What lifetime value do I need to have a top grossing game?

What does it take – in terms of lifetime value (LTV) – to have a top grossing game? It’s a topic of interest to game developers and publishers. It helps them benchmark their newest games against the current crop of winners, understand the competitive landscape for marketing spend, and forecast payback on marketing spend.

Since Think Gaming provides LTV and retention estimates on thousands of games, we looked at the distribution of LTV on the top grossing charts (US/iPhone). We looked at ~300 games that were in the top grossing charts in January, where we had LTV estimates [Some details on methodology at the bottom of the post for the wonky]. We divided those games into deciles and published the mean LTV for each decile in the chart below.

 

 

LTV distribution for Top Grossing Games

Lifetime value by decile

 

A few things stood out:
1) As in everything app store related, the rich are really rich. The top 10-20 games make a ton of money per user. Interestingly, though, these aren’t necessarily the top games on the charts. Some of the best monetizing games are in niche categories where the average revenue per user (ARPU) is very high but the market for new users is fairly small.
2) There are a surprising number of games succeeding with LTVs that don’t support buying users via paid advertising. Some of these are games that were once huge and are in decline, but others have managed to acquire an audience without having to compete with the Supercell’s and Machine Zone’s of the world. These tend to either be viral “gimmicky” apps or licensed IP with built-in audiences.

Hope you find this interesting!

Updated: We’ve added a graph showing the percentage of revenue earned by games in each decile. ~75% of revenue is earned by games in the top 50%.

Perc_Rev_by_Decile

A few notes on methodology:
1) This is gross revenue, prior to the app store’s 30% cut, and it is in-app purchase revenue only. We recently started estimating ad revenue, but it’s not included in our LTV calculations yet.
2) We estimate LTV as the revenue earned by an “average” player over the course of 1-year.
3) These lifetime values are much higher than “average games”, as these are top grossing games, even more so because this analysis focused solely on US/iPhone, one of the richest markets.
4) Generally we need to know the game’s genre and have 90 days of data to make accurate estimates.

Smarter TV buying from SimulX

Some of the biggest mobile games use TV advertising to support their business. Supercell, King, Machine Zone, and others have all spent heavily on TV over the past year. Unlike online ads, however, it can be very difficult to track the effectiveness of those ads. And the planning/buying/optimization cycle is much slower than the tools used by digital marketers.

Enter SimulMedia’s new business unit SimulX. They’ve combined Think Gaming’s performance data with TV spend history by games to determine the best TV spots to buy for mobile games.  And they’re building out tools to make TV buying look similar to the digital tools that marketers know and love.

http://www.simulmedia.com/insights/blog/simulmedia-launches-simulx-unit-help-digital-first-companies-achieve-business-outcomes-easily-through-tv-advertising/

We’re excited about our partnership and look forward to a new generation of smarter TV buyers.

The three hottest games you should check out

Money maker: Jurassic World: The Game  from  Ludia

Start with one movie tie-in. Add an Apple feature. That’s a formula for this week’s top moneymaker. Key question will be whether it can stay.

Free game: The Line Zen from Ketchapp

Ketchapp delivers another game to #1 on the top free charts. This time it’s a trippy sequel to 2014’s The Line.

Paid game #1: Broken Age from Double Fine Productions

Paid game #2: Grim Fandango Remastered from Double Fine Productions

There’s a double-feature of Double Fine games this week: a remake of the beloved Grim Fandango and the full version of Broken Age.

A note on methodology: Think Gaming heat rankings combine recency, ranking status, and growth to identify breakout games. Subscribers can see all of the hottest grossing games,hottest new free games, and hottest paid games.

Top ad networks for acquiring paying players

Many of the game developers we talk to are interested in how they can acquire user for their games. The problem is that the world of ad networks is basically composed of two giants areas: Facebook, and the Wild West of everything else.

We’re working on a solution to bring transparency and order to this mess, and have started working with a bunch of the smartest game marketers on some cool solutions. This includes transparent information about which ad networks, targeting options, publishers, and geographies are actually driving high ROI for marketers, and which are a waste of money.

Check out our directory of the top ad networks and let us know if we’re missing any of your favorites.

 

Talking the business of mobile apps

The business of mobile games and apps is changing fast, so we’re always looking for smart folks who are on top of smart trends. If you’re interested in publishing mobile apps, you’ll want to check out App Business Podcast.

Think Gaming co-founder Tim Ogilvie recently talked with ABP about game publishing, how to know whether your game is ready for external investment, and some ideas on how to place some smart development bets in the mobile gaming space.

Listen to the episode here!

 

 

Mobile Acquisition Unlocked

Mobile Acquisition Unlocked is an upcoming conference focused on – you guessed it: mobile acquisition. If you’re a game developer or publisher interested in acquiring lots of players profitably, you should pay attention and get to Las Vegas on June 10 & 11.

The days where getting featured by Apple could make your game a hit are gone. Today’s top grossing games are almost entirely driven through paid installs. Mobile Acquisition Unlocked is assembling some of the smartest folks in the business to reveal how they drive profitable growth for their companies.

Jay Weintraub previously founded LeadsCon and puts on one of the best shows in the business. Most conference blather through the same basics – Jay creates programming that is insightful and relevant.

Even better: we have a special offer to get game developers to the conference for free! MAU has agreed to sponsor 5 game developers to attend the conference for free. Reach out to us with your details and we’ll make it happen.

We are also looking to find publishers, game media buyers, or similarly situated folks that will agree to do a “media mentoring session” for game developers at the conference. Please reach out and we’ll share details on the opportunity.

Game Programming Patterns

Cool new online book that may be helpful for game developers that want to level up: Game Programming Patterns by Bob Nystrom a coder at EA for 8 years.

This isn’t “Getting Started with Game Programming”. Instead, the book covers more advanced architectural and design decisions that will help build tighter, more optimized code. While we’ve just started, it looks like a game-specific Martin Fowler’s Refactoring, but it’s free and online with a paperback version coming soon.

How can I fund my mobile game after it’s launched?

In our last post, we outlined the two types of deals generally available for pre-launch games: equity financing and publisher deals. In this post, we talk about two additional deal types that become available once your game is complete and ready for launch.

Distribution deals:

A distribution deal is when a publisher takes a game that is complete, (or very close) and provides marketing and distribution support.  They will provide all of the post-launch services from a traditional publishing deal, but didn’t make a commitment on the funding required to build the game. This allows them to see a game that’s fully built and assess it’s chances for success.

Distribution deals usually revolve around the marketing commitment that the publisher will provide. While PR and advice are important, it’s often impossible to distinguish publisher’s quality in these areas before launch. In our experience, the critical factors in a distribution deal come down to:

  1. App store relationships: In the US, this is a question of whether the game will be featured by Apple or Google, in which relationships play a big role. Internationally, payment relationships with the various app stores becomes critical.
  2. Owned-distribution: Some publishers have unique distribution that they can offer. Tango, for example, touts its ability to distribute games to users of the Tango messenger app. For the right type of app, this can be a major distribution plus, eliminating the marketing costs in #3 that play a huge role in today’s gaming environment.
  3. Marketing commitment: Almost all of the top grossing games are supported by massive marketing budgets, so the publisher’s marketing commitment will play a critical role in the success of your game. Publishers will typically evaluate whether the expected lifetime value of the game exceeds the cost of acquiring a new player through marketing. This is one reason that Scouting Reports are helpful to both developers and publishers, as they can provide insight into whether the game can be marketed successfully.

Marketing financing

Marking financing deals, or royalty-based financing deals, are designed for post-launch games that are looking to grow quickly through paid marketing. This growth tends to be expensive, because the cost to acquire a new player is high, and getting near the top of the top grossing games chart requires millions of players. Marketing financing provides funding that is designed to help the company fund this growth without diluting themselves via equity or committing to a publishing deal.

Marketing financing deals typically see the funding partner paying for acquisition marketing. They are then entitled to all revenue until they have been paid back for their marketing outlay. After that has been recouped, the parties split revenue. Typically developers receive a higher percentage of the revenue than in a publishing deal, and the developer remains responsible for marketing, launch, customer service, et al.

This can be highly attractive growth financing, but is only available to launched games that can profitably acquire new users. Scouting Reports can be very helpful in determining whether your game qualifies and we can connect you to appropriate partners.

How can I fund my pre-launch mobile game?

We talk to lots of mobile game developers who want to grow their games. More often that not, these developers need some combination of money and expertise to help take their game to the next level. But it’s not always clear what type of deals available and on what terms.

We also talk to lots of people that want to finance great games, so we get a good sense for what types of deals are common. In this post, we’ll lay out the types of deals that we see and the type of developer / game that’s a good fit. We’ll start with two posts: this post is for games that haven’t yet launched and need money to complete the game. A second post focuses on games that are largely complete and need money to help them grow.

There are generally two types of deals available for pre-launch games:

Publishing deals:

In the “traditional” definition of a publishing deal, the publisher provides funding that allows the developer to complete their game (“completion funding”) and the testing and tuning to ensure the the freemium strategy is successful. Payments are typically doled out after the completion of specific milestones, like the completion of a playable demo, soft-launch of the product for testing and tuning, or major market launches. The publisher will launch and market the game, often with a commitment on the marketing budget they will commit. Sometimes they will provide operational support for customer service and community, and other times they will help to localize the game for large international markets. The game developer will be paid a revenue share for additional receipts, after the completion funding and marketing spend have been recouped.

Equity financing

Equity financing involves selling a portion of the business (typically 15-35%) to venture capitalists or angel investors, in return for $300k – $2 million, though terms will vary wildly. Many VCs and investors shy away from games, due to a feeling that it’s a hits-driven business. So focus on investors that are known to invest in games or strategic investors.

Kristian Segerstrale from Initial Capital has a good summary of the funding options available to build games, focused on “standard” publishing deals versus equity financing. It’s worth noting that while this is a good summary of a standard publishing deal, there are lots of newer publishers in the ecosystem who aren’t requiring sequel rights, or forcing developers to give up IP. That said, if you can get a great equity investor to help you build your game, it may well be worth the dilution.

How much activity is there?

There isn’t a ton of money available pre-launch, for a few reasons:

  1. It costs a lot of money to bring out a new mobile game. Count on $500k before any marketing spend to develop a game that can challenge the top grossing charts. This raises the bar on success and makes it easier to say no.
  2. Many publishers prefer to wait for a finished product that has at least completed a playable demo, removing some of the risk that the finished product won’t match the pretty vision they were sold. They’ve also found that the freemium market is unpredictable, making games that look great in concept phase unprofitable in the market.

Increasing your chances of getting a deal

So how do you get either an equity or publishing deal? Build a great team.

Yes, you’ll need great art, distinctive game play, and a fun game. But the biggest success factor for either a publishing deal or equity financing is a great team that has built a freemium game in the past. This drastically increases the chances that the funder will get a finished product that is likely to succeed, and is generally required to get a deal done.

Want to connect with top tier publishers and investors? A great first step is to create a great-looking profile page at Think Gaming, outlining your team, concept, art style, and game play videos.

 

Should you buy King.com at their IPO?

James Surowiecki has an interesting take on the key question surrounding the King.com IPO: can they repeat their success with Candy Crush Saga?

Spoiler alert: his answer is no, citing the long history in games, movie studios, books, and virtually every other form of hits-driven entertainment. It’s incredibly difficult to repeatedly create successful entertainment franchises, and great new ideas tend to come from anywhere.

That said, King.com has a smart model for catching lightning if it happens to strike. They test lots of games on their website, looking for the right combination of user engagement and monetization that can produce another hit. If, and only if, those games show the right signs of life, they are built for mobile and aggressively marketed.

Sound familiar? It should, as it’s the strategy our Scouting Reports offer. They provide an inside look at the potential for a game to be the next Candy Crush Saga, by comparing your game’s stats to top grossing peers. Much like King.com’s approach, you should be ready to aggressively market great scoring games, or try to re-work games with lower scores.