Posted in Analytics

By Julien Femia

Game Data Scientist

@yulz__

Analytics 101 - The clues of the freemium business model.

The mobile games market is expanding incredibly fast, and if you’re reading this, you’re probably already familiar with free-to-play games like the ones we make here at Social Point. Based on the “freemium” model, these games all have one thing in common – they can be played for free!

There are almost no academic programmes to study game analytics (yet), but in fact, the analytics process is key to effective game iteration. The two challenges we face every day are deciding which events and behaviours we should track in our games, and figuring out how to best analyse the terabytes of data we receive from all our players across the world. Even if no simple answer exists to these questions, the starting point is a four-pillar analytics model that has evolved in recent years.

1. User Acquisition

The mobile gaming market has become fairly crowded, with more than 1,000 new games being released every day. Nowadays, it’s difficult to ensure the high download rates required to launch a successful game. Success relies not only on the merits of producing a high quality game – it also requires having an effective user acquisition strategy – or how we attract new users through marketing.

There are many different channels through which users can be “acquired”, but not all of them delivers equal results; sometimes large marketing spends won’t even bring enough customers to cover spendings. This is somewhere that analytics can help make decisions! Analytics 101 - The clues of the freemium business model

Copyright Alfredo Caceres - Flickr.com

When analyzing user acquisition we can't stop at counting installs or Cost Per Install (CPI). We also like to dig deeper into the Return On Investment (ROI), to be sure that we’re spending effectively. How do we know this? We study user “quality”. That considers not only lifetime revenue of a customer, but also their engagement in the game: we prefer that acquired users will keep playing the game, and hopefully bring more users with them to enjoy it… And this is where virality comes in.

2. Virality

Virality, in free-to-play games, is the ability to extend your user base without any direct marketing. This is key to success, but can be surprisingly difficult to achieve.

Creating virality consists of adding mechanics that allow your players to connect to a social network (usually Facebook, Twitter, Google Plus, etc...) to share an aspect of their game’s activities with their friends, and in return for sharing, get exciting new content or bonuses in the game. A happy and socially devoted user base can save significant sums in marketing!

Analytics 101 - The clues of the freemium business model

Unfortunately, virality is very challenging to track, so it’s difficult to gauge the success of a given system or feature. “Success” is normally measured by the number of new users that are coming into the game as a result of receiving an invitation on a social platform – but if a player is invited on Facebook, and then separately joins on their iPhone, we can’t tell. We can measure the number of requests sent by a user, which means we can observe different trends in the interaction of users within a given social network, but it’s impossible to track with certainty the recipients’ response to those requests.

3. Retention

In creating a game, there are two general questions that need answering: do the players like it? Are they coming back on a regular basis? Of all the analytics features that comprise the freemium model, retention is possibly the most important, especially in free-to-play games. It’s a good indicator of the general health and quality of a game. It’s also one of the components that helps calculate the estimated lifetime value of a player when looking at Customer Lifetime Value.

So what exactly is retention? The definition is pretty simple. Retention is just a mathematical representation of the percentage of users that returned to the game on Day X. Generally, the metric is calculated like this: to get Day X retention, divide the number of users retained on Day X by the number of users who installed the app on Day 0. Retention can be calculated over as many different time frames as desired, but three are “standard”: 1-day retention, 7-day retention, and 28-day retention (28 rather than 30, because 28 days is 4 weeks, which helps to remove weekly seasonality from the measure).

Retention metrics are vital when iterating through a product’s lifecycle, and the reason is simple – we always like to be increasing the number of users that will be playing in the future. Beautiful graphics, better loading times, adding or adapting content are all examples of improvement that can contribute to a solid, long-term userbase with strong retention metrics – a key factor of a game’s success.

4. Monetisation & Lifetime Customer Value

Creating a game requires technological resources, talented creative and scientific input, and entrepreneurial risk, none of which are free. If we want to keep making great mobile games, we need to "monetise" our creations to make income from them. Monetisation isn't our primary concern when we make games – we believe that the best results come from having happy players who enjoy playing the game for a long time, and this reflects in our long term retention rates of users. However, if a game iteration can improve long term monetisation without harming retentions, then we want to know about it.

Analytics 101 - The clues of the freemium business model

Not so long ago, monetisation was as simple as selling 100% of the game's content for an up-front, one-time-only fee – the retail price. But the free-to-play market changes everything: it lets all players access most of the game for free, while offering some attractive in-game content at a premium cost. (This introduces another design challenge: keeping competition between paying and non-paying players fair and fun for everybody!)

Since different items/abilities can have different prices, and players behave differently to each other, a complex in-game economy emerges, facets of which follow "real" micro- and macro-economic principles. This is a great area for analytics to contribute to game design.



So what kind of things do we care about in the monetisation spectrum? The three most basic metrics are:

  • ARPU = Average Revenue Per User - this lets us know how much revenue our game makes per player, on average. ARPU x Active Users to see recent total revenues.
  • ARPPU - like ARPU, only this time it's Average Revenue Per Paying User. This lets us see how much spenders tend to spend.
  • Conversion Rate - what % of players make a purchase? Active Users x Conversion Rate x ARPPU again lets us see recent total revenues.

Finally, we are interested in understanding the Lifetime Value (LTV) of our players – if we can predict how much revenue a player is likely to bring in in the future, then we can decide how much is a sensible amount to spend trying to advertise the game to them, or if a change has strong long term implications for monetisation. This isn't necessarily straightforward to predict – sometimes players bring their friends into the game... and their friends bring friends... who bring friends... ad infinitum!

Analytics 101 - The clues of the freemium business model

Of course, and this is true for all the above features, we often want to observe all of these metrics in different ways by "segmenting" the player base into different categories – for example, splitting players by geography or behaviour (do players prefer to do one thing in the game or another?). If our players link their account to their Facebook profile, we might be able to understand some basic demographic information about them too (such as age, gender), although in practice we find this isn't as useful as might be expected. But overall, the segmentation process can lead to a lot of interesting discoveries for us, which often impact game design.

This is just a quick introduction to the freemium model, but as there is so much to say, we’ll write more on each of these sub-topics, and ultimately on what helps us to build successful games every day at Social Point.

If you want to be a part of it, we are recruiting, so if you have what it takes, drop us a line – we offer the perfect playground to showcase your talents!


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