Research

Open Source, Research, Startup Tips

Being an open source company, one of the challenges we face is explaining people a few basic concepts about open source. “No it’s not the same as non profit”, “Yes, you can defend your assets”, … These are some of the answers we need to repeatedly provide.

Can you sell an open source company

One of the misconceptions that are more rooted in logic are about selling open source companies. Once you try to analyze the potential acquisition as a build vs. buy decision it seems like the build option will be much easier for the potential acquirer as the code is already out there.

Open source success: large acquisitions

Open source companies get acquired for hundreds of millions of dollars despite not having any real way to protect their code base from being copied.

MySQL acquisition by Sun Microsystems

The largest acquisition of an open source company to date. in January 2008 Sun Microsystems announced they will buy MySQL for 1 Billion Dollars. At the time MySQL was one of the most common database choices for Web2.0 startups and was the ‘M’ in the all open source LAMP stack.

VMware buys SpringSource

This $420M deal was announced by VMware on August 2009. SpringSource was a provider of Platform as a Service solutions that can be either self hosted by enterprise customers or cloud hosted for web applications.

JBoss acquired by world’s biggest Linux distributor Red Hat

In 2006, one of the earliest acquisitions of open source companies occurred when one of the companies behind Linux, Red Hat bought JBoss, a middleware provider. The deal was estimated at $420M with a combination of stock and cash.

Citrix acquires XenSource

Citrix systems, which at the time specialized in remote access management made a move in August 2007 towards the virtualization space and acquired an open source company by the name of XenSource. The deal was valued at $500 Million and positioned Citrix in competition with VMware. Here is a link to the announcement.

Zimbra getting purchased by VMware

Zimbra is a really special case. It’s an open source company that got bought 3 times. In 2007 it was Yahoo who paid $350M for it. In 2010, VMware decided to start expanding from virtualization into other IT area and acquired Zimbra from Yahoo Inc. Zimbra’s last purchaser was Telligent who bought it from VMware – here is the announcement.

Why pay so much for publicly available sources

While the biggest acquisitions have been in the Enterprise IT space, there are many other smaller companies that got purchased for slightly smaller amounts and came from different spaces. The one thing that is common to all of them is that they all have different assets beyond their code base. It could be domain expertise, strong customer base or a huge user data base. At the same time, if you try to analyze mergers and acquisitions of closed source companies you will discover that very few of them are driven by a need to own the code base.
I hope this list will help those of you who are considering opening their sources. If you are reading this article, it’s likely that you are already convinced this is a good move but you might need the ammo to convince others so feel free to use this as reference.
If I missed a major acquisition that you think I should add to the list feel free to share in the comments or tweet me @y_nizan.

 

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Research, Tips and Advice

Getting your game to the top of the charts

Most developers are dreaming of making it to the top charts. Stories of how your game will naturally grow from there just from the exposure boost motivated bigger publishers to buy installs and spiked the imaginations of smaller developers. When we think of games that ‘killed it’ in the App Store and became very successful, they all appeared in the top charts at some point.
the app store is a place to get your game on the top charts for free to play games.In the early days of the App Store, the revenue was coming from paid apps and the top grossing chart was aligned with the paid chart. Since free 2 play games started dominating the space, the Top Paid Chart became irrelevant and there is a very big difference between the Top Free chart and the Top Grossing chart. In fact the difference is so big that only 2 games appear in both Top 25 charts. That’s 8% overlap for the record.

Indie Games

The top grossing chart rarely includes games by smaller studios. It’s common to see indie titles make it to the top free chart. If you take a snapshot of the free chart in a given day, it’s likely you will see 10-15 out of the 25 top games coming from smaller studios. Part of it is the focus of bigger companies on monetization and their genre selection. Another reason is that a game that makes it to the top grossing charts quickly turns the company who launched them into wealthy companies who grow quickly and move out of the Indie category.

Game Factory Studios

Game factory studios, mobile app games

Another interesting trend is that the top free chart includes games that were created by companies who adopted a factory approach to game development. These companies will create a few titles every month and will focus on popular genres. The approach allows them to cross promote new games in a large number of self-owned titles and reach quick distribution with low investment.

Volatility

While the top grossers tend to stick around for long periods, the top free charts have rapid changes. Top grossing games usually reach a positive LTV-CPI number and allow their publishers to increase investment in user acquisition. This gives them means to maintain their leadership position.
 
the top of the charts for free to play games in the app store

 

Kids

Any major news outlet shared a story about some kid draining his parents’ credit card account by purchasing virtual goods via In-App Purchases. Reality, however, shows that games that focus on kids are much more common in the top of the free chart. It could be that kids are quicker on the trigger with downloading new apps. I’m also giving some credit to the app developers who focus on kids. They try not to trick them into making unintended purchases.

Sequels

free to play games get on the charts because they become popular with kids or because of a good storyline.The top free chart contains more sequels than the top grossing chart. I’m attributing that to two things. First, sequels enjoy free publicity and often get featured in the App Store. Second, the publishers cross-promote them in the original titles. Combine that with a positive level of trust from the users and you can see how these games can get over 100K downloads in the first few days. it seems however, that many of them don’t deliver on the hype and fail to engage the users enough to be top grossers.

Casino Games

Casino games, card games, slots, bingo and other gambling oriented titles dominate the top grossing charts. You can’t see them at all in the top free charts. The main reason is the high LTV these games return. This is a bit sad to see.

Strategy Genre

Strategy games are also much more common in the top grossing charts. I’m referring to simulation games where the user builds an empire. These games normally require a high time investment from the user but at the same time the revenue from a paying user is much higher. These mid-core games are appealing to users who are more ‘gamers’ and are more used to paying for their games.

Hollywood, TV & Sports

Some of the games in the top free chart are based on a popular movie or TV show. This is pretty obvious. Users are more likely to download, press is more likely to review and Apple more likely to feature. You can see some games with strong external IP in the top grossing charts but they are more dominant in the Top free.

So what do we think about all that?

My first thought is that it’s a very good sign for smaller developers. Being in the top 25 downloaded games even for a few days still means you are killing it and that opportunity is open for small developers. More over, small developers can adopt the Game Factory approach which is more likely to succeed over time.
Being a top grosser requires focusing on parameters that are beyond pure gameplay. The good news is that these can be learned. Indies that want to step up to the next level and are prepared to invest time and efforts can certainly make it to the top grossing charts as well.
Focusing on slightly bigger companies – there is a way to be successful at both top charts and really knock it out of the park by adopting one of the following methods:
  • Partnering up and licensing Hollywood or TV IP and then building a strategy game on top of that.
  • Licensing the rights for a sequel game but focusing on a grossing genre
  • Combining casino elements in casual games like King has been doing with Candy Crush and Pet Rescue Saga
Would love to hear more thoughts about these findings. Feel free to share in the comments.
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Industry Forecasts, Research, Resource
We love hearing good news about the In-App Purchase market growing bigger so we were very excited to hear about the new research from Gartner .
For those of you who aren’t familiar with this type of company, Gartner is a research firm that tries to predict how different markets will preform over the next year. Their projections usually come true and many companies and financial institutes really on their reports for making big decisions.
The last year was a pivotal one in terms of the mobile app market. This year In-App Purchase not only proved to be a viable model but actually proved to be the fastest growing area in the mobile industry. Gartner’s report is the first one to reflect that change so it’s interesting to see what they came up with.
Here are some interesting predictions made by the report:
  • The number of app downloads in 2013 will reach 102 Billion
  • 90% of the downloads will be for free apps.
  • By 2017 Gartner expect the annual app downloads number to reach 268 Billion
  • The expected revenue generated by mobile apps in 2017 is expected to be $77 Billion
  • Out of that total revenue, In-App Purchase revenues are expected to be 48% or $36 Billion
  • The advertising revenues in mobile apps are expected to grow drastically from $1.85 Billions in 2013 to over $10 Billions in 2017
We put the numbers on a chart to illustrate how big the growth in this market is:
App Market Growth
You might also find the detailed revenue numbers useful. Here are the figures projected by Gartner for the next few years:
a table of in app purchase sales and revenue
The report also provides detailed app download forecast in the table below:
Table 1. Mobile App Store Downloads, Worldwide, 2010-2016 (Millions of Downloads)
2012
2013
2014
2014
2016
2017
Free Downloads
57,331
82,876
127,704
167,054
211,313
253,914
Paid-for Downloads
6,654
9,186
11,105
12,574
13,488
14,778
Total Downloads
63,985
102,062
138,809
179,628
224,801
268,692
Free Downloads %
89.6
91.0
92.0
93.0
94.0
94.5
Source: Gartner (September 2013)
As expected, free apps will continue to dominate the market in the next years. If you are considering making a mobile game these days, what the growth in the numbers should tell you is that you still have a very good shot of making it. Markets that are growing quickly present more opportunities for small players and challenges for the bigger ones. The trick is to look for the sections that grow really quickly and try to innovate within them. Let’s see which section is growing at the quickest rates in the chart below.
App Market Growth worlwide, in millions of dollars
The obvious response is that the place to be these days is a free app with In-App Purchases. If you are making an app like that, you are in the right place. SOOMLA has many other resources for free to play design, In-App Purchase coding examples and more. Feel free to explore and let us know what else you need.
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Industry Forecasts, Research, Tips and Advice
As a company who strongly believe in the democratization of mobile game development we are constantly looking for signs that indie developers are winning. Traditionally the video games industry was controlled by giant corporations that didn’t leave room for anyone else. Mobile games changed all that and these days any small studio can make a game and what is most important is that they can make it to the top 25 as well. The next big hit can be yours so don’t stop believing.
Want some more data? First of all you should look at what it means to rank in the top 25? According to research firm Distimo, the top 50 app is being downloaded 23K times per day. We are interested in games (not all apps) so here is the data:
  • 1st place ~ 72K installs/day
  • 10th place ~ 47K installs/day
  • 25th place ~ 20K installs/day
So who made it to the top 25 downloaded games? Some titles are familiar names like: Where is my water 2, Grand theft auto and Candy crush saga but along with them there are 11 games by small developers. The charts can be quite dynamic but we could count 8-15 indie titles in the iOS top 25 of pretty consistently and over 15 in Android. Here is a snapshot from September 18th 2013.

the top 25 most installed mobile games list

 

Another interesting conclusion one can make by combining these numbers is that the top 200 free games only account for less than 10% of the total downloads. Please check my math:
  • Each top 200 games average 10K installs/day
  • Total game installs for top 200 games is 2M/day
  • In a full year that’s 730M
  • Total game installs/year for iOS is estimated at 8B

The number of 8B game app installs is based on these 3 articles:

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Research, Store Analysis, Tips and Advice

In our line of business, we are always talking with game developers and designers. Some of them ask us for advice on pricing purchases for virtual goods in their in-App Stores and in-Game economies. This is an important question. On one hand, if goods are priced too high, people will buy them less often, but if they are priced too low, your mobile game may not be earning as much revenue as it can.

Real Life Examples of how to price in-app purchases with soomla

How to Set a your Goal ARPU

Your APRU (Average Revenue Per User) is a key metric in free 2 play games and managing your game towards an ARPU goal is as important as navigating your ship towards its destination. Ask yourself what is a good target APRU? What amount of revenue per user would make your game economy a big success? There are several ways you can approach this question to figure all this out.

  • First, figure out how valuable your game is to the average user? What’s it worth to them? Is it worth 25 cents? How about 50? or $1 or even $5? Whatever you think it is worth, just say it. This number is a good indication of where your target ARPU lies.
  • What amount of ARPU will provide you with enough money to promote your product into the future by giving you enough to spend on new user acquisition? The amount of money for getting a new user to play your game is often referred to as cost per install or CPI. After gathering data from over 20 ad networks I can tell you that the lowest CPI you can get is $0.5 and some companies even pay as high as $2 CPI. When your ARPU is higher than your CPI, you can be confident that the money is there, letting you scale your product up the ladder quickly.
  • Additionally, ask yourself, who else is cutting into my average revenue per user? Perhaps you, like everyone else give 30% off the top to Google and Apple? If anyone knows a way around these guys, please let us know :-). What about other service providers or game publishers? If you have any of these, you will need to find more ways to increase your game’s ARPU so you can stay profitable.

How to Find Your Purchase Ratio

It’s important to know just how many of your users end up buying your app. Do you know your Purchase Ratio? Most games have purchase ratios between 0.5% to 5%. Getting the highest ratio depends on several factors. But it’s not set in stone either, a game’s purchase ratio can increase as your game’s reputation grows and becomes more recognized, or if users end up spending a lot of time playing your game.

The target ARPU, the ARPPU & your Purchase Ratio – A Benchmark Formula for Pricing for In-App Purchases

The best way to explain how this formula works is by giving a few examples from actual game developers that we’ve been fortunate enough to work with. Once, a developer came to me for advice with his initial thoughts for monetizing his newly developed free-to-play game. He told me that he could sell an extra level for $0.99 and have another option to remove banner ads for dollar. In the future, he told me that he planned to develop more levels and sell them too as level packs for $1 each. Let’s assume that he makes 4 level packs, this would mean that the maximum revenue he could make from a user is $5, with the average being something lower, more like $2. For the sake of figuring out the benchmark for the formula, let’s call this $2 value the ARPPU (Average Revenue Per Paying User). Having an ARPPU of $2, combined with, let’s say a healthy Purchase Ratio conversion rate of 2%, means that his ARPU will only be $0.04 – not even a dent in the revenue bucket these days. If I would have asked him to guess what his ARPU rate really was, he would never have come up with that number!

ARPPU (avg. rev. per user) x Purchase Ratio (%) = ARPU ($$$$)

Another example from a developer is from someone that came to me for advice about selling packs of “Save Me” cheats in his store. I told him that, from my experience, selling cheats is a dangerous practice when it comes to F2P games – it’s a double-edged sword, in fact. His suggestion was that he would sell 25 “Save Me” cheats for $1 in his store. My opinion was that when you allow users to easily buy cheats, you risk making your game too easy to play which causes players to lose interest quickly. My response was that the cheat pack would probably be the last purchase that player will ever make in his store. I told him that once a player has real cheating power, he will lose interest soon after and no longer find the game challenging. In this case, his ARPPU was only $1, making his ARPU at most be $0.05 – even if his purchase conversion ratio has a maximum of 5% – that’s just not enough to make back what his game cost him in effort to develop.

Pricing Strategies for Developing a Robust ARPPU (Avg. Rev. Per Paying User)

Finding the right Average Revenue Per Paying User really depends on the kind of game that you’ve designed. To calculate a Target ARPPU, first figure out what target ARPU you want to reach. Say for the sake of example, you want an ARPU of $0.50 with an expected Purchase Ratio of 2%, this means that your average paying player will need to pay $25 and that some people will pay upwards of $50 for your game (Yes, ARPPU’s get that high – don’t be shocked).
The next step is to start figuring out different options and scenarios, by testing them out with users before they are launched in order to see how to better develop your ARPPU as your key benchmark value. Here are a few things to remember as you maximize the potential of your in-App purchase items:
  1. Selling single-use virtual items or consumable resources in your store results in higher player engagement, more addictive game play, longer player retention and ultimately a consistent stream of revenue from your paying users.
  2. Developing an Energy Mechanics in your store. Something as simple as selling lives in your games can have a similar impact to that described in #1. This trick alone is known to boost your revenue by 10% to 30%.
  3. Sell upgrades for items in order to give players a sense of accomplishment and a feeling of progress. For as long as they feel like they are getting somewhere in your game, they will continue playing, which in turn, might lead to them making more purchases in the future.
  4. Remember to balance the power metrics of the virtual items you sell in your store with the difficulty curve you’ve developed in your game.
  5. Give players lots of options to choose from when shopping, but limit it in a way that makes them think wisely about spending upgrades for the purchases they make, and remember to never allow any player to accumulate enough gold coins to purchase everything in your store.
  6. Repeat point #5 above for paying users as well. As odd as this might sound, even paying users are at risk of getting bored, never let them be able to buy everything and anything they want in your store.
If you are interested in getting some feedback and advice for pricing your F2P game, you can submit your game for review here [http://blog.soom.la/2014/03/getting-your-game-reviewed-and-featured-by-soomla.html], or drop me a line on twitter @y_nizan.

This article was originally featured and published on Gamasutra.

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Industry Forecasts, Research

We were excited to realize that more and more game developers are looking for a off the shelf store-front solution for their mobile game. The search trend on Google for the term In App Purchase Store clearly shows that.

In App Purchase Store trends in a chart provided by google
SOOMLA offers a solution exactly to this problem but solving the problem is not enough. We need mobile game developers to know that In-App Purchase Stores can be easily created using our platform. Help us spread the word by sharing this post.
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Research, Tips and Advice
 Getting a user to pay for an app download upfront without a big name behind the app became almost impossible in the last two years. Most of mobile game developers these days are developing free apps. There is one big problem with free apps – they don’t make any money. Those of you who have tried banner based advertising will say that most clicks are made by accident and that they make the game feel very cheap. While In-App Purchases often requires a lot of investment and sophistication, offer walls or reward based adverting is not such a bad idea.
The practice of rewarding a user for a desired action creates a win-win opportunity in which the user engages with an ad because he selects to. The reward in this case is normally a bunch of in-game coins and the desired action might be watching a video about another game.
Historically, there have been a few problems with this domain. First off, the offers weren’t screened for quality and advertising ethics. This resulted in ads that were promoting fraudulent services and scams. This was made famous as Michael Arrington posted on TechCrunch and called the offers on farmville – Scamville. Well, this was over three years ago and the providers cleaned up their ad inventory. There were also some reports about Apple fighting the practice of promoting apps via reward based advertising but game developers reported that they didn’t see any change and the downloads by users who received an incentive are still counted towards the goal of making it to the top charts.

SOOMLA TRACEBACK – Ad LTV as a Service Get granular data about your ad revenue and insights into the black box of your ad revenue. Use the data to factor ad revenue in marketing ROI calculations, in product a/b tests and in ad-operations decisions.

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iphone showing a mobile game with offer wall. Sponsorpay is a provider of this high monetization format

SponsorPay

SponsorPay for mobile is available as a Unity Plugin or Native for Android and iOS. Their platform is in use by leading developers and publishers such as: EA, UbiSoft and Gree. Apart from the revenue boost you should be getting from them, they also have diverse integration options and extensive analytics.
Offer Wall example showing the variety of device support and different screen sizes offered. Tapjoy is one of the first companies to offer this form of advertising

 

TapJoy

TapJoy is probably the biggest player around. Their network spans 387MM users around the globe. In addition to iOS and Android they also support the Windows Platform. Their Unity Plugin is available through Prime31 which means you will have to pay $50-$70 to get it.
 
 

SuperSonicAds

SuperSonic used to be focused on Social games and only recently moved to the mobile space. Unlike TapJoy and SponsorPay they are much more focused on brand advertising. This means that your offer wall is more likely to include an ad from Citroen or CocaCola as Opposed to CoinDozer or Zynga Poker.
Nativex also provides this format. Offers are adapted based on the user geographic location and device type.

 

NativeX

W3i recently rebranded as NativeX to highlight their focus on native looking offers. The other thing that sets them apart is the set of tools they offer game developers to help them build apps more quickly. Their ad inventory is focused on game apps.

Kiip

Kiip is not exactly an offer wall but it’s certainly reward advertising. When the user makes an achievement Kiip rides on that feeling and reward the user with a $10 discount for a real product from a known brand.

Play Haven

Play Haven started as a platform for maximizing life time value for games but are now offering the option to promote other games for free and to include interstitial ads.

Mob Partner

Mob Partner is a mobile ad network offering differnet monetization options as well as offer walls. They support iPhone and Android.
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Designer, Research, Store Analysis
Halfbrick, developer of popular mobile game Jetpack Joyride has recently made a very interesting use of dynamic store-fronts. You might remember that Jetpack Joyride started it’s life as a premium/paid game and until recently was still paid on PSN. It’s not easy going from a paid game to free 2 play, you can ask EA, if you need convincing. The move requires a complete mindset change and this last trick by Halfbrick truly shows they have adapted to the new model.
It's not easy going from a paid game to free 2 play, you can ask EA, if you need convincing. So what did they do? If you haven’t heard already (or read about it on Gamasutra), Halfbrick recently added a new item in their store “The Wave Rider”. Adding items by itself is not so rare in games but the unique part about it was that “The Wave Rider” was sold for $4.99 as an early bird offer with a message that you can get the item for free in 4 days. This ‘time-to-free’ move was a big success for Halfbrick and resulted in 400% increase in revenues.
Here is how Halfbrick could have done this move:
 

Preparation

Using SOOMLA Store Editor, Halfbrick almost created a store-front. They nearly selected the theme Scorched Hill and then customized it with the wizard to match the design of their game. Integrating the store is as easy as calling a storeOpen() function and it supports equippable products, upgradable, single-use and anything else a game like Jetpack Joyride needs.
Adding The Wave Rider to the Store
Here is how Halfbrick could have done this move:Adding the new item to the store is easy as clicking a few buttons. Halfbrick could have done this in less than a minute by dragging the image to the screen and updating a few text fields. Of course, the wave rider still needs to be implemented in the game.

Changing the Price

This is the easiest part with SOOMLA. With a few button clicks, Halfbrick could have changed the price of the item in the store. As soon as the price changes in the dashboard it’s is magically being updated on all end devices without any need for the users to download an update from iTunes / Google Play.
 

Analyzing the Results

Without any need to implement additional analytics, anything that is economy related gets reported in SOOMLA analytics. If you think about it, this is almost anything you care about in the game anyway.
 
Disclosure – we don’t know if halfbrick is using SOOMLA or not. It really doesn’t matter though. Any developer that wants to have a dynamic store-front can signup for a free account at http://soom.la and have all this power in his hands.
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Research

The SOOMLA Project is about listening to Game developers. We already know that virtual economies are powering over 90% of the top grossing games but we wanted to know how many developers are actually planning on implementing in-game economy in their game and what other alternatives are developers using.

We asked our community of Mobile Game Developers the following question “What business model will your freemium game use?”. The options we gave were:

  • Free with Virtual Economy (in-game coins)
  • Free with option to buy full version
  • Ads (banners and full page)
  • Free and sell levels and upgrades
  • I’m making a premium game
The results are given at the chart below:
image
The full results in the original survey can be found here as well – What business model will your freemium mobile game use?
The trend towards Virtual Economies is very strong and combined with some other data about the number of new mobile game projects starting every month, one can reach the conclusion that there are about 12,000 games that are trying to integrate virtual economies at any given moment.
What’s even more surprising is the fact that if you combine all the coding efforts being put into game economies you easily reach 1,000 years of man work. One can only imagine what could be achieved even if 1% of this effort would have been funneled towards a collaborative project.
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Research, Tips and Advice

Unless you have been living on another plant in the past 18 months, you must have heard that In-App Purchase is a great monetization model. Publications like Business Insider and others have provided a lot of data to support this claim but the reality is that the picture they painted is a bit misleading.

As most of the revenue in the app markets is driven by games, let’s take a deep look into this market. The reality is that there are many kinds of in-app purchase methods but, believe it or not, only one of them is really effective.

There are games that allow you to upgrade to the premium version from within the app, others allow you to buy extra levels of features while some games are based on virtual economies and allow you to buy in-game currencies. All of these are considered in-app purchases – can you guess which one is making the most revenue?

Here is the punch line – out of the top 50 (grossing) games that use in-app purchases, 46 are selling virtual currencies and if we look at the top 100 the trend continues with 91 that are based on virtual economies.

So saying that virtual economies are powering 85% of the revenue in mobile apps is much more accurate than saying that it’s driven by in-app purchases.

This distinction seems subtle but it’s actually critical for mobile game developers looking to turn their premium game to a freemium game or ones that are just designing their game. If you don’t pay attention closely you might end up with a game that yields only poor revenue and might not even cover your investment.

Just to be clear – a virtual economy means that the game has at least one type of ‘soft currency’ that the user can earn by regular game play. It is not really about monetization. It’s about engaging your users and giving them ways to advance in game play, measure their progress and add an extra layer of fun into the game. So the games are not successful because their monetization is better but actually because these games are more fun and engaging that way.

While some might think that virtual economies are only used in MMO games or resource management games the reality of mobile gaming is different. There are ways to add virtual economies to just about any game genre and the top games of all genres are games that have created complex virtual economies successfully.

Unfortunately virtual economies are complex to build and take experience and time to balance but they are well worth it. So next time you hear the myth about in-app purchases being a magic solution to monetizing mobile games remember that the real answer is virtual economies.

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SOOMLA - An In-app Purchase Store and Virtual Goods Economy Solution for Mobile Game Developers of Free to Play Games