Conversion rate has become the standard for determining success in the
casual games space. In both formal and informal meetings within the
casual games industry, conversion rates are both guarded and flaunted
depending on what your numbers look like. Microsoft has taken every
opportunity to mention the conversion rates of the top Xbox Live Arcade
games, and the larger casual games industry has noted the need to
improve conversion rates in order to become even more financially
successful. While improving conversion rates is certainly a good area
of focus, there are limitations to conversion rate that make it an
incomplete measure of the casual games industry.
Where Conversion Rate Succeeds
There are many reasons why we use Conversion Rate. It is a very useful number as it ties sales to downloads. Conversion Rate is easy to collect and since it is reported as a percentage it doesn't give away specifics to competitors. At Reflexive we use Conversion Rate instead of Sales as our key ranking metric due to its self-correcting nature. That is to say that while listing the top games by sales is likely to keep the same games at the top of the list as they continually generate more sales, using Conversion Ratio creates a more dynamic list that corrects itself. Increasing eyes on any one game increases its sales, but if the downloads increase at a faster rate than the sales, the game will drop out of the top sales list, maximizing the audience's exposure to a variety of games.
Where Conversion Falls Short
Conversion rate in most industries is a ratio derived by dividing the number of sales of a product by the number of total customers. However, the casual games industry uses a different conversion rate, dividing sales by the number of demo downloads, giving you sales per download instead of sales per customer. This provides a limited definition of who your customer is and does not provide you with any information about them outside of their reaction to the game's downloadable demo. By neglecting to collect information on customers who drop out early in the process, you miss valuable information on ways to turn site visitors into paying customers.
What is Penetration? (Downloads/Customer)
While the conversion ratio used by most industries (sales/customers) and the one used by the casual games industry (sales/downloads) don’t measure the same thing, we can find the missing piece of information by dividing sales/customers by sales/downloads. The resultant number is downloads/customers. This number, which I call Penetration, can then be used along with Conversion Rate to explain two pieces of useful information. From Conversion we estimate how many sales are occurring per the number of downloads. From Penetration we determine how many downloads are occurring per the number of customers (with customers being a unique visitor to the website).
Case Study: Penetration and Geometry Wars
Geometry Wars makes a great case study on the usefulness of Penetration, as only some of the numbers have been released. Using the released numbers, we can see how Conversion Rate leaves us somewhat in the dark in regards to the success of the game.
On January 13th, 2006 Microsoft reported the Conversion Rate of Geometry Wars was 23%. On March 27th, 2006, the Conversion Rate on Geometry Wars had grown to an amazing 39%. What caused the change in the Conversion Rate? How did the change affect sales per customer? Did having a 39% Conversion Rate mean it was selling better than when the rate was 23%?
Using just the Conversion Rate we are lead to believe that the game has become a better seller, and while this may be the case, we can use the numbers reported by Microsoft to illustrate that we don't know this for certain when we use only the Conversion Rate.