Comparing The Value Proposition Of Social Casino, Online Gambling, Fantasy Sports

In the blog addressing  the business of Fantasy Sports and Social Gaming and their relationship to Online Gambling  the question was raised about Fantasy Sports and Social Gaming as being  proxies for  "real" online gambling. This question is difficult to answer without an understanding of the "economics/analytics/operations" of these three game genres  and how  the three  business models are measured to determine the health, cost of acquiring a player and the value of a player over time. Essentially, based on the analytics how similar or how different are these models from each other and how would you gage the similarities or differences for the purpose of acquisition, partnerships or mergers.

 For the most part all three, and in fact, most online game genres use the same  or similar analytics to determine how games are performing from a financial perspective.  This helps to place the businesses within a single context for evaluation. However, the importance of specific measurements differ form one model to the next with certain combinations being more important then others.

The following are some common terms and categories that are used across online game genres and can, and should be, be used to determine what is the best business given the specific circumstances  of a business owner.

Customer Lifetime Value(CLV)/User Lifetime Value(ULV)/Player Lifetime Value(PLV) -  The CLV of a player is determined using a number of feeder  calculations such as the average amount of time a player remains as a member or part of a game community and the average amount  of spend(coin in)a player contributes during the average lifetime of a player. This term is used consistently across gaming categories. CLV can be an excellent number to compare the different game business models because it evaluates players over a lifetime as opposed to coin in on a specific day or for a particular campaign.

Cost Of Player Acquisition - The cost of acquiring a player is obviously a big part of  determining how a game business is operated, how much working capital is required to "seed" a gaming site and what methods will be used to acquire the players going forward. The methods for acquiring players are diverse and in some cases very different  from one game genre to another. Obviously the Customer Lifetime Value(CLV) should be greater then the cost of acquiring a player or a business will not survive.

 Affiliate Marketing - Affiliate marketing is mentioned as a special player acquisition marketing method outside of the general player marketing/acquisition  category because it is a unique form of marketing and used heavily in the online gambling sector. Affiliates can also be used in social casino and fantasy sports. However, the notion of an affiliate in social casino is more likely a public  affiliation with an existing online gaming property as opposed to an organization that exclusively operates an affiliate network. In the online gambling sector affiliates can and do  obtain player leads from other gambling business such as Sportsbook resulting in   a higher likelihood that the gaming business acquiring the leads  will obtain access to a class of players that have some history of gambling/wagering behaviour and, therefore, conversion.

Social Media - Clearly Facebook, Twitter ,Tencent in China, VK in Russia and other business that encourage connections between participants are excellent ways to acquire non-gambling players. Most of the social media platforms shy away from encouraging gambling references.   However, there are clever ways to  indirectly acquire gamblers through social media. Facebook itself is an odd social medial platform because it also hosts gambling applications in certain jurisdictions where it is acknowledged as "legal" to do so. Gaming applications  in particular have been a big revenue generator for Facebook and Tencent because they  provide a virtual currency platform that is primarily used to provide virtual chips for purchase in gaming apps.  It could be argued that Facebook and Zynga could never have gone public with  stock offerings without gaming and virtual currency purchases. "Virality" is a term used to describe the propagation of  friend notifications  within a member/players social media network. This is some times called the "K" factor. Initially, Facebook allowed uninhibited connection within their network. Zynga was the first gaming site launched in Facebook during this period. They took great advantage of this "free" marketing. Facebook has since stopped virality for all intense and purposes and shifted to an advertising model resulting in the growth of their revenue stream and the increased cost of marketing gaming properties within Facebook and leveling the playing field for game businesses operating within Facebook.

Good Old Fashion Online Marketing - With virality all but dead within Facebook and Twitter evolving into more of a paid advertising platform for business and gaming properties, old fashion online marketing has become the standard way to acquire players,  Essentially, ads must be purchased in these platforms to drive player acquisition. This trend may also give rise to "affiliate" marketing for social media players given the increase rise in the cost of acquiring players within social media platforms. However, the affiliate cost has to take into consideration the actually revenue per player in these environments.

So, given the marketing standardization for gaming across the globe,  the continuing dominance  of Facebook as "the" social networking platform and the entrenchment of online gambling regimes in Europe and in the United States  how are the three gaming models standing up in terms of player acquisition and revenue per player? Should these models converge? Should they stand alone. Which model is more economically viable?

Fantasy Sports - A Bloomberg study indicates that $70 USD is a consistent amount to acquire a fantasy sports player with an expected lifetime value of $100 USD.

Social Casino  -  Another study comparing social gaming to "real" online gaming in 2012 indicated that in 2012 Zynga generated about 2 cents per player with a player base of   9.2 billion active users.  The question is what was the cost of acquiring and retaining those players? Their current stock price may reveal the reality of that business model.   Compare this with a UK online casino operator  generating 48 million USD with only 40,000 active players.

Online Gambling In The United States - With all eyes and wallets pointed to the new and emerging legal online gambling roll-out in the US(Nevada, Delaware and New Jersey) we see some disappointment with the projected numbers versus the  actual numbers. However, if you look at revenue per player in the gambling sector versus the social/freemuim sector the evaluation takes a decidedly different tact.  Cost of acquisition must also be taken into account in the comparison. The online gambling sector relies heavily on an "affiliate marketing" strategy to acquire players. The cost of acquiring a player via this method is pricey.  Affiliate marketers can charge up to 50% of a players revenue "coin-in" or a flat fee of up between 600 to 800 USD. However, these players have proven to be "transactors" in the gambling domain.

It is clear that although the statistics that determine the health and welfare off the three primary gaming models are consistent, the variation in the numbers can be extreme when comparing the three models. This should also indirectly imply how different these models really are despite the fact that they are all included in the "gaming" universe. This obvious, but some time overlooked, observation is sometimes lost in the merger and acquisition process when a gaming business in one sector  is acquiring or merging with a gaming business in another game sector. Further complicating multi-dimensional gaming businesses is the differences that exist in the operational models of the businesses and of course the "cultures" of these businesses.

Essentially, a decision to  engage in a new and different gaming model is a difficult one that requires expertise and experience outside of the current gaming model of the business pondering an expansion. Some times it is best to stick to what you know and outsource what you do not. With that said game content can be leveraged across business domains and delivery platforms. The expectation of being able to up-sell into another model or allow a player to retreat to another model to retain them has not proven to be successful.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin, has developed, launched and operated Internet gambling sites in Europe.   Kevin and Gameinlane   develop "social and real money" casino games for third parties. Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions. Kevin can be reached at kflood@gameinlane.com.

Convergence Of Social, Freemium And Gambling Games Requires A New Set Of Analytics And Game Platform Design

Freemium, social and gambling style games are beginning to converge making it hard to recognize what is a free game, virtual currency transaction related game, real gambling game, etc. The games in many cases are exactly the same in terms of content and game play characteristics with possible slight differentiation in  monetization strategies and perhaps legal status. In many cases the consumers of these games may not even recognize the differences being oblivious to what is legal or not and no longer seeing the difference between virtual currencies and traditional currencies and virtual goods and physical goods.

This blurring of game distinctions and boundaries  makes for a very interesting  game analytic system or platform. Traditional game analytics are silo-ed.   They are traditionally crafted for each of the game and game platform and audiences. We talk about ARPU in certain areas, life time value of a player in another and coin in or deposits in another. 

A number of game developers, platform providers and game publishers are now involved in all of these business models and are trying to figure out how, or should be trying to figure out how and if players are moving across the various game boundaries. For instance, if a business acquires a player in a freemium game how do they encourage the player to cross over into playing a real gambling game. How do you convert a player acquired in a  gambling game  into a freemium game? Should you? Under what circumstances should an attempt be made to convert a player? How do cross over players monetize in both environments? Is it cheaper to acquire them in a freemium game and up sell them into a gambling game? What does ARPU mean in this new world? What is the lifetime value of a customer? What is the cost of acquisition? What game features are working to keep players in the larger game eco-system? 

With the current state of game analytics and game platforms I suspect that optimizing a player across platforms is very difficult and unfortunately absolutely necessary to optimize everything from marketing spend, product feature sets and optimization of revenue per player. The games themselves may not encourage awareness of the other game types and  single sign-in or ID's not cross referenced across platforms.

Overall, game convergence requires us to view a player in a completely different light. We need to view them holistically presuming that any player could cross over, certain players will be most likely do so. Certain players will monetize better in one environment and not so well in another. Can we extend the lifetime value of player much longer then we can in a single game silo? Can we leverage the social context of a Facebook game in a gambling environment without ever launching a Facebook gambling game?

Clearly, we are at a point where the notion of a game or gaming environment has drastically changed. The analytics for this environment clearly lag behind the evolution of player behavior and game content offerings. However, the game platforms themselves may not be properly taking advantage of the new game play normal. Organizations think in silo's and build systems and games around these silo's. In a very real way the consumers or players are ahead of the game platform providers leveraging  game content as they see fit.

I am sure analytics system's will catch-up and savvy product managers will realize the opportunity. In the meantime revenue is being left on the table, cost of player acquisition  is higher then it should be and overall lifetime value of a player is unclear. 

 Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes  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. 

 

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.  

Game Analytics

I write one of my first blogs back in 08 about the commonality between the acquisition cost and revenue characteristics of two game sites I worked on. One in the UK and one in the US.  Despite their geographic differences they had striking similarities in player behavior, cost of acquisition, revenue per player and lifetime value of a player. I was able to make these comparisons because both operations created  fairly sophisticated reports and analytic tools to evaluate player behavior, cost of marketing, revenue trends, etc.  The US based  site  launched one of the first game sites in Facebook and was able to chart what is currently called the K-Factor or "virality" from the very beginning understanding the power of acquiring players for free through the "viral effect". We were able to determine K-factor because we build a data capture and an accompanying social media analytics tool kit to help us react to the 'just in time' nature of the social web.

Fast forward to today's world of online gaming, ARPU, ARPPU, NOSQL/Big Data(BD), etc.  and expensive BI platforms and you realize that almost all game sites, publishers and developers are highly dependent on analytics and reports to make their businesses run. Ironically, the information they are looking for and evaluating is remarkably the same across game types. Game properties in particular require very detailed and "just in time" analytics and reports because the success or failure of a game can be determined in a very short time. If a game is not succeeding  a business needs to know why and quickly so it can make the necessary changes as fast as possible to avoid the dreaded "dead on arrival" syndrome that impacts games more then other apps. Game related businesses also need to understand the "death spiral" of a game as it reaches its player saturation level in terms of interest and market penetration. For a variety of reasons if a game is launched and does not have immediate rapid rise in popularity the game quickly dies. Conversely, if a game is successful the business wants to feed that growth and attempt to capture as much market share as possible it has to have a very good picture of what makes that game work for players.

Although almost all  game publishers/developers are creating some level of game analytics to support their games, the level of sophistication and timeliness of the analytics can vary even though everyone is looking for the same data(ARPU, ARPPU, Funnel Report, etc.). I have marveled over this fact and have wondered why most organizations are building their own analytics and reports and not leveraging a centralized cloud  analytics solution s(a topic for another blog)?

To address this interesting phenomena and to help newly emerging game publishers and developers understand what they need to make their businesses run efficiently, I plan to write a series of blogs over the coming weeks addressing specific areas of the game reporting and analysis world that needs to be part of a game business analysts tool box. The subject requires a series of blogs because each major subset of reporting and analytics needs to be fully understood on its own merits. In addition, some businesses may decide that a subset of all reporting is adequate for their needs. The dissection of each of the core components will also illustrate how involved a comprehensive reporting and analytics solution really is. Currently, we see vendors offering pieces of the solution. However, these solutions are far from what game companies really need to effectively run their businesses. The following general topics will be addressed.

1.) The Classic Funnel - The "funnel" is the top down process of taking in leads or potential players from various sources and their conversion rate into active and revenue generating players. These are sources other then social platforms like Facebook. Funnel analysis is also used in non-gaming web apps and their are many similarities between what game businesses are looking for and what the average web application business is seeking.

2.) The Social Connect - In some ways social mediums such as Facebook, RenRen, QQ etc. are  lateral funnels generating leads on the horizontal plane.  In some cases there is a direct relationship to social media and marketing spend to the final goal of acquiring players in a socially engineered environment.  However, there are scenarios where the marketing influence within social networks is not entirely responsible for starting lead generation from social networks. Exploring the full extent of the impact of a social effect and a truly social game is paramount to managing a successful game business. The social web can sink a game as easily as it can make a game successful. Also, games can be social or viral outside of an artificially constructed social world such as Facebook. Angry Birds is a classic example of a viral game not associated with a "Social Network".

3.) Big Data - The interactions that can occur in a single game can generate large amounts of data in a very short time. This phenomena has helped to fuel the NO/SQL movement with the goal of at least capturing the data. However, currently game businesses are struggling with ways to figure out how to use this information in concert with its SQL captured data. We will explore and ponder the value of these data sources to determine value add for game business management.

5.) Power of Groups(Cohorts) - In some cases groups of players demonstrate common behaviors that a company would like to encourage or discourage. They can be a specifically targeted group or they could be groups that form dynamically within a game or within a social context outside of the game.  How do you figure out what is a useful cohort to look at and how do you determine if they are worth cultivating?

6.) Trending - It is difficult to determine the impact of players if you do not have a context for where they are taking the game or where the game is taking the players. A number without the context of time really has little value. So what trend analysis should you invest in? What is meaningful and what is noise?

7.) Reacting to Analytics - In many of my game development and operations positions the reaction to analysis resulted in a very rapid change to  a game. In other cases a longer history was required to determine what if anything should be done to change a marketing program or the game itself. In some cases a quick change to the game resulted in disaster that the game never covered from. So how do you decide what if anything should be done based on analytic and reporting data?

8.) Multi-Platform Games - Developers and publishers are beginning to put the same game on the web, Facebook, Google+, international social networks and a number of mobile devices. How do you make sense out of what could be conflicting or complementary reports and analytics from these different environment? How important is cross platform analysis?

9.) Show Me The Money! - Well, it all comes down to how a game is making money for a business and what revenue sources are working, where they are working and when they are working.  Is it virtual currency, in game advertising, on game advertising, gambling, sponsorships, lead generation, etc. How does this combination add up to success or a noisy distraction for  players?

10.) Ad Hoc Reporting - For all of the virtues of canned reports a good business analyst is going to want to slice and dice the data in  ways that are not represented in the canned reports.. They are also going to want to quickly dive into the data if something is going really good or not so good. How do you setup an Ad Hoc reporting environment that complements the canned reports that already exist and not flatten the DB with an errant query?

In the coming weeks we will engage on these categories within the game analytics and reporting universe. If you have any additional categories you would like to cover please let me know.

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.