Consumer Segmentation and Attribution (Top of the Funnel)

Analytics is a term used to describe many different things from reporting to predictive marketing, but the foundation of analytics, as one would expect, is data.  Without data, one cannot do any reporting or any predictive modeling.

Whenever I join a new group, they always say they have lots of data, but in reality, they have lots of random information that is not usable.  One of the keys to having usable data is to have a strong data base or business information team.  In the gaming industry, this is sometimes overlooked.  It is also important to work with the database team and the development teams to understand what key data is important to track. 

In this write-up, I am going to focus on the top of the funnel and what data is important to track and why.

One of the most important things to track for any game, specifically online games, is the top of the funnel.  Zynga's analytics primarly focus on this.  The general steps of the funnel that need to be tracked is as follows:

1. Consumer Attribution (What drove the consumer to your game?)
2. Registration Process (Web Funnel)
3. Installation Process (Downloading / Installing Game)
4. Game Execution Process (Playing the Game)

Consumer Segmentation and Attribution
One of the key things that needs to be done to verify the success of your marketing is consumer attribution and segmentation.  You need to be able to track or attribute where your consumers came from.  For example, what google search terms did they use, what banner ads did they click, what store did they purchase that package from, what TV ad drove them to purchase, etc?   There are many tricks to doing this but it is very important to find an advertising partner who can track this for you or implement tags that allows you to do this.  TV is very different because you will need to exclude organic acquisition versus ones driven by TV.  Normally, you need to first find a baseline then see the lift due to TV.   Every account will need to be tagged.  
Once you know what drove a consumer to your site, you should also try to find out the segment this consumer is.  Segmentation takes many forms, but the most basic segmentation is gender, location, income, race, and game experience.  You can get this information from either the registration process or surveys, but one must balance the possibility of losing a consumer for every question you ask in the registration process.  The more advanced from of segmentation is game usage, play patterns, social networks, and others based on in-game behavior.
Once you can track consumer segmentation and attribution, you can now maximize your advertising mix by now what marketing channels are the most effective in getting the type of consumers you want.  For example, maybe players who are pvpers are the best consumers and based on your attribution data you can see that a specific banner add is the most effective in attracting these users.  You can now try to search for more ways to find that consumer segment and use marketing material similar to the banner ad that was effective in drawing these consumers.

Registration Process
The registration funnel needs to be tracked click by click to see where there are any large drop offs.  Any large drop offs need to be addressed.  For games that have millions of players signing up, a 1% drop-off can be very significant especially if it is a game that has a short life such as a facebook game.
Please keep in mind proper web development protocols such as testing the webpage on all browers and operating systems, having a very linear registration process, showing a type of progress bar, and ensure that every link works before going live.  Ironically, there are many examples of webpages where one or more of these steps are overlooked.

Installation Process
One of the key drop off points that companies sometimes have a problem tracking or forget to track, is the installation process.
The installation process needs to include the following steps:

1. Link to Download App/Client
2. Download Starts
3. Download Completes
4. App/Client Installation Starts
5. App/Client Installation Steps (if applicable)
6. App/Client Installation Completes
7. App/Client Executes

Unless you track each one, you will not know if or where your issues may come from.

Game Execution Process
Once the game is installed and working, you still need to track the player experience step by step. Please keep in mind the following steps (remember it is different based on the game):

1. Opening Cinematic
2. Character Creation Steps (each step must be tracked)
3. Start Tutorial
4. Each Step of Tutorial
5. Complete Tutorial
6. Enter Game World
7. Achieve First Level

Once a player is able to complete those initial steps and reach the first level that means the game should be functioning fine.  Any drop-off before this needs to be examined to see if there are any technical issues, usability issues, or just design issues.

Once you are able to track the consumer from its source to being able to play the game, you can now maximize the effectiveness of the top of your funnel.  Make sure you are getting the right consumers and that players are not dropping off because of issues that can be easily fixed.  Consumers should be able to easily access your game. 

If you blend this with the bottom of the funnel, you can now see how well each consumer monetizes and estimate their lifetime value.  Combing both you can now calculate a correct ROI for each marketing channel and each consumer segment.  If the top of the funnel is clean and easily tracked, you can then maximize the ROI of your game.  Even if the game will not cover the development costs, you can learn from the data you collect and hopefully make the run rate of the game profitable.

Outsourcing Vs Insourcing for Video Games

 I was thinking about this a lot the last few months as some video game companies like to internally develop their own software because they can make video games or prefer to outsource their development because they want to lower their risks. 
There are many ways to outsource or insource and each type has its own factors to consider.  For this post, I will focus on the following:

• Outsourcing Vs Insourcing Development Tools (Game Engine)
• Outsourcing Vs Insourcing Game Development (Full Development of Game)
• Outsourcing Vs Insourcing Asset Development (Art, Music, QA)
• Outsourcing Vs Insourcing Publishing (Self-Publish Vs 3rd Party)

Outsourcing Vs Insourcing Development Tools (Game Engine)
When choosing to outsource versus insource game development, the first question one has to answer is whether or not your company can even develop an engine to use.  For the majority of game developers, the answer would be no.  Remember price and compatibility of the product to your team and game are the most important things to consider when deciding on an engine.
If you can develop your own engine, then you need to consider the following:

• Will you be using the engine you develop for more than one game?  Developing your own engine is very expensive and will cause a delay in the development of your game.  The payoff in developing your engine will come in the subsequent squeals of the product as the engine is continuously updated.
• Will making your own engine give you a competitive advantage?  If having your own engine does not give you a competitive advantage, it is definitely better to outsource it.  Having your own engine may give you a technology advantage, a cost advantage, or enhance the development of your product, but those benefits must outweight the costs of just using someone elses engine.

Outsourcing Vs Insourcing Game Development (Full Development of Game)
There are many things to considered when outsourcing your game development.  In my old company, the plan was too outsource safe development which carried little risks and to insource new risky products.  The argument for this was that since the outsourcer was not 100% owned giving them a low risk product gave them a better chance to succeed.  Keeping the risky product internally helped keep your internal team happy and developed their skills.  Also, because you controlled 100% of the development, it was easier for you to act if any issues arrive.  
Today, many large publishing houses use a hybrid approach.  They outsource development of non-key platforms like XBLA, PSP, or NDS and insource development of titles to low costs regions.  Outsourcing to low costs regions helps develop that team to eventually have its own IP.  For a while, Call of Duty was developed by Infinity Ward every two years while during the inbetween years, another Activision Studio like Treyarch would develop the sequal.  Ubisoft did the same thing with their Montreal and Shanghai studios were the Montreal Studio developed the main game and engine then the next year the Shanghai studio would make the squeal using the engine developed in Montreal while the Montreal worked to upgrade the engine for the next product.  Eventually the Ubisoft Shanghai studio developed their own IP as the studio matured.
Things to consider in any contract when outsourcing development is key employees, milestone, change of control provisions for both parties, the financial terms (Advance / Earnout / Royalties), and most importantly trust.

Outsourcing Vs Insourcing Asset Development (Art, Music, QA)
 Deciding to outsource or insource asset development is more straightforward than the other forms of outsourcing or insourcing discussed.  Please consider the following:

• What is the costs of Insourcing Vs Outsourcing?
• Are you outsourcing anything that is considered a key aspect of your product?
• How trustworthy is our outsourcer?
• How experienced is your team in working with outsourcers?
• How easy is it to find talent to staff your team if you are going to insource?

Outsourcing Vs Insourcing Publishing (Self-Publish Vs 3rd Party)
For many smaller developers, self-publishing vs  using a 3rd party is a very difficult choice.  Many smaller developers only consider the fact that a large publisher will take a portion of their profits to help sell their game when they can just directly sell their game themselves.  With the growth of steam, it is easier for a small publisher to sell their game directly now.  But you should only use this route if your are only selling a PC game oriented toward male users who are similar to those who currently play Valve games.  As many developers have noted, self-publishing on XBLA has many risks because a large publisher can help you get through the certification process and help you find the appropriate launch window.  Also, a large publisher can help get you a more favorable deal and wider distribution.  Self-publishing is only practical if there is a way to directly access your target market or if your brand is already so large that it is easy to sell your product.  If you do use a publisher to sell your game consider the following:

• Minimum Marketing Guarentees (A Must)
• Minimum Sales / Distribution Guarantees (Penalty if game is not sold in X Websites)
• Marketing Plan Approval (Only if you have a strong IP / Product)
• Time Limits / Renewal Periods (Allows you or the publisher to break the contract after X years)
• Opt-Out (In case of contractual breech, Acquisition, or other issues)

There are many  things to considering when choosing to outsource.  It is not an easy decision (unless you have no choice) so please do not only look at the dollars and cents.  Please consider the long-term impact it will have on your business.  Be careful to not to outsource what makes your company great because that will lead to ruin to the creation of a new rival.

Physical Products and Digital Worlds: Combining Toys and Games

Skylanders has been considered by many as one of the biggest innovations of the year.  Combing figurines and a digital world to form one of the years sleeper hits, but is this really innovative?

As some of you know, WebKins, NeoPets, Magic, Pokemon, and many other titles have been able to successfully merge the Physical and Digital Worlds.  For every success, there have been countless failures.

Having studied this market and reviewed many pitches regarding similar products, I would like to give you my opinion on what makes a successful Physical and Digital tie-in.

Let us start off with a recent experience I had.  Someone wanted to make a game that combined selling cards that could be scanned into a game.  The scanned cards would lock in-game objects.  First, this is not a novel idea.  Many games have tried this successfully though most have been failures. 

Webkinz is a great example of a huge success.  Webkinz can be said to be the evolution of NeoPets.   For those of you who do not remember, NeoPetz was a web game that originally made most of its revenue from advertising sales and micro-transactions.  As NeoPetz grew, it expanded into the retail market by selling plush animal versions of the NeoPetz you found in game.  While NeoPetz went physical, companies like Build-a-Bear and brands like American Girl gave their products a virtual world to live in.  Physical Products and Digital Worlds were starting to converge.  WebKinz took this idea and made it so that you bought a plush animal and then scanned it in game.  You not only had a plush animal in the real world but a copy of your pet in a virtual world.   Today, Moshi Monsters and Skylanders capitalize on this idea.

At the same time, many other companies have tried this and failed and the main reason is that they think that being successful in one channel leads to success in both.   What made the brands I mentioned earlier succeed was that both the physical product and the digital world could stand on their own.  The physical products were collectable, trade able, or playable.  Also, the digital worlds on themselves are fun with social features, persistence, and high usability.  Together, both the Physical Good and the Digital World enhance each other!  People must think of the products as separate but equal and create them with that in mind.  This may seem like a very simple philosophy but may people seem to forget this

What are good virtual items or services to sell?

Someone asked me what type of virtual goods should be sold, and I mentioned that it is based on the game.  One of the things that people should keep in mind, is that if your are going to make the majority of your revenue from selling virtual items, you will not be profitable if it is ONLY BASED on decorative items. 

With a lot of successful games in the Western Market and years of games selling virtual goods in the East, there are alot of examples one can draw from to help populate their item store, but keep in mind what works for one game will not work for every game.

I.  Examples of some items that probably will not work in the west due to various laws is as follows:

• Yell Item / Blow Horn:  For a fee, players can spam all chat channels a message.  Because this message may be profane or disturbing to other players, this is probably not a good item to sell in the US.
• Lottery Ticket:  Buy a ticket for the chance to win an item.  The base concept is of coarse an issue as it is considered gambling but there are work arounds to make this feasible in the US.  For example, win X amount of times and get a ticket. 

There are a lot more items that will not work in the West due to legal restrictions.

II.   Items or services that should definitely be looked into by RPG based games:

• Character Name Change
• Character Gender Change
• Character Race Change
• Character Class Change (may be abused if players play an easy class to level then switch to a more difficult class to level)
• Server Transfer
• Additional Character Slots
• Additional Bag Slots
• Additional Bank Slots
• Premium CS Support (normally added as part of being a premium or paid member)

III.  Items or services that are offered in the east which should be evaluated for the west:

• In-Game Character Wedding Services:  Yes players do spend money to have their virtual characters wed.
• In-Game Location / Facility Services:  Players sometimes reserve or rent a area for their guild friends or others to get together.

There are a lot more services sold in the East that may translate well in the West but they are currently slipping my mind.

IV.  Game altering items need to be considered with the following mindset.

• Money Vs Time:  Many games that do well allow players to buy items that they could otherwise earn in game after playing for multiple hours.  For example, would you rather spend an hour killing mobs to gain a access key to the next area or would you rather pay $5.  Some games I have worked at allow you buy items that give similar benefits as an item 2-3 levels higher but only for a short duration. 
• Duration:  I believe that most paid items should be limited duration based on usage or time because of various tax laws in the West.  Also, this helps enforce the Money Vs Time value as players can "earn" the permanent item or pay for the limited use item.
• Separate but Equal Catalog:  Due to tax and other legal issues, it maybe a good idea to keep virtual items and paid items separate.  For example, both items may have the same bonuses but will have different colors and requirements.  If the same item can be paid by both cash or in-game earned cash, then the tax laws change.  Businesses need to keep this in mind if they want to recognize the cash up front or as it is spent or over the life of the customer. 
• Do NOT BREAK the Game:  Some companies and the west have had failed micro-transaction games because they have an ultimate weapon or item that breaks the game.  Make sure that even if an item gives a competitive advantage, it is not an insurmountable advantage.  Items should help players level fast, access items faster, get better skills, or look cooler, but they should never be required to win.  Players need to know that skilled players can beat a character completely upgraded with cash items.  Remember they need to think that it is fair, it does not need to be fair.  An example is if players can buy health pots during a match.  If the health pot had a cool down to begin with and health pots already randomly drop, why not allow for an instant transaction to buy a potion?  Now if players can buy unlimited potions and used them without any delays then it would be unfair.

V.  Personalization items should always be include any item catalog.

• Character modifying items help players be more unique and more attached to their characters.
• Fun items such as emotes, dances, and other help their character be more fun without playing the games.

Items should be planned out with the game design so that the games and the items are self reinforcing.

New Anime Season (01/01/2012)

Happy New Year!

I have always been a huge fan of the website random curiosity.  Below is a link to their Winter 2012 preview:

http://randomc.net/2011/12/26/winter-2012-preview/

Last season had a lot of strong anime and it seems that the winter season will also have a good line-up.  A lot of these anime look like they will do well in the US.

As I wrote before, anime that does well in the US must be easily translated and understood by US culture.   Also, Funimation is doing a good job of helping bringing anime directly from Japan to the US online.

Since I have had a break from work due to the holiday season, I watched some older anime that did not receive good reviews or are on my list of anime to watch.

One anime that stood out because of the horrible reviews and formulaic plot was http://en.wikipedia.org/wiki/Linebarrels_of_Iron.   Linebarrels of Iron was interesting in that it was created by Gonzo, Published by Funimation in the US, and still had manga series.  As a Mech anime by Gonzo, it had a lot of potential, but most people reviewed it based on the first few episodes and those reviews were just for the first few episodes.  The anime started off with the main character being extremely egotistical and not someone a typical person would like as a hero.  Because of this, most people gave the first few episodes horrible reviews.  In most US Media, the main character is designed to be liked or if he is disliked originally has potential to be liked and has a catharsis early in the series which sets him to the right path.  In this case, Hayate, the main character, was a horrible person throughout the beginning of the series which led many people to stop watching the anime.  Something as simple as this should be factored into cultural differences when selling the anime in the US.  Of coarse, this anime was not for TV because it was it would have done very poorly. 

How to select Key Performance Indicators for an Online Game?

Key Performance Indicators (KPIs) are very important in evaluating how your game is doing.  Some people believe that it is important to have every indicator measured as a KPI while some believe it should be a set of a few indicators.

In my opinion, KPIs should be high level numbers that encourage research and discussion.  If it was up to me, I would use the following KPIs:

• Peak Concurrent Users (PCU):  PCU is the most basic of online KPIs because it shows many things such as the following:
• Technical Issues:  Sudden drops in PCU indicate there was a major service issue or if there was a small technical issue.  For example, a small drop hints that one shard / server may have crashed while a total drop means the entire service went down. 
• High Level Player Engagement / Retention / Acquisition:  PCU over time tells you how your player base is trending.  If you have an acquisition program and your PCU changes at a rate higher than before, then it was successful.  If it remains the same, it was not successful.  If it drops, well you had a campaign that hurt the user base.  If you are not doing any acquisition and your PCU goes up, maybe a new consumer base found your game.  Who are these people how do you get more of them?  If your PCU is drop rapidly over time, your player engagement and retention is horrible.  If your PCU stays flat without any acquisition, your player engagement is good and your retention might be good.  You will need to look deeper to see if you have high organic acquisition and low retention which also might cause this.
• Informs Service Strategy:  PCU tells you at what time people play and when you would except the most service calls. PCU also dictates the amount of servers you need to support your game.  Not everyone is online at the same time so you need to make sure you do not over commit on server hardware.
• Competitive Impacts:  PCU will also change based on what your competitors are doing.  If you get a high drop in PCU, that means your competitors really hurt your game.  You will need to play for a counter attack.  If your PCU is not affected, that game was a different audience than your user base.  Should you check to see what type of user plays that game and why?  That is up to your longterm strategy.
• Operating Profit (OP):  OP is the most important financial measure besides ROI.  ROI is not a KPI because it should be campaign, program, or development based.  OP is a daily, weekly, or monthly measure that tells you if you should keep your game alive.  OP is more important after the initial launch of the game because it might lead to bad decisions before the launch of the game.  Only revenue and costs that can be made or saved by turning off the game should be factored in this number.  OP is an indicator of the following:
• Sustainability:  Remember that the investment in the game and all other prior investment are SUNK COSTS.   Keeping this in mind, this metric shows you how profitable the run rate of the game is.  Even if you do not cover your fixed costs, you are covering the costs of doing business and making enough to support other projects.
• Right Sizing the Business:  Once you launch, you will be able to see how successful your game really is.  Based on this, you can project your monthly OP.  If your OP is negative, you can lower some of your support costs.  Remember the vicious circle of Online Game Failures, cutting marketing to save money = lower acquisition.  Cutting Service to save money = lower retention.  Cutting new content to save money = higher churn.  Cutting everything to save money = no users.   Right size your business so that you have enough marketing, service, and content to maximize your OP!
• Economic Costs:  Even if your game is OP is positive, your OP% might be next to nothing.  You will need to compare keeping the game alive versus investing that monthly run rate into another project.  If you are doing your job well, the game should have a 70-80% operating margin or higher for an MMORPG.   This should make the economic costs of keeping the game alive very low.
• Churn:  Churn is very important metric because it shows you how well retention is and what average life is.  This metric is similar to PCU but is more focused on retention and average life.  Remember using the change in the subscriber base IS NOT CHURN.  Churn is the % of players leaving who had the chance to play the game!  The key ways this KPI is used is as follows:
• Retention Measure:  While PCU tells you how your overall user base is doing.  Churn, when used as Volume Churn, tells you how retention is.  Volume Churn is defined as follows Total Players Who Stopped Playing / Total Players Who Played the Game That Period.  Volume Churn controls for acquisition.  If you use just change, acquiring users may hide the any lose in players.  This metric does not do that.
• Average Life Estimate:  1 / Volume Churn is an estimate of your average player life.  If a service has a 33% churn.  1/ 33% =  3 months.  As you can see, this metric does work.
• ARPU:  As discussed before in a previous post, ARPU is a key indicator of your overall profitability by user.

Other KPIs that should be considered are based on your type of game:

• Conversion Rate:  Subscription based MMORPGs use Trial to Playing conversion rates versus Free2Play games use the % of their active player base who play.
• Daily Users:  A measure of player usage of your product.  PCU is a better indicator because of all the other factors it helps measure.
• Daily New Users:  A measure of player acquisition.  More important for Free2Play games that subscription based games.
• Average Weekly/Monthly Playtime:  A measure to tell you how longer your players are engagement.  Based on amount of content you have, you can project how long it will take people to complete the game on average.
• CS Satisfaction Scores:  How well is you Customer Service team is doing is very subjective.   Player Surveys or Satisfaction metrics are good at keeping your CS Support on the proper cost level.  The goal is to balance costs with good CS Support.  Free2Play games should have minimum support.  Statistics that should be included in this calculation are average response time, average resolution time, and player CS scores.

These are overall good high level metrics that after one glance can help you quickly evaluate how your game is doing which is the purpose of a KPI.  Any deeper metrics is a way to analyze the games performance and should be done in a more in-depth manner.  KPIs belong in a dashboard for all key stakeholders to review.  Once a problem is highlighted, then metrics to help explain the issue should be reviewed in EXTREME detail.  Metrics without context lead to BAD DECISIONS.  Every game is different so remember to keep that in mind.  Not all metrics are applicable to all things.

In addition, I personally like to use dashboards that list all key marketing and production activities that occured so you can visusally see the impact!

What is the future of Anime and Manga in the US?

This week there is not much "big news" about the gaming industry except for the large black friday sales and the IPOs of both Nexon and Zynga, so I will talk about the Anime and Manga industry this week.

Over the last few weeks, I have been expanding my reading of Manga to beyond the most popular Shonen and Shojo manga.  The amount of Manga being written is actually Manga being written is actually very incredible.  What is even more interesting is that a lot of anime is actually based on light novels, and if these light novel based Anime become popular, they are  turned into Manga.  Light novels are basically like the name implies, light novels.  They normally have only a few pictures.

Currently, anime has gained a foothold in the US market and has expanded to be accepted by most youths.  There are cable channels that now show Anime and the Cartoon Network has a dedicated time slot to Anime.  Disney also shows some popular Anime such as Naruto.  Because of this, manga has also grown with the growth of Anime.  A lot of good light novels are also being published in the US, but as to how successful they are I am not sure.  

Hopefully as these children grow older, Anime and Manga become more mainstream.  The video game market took a long time before it became as mainstream as it is today.  The same can be said about a lot of new forms of entertainment.  Some forms of new entertainment like Reality TV are adopted quickly because of its broad appeal.

The issue that Anime and Manga have is the stigma that is associated with it.  Even in Japan, Anime and Manga fans are looked down on and are called Otaku's.  Female Otaku's are called Fujoshi which means rotten women.  Also, in Japan, Hikikomori or "shut-ins" are normally associated with being gamers or anime fans.  These are all stigmas that the video game industry had to overcome.

There are studies in the West about how video games negatively affect people and there are the same studies about Anime and Manga. 

Hopefully, today's youth who are accepting of Anime and Manga will help make it a mainstream form of entertainment accepted by all.