Sorting Out Investing In The Online Gambling/ Gaming Industry In 2016

The continuing consolidation in the online gambling  and social casino   sectors begs the questions as to the future of the overall online gambling sector as a growth or consolidation play.  Essentially, is the sector still offering new and engaging games to players that  result in  the growth of players and revenue?   Growth rate predictions for the online gambling sector are only in the single digit category,  Social casino  is also slowing and entering the single digit growth category. However, acquisitions such as the Candy Crush acquisition by Activison in the social casino category  make for interesting opportunities for truly knowledgeable investors.

The surprising 2015  launch of Fantasy Sports as a semi-regulated "skill game" presents new and  interesting opportunity for gaming operators going forward. The "skill" category as a gaming category that can garner a large following of players has been a pleasant surprise to gaming operators. 2016 may see some interesting "regulatory" challenges to this business model requiring existing or potential fantasy sports operators to   factor in regulatory compliance fees into their business models.

The online gambling market is estimated at 40 billion USD .  The size of the online gambling market is significant. However, The  online gambling space is far from homogeneous making it difficult to fully comprehend it as a single sector. It is also highly fractured from  a regulatory perspective making a proper assessment of its potential growth rate challenging. Some jurisdictions are regulated and some are not.   In addition, there are many different forms of online gambling; casino, sports book, etc.  From an activity/regulatory perspective gambling has traditionally included three elements; chance, consideration and prize.  However, that is beginning to change with "skill" gaming/fantasy sports entering the mix of legalized gambling.  In the US the skill  sector is  regulated and limited to certain states . Nevada's recent move to regulate  fantasy sports  as a gambling activity adds more complication to the notion of what is and is not gambling. 

In the social casino  sector  the virtual currency payout format has been used to avoid standard gambling regulation. However, from a pure experience perspective the virtual currency payout does not change the fact that players are still wagering.  Many of the traditional  online gambling and in some cases land based casino  operators realize this and  are engaged in both the  'real money" and  social/virtual currency casino  space. 

Other factors making it hard to fully understand the sector is the existence  of regulation in some markets and no regulation in others.  Regulated markets usually keep track of player activity and unregulated ones do not or have questionable numbers. Even  in regulated markets such as the United States  many Americans regularly play games hosted in territories that are not regulated such as Costa Rica and Panama.  

Given all of the moving parts in the gaming/gambling sector  it will take a very savvy investor and or organization to make the proper  decisions on how to enter  the online gaming space, stay in the sector or  make acquisitions in 2016. With this said the complicated nature of the sector favors knowledgeable investors and existing businesses in the online gaming space. There are certainly  new opportunities in the "skill" game arena and in the consolidation of gaming models such as skill, chance and social gaming. Fantasy sports and its "skill" category will also draw the attention of traditional  sports book operators as they have access to sports activity content and feeds that can be leveraged in fantasy sports.

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane  has developed, launched and operated Internet gambling sites in Europe.   The company engages with land based casino  operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation  of game content.  Gameinlane   develops "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.

  

Outsourcing Game Development Challenges And Opportunities

Many game development/publishing organizations are growing rapidly as "games" become the app of choice for entertainment, branding and engagement. This is driving the cost of game development up and the demand for more games. This pressure is forcing game developers to consider out-sourced game development to fill the demand.

 For a number of reasons game(Apps, Facebook, Video, Web, etc.) development  is unique relative to other domains. Building games is very different from developing banking applications, health care apps, manufacturing systems etc. The "creative" aspect of gaming is a primary differentiator requiring a close knit collaborative effort with development team members including project managers, program managers, artist, illustrators, etc. to create a compelling market relevant game.

 Games usually address a specific demographic that may have cultural  bias.  To address these preferences a game  development team must address those prejudices to assure the game  satisfies the intended target audience. Games have also become a major  form of entertainment  and game publishing can be very lucrative if executed properly.

 Game development can be challenging and expensive. The demand for new, creative, cultural relevant,  engaging game content drives development costs up resulting in organizations seeking  "outsourced" development resources. In discussions with several game development and publishing companies the outsourced solutions is a potential panacea for increasing the output of the native game development team.  

 Some game companies have been encouraged to outsource their game development to locations that are outside their geographic and "cultural" spheres.  Many countries and regions in the world have focused on  providing "outsourced" game development teams. Historically, these regions started development teams addressing "traditional" business domains and have begun to move into "game development" based on demand for this form of content.  This trend has intensified and it is also caused some outsourced shops to claim that they understand the game development process but really do not requiring game publishers to carefully scrutinize these organizations before committing to outsourced deal.

So how do you qualify an organization to determine if they can really do game development?

Meet and Greet - Despite the propensity for all of us to engage virtually as opposed to physically there is no substitute for actually visiting an organization and getting to know all of the players that will be engaged in the development effort. Granted the cost of visiting an organization halfway around the world is prohibitive. However, pressing the flesh is a good way to understand the organization and to make the organization know that you are "watching". Things to look for while you are there is the number of team members, their qualifications, their commitment to the organization and if the are actually part time  workers on contract themselves or actual employees. 

Staff Interviews - Everyone that will work on your project needs to be interviewed and introduced to your team.  If staff changes occur be introduced to the new members.

Architect - Who is the architect of the game? Ideally the architect still resides in your organization and not the outsourced group.  The architect establishes overall design, coding standards, etc. The host company should still have people on staff to guide and drive the external development team.

Start Small - The game that is intended to be developed may be complicated and a large project. However, the initial project or tasks given to the outsourced provider should be either limited or the project should be segmented into smaller executable segments to test the external team with a manageable task.  

Code Reviews - Regular code reviews are mandatory with members of the remote team participating in the code reviews. Code standards should be set by the host team.

Coding Standards And Code Documentation -  There will be a point where the code and game will be turned back over to the host development organization. To ensure a useful transition the host organization should set the standards for how the code will be documented and what the coding standard should be.

Source Control and Bug Tracking - Ideally, the contracting company should host the sources control system and  bug tracking system standardizing release management, bug prioritization, etc. This way the company has access to all the code and can take over the project if necessary.

    

Financial Penalties - Enforcing financial penalties with entities across the world and in different legal jurisdictions  is difficult if not impossible in some cases. However, having a contract that explicitly indicates the consequences for failure to deliver on time,  having xx amount of performance or code failures, etc, at least establishes a precedence and could encourage the outsourced company to adhere to best practices. 

Testing And Sign-Off - The host organization should conduct testing and final sign-off of all production committed code.  Do not depend on the  remote development company for final sign-off.

Copy Cat Risk - Inevitably, a third party develop organization will gain knowledge about your game and the way it was built. There is little protection from having that game copied in some format for another organization. If that organization  is in the same legal jurisdiction there could be recourse. Also,  the third party developer  client  is in the same legal jurisdiction you are in they could be sued leading to some resolution of the dispute.

In conclusion, outsourced, theoretically inexpensive game development, is very tempting and has been successful in some cases. However, without proper controls, expectations and processes in place to assure success issues have and will occur. Best practices are always a way to mitigate risk for both the contracting and contracted organization.

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.

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 - Big Data And Business Intelligence(BI)

Games generate more data then an average application because of the game state machine. Terabytes  of data can be accumulated in a short period of  time in a gaming environment. Essentially, a player can enter a game and cycle through a series of scenarios for a prolonged period resulting in the opportunity to generate considerably more data about a player and  game play characteristics than a standard waterfall application.  This unique  characteristic of games  results in an opportunity to capture more data throughout the game cycle and to potentially add this  data  to a depository  for the purpose of business intelligence(BI).  Ironically, this perceived gold mine for project managers, financial analysis, game designers and business managers creates its own set of challenges.  Be careful what you wish for!

Data Capture, Format Of Data And Player Experience - There is price to pay for adding data capture for the full cycle of a game. The data itself has to be identified in a way to make sure that each data point is uniquely identified and can be used to generate BI on a game, its players, traffic sources, revenue, etc. 

The data capture has be executed in a way that does not impact game play. The speed of game play, transitions in a game and messaging in the game have a significant influence over the popularity of a game. Data capture has to avoid any impact on these game mechanics.

The  game data has to be in a form that allows for the data to be retrieved and evaluated in the context of the information requirements of different stakeholders in an organization. The challenge is to maintain a balance between the objectives of a player and the objectives of the organization's desire to learn as much from game play as it can. 

There has to be a place to put the data and a way to handle the spikes that can occur in game data generation. Social game developers and platform providers were some of the first adopters of the NoSQL model because they could quickly store game data in a simplified format and at the same time capture data about game play. The problem with this approach is that often the format of that data and the storage  depository makes it very difficult to retrieve and make any sense out of this data. Things are changing with more emphasis on the ultimate goal of using the data for BI.  There are companies attempting to create a bridge between NoSQL and SQL reporting databases.

Retrieving Data, Reporting And Business Intelligence - Business intelligence has  emerged as a very important aspect of operating a successful game company.  Internet gambling, MMOG and RPG game providers were early adopters of traditional business intelligence tools to help them understand cost of acquisition, player retention, revenue per player,  game mechanics factors,  identification of important players in the game community, etc.   Social game companies have followed adding NoSQL strategies to cope with high data volume. The social game companies have pushed the envelope or data capture and reporting due to the potential for social games to grow large communities of gamers quickly and for these  communities to shrink quickly. NoSQL products are evolving based on the experience gained from the early adoption of NoSQL by social game companies.

A number of traditional BI companies, SQL and NoSQL providers and newly minted data reporting platform providers  focused on the social and casual gaming sector have entered the market to address the specific data and reporting needs of the gaming sector. This is an indication that new innovations and tools will become available for game companies. It also indicates that were are not quite there yet. Very often unique BI, analytics, data capture and retrieval techniques are being created by the game companies themselves because no ultimate data capture and reporting tool kit is available.

In summary, the game data and intelligence world is evolving quickly. Competition within gaming sectors and the cross over of players between different gaming sectors  is  requiring any company desiring to be competitive in the gaming market to have efficient data capture, report  centered data stores and a full menu of key performance indicators and adhoc reporting to adjust to ever changing situations and to remain competitive in the marketplace. 

Game Analytics Blogs

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.

Making Money With Online Games

It is no secret that online games of all kinds are generating a tremendous amount of revenue for businesses. Although hard to confirm, it could be that games are the second highest source of revenue(Facebook credits) behind advertising within the Facebook environment and the highest source of revenue for individual application providers within Facebook. Online gambling has consistently posted  3 to 4 billion dollar revenue numbers per year with the numbers continuing to increase. We also see a big push to "gamify" traditional e-commerce applications to increase e-commerce revenues.

So what is this all about and why are games such an attractive way to make money on the web and in social networks?

There are a number of reasons for this phenomena with no single reason being the most important. A number of game elements come together to create an optimal environment for game revenue generation. It is also a myth that once you launch a social game or a gambling style game the money flows in. This is far from the truth with many social and gambling games missing the mark and being taken off of the market. Also, one size does not fit all. Some game elements work better then others in specific environments. A game launched in a social network has to have a social component to really make it work well. Conversely, I have seen single online slot games with no manufactured social elements generating great revenue while other slots generated very little revenue.

With this said, there are game elements that are common to most successful high revenue generating games. 

Engagement  - Games are differentiated from other Internet applications because they frequently engage the player  in an engagement that lasts more then a few minutes.  Essentially,  the consumer of the experience stays within the application longer then they normally would in other applications.  This engagement is achieved by exposing the player to a number of game mechanics.  The exact mix of game mechanics differs from game to game. However, the mechanics always have to add up to longer engagement within the game.

Community - Even in solitary play style games like slots and casino games a sense of belonging to a community is required to encourage a player to frequently return to a gaming property and to feel comfortable with contributing time and money to an online gaming operation.  This sense of community instills "trust" in the gaming operation, a common activity that can stimulate conversation among like minded players and a competitive element that encourages players to achieve recognizable milestones. Even in social games community must be cultivated to encourage players to connect with  other players in the gaming community thus growing the overall community. In many ways customer support operations play a big role in maintaining and growing communities. Addressing system problems, billing issues and game play disputes quickly and effectively is essential to maintain trust in the game platform and an indirect way to attract other players to the community.

Multiple Monetization Methods - Really profitable games have more then one source of revenue. In social networks the two primary sources of revenue are virtual currency and advertising.  In some cases games have small games included within them or on a side bar that generate revenue. When the player of the primary game becomes fatigued they have the option to play a short easy to play game.  Some game operators use a referral system to refer or up sell their players into other gaming venues. This multiple choice of revenue generating opportunities helps to increase revenue per play, decrease the risk of receiving no revenue per player and helps the game publisher understand which revenue methods work best for classes of players.  This later reason also helps game companies profile players into categories of less to most likely to contribute revenue for certain types of revenue generation offerings

Placement Of Monetization In Game - Where a monetization element is placed in game, when it appears to the player and the method of taking the transactions are critical considerations when designing a game. The opportunity for a player to contribute funds in a game should not distract the player from the game play itself. On the other hand the financial transaction should be presented in places where it is obvious that more fund contribution will enhance game play, allow a player to move to a higher levels in a game  or avoid the termination of the game. Monetization encouragement should be presented at critical places in  a game where more contribution to a game will increase the likelihood for an improved prospect of winning or winning larger prizes.

The Value Of Free Play And Ad Revenue - Many online game companies do not fully understand the value of free play in the context of game monetization. The ultimate goal of a free play option is to upgrade a player to a pay for play level,  to allow players that have pay for play fatigue an option to stay in the game community even if they are out of funds. Free play is used to keep players within the game community and defecting to another game site. Ultimately, this strategy should lead to more players transacting because the overall player pool is always increasing. 

Advertising can and should be a monetization method in free play. However, it needs to be  presented in such a way that the player does not find the advertising annoying. In this case the player will not be monetized to the full extent.  Unfortunately many gaming sites bombard free players with excessive advertising resulting in high drop out rates.  In some cases games sites do this to make the free play option so unpleasant that the player either leaves or upgrades to an advertising free pay to play level. This strategy is flawed because there is a high likelihood that the business will lose the player entirely. 

Reasons to Return To The Game - Inevitably gamers have to leave a game for a number of reasons. A good game will always have a reason for the player to return. The reasons to return to a game are varied and depend on the type of game. In a role playing game(RPG) a player always has the opportunity to reach another level. Games like Cityville or Farmville use this technique to continually draw players back to a game. Essentially  the game becomes addictive. In a gambling game the reason to return is the hope that there may be a big payout or increased play will increase the likelihood of winning. In many cases the game creates a community of players. Many players return to a game to rejoin the game community.

Measuring Progress - Players enjoy comparing (competing) themselves to others and having a means of sharing  a status with others. This is just human nature and needs to be an essential part of any successful game. A game should have leader boards, notification of players achievements, point accumulations, levels of play achieved, etc. visible to all players of the game.

Monetizing Across Multiple Games - In an ideal world a game operator will have multiple game offerings. Many of the big game publishers in Facebook run multiple games. They constantly cross sell players to other games in their portfolio. The added games will help monetization in a number of ways. The obvious one is that once a player is acquired you can generate revenue from a number of games. The less obvious reason is that a player can become bored with a game and needs to be constantly stimulate by new games. If additional games are not added then the player will leave and perhaps not return.

Games Advertising/Branding - I can not think of a better place to advertise or obtain brand awareness for your product or company then in online games. The simple reason is that the players spend so much time in a game environments. Brands will pay a tremendous amount of money  for this exposure. I am surprised that gambling operators do not take more advantage of this form of revenue generation in their games. Some of the larger social game publishers are heavily sought after by big brands because the brands understand that some games give them sustained exposure to large number of players.

Hierarchical Pricing Structures - Having different pricing packages based on a game, type of game, access to games, etc, is a good way to extract a higher revenue per player. You see this often with an entry level fee and a premium offering. Game publishers could easily increase the number of levels in games beyond 2 and increase their revenue because players frequently do not have binary coin in decision points.  

Player Profiling - Player profiling has become a critical part of many gaming operations. Sophisticated business intelligence systems are being used to determine when players are likely  to transact, how often they will transact and how much they will contribute to a gaming operation. Essentially, knowing the customers has been raised to a new level because players are inadvertently giving game platform providers information about their game play behavior and themselves. Combining this information with player profile information volunteered by the player and the players social networking connections results in targeted acquisition  and up-sell programs that increase the spend per player.

Clearly, online games have become a good  source of revenue for game publishers. However, not all game publishers are fully optimizing their games sites to take advantage of the revenue opportunities. E-Commerce sites will continue to be intrigued by the value of game mechanics in their applications for good reasons.  The continued popularity of games will drive companies wishing to brand themselves and their products to spend money on games as a way to get there products and services recognized resulting in additional revenue sources for game publishers. Given the creative nature of games there are still many opportunities to launch successful games. We may see the addition of more ways to monetize games given their popularity opening the door to new game development, new venues and higher revenue.  

Interplay of games on mobile devices, on the web and within social networks still has a long way to go offering creative opportunities  for new entrants in the space and even more opportunity to generate revenue. 

Just having a game in Facebook does not guarantee high revenues.  Games have to be interesting enough to support all of the mentioned features and they have to be engaging enough to attract high numbers of players. In the Facebook environment we are talking about millions of concurrent players if only single monetization methods are employed. If more monetization methods are used fewer players are required.. In gambling style games the total amount of players can be smaller becomes of higher transaction amounts. However, retention features are critical to maintain adequate income to support a game.

In all game environments a steady flow of new games should and will be introduced as businesses and governments realize the value proposition of games.  This means that competition will intensify and player expectations will be higher resulting in the demand for more interesting games, more variety and better ways to entice players to part with funds to play games.

 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.   

  

The Soul And Anatomy Of Games For Business Applications

Recently I started to ponder what makes an activity a game and what differentiates this activity from other fun and interesting activities. This speculation has been prompted by a number of recent assignments involving the incorporation of game mechanics into traditional business applications. The goal of adding game mechanics has been to increase traffic, customer loyalty, customer retention and to provide differentiation in the marketplace.

During my addition of gaming features into business applications I began to wonder why these features traditionally had value in a gaming environment and if they would be useful in a standard e-commerce application. What is it about games in general that naturally interest people and keep them playing over and over again?

The diversity of games and the way people play games came into the mix of my thinking. Why do some people play games in complete isolation with no contact with anyone and play these games for hours and hours and why are other people intent only playing peer to peer or multi-player game? Why do some people play a game of poker for no traditional compensation and why will others only play poker for high stakes?

Is there some thread tying all of these games and different behaviors together or are there really very different forces at work resulting in totally different behavior and motivation?

This question became very important to me as I began to decide or recommend what game features would be incorporated into my client's applications. Do all game features apply to an environment or do different audiences require different game features to keep them interested?

My thinking about this problem has brought me to a very interesting place. Given the diversity of games, the different preferences of gamers and the shear amount of time invested in playing games I came to the conclusion that some basic game mechanics have a wide appeal. Others do not have mass appeal causing the marketplace to be highly segmented. The styles of games people play appear to be influenced by culture, age, history, availability, technology access, legality, etc. The only common thread amongst all game types I could detect was that people play a certain game because it makes them feel "good".

The question is what is it about a game that makes people feel good. I am also a musician having explored a number of musical styles and have played different styles to different audiences. It is amazing to me how some people enjoy one style of music and not another. Even the same song played in a different style will get a different reaction form the same person. The music itself is based on the same system yet the a person will respond differently to a modified version of the song.

I suspect games and music are similar in this regard. There is something about a game that elicits an emotional and psychological state of satisfaction that is unique to that individual.

Finding a game style that makes everyone feel good is probably not possible. Some game sites and content providers address this by creating a large gaming content pool. Others focus on a specific market and only address that market. The challenge for e-commerce or other business models attempting to leverage the popularity of games in their applications is a bit more difficult. Certainly some of the basics that are found in most games and gaming environments are mandatory. Adding other gaming feature sets beyond the fundamentals requires more thinking. A study of the business clientele and audience is essential. The game a business is creating is a hybrid between a "true" game with a specific business objective to sell something other then the game while maintaining the feel good game experience. The feel good sensation has to lead to an actual purchase of a good or service.

Clearly businesses are on the move wanting to leverage the popularity of games into their business applications. This is a great idea as long as the approach to adopting games to a business is taken in the context of the business and its audience. One shoe will not fit all and some experimentation will be required to determine what the best game features are for each business. Certainly, if you can wrap the entire game and business transaction into a feel good gift wrap really good business things are going to happen.

Should An Online Game Operator License Or Build Games?

Online game operators frequently have to make a decision to license or to build games. To a certain degree this decision is similar to a buy versus build decision for any software product or service. However, there are some unique characteristics associated with operating online games that make the decision to license versus build more challenging for an online game operator.

Should All Games Look And Play The Same? - Each game development team will have its own way of developing games that impact the look, feel and mechanics of a game. If an operator plans on licensing games from a number of different vendors it is important to understand what the players tolerance is for differences in game interfaces and mechanics. If the operator develops their own games this becomes less of issue because the operator can control and influence the game experience.

Do The Games Have To Be Integrated Into Social Networking And Social Media Properties? - Social mediums such as Facebook, Twitter, Bebo, MySpace and Hi5 are becoming platforms for game delivery. It is no longer adequate to solely have a web site as a landing page and entry point into a game experience. An operator has to have a presence on social media platforms to reach optimal market share. This places a demand on game suppliers and operators to provide games in social media environments and on web sites.

Thin(web 2.0) Versus Thick Game Clients - It used to be conventional wisdom that an operator had to have a downloadable game client to provide a player with the visual and game play mechanics sophisticated enough to address the demands of players. With the proliferation of Web 2.0, advanced graphic develop tools and full featured web browsers the gap between thick and thin game clients is closing making it possible to provide the same graphic and mechanical experience through a browser. The need to support both thick and thin client game clients needs to be taken into consideration when deciding on the platform of chose. Social Networks are especially sensitive to the need to support thin clients and make it difficult to integrate thick clients into their environments.

Game Platform - Games require a platform to operate on. A platform provides payment processing, reporting, interfaces(api's) to internal and external programs, security, data storage, ad serving, age/location/identity, server side processing, community and social networking features.

When an operator licenses or builds a game system the platform is a much larger and more sophisticated then an the individual games that run on the platform. When an operator "buys into" or builds their own games they are committing to a game platform. Supporting a range of games requires a sophisticated and flexible platform to deliver a wide array of game content.

Development Team - Online games are developed by teams of developers, engineers, project manager and product managers. The teams use certain program languages, API standards, databases, architecture and messaging systems.

Building games is non-trivial and requires a sophisticated technical and managerial staff. Despite the expense and sophistication of a development team, having a development provides an operator with the flexibility to build games and a platform that meets the immediate and ever changing needs of the organization. It also allows the operator to be less dependent on outside resources.

IT Infrastructure/Cloud Computing -Game platforms run on hardware that has to be hosted somewhere. The hosting requires a staff to manage the operation regardless of the hosting environment. Cloud computing has become a new option for game operators obviating the need for hardware purchases. However, the move to cloud computing is not necessarily a good fit for game platform hosting. If a game platform has extreme CPU utilization spikes, rapid increase in storage, inter server communication, database architecture issues and API calls to systems outside the cloud it could rule out the cloud. The important point is to recognize that hosting is a large part of game platform operation that either the vendor or the operator will have to tackle and manage.

Time To Market -Operators are frequently under pressure to get a platform and or games up and running quickly. The pressure to accomplish this goal can have a significant impact an operator's decision to license versus build. There is no single path that will optimally get an operator to market faster. However, there are long term implications to either decision that should be taken into consideration in concert with the decision to get to marker quickly. In some cases the short term goal of getting to market quickly could have negative long term consequences for the organization.

Market Differentiation - It is difficult to differentiate a game property if you are licensing games. There is certainly a way to mix and match games or provide different incentives and promotions to set an operator apart. However, in the end the games you are licencing are the same games that are available to other licensees.

Flexibility And Control - There is an operational and philosophical question that an operator needs to answer before embarking on the license versus build decision. How much control and flexibility do you need to have over your game product offering? This decision is not made out of context without consideration of the other items I have mentioned. However, a decision to license versus build has long term implications in respect to the operators ability to react and move quickly to changing market conditions.

Conclusion - The decision to license versus build games is a complex decision requiring an operator to consider many factors and to avoid the temptation to react to a short term objective that may have long term consequences. Once an operator commits to a certain course it is difficult to change. The decision should be well-thought out evaluating the pros and cons of the decision and the impact on the long term health and welfare of the business.

Zynga Under Investigation By Department Of Justice

Recently, I was discussing the online gambling business with a former online gaming colleague of mine and he brought to my attention that Zynga was under investigation by federal and state authorities suspecting that Zynga's Facebook poker room was engaged in online gambling. I thought this was a bit serendipitous considering the fact that I had recently published a blog, Virtual Currency And Gambling, about the danger of virtual goods purchases and sale being considered gambling. I specifically mentioned Zynga being at risk during a series of exchanges I had with individuals responding to my blog.

The Tech Crunch summary is exactly as I described the risk in my blog. The circular nature of virtual goods purchases, a game of chance and winning virtual goods could be considered gambling.

I have been writing a number of blogs about the online game virtual currency trade and how the Chinese governments gets the connection between this trade and gambling. Virtual currency trade is big business in China and it is obviously now becoming big business in the US.

What has surprised me is the lack of understanding of the relationship of virtual currency to gambling outside of China. A number of my blog viewers adamantly disagreed with me arguing that virtual goods purchases were not subject to gambling law. Clearly this is not the case.

To further complicate matters Zynga has been engaged in selling leads to European online gambling operators. This started well before Zynga began dabbling in virtual currency purchases. Much of their revenue growth prior to virtual currency purchases had been attributed to this exchange. This practice has been discouraged by the DOJ and state attorneys for years. Zynga may not be in violation of any US law if the leads sold to gambling operators do not result in US citizens gambling from the US. However, Zynga's affiliation with online gambling operators does not bode well for them. The authorities may come down hard on the company to set an example for other online game companies.

Virtual Currency And Gambling

Several of my blogs have addressed the emergence of virtual currency as rival currencies to traditional denominations such as the dollar, yen, euro, etc. The recent reaction by the Chinese government to restrict the inter trade of gaming virtual currency because of its ability to usurp the value of their currency created a stir in the online payment and gaming arena.

I received several responses to my comments on the Chinese government move implying the Chinese government was attempting to stop the proliferation of "gambling" by restricting virtual currency trade. Further investigation of the government's announcement did not reveal any relationship between online gambling and the legislation.

However, the debate made me think more deeply about the way online gaming companies are using virtual currency in their businesses.

Casual gaming, MMOGRPG and online video gaming businesses have evolved from granting virtual currency for game play to allowing players to purchase virtual currency. Virtual currency purchases are used to gain access to different levels of games and to purchase virtual items.

So how does this evolution of virtual currency exchange relate to gambling? There are many definitions of gambling and each jurisdiction has its own notion of gambling. However, a good rule of thumb used by the US government defines gambling as a combination of consideration, chance and prize.

If a gaming activity requires consideration/payment to engage in the gaming activity and there is an element of chance associated with a particular outcome and the outcome has monetary value then the activity is considered gambling.

So let's dissect this in the context of the recent evolution of gaming virtual currency. If I can purchase virtual currency using traditional currency (consideration) to play a game of chance that can lead to a prize of more virtual currency then is this not gambling???

To make thing even more interesting if the prize won is a virtual item which in turn can be sold for traditional currency inside the game or outside the game on e-Bay does this make it even more obvious that we have now entered the realm of true online gambling. If the virtual currency won can be traded outside the game universe for other currencies or traditional currencies is this not considered a prize in the traditional sense?

Subscription models such as World of War Craft also fall into this category. The subscription fee is paid in a traditional currency. The fee provides access to a game where play leads to the granting of prizes in the form of virtual goods which in turn can be sold on e-Bay for real cash.

My point here is that it appears the casual online gaming companies are implicitly or explicitly crossing over into the traditional world of gambling. This is creating an interesting challenge for gaming companies, regulators and consumers.

I suspect we will hear a lot more about this in the near future. Many of the online game companies are now generating "significant" revenue form the sale of virtual currency. In many cases this is becoming their primary source of revenue. When one of these companies attempts to go public or is engaged in a purchase by a public company will this bring this issue to the forefront and be challenged???

Gameinlane Virtual Currency Exchange

For all of the followers of my blog you know I have been interested in the rapid evolution of virtual currency. This weeks announcement that the Chinese government will begin the full regulation of virtual monetary exchange underscores the importance of virtual currency for the world economy. They have instituted this move because virtual currency trade is disrupting the trade and value of traditional currencies. This further confirms my prediction that the intersection of virtual currency and traditional currency is on the horizon. In fact, it is already here. I am of the opinion that this is the single most important development we may see in our life times. It will create all kinds of opportunities and challenges. It will rock Wall Street and redefine Main Street. The line between virtual goods and physical goods went from blurred to non existent.

So how do you get on board and not buried in the onslaught of virtual goods merchants and virtual currency issuers. You leverage virtual currency to get big fast!!!

We have marveled at Blizzards early success and Zynga's recent success in this space. Their big problem is that they act as insulated silos not encouraging the open exchange of their currency. Guess what! This is a big mistake and a great opportunity for other virtual currency issuers to create larger and more sophisticated trading environments. How about inter trade of virtual currency between issuers? Yes, this is the next step and a way to grow a much larger community of virtual currency users and virtual currency.

At the risk of self promotion I have started a business, www.gaminlane.com to do just that. I have begun to engage game companies and virtual currency issuers to join the virtual currency marketplace.

If you are issuing currency now leverage it by allowing it to be exchanged with other currency issuers. Start establishing a real value for your currency by allowing people to use it outside of your environment!!

Let's create the next big wave in virtual currency. For more information on how to sign-up please contact me at kflood@gaminlane.com.

Is my prediction of a Universal Virtual Currency on the Horizon??

Virtual Currency Meets Main Street

Several months ago I wrote a blog item about the emergence of a virtual currency. I received a fair amount of criticism about this prediction. I think the term "your are crazy" was used a few times. Recently, some of my early critics have reached out to me and admitted that I might actually be right. I do not know if you have been following the accelerated rate of virtual currency trading and virtual item sales but it has been intense in the last several months. Please read the information on the following links Communities Print Their Own Currency, Poker Goes Virtual, ChangYou, Investment In Virtual Worlds, SpareChange, MyCoke, Viximo, Habbo. This is only a small sample of the buzz about virtual currency and virtual items.
My current radical thinking is that the convergence of main street and wall street businesses with the virtual world and gaming environments is going to tip this phenomena over the edge and bring about a formal business exchange process involving virtual currency and traditional currency. This is the next step in the march towards a single virtual currency that acts as a trading currency bridging the gap between disparate businesses and traditional currency.

So Why Is This Happening And Why Are Traditional Businesses Going To Jump In?

Traditional Businesses Have Been Issuing And Using Virtual Currency For A Long Time - We seem to forget that airlines, hotels and credit cards companies have been issuing virtual currency for years trading in virtual currency well before the virtual world even existed. We do not think about frequent flyer points as virtual currency but they are. In fact, they are rewards for a job well done in the flying game. The most proficient road warriors receive points for their dedication and hard work.

Main Street Virtual Currency Trading History - Airlines, hotels and credit card companies have a history of trading virtual currencies within exclusive clubs and partnerships. If you own the virtual currency of a company in the partnership you can trade it for another company's currency.

Virtual Currency Monetary Valuation - The trade of virtual currency within traditional company networks has established a real monetary value for virtual currency. Points exchanged for real items such as airline seats, hotel rooms, camera's and cloths establishes a traditional monetary value for the virtual currency. These valuations float and change as the businesses change and the relative value of the items change. Essentially, these companies have created an organic and informal trading and valuation platform for virtual items and virtual currencies.

The Gamer Generation - I know many gamers and it is striking to me how the demographics for this community are changing. We are accustomed to thinking of gamers as people between the ages of 12 and 18. Not so anymore. Video games, MMOG and MMOGRP games have been around for a long time breeding an entire population of adults that have played these games, understand virtual items and virtual currency.

Virtual Items Become Real Items - The more you play games with virtual items as an essential part of the game the more you consider these items to be no different then a real sword, pair of shoes or poker chips. A person that engages in these games on a regular basis does not think that there is any fundamental difference between a physical item and a virtual one. They both have value and are used for a specific purpose. This may sound subtle but it is very important. People that play games involving virtual items and virtual currency inherently understand the value of virtual currency.

Traditional Companies Go Virtual - I was at a social gaming meet up in San Francisco recently and had the good fortune to sit next to a person building virtual worlds for traditional companies like Coke, Disney, NBC, etc. These companies have bought into the importance of providing virtual experiences for their consumers thus bridging the gap between their brick and mortar operations and the virtual world.

The Dollar Is A Virtual Currency - The dollar and many other popular real trading currencies have no physical backing. The US went off the gold standard years ago. The dollar's value is based on its trading power relative to other currencies. Scary as it sounds without this trading value it would have no value at all. Is the dollar a virtual currency?

Online Payment Option Limitations - In many parts of the world it is a difficult to buy things online with traditional currency and traditional payment vehicles such as credit cards. The phenomenal growth of virtual worlds, virtual items and virtual currency in China is directly related to the lack of good ways to buy and trade things online in a traditional manner. This has spawned the need for a different way of transacting online that inevitably drives the adoption of online specific trading and currency models.

The World Economy Facilitates The Use Of Virtual Currency - You may not have dollars, yen or rubles but you most likely have virtual currency in some form. If you do not it appears that some outfits are allowing you to create and trade some. This is all about the failure of the traditional economy to put traditional currency into peoples pockets and the large stores of point and virtual currency amassed by gamers and consumers. Why doesn't someone take advantage of this and let people use these points to drive customers to their properties. provide discounts on items, etc? What a great way to stimulate the world economy!!!



How Will This Evolve?

1. )Bridge The Gap Between Traditional and New Age Virtual Currency Issuers -I think what will happen first is companies like Delta Airlines or Disney agree to exchange virtual points with game companies like World Of Warcraft or Zynga. This seems to be relatively easy and beneficial to both worlds.

If I am not mistaken frequent flier points are considered to be an accounts payable and therefore a liability on the balance sheet. This should motivate an airline to encourage their patrons to use as many of their points as possible. If they can't take a trip then play a game online or buy a virtual item.

2.) Networks of Virtual Currency Trading Partners Emerge - What a great way to increase traffic to your gaming property. Many games sites are hungry for players and more content to provide stickiness. Why not form a coalition of game and other virtual currency sites to increase your traffic and provide new and fresh content for your consumers. The way in is to trade one currency for another increasing the overall value of all of the currencies. In many ways it becomes a game in and of itself.

3.) Networks Grow In Volume And Complexity - At some point the complexity of trading virtual and traditional currencies is going to require an intermediary step between the trading partners. Just the handshaking alone will require a common API and some standard rules so everyone is not wasting their time doing their own and creating barriers of entry in the process. It could be that one of the currency issuing companies emerges as this broker.

4.) A New Virtual Currency Trading Currency Is Born - The sophistication and volume of trading will result in the creation of an intermediary virtual currency that all currencies are converted into and out of. This would make valuation easier and more understandable.

5.) The Intermediary Trading Virtual Currency Becomes A Standalone Currency - In the final step the intermediary currency now becomes a currency with its own value and companies start using this currency as their purchase and sale currency avoiding the need to create their own.
In conclusion, the notion of a universal virtual currency could be perceived as Utopian and perhaps unachievable because of all the complexities, laws and business forces that exist in the world today. However, one should consider the business need to merge the virtual world with the physical world. In fact, the virtual world may become a larger part of GNP then most people can image. We currently do not have a good way to universally trade and value this currency. Some form of common trading currency is going to be required to make this happen.

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What Everyone Should Know About Subscription Gaming

World of Warcraft and EA's Club Pogo are two of the well known game sites that use subscription as a means of generating revenue from online game play. Over the past several weeks I have received a number of inquires concerning online subscription gaming. My discussions with the interested parties reveal some preconceptions and misconceptions about subscription gaming. Subscription gaming is not for everyone and has some unique characteristics that should be taken into consideration before committing to using subscriptions to monetize game play.

I spent 5 years operating online subscription gaming sites on two continents with very different regulatory regimes targeting different gaming audiences. That experience taught me that subscription gaming has fundamental characteristics that transcend geography and game type.

Legal Status - Many of the questions I receive on subscription gaming involve its legal status. This is the one area that business owners are the most confused about. First and foremost the subscription model in and of itself does not make a gaming site legal or illegal!! Taking a fee of any kind for game play is consideration. In most regulatory regimes the combination of consideration, chance and prize are all taken into account to determine the classification of the business, game and transaction.

Laws addressing online gaming are complex, confusing, ever changing and in some cases poorly defined. My suggestion to anyone contemplating monetizing game play through subscription or any other monetary consideration should consult an attorney that specializes in this field. My recommended attorney's for US operators are Tony Cabot and I. Nelson Rose. For the UK and for Eurozone operators I recommend Harris and Hagan in London. They will have good advice on UK operations and will refer you to qualified attorneys for the rest of Europe. Asia is a different challenge with legal advice hard to come by. My suggestion for operators considering Asia as a target is to isolate the country(s) of interest and then research businesses that are engaged in monetizing gamers. Reach out to them to determine how they decided to move forward with their transaction model.

Life Time Value of a Player (LTVP) - The LTVP is a number used by many gaming sites to develop business models, measure progress and to project future revenues. In a subscription model this is not as easy to do as you might think.

In my last company I took random samples of subscribers to determine their subscription durations, drop off and resubscribe rates. My sampling consistently indicated that subscribers were subscribing and resubscribing on a regular basis. I can not reveal the actual rate for this company but it was a surprise to me to see so many players treating the subscription model as a "micro transaction" model.

This behavior makes it hard to determine what the lifetime value of a player. It requires some sophisticated math involving statics and probability to sort out what is happening at any moment in time. A better and more simpler way to determine the health of the business is to calculate the total subscription revenue for each month and determine the percentage increase or decrease from the previous month. Going forward you should see a trend that will help you predict future revenue.

Subscription or Micro Transaction? -In analyzing gamer behavior watch out for high percentages of churn and then re-subscriptions. If players are coming and going at relatively high rates this means your property may be a better candidate for a micro transactions and or a lower subscription fee. This phenomena is what I call a a micro transaction in disguise. The content or characteristics of your property are not attracting a long term commitment by players. This does not mean that you do not have a business but it does mean that you should reconsider your content to attract longer term players or change the model to take advantage of the short visitation of your clientele.

Churn - Churn is the fall off of subscribers on a month to month basis. In both of my subscription gaming experiences churn stayed constant. This may not be the case in your proposed operation but for this example let's presume yours is constant. The challenge for subscription sites is the back filling of the lost subscribers as the overall pool of players increases. For instance, when you first start out with your business you may have 1000 players subscribing. If you have a 20% churn rate you will need to replace 200 players to keep you revenue numbers the same as the prior month. When you have 10000 subscribers you will have to replace 2000 player before you can grow your revenue.

This phenomena creates interesting marketing and operational challenges. In the early days of a subscription business you may see excellent growth because your churn pool is relatively small. When your overall pool increases it becomes more difficult to maintain the status quo and to grow. This may require a constant addition of new content to keep pace with churn or ever increasing marketing expenditure to keep the business growing.

Source of Payment - Subscription monetization requires a relatively reliable single transaction source to bill on a regular basis. Credit cards are the most popular source of obtaining funds for recurring transaction. If you are in an environment such as China where credit cards are not commonly used you may have to reconsider using a subscription model.

Churn And Credit Card Transactions - Involuntary subscription cancellations related to credit card expiration and insufficient funds are significant contributors to churn. Special programs, reporting and notifications are required to address these issues. Build these programs into your operation early.

Recapture Programs - There are a number of clever methods to recapture subscribers that have involuntarily and voluntarily stopped subscribing. These programs impact your decision on CRM and payment processing selections. Be sensitive to these issues early and modify your procedures and systems to quickly recapture lost subscribers.

Recurring Payment Providers - Some of the credit card payment services offer a recurring billing option. In most cases these will not be sufficient to run your business. Players will have to be rebilled when they fall out of their normal subscription run. Special for free subscription periods may be required to keep a player as part of your service. Special promotional discounts that have initial periods and revert to another payment amount will be required. Do not think of subscription gaming as an effortless way to generate revenue. Flexibility in payment processing is essential for success. You may have to build your own recurring billing system.

Community/Social Networking Features - I mentioned in a previous blog (The Power Of Your Existing Players) about the importance of existing players in an online gaming business. Do not start your subscription gaming business without community or social networking features. The best way for you to decrease your churn rate and to cost effectively increase your subscribers is through voluntary player invitations and the camaraderie of the community itself.

Free Play Is Essential - I also addressed this in a previous blog (The Importance Of Free Play). Never under any circumstance force a new player to transact without having experienced game play for free. The fall off for this mistake could be terminal for your business. Those first players are so important for building community and volume. Transition (Optimizing Pay For Play Transitions) them into the subscription transaction model and let them fall back into free play if they can not transact. They may return and become subscribers at a later date.

Players That Pay But Do Not Play - There is a cadre of players that will play for a bit but stop playing and still pay for the service. This is great but your ability to maintain this revenue source is heavily dependent on how you deal with credit card expiration. Do not take these people for granted. If they do fall off reach out to them again.

Gaming Platform Requirements - If your subscription model is working you are going to experience high volumes of players playing at the same time over long periods of time. This translates into technical game platform challenges. In my previous position we flattened two game platforms that had been designed for a game transaction model. Your average off the shelf systems are not going to make it. Build a business plans that includes the development and maintenance of your own gaming platform. This is expensive but you will need the expertise and flexibility to react to volume spikes and the addition of more games and content.

In conclusion, the subscription model is a creative way to offer a comfortable initial price range for players and still get a higher overall transaction amount if you can successfully retain players. However, operating a subscription gaming business is not a trivial undertaken and requires special operational planning and procedures to make it work effectively.

For more details on operating a subscription based gaming model please contact me at kflood6@gmail.com.