Startup types, stages and metrics baselines. Farley Millano -

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1 Startup types, stages and metrics baselines Farley Millano - farleymillano@gmail.com 1

2 Agenda [1/2] Recap Intro Startup types Mobile games Startup type + stages Establishing goals Mobile games 2

3 Agenda [2/2] Lab: Trabalhos escritos de análise de jogo comercial Dúvidas e questões 3

4 4 Intro

5 Intro How you make money drives most of what should be measured, this is basically defined by: Stage of the company (as seen in last class) Activity of the company Starting point: big picture and look for what a engaged" costumer is. Fundamental blocks Segment: different users mean different monetisations Optimize for good costumers 5

6 Business model flipbook 6 (Yoskovitz & Croll, 2013)

7 Business model flipbook Over 6000 permutations! (with only a few examples) 7

8 [Dropbox] Business model flipbook 8 (Croll & Yoskovitz, 2013)

9 Startup types 9

10 Startup types There are several ways of building a business It is an ever-increasing list Revenue-Models-final-EgXuEtSibE7 Consider Amazon: Transactional, physical-delivery, SEM, marketplace, UGC 10

11 Startup types As a matter of simplicity, we chose to focus on six models described by Croll & Yoskovitz (2013): E-commerce: Amazon SaaS: Skype, Dropbox, etc. App (in-app purchases): Angry Birds, Clash of Clans, etc. Advertising: Online newspaper, blogs Social network (UGC): Facebook, Twitter, etc. Two-sided marketplace: Uber, Ebay, Etsy, etc. 11

12 App model It is a model made famous especially after itunes: App Store (Apple), Google Play, Microsoft Store, Steam, PSN (Sony), etc. Seamlessly content purchase Exclusive to a unique vertical or Porting (more than one store) Challenge: gatekeeping Limits continuous deployment or A/B Testing, for example Workaround: Downloadable content Launch in a specific country Launch in Google Play (faster than App Store) 12

13 App model - Revenue Streams Up-front purchase: buying the game from the store 13

14 App model - Revenue Streams Downloadable content: new maps, new skins, new players, etc. 14

15 App model - Revenue Streams Avatar/Character customisation: clothes, hair, etc. 15

16 App model - Revenue Streams Advantages: weapons, upgrades, power-ups, etc. 16

17 App model - Revenue Streams Countdown timers: avoid long waits for progress 17

18 App model - Revenue Streams Upselling: upgrade to bundles that contain a certain number of features 18

19 App model - Revenue Streams Subscription: regular payment of a defined fee. 19

20 App model - Revenue Streams In-game ads: advertising impression or video watching mid-game 20

21 App model - Revenue Streams Gift cards: physical cards that gives virtual credits 21

22 App model - Revenue Streams Downloadable content: new maps, new players, etc. Avatar/Character customisation: clothes, hair, etc. Advantages: weapons, upgrades, power-ups, etc. Countdown timers: avoid long waits for progress Upselling: upgrade to bundles that combines features or various revenue items Subscription: regular payment of a defined fee. In-game ads: advertising impression or video watching mid-game Up-front purchase: buying the game from the store Gift cards: physical cards that gives virtual credits 22

23 App model - Metrics Revenue Streams Business Model Developers need to track a certain number of metrics There is a pattern/flow of how to "use" an specific app Discover: search, featured or ranking Review analysis: screenshots, ratings or comments Download: free or paid Register: , Facebook, etc. Play In-game economy: virtual coins, watch ads, power-ups, upgrades 23

24 24 (Croll & Yoskovitz, 2013)

25 App model - Metrics [Downloads] It corresponds to the number of times a game has been downloaded ASO: App Store Optimization A number of techniques employed to reverse engineer the dynamics of an app store Getting featured impacts ranking (Distimo): Android: +42 positions iphone: +15 positions Flurry: Top 25 apps accounts for 15% of all revenue Remaining Top 100 accounts for 17% 25

26 App model - Metrics [ARPU] It corresponds to the average revenue per active user (monthly or lifetime) ARPU = Monthly revenue / # monthly active users There must be a balance between fun and revenue streams 26

27 App model - Metrics [Churn] User abandonment must be tracked in 3 time periods: 1 day: bug in registration, tutorial, etc. 1 week: problem in deepness of the game 1 month: poor update/retention planning 27

28 28 (Croll & Yoskovitz, 2013)

29 App model - Metrics summary Downloads Costumer acquisition cost (CAC) Launch rate Is my strategy working? Percent of active players Percent of users who pay Time to first purchase Monthly average revenue per user (ARPU) Ratings click-through Apply analysis techniques: Cohort, Segmentation, etc. Virality Churn Costumer lifetime value (CLV) 29

30 Monitoring: startup types + stages 30

31 Startup type + stage We have already seen two ways of categorising a certain business: Type: basic activity and functioning Stage: maturity and development 31

32 Startup type + stage Their combination helps defining the "what" and the "when" t 32 (Croll & Yoskovitz, 2013)

33 Startup type + stage We have already seen two ways of categorising a certain business: Type: basic activity and functioning Stage: maturity and development 33

34 34

35 35

36 Defining goals 36

37 Defining goals - Intro Now that we know which and when to focus on certain metrics The question is: What's acceptable? "What s normal? 37

38 Defining goals - Intro It is really hard to define baseline for digital products Ever-changing rules and players Maturity of a particular model Rough idea: Startup Compass has a good database on averages" Tip: Do not rely on averages, most startup fails 38

39 Defining goals Some metrics are foundational for almost all business model: Growth rate User engagement Pricing Costumer acquisition Virality Mailing list effectiveness Uptime Time on site 39

40 Defining goals Some metrics are foundational for almost all business model: Growth rate User engagement Pricing Costumer acquisition Virality Mailing list effectiveness 40

41 Growth rate - Goal Goal: 5-7% / week in terms of stage: Pre-revenue (Stickiness and Virality): Active users Revenue on: Growth of revenue 41

42 Engaged users - Goals Web-based service: 30% of registered users / month Mobile-based: 30% of download users / month 10% of registered user / day Concurrent usage: Maximum of 10% of daily users The rate of 30/10/10 is common across a variety of segments Moving past that: go to Virality, Revenue or Scale stages Find leading indicators of growth 42

43 Pricing - Goal Depends on the product or service market Testing price sensitivity is key Very few startups do so! Recommendation: find the "sweet spot" and aim for 10% below for user growth 43 (Croll & Yoskovitz, 2013)

44 Costumer Acquisition Cost - Goal It totally depends on the market Rule of thumb goal: 33% of Costumer Lifetime Value Churn and Costumer Breakeven has a huge impact on this rate: lagging indicator Forces a baseline: early comparison 44

45 Virality - Goal Above Viral Coefficient above 1 is great, but very hard to achieve A coefficient of 0.75 is pretty good Build inherent virality into your game Artificial virality must be contrasted with the costumers it brings Important: helps to reduce Costumer Acquisition Cost 45

46 Mailing List - Goal Open rate: 20-30% Click-through rate: above 5% 46

47 Goals for App metrics Several metrics that applies across segments, as seen previously Some are more specific for mobile apps App size Costumer acquisition cost Launch rate Etc. 47

48 Goals for App metrics Several metrics that applies across segments, as seen previously Some are more specific for mobile apps App size Costumer acquisition cost Etc. 48

49 App size - App metrics It should be under 50MB, otherwise your user will need Wi-Fi connection This can be minimised by downloading additional content after install 49

50 Costumer Acquisition Cost - App metrics App Store Optimization: two types of marketing: Mercenary: paid downloads and review ratings Brings other users through app store rankings Goal: $0.50 per install Legitimate: banner ads within other apps Organic, more engaged users Goal: $2.50 per install Overall CAC: less than $

51 Percent of active players - App metrics Research from Flurry (200,000 apps): 54% remained after one month 43% remained after two months 35% remained after three months 3.7 interactions per day (high variance) Engagement increase: 25% to 35% in the third month Smartphone: 12.9 times / week for 4.1 minutes Tablet: 9.5 times / week for 8.2 minutes 51

52 52 (Croll & Yoskovitz, 2013)

53 Percent of paying players - App metrics Freemium: 2% conversion (free to paid version) In-app purchase: 1,5% of users buys something 53

54 Average revenue per daily active user - App metrics Per game genre: $0,01 - $0,05 for puzzle, caretaking and simulation games $0,03 - $0,07 for hidden object, tournament and adventure $0,05 - $0,10 for RPG, gambling and poker games Aim for above $0,05 (ARPDAU) 54

55 Monthly average revenue per user - App metrics Average: $3 per month or $0.10 per day Depends a lot from market segment 55

56 Monthly average revenue per user - App metrics Average: $3 per month or $0.10 per day Depends a lot from market segment 56

57 Average revenue per paying user - App metrics Depends on the level of expenditure Whales: 10% players, ARPU of $20 Dolphins: 40% players, ARPU of $5 Minnows: 50% players, ARPU of $1 Identify leading indicator of behaviour for these categories Offer in-game monetisations for each kind 57

58 Review rating clickthrough - App metrics Number of people who review an app Less than 1.5% for paid apps A lot less than 1% for free apps 58

59 Conclusion Knowing what to measure drives strategy: Frequently used with loyalty: in-app purchases, advertising Frequently used without loyalty: per-transaction fee Infrequent, low-loyalty: up-front purchase, one time fee Infrequent, high-loyalty: upselling, invite other users Having some metrics baseline helps starting somewhere and benchmark 59

60 Startup types and stages Farley Millano - farleymillano@gmail.com 60