who really drive the licensing business. The majority of licensing is in things for kids like shirts, toys, bed sheets, pajamas, etc.
• Merchandising broadens your IP with consumers, but it's hard. It's like buying two lottery tickets instead of one. You need to have IP that is merchandisable.
• There are companies now that specialize in merchandising to very narrow niches. For example, they would make a jacket from Resident Evil and sell it for $1,000. Their revenue model revolves around small volume of sales, but high dollar amount per sale.
• Casual games are aimed at the common denominator. Is it worth moving this to a niche audience? Generally, no. Only a small percentage of the audience (1-8%) monetizes, so you really need a big audience to make money.
• In many cases, games are not reinventing the wheel. Zynga's 'ville games are just SimCity, Draw Something is Pictionary, Words With Friends is Scrabble. It is difficult to bring consumers interesting and exciting ideas, which is a problem that the industry is currently facing.
• Discoverability of your game is everything. An app developer without a contact at Apple to get their game featured at the AppStore is like a retail box developer without a deal with Walmart to have their game on their shelves. There is little chance of success if you're not featured in the AppStore.
• How do you move from games-as-product to games-as-service model? Games-as-service was a model pioneered in Korea by Nexon, mostly as a counterbalance to the piracy in Asia. They treat game content as episodic and it is a more involved process than the traditional model.

Question and Answer

• What do you do with non-paying users? Free users are costly since they take up server space or network capacity. Make them watch a video ad and make the money back from advertisement. The ad model can be difficult because you need a big enough audience to make money. You also need to put ads early in the game rather than later. Users would complain if they suddenly started getting ads after being used to not seeing them. You may also leverage these users for virality.
• Is Kickstarter changing the rules of publishing games? What impact will it have on the development ecosystem? For Kickstarter campaigns to be successful, it needs studios that have a pre-existing install base like Double Fine or games with an avid fanbase like Wasteland. The Kickstarter craze is an interesting phenomenon, but it won't overturn the traditional publisher model. In addition, none of these funded game have come to market yet. Will they actually be good games? Will the developers be able to deliver on their promise? The role of the publisher is to make sure the developers are able to meet the promises to the consumers.
• What are sponsorships? For the Facebook version of Cooking Mama, Ragu approached Arkadium about using the brand for one of its minigames. It made sense for a food-based brand to be incorporated into a food-based game. Good advertisement is not evil.
• Some players, who are completely opposed to ever paying for the game, are not so offended by taking 30 seconds to watch a video ad and getting something out of it.
• Would there be any more cases like thatgamecompany and their three-game deal with Sony? Publishers run on risk-based management. If presented with a unorthodox game idea like Spore, they need an established successful team to counter balance the risk in the game design like Will Wright's team. Publishers like 6waves make deals where they take a percentage cut for games that are already almost finished and they don't have to fund development. To make a publishing deal for development, you need to have a good track record of making money.