Dear indie mobile game developer

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Dear indie mobile game developer,

I interact with you on a regular basis, as a mentor in the Gamefounders incubator and when you email me via this blog, asking me to serve as a sounding board. I’m always happy to provide you with my opinions, but I’ve begun to notice repetition in the things you're saying. I apologize for the impersonal nature of this reply, but I thought that addressing you here would be more convenient for both of us.

First, let me attempt to summarize your position:

You and a small team have developed a free-to-play mobile game. The test users you’ve watched play the game love it, and you think it’ll do well when opened up to a larger audience. But you’re a game development studio, not a marketing agency, and you have no idea about how to get your game into potential players’ hands.

First, congratulations on developing a mobile game! But unfortunately, building a user base is part of the game development process for freemium mobile.

Allow me to explain. The App Store is host to thousands of games that have been made available for free by hobbyist developers, gaming enthusiasts, and major studios alike. As a result, development budgets and players’ expectations of the games they're entitled to for free have increased concurrently.

The economics behind this phenomenon – that no marginal distribution costs, the potential for massive scale, and a Pareto optimal pricing feedback loop have resulted in products that must be given away for $0 – aren’t important. The bottom line is this: mobile games have been completely commoditized.

That isn’t to say that your game isn’t better than others in the App Store, or that the quality of a game doesn’t impact how well it performs. Quite the opposite: with so many free games available for instant download, that your game is good is a pre-requisite for even mild traction. But making a good game doesn’t guarantee you anything in the freemium ecosystem – it is simply the minimum basis on which you enter the competition for players’ attention (and disposable income).

What you have to realize is that, if you want to publish your own game, you cannot be merely a mobile games development company: you must also be equal parts marketing and analytics company.

If you don’t have a sophisticated analytics infrastructure, the in-house expertise to extract insight from that infrastructure, and a marketing team in place, you’ll get steamrolled in the App Store. After all, you’re competing against the likes of Kabam, Supercell, King, EA, and others, all of which can vastly outspend you in marketing.

So what should you do? I don’t know. But here are what I deem to be your options:

Publish your own game. For this, you’ll need money – lots of money. For one, you have to instrument your minimum viable metrics and build an analytics infrastructure to store and parse those data points -- or outsource this to one of the myriad mobile analytics vendors. Choose a vendor wisely; many won’t be around in 12 months.

Once your analytics infrastructure is in place, you have to soft launch your game and iterate upon it. This is a more onerous and expensive undertaking than you think it is.

The test users that raved about your game haven’t provided you with valuable feedback. Did you offer them pizza or movie tickets in exchange for playing your game? Are they your close friends or family members? If so, they were lying to you.

You need lots of objective data points about your game from disinterested parties. That requires soft launching your game in a test market, gathering behavioral data, and using that data to iterate upon your game.

That process sounds straightforward, but I’ll enumerate the steps involved:

1) You must accumulate data in a test market. Many developers choose Canada for this (for a number of reasons I won’t go into here); because of this, CPIs there are high. Gathering an actionable, relevant volume of behavioral data in Canada will cost you about $2.5k (1,000 users at a $2.5 CPI). You can gather less data (ie. acquire fewer users), but your results won’t be as reliable.

2) You must analyze the data you have collected. This requires an analyst (note: analyst, not data scientist. The distinction is important; the skillsets are totally different). Good analysts with experience in either mobile consumer apps or games are in short supply, making them expensive. Expect to pay an experienced analyst about the same as you pay an engineer.

3) You must iterate on the game based on the results of your analyses. You need to hit some baseline metrics, mostly related to retention, before you’re ready to hard launch. Even if you’re able to address each iteration in a single product sprint, you’ll need two weeks of development per update.

It’s hard to say how many iterations your game will require in soft launch before it’s ready for hard launch. If your retention metrics are strong (ie. Day 1 retention above 40%), you might only need 1 or 2 iterations for “polish”.

Something to consider is that you may not be able to appreciably boost a game’s retention through iterations if it’s initially very low (say, Day 1 retention at or below 25%). In that case, you’ll need to address more fundamental aspects of the game, which could require months of development.

Once you’re out of soft launch, you can launch globally. You won’t receive featuring*, which means you’ll need to acquire users in key markets through performance marketing campaigns.

To do this, you need to hire a user acquisition manager (you can get by without one in soft launch by working with only 1 or 2 networks). Good user acquisition managers aren’t cheap.

Once you’ve hired an experienced user acquisition manager (which can take a while – like analysts, user acquisition managers with experience in consumer mobile are in short supply) to lead your marketing efforts, you’ll want to start running campaigns on the basis of LTV. How much you spend depends on how quickly you want to grow your game; the more users you buy, the higher CPIs you’ll pay. You should expect CPIs to fall along a range of between $2 and $5 in the US when acquiring users at reasonable scale.

Keep in mind that acquiring users for only marginally less than their predicted LTVs will provide you with a very slim per-unit acquisition profit margin, which will only materialize after months of those users playing your game (you bear acquisition costs upfront but revenue is generated over the lifetimes of users).

You should figure out what your revenue schedule looks like (ie. when do users pay you?) in order for you to cover the overhead costs you’ll incur while LTVs are accumulating in the months after launch, before your game reaches a steady state.

Of course, you could always launch your game without marketing it, operating under the assumption that it will develop a user base organically. But more likely than not, if you can’t engage in user acquisition, your game will fade into obscurity**. The mobile games ecosystem is 95% graveyard and 5% magic beanstalk arboretum.

If you’re not in a financial position to manage the expense of these operations – which are, for the most part, only obliquely related to developing games – then you can try to raise money from investors.

But even if you’re successful in raising money (which you probably won’t be if you’re not developing a platform), the fundraising process will be long, so you’ll need at least a few months’ worth of runway available.

Some people might suggest that you try to raise money on Kickstarter, but unless you’re well known (by gamers, not gaming / technology professionals), you’ll probably just waste your time.

If publishing your own game sounds impractical, then you have another option: you can enlist the services of a publisher.

Will Harbin says you don’t need a publisher, but Kixeye has a large portfolio of games to keep its revenue stable and cross-promote new titles with. Do you? If not, his advice might not be applicable to you.

For a lot of indie mobile game developers, entering into a publishing arrangement can be the best course of action. But understand that most publishers will only take care of global hard launch marketing – few will fund your development.

If you decide to have another company publish your game, you won’t get good terms if you’re not negotiating from a position of strength (ie. you have money in the bank or a number of suitors interested in publishing your game), so you probably shouldn’t wait until you’re almost destitute to try to negotiate a publishing deal.

And even if you do get relatively good terms, you should still expect to give up a substantial portion of your game’s revenue – probably between 40 and 60%, depending on your financial position, the potential of your game, and your negotiating skills -- in return for the publisher taking a substantial financial risk on your game.

You might bristle at the idea of giving away such a large portion of your revenues – after all, if you release the next Clash of Clans or Puzzle & Dragons, this could amount to hundreds of millions of dollars over the course of a year. But this shouldn’t concern you, for two reasons: 1) you’ll negotiate an exit clause in the contract requiring only 3 months’ notice, and 2) you’re not going to release the next Clash of Clans or Puzzle & Dragons***.

If you realize that your game isn't ready for hard launch but you can't afford to fund a soft launch, you can engage a development partner that will take a revenue split but at least partially fund your development and assist you in areas that you don’t have domain expertise in like analytics, monetization design, marketing, etc.

I don’t think enough of these types of deals have been struck in the space yet to draw any broad conclusions about them. If you have the time (ie. money) to explore such a deal, you probably should do so in parallel with any discussions you’re having with publishers. But I would assume that deals like these are slow to close, so start early.

Whichever path you choose, you should take pride in the fact that, by releasing a freemium game, you’re contributing to one of the most significant commercial paradigm shifts in history. I wish you the best of luck, and I look forward to playing your game.

* actually, you might, but the odds are pretty slim, and you certainly can’t count on it.
** this isn’t necessarily true – some games do succeed without marketing budgets. But you can’t count on this.
*** maybe you will, but it’s not wise to develop plans around this.

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