[When MMOs all had monthly subscriptions, comparing financial health was much easier. But, as CDC Games' Ron Williams usefully explains, metrics for online games are a lot more complex than that for today's microtransaction and ad-supported titles.]
Several metrics to track the general
financial performance of a PC-based online game are easy to come by. However, there are different business models for every game genre and
until a game has significant profits, it is very difficult to understand
the financial potential of a game. More importantly, determining if
a game is being managed to its full potential by the game operator is
even less clear.
In particular it seems there is little ability to
compare how well one online game in a specific genre compares to any
other game -- even a sequel to a game operated by the same company.
What are some of the most useful monthly metrics for understanding how
well an online game is being operated by management?
This model is of particular interest to me because I head up the U.S. division of CDC Games, is one of the market leaders of online and mobile games in
China with more than 120 million registered users. The company pioneered
the "free-to-play, pay-for-merchandise" online games model in China with
Yulgang and launched the first free-to-play, pay for items FPS
(first person shooter) game in China with Special Force - and is now expanding to the West with games like Lunia.
To understand how well management
is driving users to the game, converting precious marketing resources
to paying customers, and keeping possible subscribers happy, there are several
data points to track.
The key metrics to trend month-to-month, and more
importantly the handful of metrics that can be compared across game
genres, game operators, and online game business models are: the total
number of unique visitors (UV) to the game's web home page each month,
average marketing cost per unique visitor on a monthly basis, the total number of
registered users (RU) for the game, the number of new registered users
gained each month, percentage of unique visitors that convert to new registered
users of the game each month, average marketing cost per registered users on a monthly
basis, number of new RUs that convert to new paying users (PUs) of the
game each month, the average marketing cost for new paying users on a monthly
basis, and the total number of paying users for the game.
Total monthly unique visitors
(UVs) are seen as key indicators of the value of websites that generate
advertising revenue on their content. With advertising revenue still
a minor part of most gaming companies' income statements, why is it
important to understand the trend of unique visitors for a free to play, subscription,
or micro-transaction based online game?
Any web-based business with aspirations
to earn revenue is, at the end of the day, following a very simple formula:
find something someone wants to pay money for that can be sold online
(content), get customers to look at the content, and then convert viewers
of the content to content buyers.
This is Google's, Yahoo's, eBay's,
Amazon's, and every for profit online game operator's business model.
Most of the best web-based business models are 100 percent digital --
the entire transaction from marketing to consumption of the
content is all done online.
An online game is just online content
that you need to market in order to sell. The number of potential customers
you can drive to the game's website either through word of mouth or
through marketing spend is the key driver of sales, just like any other
online business. The UV trend line is the best indicator of sales potential
of a game.
Additionally, if the same formula
for determining unique visitors is used -- there are a few debated methods out there
-- it is very easy to compare how well one game is attracting potential
customers versus another. In fact, unique visitors can be compared across entirely
different web businesses, which gives investors that ability to see
where an online game stacks up against the best business on the web.
If you looked at a chart of the top 100 for profit websites ranked by
total monthly unique visitors, you will quickly see that there is a
very strong correlation between number of unique visitors and web-based revenue
and even market capitalization (for those sites that are public).
Of course any web site with a large
monthly unique visitor metric also has significant potential to sell ads, market
merchandise, and most importantly be a major portal in the move to digital
convergence now underway.