Game Analytics - The Classic Funnel And The Game State Machine

The funnel has been with us since the beginning of time if you consider the WWW to be when time began. Funnel analysis is primarily focused on determining the amount of web traffic coming to a property in a certain time slice and how that traffic trickles through a web site to the ultimate goal of making money from the traffic. Game properties that are web hosted also use the funnel. However, games have unique characteristics exhibited by their "state machine" behavior that challenge funnel analysis as an exclusive source of traffic/revenue analysis. Social networks and mobile platform environments also challenge the effectiveness of the funnel as a comprehensive way to evaluate game traffic. Despite these caveats funnel analysis is useful for game BI and should be a part of an analytics package if a game is hosted in a web environment.

The goal of the funnel is to line-up the cost of acquiring  traffic with the revenue that the traffic generates. The funnel is geared to e-commerce sites where there is a definitive end goal of a transaction. Fall off can happen from the time the traffic arrives at a site and the actual transaction.  Analysts peal through the funnel data to determine where the drop off occurred with the hope of adjusting the site to improve the "conversion" rate. Each site or game  will have its own characteristics and conversion rate.

The funnel is not generally used to evaluate social media environments because of the impact of the social or viral impact on conversion.  True mobile applications(excluding web apps run on a mobile device) because driving traffic and analyzing games in a mobile context requires  a different approach. We will cover analytics for these environments in future blogs.

 Web traffic will come from various sources such as paid search, natural search, e-mail campaigns, affiliate sites and referring sites. Each of these sources will have a cost. When all is said and done the cost of acquiring this traffic is compared to the revenue generated by a game. The hope is that the revenue exceeds the cost of acquisition.   Traditional web marketeers   live by  funnel reports to help them adjust marketing programs and to assure that marking funds are well spent. A good funnel analytics package will provide results instantaneously to allow an organization to react quickly to positive and negative trends.  

Evaluating the relationship of traffic to revenue in the funnel can be challenging because traffic does not necessarily translate to revenue in a fixed period of time.  So when do you draw the relationship between traffic and revenue? A very crude and often used method is to run reports for different period's of time; 1 hour, 1 day, 1 week, etc. and see what the ratios are. However, a much more precise way is to take a traffic/marketing campaign  source and follow the life cycle of revenue from its inception to the eventual end of its lifetime value. There is usually an initial peak of traffic at the start of a campaign and then a tailing stream of acquisition and revenue  commonly called the "tail".  Funnel analysis can become very sophisticated if each marketing program thread  is tracked in this way giving rise to overlapping threads and traffic tails.  

Games themselves poise an interesting challenge for funnel analysis because unlike a standard e-commerce application games are "state machines". Games  are not single threaded experiences. Instead they engage an acquired player in a number of ways and in some cases loop a player through a series of steps over and over again keeping the player in a game session for a prolonged period of time.  In essence, even a simple game such as a single player slot machine potentially engages a players in a number of states. Some times the cycle a game puts a player through is predictable in some cases it is not. This is especially true with multi-player games like RPG's and MMO's.  Some game state machine experiences can cycle over and over again for long periods of time creating many revenue opportunities to monetize a player and many places for a player to fall out of a game. This is what makes games such a great way to generate revenue from a player giving rise to the "gamification" of standard e-commerce applications and a challenge to determine how best to keep a player in the cycle and also monetize within the  game cycle.

For this reason games are unique and very different from  standard E-commerce applications.  Once a player engages in a game the funnel analysis becomes less valuable and a new set of analytics strategies must kick in addressing game dynamics. This is the primary reason why game analytics stand apart and in their own space. Essentially, Google Analytics style reporting has a limit in its ability to provide adequate intelligence on the full scope of  game acquisition, retention, fall-out and revenue. 

A truly game oriented analytics package will include a state machine analysis in addition to funnel analysis helping business owners, developers and marketing staff to obtain a full understanding of a game and its impact on the bottom line.  

In summary,  funnel analysis  has a place in the pantheon of  game analytics and reports. However, the "state machine" characteristics of games, combined with  social network and mobile platform deployments,  requires game developers and publishers to go beyond the funnel report to obtain a full understanding of game cost of acquisition, revenue per player, fall off in a game and player retention.

Game Analytics Series

Game Analytics Overview

Game Analytics - The Classic Funnel And The State Machine

Game Analytics - The Social Connection

Game Analytics - Big Data And Business Intelligence(BI)

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.  

What Social And Casual Internet Game Companies Can Learn From Online Gambling

Recently I have published blog items primarily focused on educating online gambling operators on the virtues and threat of social games to  their operations. In point of fact, I have been a bit unfair to the online gambling operators because I have not highlighted their strong points and how social and casual game operators could learn a few lessons from them. Indeed, online gambling operators have a lot to be proud of and social and casual game operators can learn from  online gambling businesses.

The Regulated World - Sooner or later the authorities are going to take social and casual game operators more seriously. The amount of virtual currencies transactions being processed ,  under age issues and social games that mimic real gambling games are a few of the items that are  going to trip a wire in some jurisdiction causing the social game companies to engage in practices that online gambling companies have had to comply with and implement to keep their licensees.

The list of activities and requirements that online gambling operators have to attend to remain legal and safe operators is staggering and non trivial to maintain and implement. To name a few, regulatory legal counsel, auditing regimes, employee background checks, increased charge back management oversight,  auditings of  software platforms,  game outcome monitoring to assure fair and random outcomes, upgrading of  networks and hardware to address denial of service and intrusion attacks,  etc. These activities, systems and safe guards are common practice for online gambling operators existing in  regulated environments. The enforcement of these safeguards does create an expense overhead beyond the thresholds that social gaming companies are comfortable with. However, the time is coming when social game companies will have to pick up their game and comply with external regulations that require processes already used by online gambling operators.

Online Gambling Companies Are Banks - Most online gambling companies have the concept of deposits and accounts to allow for the deposit of funds to game play and for the ability to withdraw funds when needed. Social and casual game companies have not followed this model because they do not have the concept of a cash withdrawal. Virtual currency does accumulate and is referenced as a line item in an accounting system. However, virtual currencies, as of this date, remain in the virtual world. I suspect this is going to change slightly as virtual currencies become exchangeable  amongst themselves and consumers demand the ability to take their currency to another site or game property. Facebook credits are a defacto standard within Facebook and Facebook is not allowing exchanges or transfers between currencies right now. However, I suspect this is going to be challenged as unfair resulting in a potential anti trust or  monopoly claim requiring them to allow for cash out and exchange. This will require social gaming companies  to have exchange rate virtual currency systems,  cash equivalent calculations for  virtual currency and the ability to redeem virtual currency from a virtual currency depository. This all looks very much like the only gambling world.

Code Quality And Speed To Market - Social game companies are notorious for poor quality releases and bugs in their game releases. They do this because their is a higher value placed  on new content releases relative to the quality of  the overall game experience. This is tolerated because of the perceived notion that the games are for fun and not for money. This practice becomes less tolerable as players invest larger amounts of virtual currency into games changing the value proposition for players.

Conversely, Online gambling companies have to be very careful about releasing code that results in incorrect calculations, game outcome flaws, unannounced outages, etc. This is the case because of the amount of money involved and the need to get it right and having a system running all the time.  Their new content releases are less frequent then in the social gaming world not because they have poor developers but because the quality standards are higher based on consumer perception of the value proposition..

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Niche Markets And Profitability - Online gambling companies have the ability to address comparatively tiny markets relative to casual and social gaming companies and still make money.  Social and casual gaming companies struggle with profitability even at the high usage numbers they experience. They do use a number of monetization methods to get to break even. However, their player numbers still have to be very high to achieve profitability. Social gaming competition has already gotten to the point where mass adoption of a single game is very hard( expensive)  requiring social and casual game companies to begin to figure out how to carve out small market segments and make money off of these markets. Gambling companies make games specifically for niche markets that have the potential for generating enough revenue to justify the games development. This goes beyond language localization. Gambling companies also look at cultural differences that impact user interface design and preferences of players. If you can successfully design a game that is truly unique and specialized for a market you can acquire a significant percentage of market share over companies that genericize their games . The social gaming companies might take a look at how the online gambling companies are achieving this and try and copy their techniques.

The online gambling operators are doing many things very well and better then the social game companies. The gambling companies are also very familiar with a regulated world and know how to successfully compete in a regulated environment. Social and casual game companies need to prepare for the day when their world looks very similar to the online gambling world taking some advice from the online gambling world may be a good idea. 

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.

2011 GDC Takeaway

I was pleasantly surprised to see the end of the video console game focus of GDC this year. The game world has moved well passed xBox, PlayStation and the Nintendo Wii to bigger audiences, better revenue and a more diverse array of game content in casual, social, mobile mediums.

I attended a number of seminars and presentation on a verity of subjects and was impressed by the quality of the  presentations. The following are some highlights.

Zynga In A Buying Mood - Apparently Zynga has decided to start buying up game companies in domains that they are not familiar with.  I sat in on two seminars with speakers from companies that had recently been purchased by Zynga. Area Code now Zynga New Youk is a  company that focuses on community style games in the conventional sense. These games are not standard Facebook social games. They are truly games that address the needs of physical communities. The presentation was on a game they created for the city of Macon, Georgia that encouraged community connections between different area codes using a community virtual currency. Not sure exactly what Zynga plans to do with this kind of company. Area Code is clearly not a Farmville or Poker oriented company. It will be curious to see how the Zynga  Area Code relationship evolves.

New Toy Inc, now Zynga With Friends is the recent mobile game company that Zynga purchased. This makes a bit more sense to me then the Area Code purchase. Zynga needs a mobile strategy and Zynga With Friends helps to bootstrap Zynga into the mobile space. Zynga seems to be taking a hands off approach to this Texas company at the moment letting them create their own versions of games. However, I suspect that things will change over the coming months bringing this group into the Zynga fold resulting in games that are more closely allied with the current Zynga brand.

Sociology Meets Virtual Social Networks - There were a couple of fascinating presentations by academics from  the social science and psychology domains. Their presentations brought to light that there is still much that can be done within virtual social networks(Facebook) to add richness and intrigue to our virtual networking world. It appears we have just scratched the surface of mimicking social interaction on the Web.  The presenters worked for Playdom so these were not disconnected academics. Clearly, we are about to see more interesting social interaction generated by social games that will grow social networks even larger then they are today.

iPad As "The" Game Platform - Graeme Devine and old timer in the game development community  and current Apple employee made it perfectly clear that the iPad is the ultimate game platform. He also made it clear that developers do not know how to develop games specifically for the ergonomics and capabilities of the iPad. Most of the iPad games to date are ports from the web or iPhone making them sub pair and even annoying on the iPad. Given the real estate and the ability to turn the iPad in an direction plus the touch, voice and video capability of the device it is predicted to excel in the delivery of unique and interesting game content. It could be argued that the iPad may become the replacement for the console providing a mobile alternative to console gaming.

Social Game Monetization - There were a host of seminars on social game marketing and the ability to slice and dice a game audience based on age, location and behavior. Much of this is well known with data being actively used to target game content and advertisers. However, the biggest revelation  to me was the amount of money being spent by single individuals on virtual currency and virtual goods. One of the presenters posted a slide/graph representing a  very step curve for a small segment of the social gaming community contributing a very large amount of the total revenue in games. These players were identified as "whales" a common term used in the gambling industry for individuals that spend a lot of money in casinos and in online gambling properties. In fact they are the ones that result in high profits for casinos. Some one in the audience asked how much per player these players were wagering or spending in social games. The answer was between $50,000 to $100,000 per player per year. I found this fascinating and a bit shocking. Apparently the game publishers were catering to these players in a similar way that casino's cater to their high roller customers. This is significant because the conventional wisdom is that social games and gamers do not really generate that much cash. It appears this perception is wrong. When you consider the total amount of social gamers even a small percentage of "whales" in this community actually results in relatively high numbers of players buying significant amounts of virtual goods and currency.

Analytics Are Everywhere -  The degree to which social game play data can be sliced and diced is becoming an art form/science. The social web provides all kinds of data on individuals, groups, advertisements, activities, interests, behavior, etc. We appear to still be in the early phases of the use of this data for targeting, monetization, acquisition and retention.  A game developer has to add features/api's into there games to extract this data if they want to have successful game. Publishers need to have data miners and systems to leverage this data to make a case for their publishing platform. These features could make or break a successful game. Where we cross the line on data mining and privacy is still uncertain. It look's like companies are pushing the limits (within Facebook policy) as far as they can to micro segment the social networking gaming population.

Gameification - Is it a game or a business application? I have written about this before and I am personally involved in the gamification of several applications. This topic was full on with the distinction between a game and an application becoming hard to detect. Check out Mod Cloth  a company that has some clever ways to engage their community to further their business goals.

Clearly, GDC has gone all in and has focused on casual and social games as the wave of the future. The amount of side activity in separate meetings, parties and VC hosted events indicate that all the usual suspects are hot to get into the casual and social gaming space.

In a certain way this is a bit scary because expectations and decibel levels are really high. I could hardly move in some of the VC hosted cocktail parties and of course I could barely hear anyone.  Despite this the conference was actually valuable from a practical perspective. I decided on a couple of new game development and publishing strategies based on information I received at the conference.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.