Startup Tips

App Monetization, Resource, Startup Tips

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Many app developers are looking to project their app revenue as they are starting out. This is obviously an important question as publishers needs to justify the development effort in their mobile apps. The answer is dependent on many parameters and quite complex to answer. However, we identified the key drivers and created the following calculator for you. Below the calculator you can find explanation of all the fields.
 

FREE REPORT – VIDEO ADS RETENTION IMPACT

 

Mobile App Revenue Calculator

Calculator Explanation and Fields

The calculator has 4 parts:

  • Retention Inputs
  • Monetization Inputs
  • Traffic Inputs
  • Output / Results

Retention Inputs

Here you will need to input your D1, D7, D14 and D30 retention figures. If you are unclear about how to do this we highly recommend checking these guides for getting your retention in Flurry and GA. Even if you are using another analytics platform it will give you a sense of what you are looking for. In short d1 retention is how many users played your game 1 day after the first day they played. If you had 1,000 users that downloaded your game and played it in one specific day and the next day 350 of them came back to play again your D1 retention is 35%. One popular benchmark in the mobile games industry is 40%,20%,10% for D1, D7 and D30 retention – this is considered good retention and not all games get there.

Monetization Inputs

In order to calculate your app revenue, we need 2 types of monetization inputs: IAP and Ads. For In-App Purchase (IAP), the two input fields are:

  • Conversion rate to payers
  • Average Revenue Per Paying User (ARPPU)

The ARPPU is impacted greatly based on what type of app you have. Some apps and games simply sell remove ads for $1 and then the ARPPU will be $1. Strategy game apps on the other hand allow the user to build armies and castles by buying virtual currency and create a competitive state that can lead users to spend hundreds of dollars in the app.

On the Ad side of things, you will need to enter the following fields:

  • Opt-in ratio to rewarded video
  • Number of rewarded videos you expect your user to see in a typical day
  • Number of interstitials you expect users to watch in a typical day
  • Number of banners per day

Note that most apps don’t have all 3 at the same time. If your app doesn’t have one of these ad types, simply put 0 (zero). The opt-in ratio to rewarded video is a tricky one if you haven’t started out yet. Consider these values:

  • 10% if you are hiding it inside the virtual goods store
  • 20% if you are prompting users in a specific situations as they run out of a resource
  • 40-60% if you are going to measure and optimize on this parameter and have multiple prompts on a daily basis

If your app have interstitial videos as opposed to rewarded videos, just treat them as regular interstitials.

Traffic Inputs

Another critical set of data for calculating the app revenue is how many users you will have. You will need to enter the expected number of downloads per day and the traffic mix between Tier 1 (US, UK, CA, AU, DE, FR, NO, FI, SE) and Tier 2 countries. If you are unsure about the values for these fields or other fields in the calculator you can also check out our game benchmarks post.

Outputs/ Results

Here you will find the estimated daily app revenue alongside other results:

  • User life days – this is how many days the average user will play in your game over his entire life
  • DAU – how many users open your app on a daily basis
  • Tier1 ARPDAU – the daily revenue per active users for tier 1 countries
  • Tier2 ARPDAU – the daily app revenue per user in tier 2 countries
  • The ratio of ad revenue out of the total

We also wrote up a full post on the comparison between ad networks here or download the full comparison spreadsheet below for free.

FREE AD NETWORK COMPARISON SPREADSHEET

 

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Game Design, Startup Tips

15-Ideas-for-Game-Bots

Lately I have been hearing more and more buzz about bots being the new apps. Many of my friends who until recently were working on new apps are now working on new bots and Facebook announced recently that there are already 11,000 bots on its messenger platform. This led me to ask myself what kind of game bots can be build on messenger – what is going to be the Angry Birds of bots?

What game bots can you find today

I reviewed the discovery channels for bots and came back quite disappointed. The only games I could find were trivia questions and a poker game that was almost impossible to play. I thought it would be nice to share some ideas and see if they become a reality. If you end up pursuing one of these you can give me credit or not – up to you.

Ideas for game bots

Screenshot 2016-07-14 16.21.591- Spot the difference – this game has been around for as long as I can remember and it’s fun for kids as well as adults. The user gets two pictures that are identical with a few small exceptions and has to find the differences.

2- Personality quizes – In this game the user answers a series of questions about himself and once he finishes he gets to know a new aspect of his personality. This one has many flavors: “What Disney charachter are you?”, “What pop star are you?”, “What type of guy will you mary?”, ….

3- Drawsomething like game – this is a game that has to be played in pairs where one player doodles a picture and the other person has to guess it. Due to the highly social nature of this game it should work well on Messenger.

4 – Who said that (usually politician vs. villan) – in this genre of games the player is presented with a sentence and has to guess if it was said by famous person A or famous person B. When confronting a polititation with a super villan this is lot of fun.

5 – Guess the image (2 options) – guessing what’s in the image can be lots of fun to play in messenger and makes a great fit as it’s highly sharable. In this version the player has to only chose between 2 options. Some popular version of this game in web where:

6 – Guess the image (list) – this one is very similar to #5 but here you have more options to chose from and has to progress through a list. Some popular flavors of this game on web and mobile were:

  • Name the logo
  • Guess the Emoji
  • Guess the picture in the closeup

7 – Spot what’s wrong in the picture – in this game the user is challenged to spot something that defies the common sense in the picture. This OCD test is a good example

8 – What food has less calories – this game is slightly educational – the user is presented with 2 pictures and has to guess which one has less calories.

9 – Sports betting – placing bets on sports matches is a huge business in countries where it’s allowed. A messenger bot can be the perfect way to do that without worrying to much about installing apps and creating accounts.

10 – Song guessing – identifying songs has always been a fun thing to do. In mobile, Songpop made millions on this but there are no bots that offer this type of gameplay yet.

Screenshot 2016-07-14 16.10.1611 – Wordwhizzle – This popular mobile game could be easily turned into messaging based interaction. The bot presents an with the letters and the user has to make the word with a single hint.

12 – Would you Rather – There are a few successful mobile games in this genre: “Either”, “Would you Rather” and more. The user is presented 2 options for example:

  • Be in a car accident that kills only you
  • Be responsible for a car accident where you live but your family and friends die

Once the user makes a selection he is presented with the statistics about the distribution of the responses.

13 – True or False – The bot presents 2 sentences to the user who has to guess which sentence is true.

14 – Sports betting – This is probably the most profitable bot service you can make in countries where betting on scores of games is regulated. Sometimes a messaging interaction could be the

 

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App Monetization, Startup Tips

can app companies succeed with ads only header image featuring the word success on an optimistic green gradient background

Many mobile app companies are asking themselves if they still have a shot these days. Are there still opportunities left for someone starting small these days where so much competition already exists from much bigger guys like Supercell, King, EA, Zynga, etc.

The short answer is yes. Lets see how:

The rise of rewarded videos

The top grossing games are monetizing mainly with IAP and competing with them becomes harder and harder. One of the main obstacles for smaller companies is the competition with the huge user acquisition budgets that bigger companies have. On the flip side, these budgets are an opportunity to make revenue from placing ads in your app. This is the opportunity that exists in rewarded videos today. The big game publishers are willing to pay high CPIs that translates into big payouts for apps that can get enough users to watch videos.

Forecasts show more money going into mobile advertising

The good news doesn’t stop with the current trend. Forecasts shows that mobile advertising and specifically video advertising in mobile is going to triple over the next 4 years. This is a result of big brand advertisers starting to warm up to video advertising. Research firm eMarketer is forecasting this revenue to reach $195B in 2019.

mobile internet ad spending worldwide 2013-2019 based on eMarketer research - showing a forecast to reach $195B by 2019

This means that the opportunity to create ad-supported apps is going to get bigger in the next few years.

Organic traffic or paid marketing

Traditionally app companies that monetize through in-app advertising are relaying on organic discovery and word of mouth virality. However, in the last 18 months there is a new breed of companies that are able to generate enough revenue from advertising to be able to also invest in paid marketing. These companies are paying in marketing dollars to get users into their apps and getting paid back for sending these users to other apps. As counter intuitive as this may sound, an app that is able to make more money on a single user than it pays to bring that user in can justify their marketing spend.

Examples of successful ad-supported App Companies

Some app companies that were able to make double digit millions of dollars (based on estimations) while monetizing mainly through advertising: Outfit7, Tabtale, Mobilityware, Gram Games, Tapps Games.

Maybe your company is the next on this list.

If you are planning an ad-supported app you should plan on attributing your ad revenue. Check out SOOMLA Traceback – Ad LTV as a Service.

Learn More

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Resource, Startup Tips

What is an Accelerator?

Imagine, you wake up one morning with a killer idea for a new company. You know it would be amazing and super valuable for the industry. However, you have no idea where to begin. All you know is that starting a company can’t be easy. It takes time, money, innovation, and a whole lot of creativity. Startup AcceleratorsSo you begin researching and poking your head around the internet, checking Reddit, Quora, Google, and find a lot of people mentioning accelerator programs. You come across big name companies such as Airbnb, Twitch, and Parse all started in an accelerator. You realize that this is the way to go and begin finding the accelerator that’s right for you.

Seed accelerators, also known as startup accelerators, are fixed-term programs to help entrepreneurs kick start their company. These programs usually offer mentorships, educational seminars, and other benefits. While many might think accelerators are just for startups, that isn’t true. Game studios can easily benefit from the mentorship and entrepreneurial tips accelerators offer. At the end of the day a gaming studio is a business, selling a product – the game. We can clearly see this shift in the mobile gaming industry as more and more game studios become GaaS, Games as a Service. Game Studios are now continuously deploying updated versions of their games and employing analytics to measure and optimize the product’s usage. Accelerators can help studios learn and maintain these practices which will help grow their studio in the long run. Developing the game might be the fun, exciting part, but for the game to be successful it needs to be marketed which means having a strong understanding of the industry.

There are hundreds of accelerators worldwide, all offering varying programs to help startups get their feet off the ground. There are, of course, the more well-known accelerators such as Y-Combinator and TechStars, which are extremely competitive, but can offer a huge network of alumni. These larger accelerators are always looking at ways to diversify their portfolios, so just remember it never hurts to apply.

Startup Accelerators: The Big Guys

Y-Combinator
Founded: 2005Airbnb_Logo
Located: Mountain View, CA
Batches per year: 2 (Summer + Winter)
Logistics:
• Invests $120K in return for 7% equity
• 3-month program – must relocate and live in the Bay Area, CA for the duration of the program
Notable Startups: Dropbox, Airbnb, and Reddit

techstars logoTechStars
Founded: 2006
Located: Boulder, CO
Batches per year: 2 (Winter + Spring)
Logistics:
• Invests $100K in return for 6% common stock
• 3-month program – must relocate and live on site for the duration of the program (have programs in a variety of locations)
Notable Startups: Contently, Localytics, and Kinvey

Founders Institute
Founded: 2009
Located: San Francisco, CA
Batches per year: 4 (Fall + Winter + Spring + Summer)founder-institute
Logistics:
Shared Liquidity Pool
• 4-month, part-time program
Notable Startups: Udemy, Appota, and PetHub

500 Startups
Founded: 2010
Located: Mountain View, CA
Batches per year: 4 (Fall + Winter + Spring + Summer)
Logistics:
• Invests $125k in return for 5% equity
• 4-month program
Notable startups: Tamatem (mobile apps & games), PicCollage, and Punchd (acquired by Google)

DreamIt VenturesDreamIt-logo
Founded: 2007
Located: Philadelphia, PA
Batches per year: 3 (Winter + Spring + Fall)
Logistics:
• Custom seed investments when required
• 3-month program – relocation is not required
Notable startups: Meerkat, SeatGeek, and BioBots

Microsoft Ventures – Accelerators
Founded: N/A
Located: Redmond, WA (have offices all over the world)
Batches per year: 2
Logistics:
• No funding and does not take equity, provides all software, tools, and cloud access needed.
• 4-month program – prefer to be on site
Notable startups: Ranku, Mobli, and RunMobile

AngelPad
Founded: 2010
Located: San Francisco, CA
Batches per year: 2 (Fall + Spring)Postmates-Logo
Logistics:
• 10-week program
Notable startups: Postmates, Mopub, and Adku

LaunchPad LA
Founded: 2009
Located: Santa Monica, CA
Logistics:
• Invests $25-$100k in return for 6% equity
• 4-month program – must relocate to LA for the duration of the program
Notable startups: GameSalad (formerly Gendai Games), Melon, and Flipgloss (acquired by Fordes)

AlphaLab
Founded: 2008
Located: Pittsburgh, PA
Logistics:
• Invests $25K in return for 5% equity
• 5-month program – must relocate during the program
Notable startups: ModCloth, Mobile Technologies (acquired by Facebook), and ShowClix

The Brandery
Founded: 2010
Located: Cincinnati, OH
Logistics:
• Invests $50K in return for 6% equity
• 4-month program – must relocate to Cincinnati for the duration of the program
Notable startups: Cintric, HireWheel, and Off Track Planet

MassChallenge
Founded: 2009masschallenge_logo
Located: Boston, MA (have offices in US, Israel, and UK)
Logistics:
• Uses a competition framework to shape their accelerator therefore they do not take any equity and companies are eligible to win $2 million.
• 4-month program – must relocate to the city of the accelerator for the duration of the program
Notable startups: Gameblyr, Anfiro, and Grapevine

MuckerLab
Founded: 2012
Located: Santa Monica, CA
Logistics:
• Invests $21K in return for 6-8% equity
• 3-12 month program – must relocate to LA for duration of program
Notable startups: Surf Air, Twenty20, and Retention Science

Blue Startups
Founded: 2012blue startups
Located: Honolulu, HI
Logistics:
• Invests up to $50K in return for 6% equity
• 4-month program – must relocate to Honolulu for the duration of the program
Notable startups: Pharmly, Wicked Loot (game development company), and Comprendio

Amplify
Founded: 2011
Located: Venice, CA
Logistics:
• Invests $50K-$200K in return for 5% equity
• 4-8 month program
Notable startups: Gear Frontier, Alphadraft, and Repost NetworkThe Amplify community

BoomStartup
Founded: 2010
Located: Salt Lake City, UT
Logistics:
• Invests $20K in return for 6% equity
• 3-month program
Notable startups: 7 Generation Games, Flying Software Labs, and Parakeet

Capital Innovators
Founded: April 2011
Located: St. Louis, MO
Batches per year: 2 (Fall + Spring)
Logistics:
• Invests $50K in return for 5-10% equity
• 3-month program – must relocate to St. Louis for the duration of the program

Tech Wildcatters
Founded: 2009
Located: Dallas, TX
Logistics:
• Invests $25K in return for 8% equity
• 3-month program
Notable startups: Yoolod, Game Time Giving, and Jackpot Rising

They Might be Little, but They’re Mighty

While the larger accelerators, of course, have the big names and at times larger budgets, the smaller accelerators are just as successful. There are also many smaller accelerators that are geared only for gaming studios.

Game Studio Accelerators

YetiZen (only accepts Game Studios, Game Platforms, Game Publishers, and Game Tools)
Founded: 2010yetizen
Located: San Francisco, CA
Logistics:
• 3-11% equity
• 3-month program
Notable startups: Grantoo, Frenzoo, and YesGnome

GameFounders
Founded: 2012
Located: Malaysia
Logistics:
• Invests approximately $17K in return for 9% equity
• 3-month program – must relocate for the duration of the program

Core Labs (part of GSVlabs)core labs
Founded: 2015
Located: Redwood City, CA
Logistics:
• 10% revenue share
• 6-month program – prefer studios to relocate, but do not require it
Notable startups: Spread Shot Studios, Dream Harvest, and Aze Games

Global Top Round Accelerator
Founded: N/A
Located: Foster City, CA
Logistics:
• Invests $35K in return for either 7% net revenue share OR 3.5% equity
• 6-month program
Notable startups: Headup Games, 1506 Studios, and KBJGames

Stugan
Founded: 2015
Located: Stockholm, Sweden
Logistics:
• 2-month program – must relocate to the cabin in the woods

Game Dojos
Founded: N/Agame-dojos logo
Located: San Francisco, CA
Logistics:
• 3-month program – not required to relocate
Notable startups: Little Think Tank, Plain Vanilla Games, and Focused Apps LLC

Execution Labs
Founded: 2012
Located: Montreal, CanadaXL_Logo_rendered_positive
Batches per year: 2 (Winter + Summer)
Logistics:
• Maximum investment of $50K with a max. return of 14% equity
• 3-month program – must relocate for the duration of the program
Notable games: PewDiePie: Legend of the Brofist, WinterForts: Exiled Kingdom, Shattered Planet, and Big Action Mega Fight!

Accelerators for All (Including Game Studios)

Bizdom
Founded: N/A
Located: Cleveland, OH or Detroit, MI
Batches per year: 2 (Winter + Fall)
Logistics:
• Invests $25K in return for 8% equity
• 3-month program – must live for the duration of the program in either Cleveland or Detroit
Notable startups: Deck of Dice Gaming, Greenlancer, and Passage

RevUp by Betaspring
Founded: 2009
Located: Providence, RI
Batches per year: 2 (Spring + Fall)
Logistics:
• Invests $75K, takes no equity, but return the investment as a percentage of revenue over a 36-month period.
• 3-month program – do not need to relocate
Notable startups: Mavrck, Modelo, and Splitwise

Chinaccelerator
Founded: 2010
Located: Shanghai
Logistics:
• Invests $30K with the option to invest up to a predetermined amount in the company
• 3-month program – must relocate for the duration of the program
Notable startups: FancyCellar, Shophop, and App2ez.com

FounderFuel
Founded: 2011
Located: Montreal, QC
Batches per year: 2 (Fall + Spring)
Logistics:
• Invests $50K in return for 6% equity
• 3-month program – not required to relocate
Notable startups: Spot, DoBundle, and Playerizeworking picture

Nxtp Labs
Founded: 2011
Located: Buenos Aires
Logistics:
• Invests $25K in return for 2-10% equity
• 3.5-month program – must relocate for the duration of the program
Notable startups: TinyBytes Games, Moblabs, and Populy Games

StartUp42
Founded: 2013
Located: Paris, France
Batches per year: 2 (Fall + Spring)
Logistics:
• Invests $5K and 0% equity (but access up to $100K of government funding)
• 4-month program – must relocate for the duration of the program
Notable startups: Pistache, defab, and Themecloud.io

SeedSumo
Founded: 2013
Located: College Station, TX
Logistics:
• Invests $50K in return for 10% equity
• 3-month program – should try and be on site for the majority of the program
Notable startups: askU, Fanout, and Gazoo

Lightning Lab
Founded: 2012
Located: New Zealand
Logistics:lightning lab logo
• Invests $18K in return for 8% equity
• 3-month program – must relocate for the duration of the program
Notable startups: Future Insight, Tomato, and Promoki

SparkLabs
Founded: 2012
Located: Seoul, South Korea
Logistics:
• Invests $25K in return for 6% equity
• 3-month program – must relocate for the duration of the program
Notable startups: Dropbeat, DoubleMe, and Rap Wanted

For More Game Studio Accelerators

There are still hundreds of accelerators that weren’t mentioned, but are also viable options. If you’re interested in finding more here are a few other resources to help you find the perfect accelerator for your studio:

Accelerat.io
MyStartupLand
Global Accelerator Network

It is important to evaluate what you’re looking for and hoping to achieve before applying to accelerator programs.

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Startup Tips, Tips and Advice

The first time you get on a marketing call with any prospect, competitor or potential business partner might be somewhat intimidating for some people.  I recently hBlog-Post-Meme-First-Marketing-Callad a first such call and found that it required certain preparations to increase my confidence.  I’m not referring to sales calls or to cold-calling, but to a pre-scheduled call with another party that you want to learn about.  If it’s your first call on the job, or your first encounter with a new party, here are some tips that will help you steer your way through the call successfully:

Plan Your Goals

Or, in other words, start from the end.  What do you want to accomplish from this call?  What, in your opinion, would be deemed a successful call, and what would be considered a mediocre result?  What assessments or learnings would you like to come out of the call with?  What key numbers or statistics would you like to know from the other side?  If you ask yourself these questions beforehand, you’ll have a better idea of what you want to talk about and where to lead the discussion.

Set a Discussion Framework

Usually when you get on a call with another marketing/biz-dev person and you’re past the hellos and intros, you want to take the lead and layout in several points the main things you’d like to discuss.  Imagine this as a short table of contents – just like you’d expect to have a TOC for long articles in Wikipedia.  This sets a framework for both sides, a mini agreement if you may, of the call’s agenda.  It clears the smoke and helps the other side get a clear idea of what to expect from the call, and it also puts the reigns in your hands for initiating the framework.  Another valuable effect of setting the discussion framework is that it nonverbally emphasizes that this call has a time boundary.  The person you’re talking to is just as busy as you, and neither of you want to get caught in an endless conversation.  Here’s a rather simple example –

“What I’d like us to do today is to discuss your company’s product – X.  I suggest you start by presenting yourself and <your company>, I’ll follow and tell about <our company>.  Then we can discuss what plans you guys have for X during 2015, and we can talk about some mutual opportunities there.  I’ll elaborate about our new initiative Y and how it’s relevant for your company, and we can wrap up by talking about some ideas for reciprocal content publishing.”

Present Yourself and Your Company

Since we’re in a first-time contact with the other party, it’s only curtious and fair to the other party’s satisfaction that you present yourself and your company.  This isn’t exactly an elevator pitch, you do have more than 30 seconds, but don’t make it too long.  I’ve learned that people (including myself) have an easier time digesting numbers and names rather than understanding exactly what your product does and what technologies you use.  So assuming that your company and the other party are operating in the same industry and share the same “lingua franca,” there’s no real need in to dive into details.  Here are some bullets I usually use for presenting:

  • SOOMLA was founded in 2012.
  • We’re an open source company – all of our code is freely available on Github.
  • We have 500 multi-game studios and more than 4000 live games using our open source framework.
  • We’ve raised $1.4M till date and are raising another round these days.
  • Some notable publishers using our technology are Disney, Sega, Gumi, Chillingo and Kabam.
  • We’re a team of 7 strong and growing.

Let The Other Side Talk

This is actually basics of human psychology more than it is marketing.  People like to talk.  People especially like to talk about themselves and their work.  You should be generous and give the other person significant time to talk about themselves in order to build trust and to let them feel comfortable in the discussion.  As the conversation develops, you can support this by asking more “door-opening” questions to new subjects the other side is eager to talk about.  An interesting thing that happens many times is that the person you’re talking to will disclose more information than what you thought would be accessible to. This is great because new learnings are being achieved serendipitously.

Ask Open-Ended Questions

Consider that one of your goals from a marketing oriented call is information discovery.  If you’ve planned the call’s goals, then you should know which key learnings you’d like to uncover, and this should drive what questions you ask and how.  When you pose open ended questions, you’re empowering the other side to choose how they want to answer your question.  What this technique does is usually gets the person you’re talking with to answer with much more detailed responses than asked, which can open new “threads” to the conversation.  An open question also avoids falling into the selection bias trap.  What I mean is that you don’t offer the other side both the question and the possible answers.  What you really want to learn about is the answers you didn’t even think of.  An example of an open-ended question could be:

“So tell me, what are your goals for project X in 2015?”

Offer Shared Initiatives

Eventually, you’d like to take action with the other party in a way that creates value for both sides.  Many of these initiatives can be from content marketing.  Some things that come to mind are guest blog posts, shared articles and hosted webinars that show how to use both companies’ products together.

Keep Things Cool

People will remember you for the best if you were nice to them.  Make sure to be polite and friendly during the call.  Consider preparing some icebreakers before the call as well.  Check up on the person you’re calling in social media, learn where he or she is from and what they like to do.  It’s always useful to be able to spark up some small talk about any common interests when you first get on the call.  Having backpacked in a lot of countries, I personally find that praising peoples’ hometown or country and sharing my experience there a nice icebreaker.

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Startup Tips, Tips and Advice

Happy New Year - Soombot 20152015 is right in our doorstep, and it’s time for some new year’s resolution.  I thought it will be a fun exercise to look at 2014 and reflect rather than just do a Happy Holidays post. I’m pretty sure there are some lessons to be learned from our experience so in the spirit of being open like we have been since day 1 I’ll share some of the more interesting events.

 

Killing the Storefront right after our seed round

January 15th was the official closing date of our seed round. It was a $1M round with over 15 participants. Quite a big vote of confidence for our small company. Confidence? How so? Funding and confidence are often mixed by founders. In reality, getting an investment should not make you more confident as investors will never know your company better than you. Quickly after the money was in the bank, we already knew that the company’s path is not the right one. The Storefront product was something we really believed could help game studios but the reality was that despite its sharp design and intuitive UX, developers just refused to use it. It was a tough decision to make but we had to kill it.

Discovering how popular the framework has become

Since we killed our commercial product we could focus a bit more on the open source framework. One of the questions we always tried to ask ourselves is how big it really is? It was only in May this year when we finally had the answer. We went to a meeting with a potential partner and while we started mumbling something about our estimates regarding the popularity of SOOMLA, he said: “I just got this new cool tool that tracks SDKs, want to try it?”. He was referring to MixRank and soon enough we realized that SOOMLA is about 10 times what we thought it was. We were thrilled with this new information.

The road to GROW – the first unilytics platform

So being the market leader and having a huge community of developers around the open framework is one thing but we knew that we need to generate clearer value on the business side of the game. With Unity and many other providers moving in and providing different services to developers around cloud, monetization, advertising and analytics we knew that we needed something that will be very unique if we wanted to capture developers’ imagination. The idea of disrupting the analytics space with a community based approach first entered our minds around April and while still evaluating other ideas like game server and anti-fraud solutions we started validating the idea by telling developers about it. The responses were extremely positive but we knew that for this product to have value to anyone we needed a critical mass. After all, if you are benchmarking your game – there better be other games to compare it to. To check if we can overcome this problem we tried to sign up game studios in advance. In 2 months we were able to sign about 80 games adding up to 14M end user installs and after 6 months we had over 60M end user installs. We knew we are on to something good and we worked to develop it as quickly as we can. At the end of October the beta version was live and in the last few days we are seeing over 15K DAU and will quickly reach the needed critical mass.

The lesson to be learned

Analyzing this sequence of events, it took us way too long to kill the Storefront product. We didn’t want to kill our beloved product so that’s for sure part of the reason. There was another problem, however, we didn’t have a good alternative. It was only after we knew the true size of the open source community when we realized there are new options out there. Looking back at the last 2 years of the company, I believe we could have done more to better assess it. On the flip side, there are a few choices that made a huge difference for us. First of all, choosing inbound marketing and open source as a distribution strategy paid off big time. Second, keeping the burn rate low was very tough at times, but this is what allowed us to pivot when needed. And lastly, the combination of a great team and a fast growing billion dollar market is what generates pivot opportunities so that choice already proved itself time and again.

So now that we are fully pivoted to our new position, 2015 is going to be really awesome. This is the year where SOOMLA breaks through!  In that joyful spirit, we’d like to wish the entire gaming community, and especially developers of the SOOMLA community, a Merry Christmas and a Happy New Year.  We wouldn’t be this far down the road without you.

 

Merry Christmas 2015 - Reindeer Bot

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“You might have noticed by now that I’m allergic to veto rights” – That was how I started a recent email to an investor with who we are finalizing the paperwork for an up and coming investment. Maybe we should start from the beginning. This is our 4th investment round for SOOMLA and my first company EyeView had too many rounds to count by now. All this experience has led me to focus all my negotiations on the veto rights. Here are 5 reasons why you should consider a similar approach.

Veto rights can decrease your valuation

Most likely the protective provisions that the investor will ask for are designed mostly to limit your ability to raise future rounds. Some investors will be upfront about this but in other situations you might find different terms that require investors’ consent for board changes, changes to existing rights or other changes that might look innocent. In reality even the latter ones effectively mean that the investor’s consent is needed in order to raise a new round. In theory, an investor should have a motivation to keep the company alive but in reality more institutional investors are eager to increase their position, and controlling future funding means they can force an internal round at a lower price.

Preventing exits

While most founders will be ok with an outcome of a few million dollars investors usually have a target return that is x times bigger than their investment or sometimes x times what they planned to invest in the company life (even if they haven’t invested it yet). Investors can usually afford to take bigger risks since they are diversified. Most likely a $20M exit after 3 years could be a really good thing for a young founding team of 2-3 founders but investors might not be that happy with the outcome even if they invested a year earlier at a price of $5M. To prevent founders from selling too early, investors add control provisions that allow them to prevent a liquidation event if it’s too low.

Certain control provisions create leverage

While some rights might look innocent, the ability to veto budget decisions, salaries, expenses or any other operational decisions can create leverage for the investor and give him or her tools to force the company into a situation where it needs quick cash. Given in the hands of the wrong investor these types of rights can limit the company’s funding options and result in a down round.

Sets precendence for future rounds

The reality of funding rounds is that while the share price of the last round is the starting point for the next round, the protective provisions you gave in previous rounds are the minimal rights the next investors will ask for. The number of times an investor gave up a right given to previous investors is zero.

Distinguishes good investors from bad ones

Successful companies are run by their CEO. Investors that try to drive from the backseat are preventing companies from succeeding and one of the best ways to identify such investors is by the amount of operational control provisions they want. In addition, focusing negotiations on the veto rights leads to real discussions about future situations and what everyone expects from them. Its easy for investors to say, I want to veto salary changes but what they really want is to make sure you don’t liquidate through the salary and there are less controlling mechanisms to ensure that.

As a last result require coalition for veto right

There will be situations in which you will have to give up your fort. The investors will insist on them and you will not want to walk a way. If that happens the second best to having no veto rights is requiring investors to unite in order to activate that right. Ideally, you would want investors to agree unanimously as a condition to activate the veto but any threshold that forces investors to form a coalition makes it hard to use it as leverage.

 

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Recently I had the pleasure to explain a few basic game publishing concepts to a several investors who didn’t have a lot of game industry experience but were eager to learn. I thought this knowledge could serve other new comers as well.

Q: What is game publishing and how it evolved? 

Game publishing history starts in the days where the only way to distribute a game was through retail chains. Very much like book publishing or the music industry the gaming industry started with an offline distribution model. In the days, the core functions that game publishers fulfilled were funding the risk and getting the game to users. In the days of online games, users started downloading games and playing online rather than buying them at stores but the role of publishers still revolved around bringing the users and funding the game production. The big change started in the the days of facebook games and mobile games.
 
the historic role of publisher is to fund the risk in game development as well as distribute games to retail stores. Call of duty for xBox was burned to CDs, put in boxes and sent to stores.

Q: What led to the change in the role of game publishers?

The emergence of Facebook gaming and mobile gaming changed the way people discover and find games and centralized it. In this world the game distribution channels are accessible directly to the developers and the function of bringing the users to the games is now provided by Apple, Google and Facebook. In a sense, they are providing a big part of publishers’ historic role. Another big change is that developing games became a lot easier and cheaper than it used to be in the past. With more and more game productions being self funded, publishers started waiting for the games to be finished before deciding to allocate funding. In other words, publishers stopped funding the risky part of game development.

Q: What is the publisher role today?

With the two core functions gone, publishers needed to re-invent themselves. Their role evolved into a mix of:
  • Production guidance based on best practices and experience
  • Improving App Store placement and ASO
  • Funding a test budget for user acquisition
  • Tracking game performance and benchmarking
  • Providing monetization tools
The main difference is that these functions are not as exclusive as they once used to be.

Q: What does IP mean in the gaming industry?

Unlike other technology industry where IP (Intellectual Property) usually means a proprietary piece of technology that would normally be patented. In the gaming industry IP normally means a set of characters, art work, gameplay and trademarks that users developed strong emotional bond with. In a recent example, Rovio developed a great piece of IP around Angry Birds and was able to transfer it to physical merchandise and sequels.

Q: What is 2nd party publishing?

To understand that, let’s first answer understand what is 1st party publishing. 1st party publishing is when a company is publishing their own game. This is the model used by Zynga, King.com and Supercell with their games. 2nd party publishing is when a publisher designs a game around newly generated IP or existing IP. The contracted studio is mainly in charge of programming the game. One area where 2nd party publishing deals are common is game porting. In game porting, the publisher already developed the game for one platform and is now taking it to new ones by outsourcing the development.

Q: What is 3rd party publishing?

In 3rd party publishing deals a studio comes up with a unique set of IP: great art work, innovative gameplay and lovable characters. The publisher’s role is smaller in this type of deals and is a mix of the things mentioned above (tools, funding, production advice, …). There are two types of deals in this model. Co-development and publishing only. In co-development, the publisher is committing to the project in advance and is funding it through it’s riskiest phases. In addition, the publisher helps with the game production and guides the development. In a publishing only deal, the publisher would usually take a fully developed game and will make a test to see how the game performs. In other words, the publisher will cross-promote the game or put some budget for user acquisition but only the minimal amount required to determine if the game is a hit or not. Some publishers will do this in bulk and will perform this kind of testing with dozens of games to find one that will show good results and then promote it aggressively. The co-development model is considered a much better model for game studios, however, they are more rare and usually requires good relationships with publishers as well as track record of game development. Many young studios engage in a 3rd party publishing deals to start building those assets so they can later on win co-development projects and 2nd party engagements.
 
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Startup Tips

One of the things you often hear from younger entrepreneurs is that they rather keep their ideas a secret from fear of competition. More specifically, the scenarios they describe is they are concerned one of the bigger companies in their space will ‘steal’ their idea. The main problem with this misconception is that it prevents startups from validating, learning and iterating on their ideas.

Suggested experiment to prove the competition myth wrong

If you haven’t read Lean Startup by Eric Ries I highly recommend you do. One of the core principals of this new management theory is to iterate on your MVP through a build-measure-learn loop. Obviously, this requires getting your product out in very early stages which might seem risky to some entrepreneurs. Eric suggests the following experiment to prove that the risk is almost zero:
  • Take one of your less important ideas or one that you are not pursuing
  • Find the big company who will be most likely to steal it
  • Identify the product manager in charge of this product line
  • Try to convince him to pursue your idea
If you actually go through the process or if you spent any time working for a big company you will soon realize that this is impossible. Big companies always have more ideas than resources to pursue them and their appetite for risk is a significantly lower than yours. Moreover, as soon as you will start iterating on your idea, it will change and evolve so much that in 6 months, you wouldn’t even recognize it as the same idea any more. Even if the big company product manager would have pursued your idea, he will never be able to iterate on it as quickly as you can. Try to imagine him explaining to his boss the that the idea he was pursuing was not good and how he learned in the process that there is a new idea that is worth pursuing but most likely this idea will change too in a few months. I can’t imagine a single company who will allow that.

The empirical proof – startups don’t lose to competitors

In boxing, the opponent is your biggest threat and will likely knock you down. In startups however, the risks are far bigger from macro changes and general lack of interest by the market compared to the competition
There is another way to think about it. We can actually analyze what kills startups in the real world. The statistics show that only one out of 10 VC investments succeed but I would argue that 99 out of 100 companies don’t even get VC backed. Y combinator’s acceptance rate in 2011 was 3% and in 2012 it was 2% – can you guess the ratio in 2014? So what really kills startups? Chris Dixon in his blog post – Competition is Overrated argues that it’s mostly indifference and lack of awareness. I find to be very accurate. The world is not waiting for new ideas. Most people think the way they are doing things is just fine and you have to work pretty hard to convince them otherwise. This is yet another reason why testing your value hypothesis early is so important for a startup.

SOOMLA competitors are long gone or pivoted away

When we started out, there were a few companies people named as potential competitors. Some of them ran out of funding and shut down. One big company that made us lose some sleep is Chartboost with their store product. I’m glad to say that both companies realized that the store product was not worth pursuing. Chartboost decided to focus more on their core business which is advertising and SOOMLA pivoted to focus much more on the open source framework and we are actually exploring a potential collaboration these days.
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Startup Tips

Recently I had the opportunity to judge in a qualification process for a startup acceleration program called Mass Challenge. It was great to see how much innovation we have in our small country but it was also obvious that some of the applicants were making big mistakes in their applications.

Mass challenge applicants were making mistakes that decreased their chances of being accepted into the program

First mistake – Single person teams

Teams with only one person have a small chance of being accepted into an accelerator. Even worse, they have a small chance of succeeding, surviving or raising money. Think about pitching to an investor – his first thought will be: “you couldn’t even convince your friends that you are going to succeed”. My advice is to find really great co-founders before anything else. Possibly even before you have an idea. The criteria for finding a good co-founder is that you believe he should own an equal part of your company. If the person you found is not worthy of that then you haven’t found the right person.

Second mistake – English level and non-english videos

Israel is a pretty small country. Many local startups realized that and are addressing larger markets like the North American one or the Far East markets. However, a surprising number of applications presented one of the following related mistakes:
  • Having spelling errors and grammar errors
  • Including a youtube video with hebrew narration
  • Giving only Israeli customers as references
Penetrating a foreign market is hard enough as it is. The most basic requirement is to speak the language.

Links to social pages with lack of traction

When you get 100 applications, the easiest way to compare them is by how many users they have. Chris Dixon claimed that 10 million users is the seed round threshold and other expert have emphasized the importance of having traction. Accelerators are a step before a seed round so traction is not a must. However, if you do include links to social media pages, make sure they have some followers. I have seen consumer apps with as little as 250 likes but the biggest surprise was a link to a twitter account with 0 followers. Why would you even put that in there?

Not writing the team members names

Early stage investments are about teams. This is even more true for accelerators. Everything else is likely to change in the future, the product, the business model, the marketing strategy and the technology. There one thing that is supposed to stick is the team and that’s what accelerators are looking for. GREAT PEOPLE. Applying to an accelerator without giving your names is a big no no. We want to google you and  see what your linkedin profile looks like. What code you published on Github and what do you blog about.

Not addressing the critical mass question for a network idea

A pretty big number of ideas this year had a network component. Platforms for connecting people to make decisions, share tasks, sell items, make food for others, map traffic accidents and many other things all have one big thing in common. You might call it “the chicken and the egg problem” or “the critical mass problem”. The core of the problem is that the first user that wants to use the service has 0 value. If you want to buy and there are no sellers you will go elsewhere and if you want to sell home made food and there is no one buying you will not use the website. It’s a big problem and any startup that relays on building a network should know two things:
  • What is the critical mass? When can use come in and receive value immediately?
  • How do you get to the critical mass? What value can you give in the meanwhile to make people stay?
Most teams didn’t even show that they understand that this was an issue. If your idea falls in that category, make sure you have a plan to solve the critical mass problem.
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SOOMLA - An In-app Purchase Store and Virtual Goods Economy Solution for Mobile Game Developers of Free to Play Games