Mobile Gaming: Are you Leaving Money on the Table?
This article is one of a multi-part series focusing on Growth in Mobile Gaming leading up to Casual Connect 2018. Meet us at the event to learn about our Accelerate and Extend products tailored specifically for mobile startups.
You built a game that users love, you’re making good money, but is it enough? It’s intuitive to re-examine a strategy when things aren’t working, but when you’re profitable the thought of taking a closer look at the numbers seems unnecessary. But what if you’re leaving money — a lot of it — on the table?
Many mobile gaming entrepreneurs focus on keeping user acquisition costs low and increasing their install base. That formula, they believe, ultimately leads to more revenue and a growing business. It’s directionally true, but in some cases it can create missed opportunities.
Not all users are of equal value
On average, about ½ of revenue for mobile games is generated by 0.2% of users. For every 1000 people that download your app, 2 of them are driving nearly half of your earnings from that user base. They are the segment commonly referred to as “whales” and everyone in your category is paying good money to woo them. If your acquisition strategy puts an artificially low ceiling on what you’re willing to spend, you might be missing out on this segment with your advertising.
There are other consequences for your user acquisition strategy as well. For starters, if you maintain a strict CAC, you might be generating a large number of installs among the kinds of users that generate little-to-no revenue.
Look at your existing install base and segment the top 0.2% of users based on revenue and take a few actions:
- Calculate the average CLV for this segment
- Calculate the average CAC for this segment
- Determine the average lifespan to inform CLV projections in real time
The average CLV should give you a ballpark for how high your CAC can go for short spurts and still be worthwhile. If you’re not comfortable going quite that high to begin with, work your way up in increments. When you do the math to find out if the strategy is working, remember to calculated based on totals not averages. Being willing to extend to a broader, more expensive audience should increase volume. Every incremental user with a CLV greater than the CAC beyond your old bid rate is extra profit that your previous strategy was missing.
CLV is dynamic, not static
The strategy of allowing higher bids to acquire more users only works out if the math on your CLV is accurate. Avoid using old data or non-segmented data that lumps in organic users with those acquired from other channels. Each acquisition channel comes with different targeting techniques and may result in audiences with vastly different results in terms of returns on spend. By keeping those cohorts discreet and managing the CLV separately for each channel, you decrease the risk of spending too much on users with low ROI.
Tools like Braavo’s Intelligence platform, which is available for free to all users, can do the math for you and adjust assumptions in real time based on current performance. By establishing a real-time connection with your advertising, app store & analytics accounts, you know you are making decisions based on what’s happening right now – not last month or even last week.
Target your total addressable market
There are a variety of reasons that games, even hit games, never reach their full profit potential. A common reason for mobile gaming startups is a failure to reach a large enough audience with their message.
Without funding, mobile gaming entrepreneurs can only spend on marketing what they take in from games. With payments on your earnings from IAPs and mobile ads taking 2-3 months to arrive, the opportunity to capture demand when a title is hot can be gone by the time funds are available to obtain sufficient reach.
Targeting is another culprit in reaching too-limited an audience. At times, mobile gaming entrepreneurs fall in love with a tactic or strategy early on and assume that once costs increase they don’t have anywhere to go from there. The reality is that every platform and targeting approach has its limitations. The key is to use a variety of tactics in concert to complement one another.
For example, Facebook lookalike audiences are an incredible tool, especially if you have a great seed audience to model it after (tip: use the 0.2% segment and pull device IDs to create a lookalike audience from on Facebook). By design, your best performance is going to come early in a campaign using Lookalikes. The algorithm stack ranks the most similar users so they are reached first. As you extend the audience from 1% to 2% and beyond, the audience becomes diluted. That doesn’t mean you’ve run out of good prospects, it means you may need to diversify tactics to reach more high value users (i.e. target by interest).
Games may sometimes have a short lifetime in the spotlight. But when it’s good, it can be really good. To capture demand when it’s there for the taking, be prepared. That generally means having sufficient access to capital to accelerate spending on a hot title when the moment is right. Solutions like Braavo Accelerate should be considered to get access to your earnings faster, enabling you to re-deploy capital quicker into the business. Remember – if you’ve got profitable marketing channels, every dollar not spent on UA is lost profit. Furthermore, if you’re really nailing your KPIs and have an opportunity to substantially increase your UA budget quickly, Braavo Extend delivers on-demand funding up-front based on your future potential.