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ARM yourself in a post-viral world

By on November 9, 2010

Building a sustainable online business is tough. There are so many aspects from getting customers to serving them to making money from them that it can be very easy to be overwhelmed by all of the ideas that you and your team have to implement. It is often a struggle to work out where your priorities lie.

For the past couple of years, I have been using a framework I call ARM yourself to think about how to improve the businesses I work with. It has been extremely useful for finding the gaps in a company’s business and for making quick, simple tweaks which have a major impact on the bottom line.

I’ve decided to share it with you.

ARM yourself for fun and profit

The three letter acronym ARM stands for:

  • Acquisition: How do I get people through the door cost-effectively?
  • Retention: How do I keep people coming back for more?
  • Monetisation: How do I build money-making strategies into gameplay?

Over the next few weeks, I will write a separate post on each aspect, and how the tricks you can use to improve your business. This post, however, is to explain how the three aspects work together to make a profitable whole.

Get your business in total ARMony (sorry)

In the long run, it is essential that Acquisition, Retention and Monetisation are in harmony. Yet time and again I see companies for whom only one or two of the three aspects are included in the planning of new features or development. Usually, but not always, Retention is the aspect that is omitted.

(As always, there is an exception to the rule of harmony. Facebook and Twitter made big businesses and attracted great investors with no monetisation strategy. However, unless your business aims to be truly transformational, and very few games businesses are, I think it would be a mistake to ignore monetisation from your planning.)

Consider these (fictional) examples of companies that don’t have all three business in harmony:

  • A company spending £10,000 a month on Google Adwords and obsessing about conversion rates from registration to purchase, but putting zero effort into persuading users to come back the following month and making another purchase (a.k.a the leaky bucket)
  • A company that aims to build a massive business but has no idea how it will make money (a.k.a the Facebook wannabe)
  • A company that spends no effort on marketing and obsesses about retention and monetisation rates (a.k.a the unknown startup).

All three of these examples have glaring holes in their business model. Once you apply the ARM yourself framework, the holes become obvious, and it is much easier to prioritise new features and development resources.

Which should I be?

Obviously, I think you should keep all three in balance. But if you have to pick, especially if you are a game company, I would choose to be the unknown startup. And here’s why:

  • Acquisition is just a question of money. There are clever, cost-effective ways of getting CPA down, but if you can’t do that, you can always throw a shipload of money at the problem. That means that competitors with better funding will win on Acqusition, so this is not where I would choose to compete.
  • There has, historically, been a route to fast success through focusing on viral Acquisition. Think Skype, Zynga, Playfish, Facebook itself. I think that that the viral boom is over. Not only has Facebook effectively shut down all viral channels on its own platform, but consumers are getting more wary about signing up for new services of any type. Virality is still great if you can achieve it, but it is so hard that it is not where I would invest my scarce resources.
  • Retention, and to a lesser extent, monetisation are entirely within your control. We make games, right? And the key skill of designing a good game is about leaving players wanting more, whether that be “one more go” or “come back tomorrow”. That means we have a ready-made advantage in competing on Retention. It is our secret sauce, and we should use it.
  • Monetisation is critical to all businesses. Having revenues means you are in control of your own destiny. As I have posted before, having only 1,000 users is not a disaster if you have good conversion, retention and ARPU rates. So I would prioritise finding a route to profitability.

To sum up

ARMing yourself is a great way to look for gaps in your business. Take two minutes to do it, right now. Think to yourself:

  • Am I getting people to come to my website/game?
  • Are they staying?
  • Are they making me enough money each?

If you don’t know the answer off the top of your head, go and ask your CTO, your team, or, even more valuably, the data and metrics you collect from your users.

I will be posting more details on Acquisition, Retention and Monetisation over the next few weeks.

But if this framework hasn’t already given you a bunch of ideas for improving your business, I’ll be very surprised.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • http://www.dailymail.co.uk/news/article-83246/The-5m-wedding.html Peter Shalson

    I like this , I am going to go with the last one , thought I am a web-developer but I need to find a way for my customer to come back and ask for mor.

  • Anonymous

    (taking this back here, as discussing it on Twitter isn’t working out)

    We got into discussing the phrase post-viral world, where I raised the point that what is often characterised as “viral” in this kind of discussion is in fact good-old spam advertising. The reason why this matters is that orienting for acquisition of customers through true virality is fundamentally different to that of awareness marketing.

    It’s about how your business is oriented, basically. I don’t think it’s generally possible to create a business purely on mechanisms (as a lot of web game business are doing) and at the same time create something truly viral. The reason is that truly viral stuff tends to represent never-seen-before leaps that it’s just not easy to measure your way into in that lean-startup model.

    At the same time it is wrong to characterise that needed leap as post-viral. It is in fact thoroughly viral. There may not be a repeatable process for getting there, but that is true in all forms of entertainment. There is, however, a repeatable orientation.

    The point I’m driving at is that I think it’s important to emphasise that games are an entertainment business, and so it’s not just the case that if we can’t find easy users through spam that the only option is to hang onto the users that we have. Those mechanisms are certainly massively important, but we do still need to go out to bat with new games and build new stories that pull in new players.

  • http://www.gamesbrief.com Nicholas Lovell

    As so often in our discussions, we disagree over semantics. I think we are in a post-viral world because viral mechanics are no longer the heart of social game design. When “virality” is about “do people want to share this game”, it becomes a question of designing a great game, that keeps people engaged. If you are successfully retaining customers, they are more likely to tell their friends, and hence your game is likely to go viral.
    I agree with you that a lot of “viral mechanics” were spam. I also try to help businesses know where to focus their scarce resources. I would invest more resources in keeping customers (and keeping them happy) than in chasing ephemeral (and hard to achieve) virality.

  • Anonymous

    Quite, but I find semantics are important. A great deal of the debate over games in general is obscured by semantic confusion, so everyone comes away from those debates hearing different things.

  • Qwilderwibben

    AWESOME article.

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  • http://dorothysimmons.multiply.com/links/ Nicole Stillwell

    Thank you for this great post! It has been very useful. I hope that you’ll continue posting your wisdom with us.

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