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Online game design: which of the three business models will work for you?
Do you really understand the business model of your online game? Are you focusing on it with laser-like precision? If not, you may be wasting time and money on dead-end strategies.
A recent article on Venturebeat got me thinking about how to grow your games business. Eric Ries argues that there are three drivers of growth, and you have to pick one (The full article is worth reading.
The three categories are:
and Eric argues that a startup needs to know which of the three are his bread-and-butter.
Virality works when there is a benefit to a user in having their friends use the product. Skype was viral, since early adopters couldn’t speak to their friends for free without encouraging their friends to register for the service in a virtuous spiral of cheap customer acquisition.
Farmville is a great example of a game that makes inviting friends into the game something that is hugely beneficial to a player. (See Six secrets of Farmville’s success – and 33 million people agree).
Viral games don’t need to worry about monetization. If you build a big enough audience, you can find ways to make money from them. Focus on having great designers who analyze what makes the game fun and viral, and keep tweaking to get to the biggest number of users as fast as possible.
Some products monetize really well. World of Warcraft generates over a $1 billion in year in revenues. Blizzard can afford to spend a huge amount on customer acquisition given the regular subscription revenue that flows from each new user.
Games that focus on monetization, and do it better than their competitors, can afford to invest heavily in marketing. The key is to know the LifeTime Value (LTV) of your customers really well. If cost per acquisition (CPA) is less than LTV, you have a business that is growing profitably; if CPA > LTV, you’re in trouble.
A games developer depending on monetization needs to start hiring analysts and stats grads pronto. Endless tweaks to drive up conversion rates is the name of the game, and that won’t happen without data.
Eric also refers to this as addictiveness and gives the example of ebay as a site which relied on getting people hooked on it.
Games are in a great position here, with decades of experience of creating “just one more go” hooks or the life-consuming gameplay of titles like Civilization or Championship Manager.
Bejewelled Blitz, currently riding at #9 in the Facebook games charts with nearly 7 million users, is a prime example. There are few viral hooks to the game but it has nailed the “just more go” feeling perfectly.
So which one should I pick?
Any of them.
There is no “right” business model. Make games that you want to make and that you believe fulfil a market demand.
But once you’ve got a rough idea of the game, decide whether you’re going to focus on virality, monetization or stickiness. It will help you with key design decisions and enable you to recruit the right people to make your game a profitable success.