dialects

Games are hot lately and GDC 2009 is just around the corner. When talking about games, most people tend to think about the business of making games in the loose terms of console, casual and mobile. However, the casual games industry is definitely a lot more segmented than that. The conversations become radically different depending on what group you’re speaking with. The basis for why this is stems from the underlying economics of each industry. This can be summed up in one question: How are you monetizing your users?

Put a grab bag of casual games people in the online games industry together in a room, and the conversations will be incredibly diverse — ranging from CPMs, RPMs, ARPUs, sponsorship deals, publisher relationships, and viral co-efficients. In the end, they are all trying to answer the same question (how much money can I make?) but speaking with with different dialects. Here’s how those dialects, in a rough way, break out.

Web games, defined as distributed browser-based games that are not dependent on a destination site, primarily monetize users via advertising. Gamers playing these web games are predominantly monetized via advertising today. Developers monetize games via in-game ads such as Mochi Media (where I work) and game portals hosting the content monetize the games via around-game ads. Developers license their content, do custom development deals, and sell game sponsorships to portals, who do these deals as a vehicle for traffic acquisition. Direct user monetization via micro-transactions and purchases are still emerging. In a primarily ad-based market — developers and game portals are primarily focused on advertising-centric metrics: number of sites where the game is distributed, number of game plays, RPMs, CPMs, average click-through rate of advertisements, page views, time on site, efficient traffic acquisition, and basic retention stats to get people to come back.

Casual downloadable games, which are typically downloaded games that users can trial and then purchase. These are typically monetized via direct one-time user sales from the game publisher. Developers typically work with an oligopoly of game portals who publish their games and sell them to a user base which they maintain, paying back a rev-share to the game creator. With these limited distribution channels, the success of a game is largely dependent on getting onto the Top 10 list for a long enough period of time to make a profit. With the glut of games coming into the market, margins are getting slimmer, however, and several suggestions to improve this model are emerging. Due to this model, however, most conversations in the downloadable space focus on publisher partnership development, developer community, channel management strategies, franchisable IPs and the stats are transaction focused — conversion rates, sales, break-even sales, etc.

Virtual worlds, or destination-based virtual worlds where users inhabit the world and interact with one another with virtual representations of themselves. These are typically monetized via a mixed bag of advertising, subscription streams and virtual goods. The creator of the website is focused on engagement, retention and content to directly monetize users through purchases. These virtual worlds therefore, are keeping an eye on the advertising numbers but are most concerned about retention and payment stats — PVs/visit, payment fraud, cohort analysis, engagement funnels, ARPUs and balancing their virtual economy so that the available money isn’t too much or too little. In addition, they are very focused on community management and support issues.

Social games, which blur quite a bit with virtual worlds, are games which are deeply integrated with the social graph and APIs available on social networks. Social game developers make money from the users playing these games, with a combination of incentivized CPA offer networks and direct payments. These developers are focused on honing their viral loops to acquire new users into the system, creating engagement funnels to engage those users and convert them, and measure ARPUs for the users. Unlike virtual worlds though, there’s less of an emphasis on community management since everyone playing the game with you is theoretically managed by the social graph, but instead more emphasis on viral spread.