Startup Life
Technology. Startups. Venture Capital. My Life.
Product Management for Mobile Gaming
Mar 10th
As an aspiring tech CEO, I have been told numerous times that being an “A+” Product Manager will provide the experience, understanding and discipline to become a great CEO and to lead an accomplished company.
I often provide strategy and product development guidance to some of our portfolio companies; however, I wanted a more immersive experience and to be part of the excitement of startup life. So over the last several months, I increased my assistance to a particular portfolio company in the Toronto area, which I believe is well positioned in the marketplace. Strategy discussions with management of this company led to a conversation to bring me on-board as Product Manager of a new mobile social game at the idea stage. Eager to help the company succeed and to gain additional experience, I undertook a more formal responsibility on evenings and weekends as Product Manager. It was a perfect fit for both the company (lacked product management capabilities) and my career ambitions.
As part of the team, I faced my first challenge: Figure out the best way to manage the development team and the product. I evaluated several methods of product development and eventually settled on SCRUM since it is ideal for agile development with rapid iterations and incremental updates — perfect for an iPhone game.
For product managers that are new to SCRUM, be sure to check out the SCRUM Reference Card (great overview) and beginners SCRUM Guide (fairly basic). These were helpful resources in my quest to better understand this product development process.
It was my next goal to conceive of a process to coordinate everyone’s collective efforts on the team to come up with ideas and potential features for the game and to convert that list into the Initial Release Plan and Product Backlog for the game. I created a spreadsheet in Google Docs and shared it with the team. I wanted to be a very transparent Product Manager and show the team everything that I saw — idea list, resource planning, timeline estimates, business value associations to product features, etc… I did this because I believe that transparency will help the team better understand my points of view and decision-making rationale.
Since I am continuing to learn, I invite you to have a look at the Initial Release and Version planning spreadsheets that I created to manage the product development process. Naturally, I stripped out any game-specific information, removed the names of people involved and altered values so that it would no longer represent our plan in any fashion. Other small changes to this public version include:
- For the idea list tab, each item should be a minimum of 4 hours to a maximum of 16 hours only; tasks less than 4 hours should be placed on each developers Scratch Pad and aggregated into an item on the list; tasks greater than 16 hours should be broken down into components (if possible) to fit within the 4 – 16 hours window for ideal planning purposes.
- Each developer would have his or her own “Scratch Pad” (the demo version only shows 2).
- The only tab that was completely removed was the method by which we determine business value for each product feature.
- The “Product Backlog” tab is dynamically driven from the “Idea List” tab and broken-down into version and sprint for each assessment; a tip for collecting the unique “Groups” is to export the long list of Groups from the “Idea List” into Excel and create a Pivot Table, then select the grouping and extract the unique elements to import back into Google Docs.
- In the “Product Backlog” tab, you should determine your own complexity factor for the project (a guide to determining this factor can be found in the SCRUM Guide linked above).
I would love to hear your questions, comments and (hopefully) suggestions to further improve what I have already created in hopes of making this effort more successful. If you would like a copy of my example spreadsheet, please let me know and leave me your email address in the comments section below; I’ll make sure to get you a copy either on Google Docs or as an export to MS Excel.
My next post will discuss putting this plan into action.
Reward Systems that Drive Engagement (via Amy Jo Kim)
Mar 9th
Amy Jo Kim, CEO of Shufflebrain, gave a talk at Game Developers Conference 2010 and focused on the web-meets-gaming world (called metagame design). This is the practice of applying game-like reward and feedback systems to non-game applications for the purpose of driving loyalty and engagement. This slide deck (embedded below) focuses on three levels of metagame design: points tables, feedback and rewards, and viral outreach. She also reviews the pros and cons of metagame reward systems like levels, badges, leaderboards, spotlights, and quality ratings. AJK was kind enough to post those slides online for the community — thank you!
Metagame Design – Presentation Transcript
- MetaGame Design Reward Systems that Drive Engagement Amy Jo Kim CEO, Shufflebrian
- What is a Metagame?
- Using out-of-game info or resources to affect in-game decisions Gaming definition
- Layering an rewards system onto an existing activity
- Metagames are Everywhere
- Collecting Complete Collections — Gain Status, Access, $$
- Behavior Chart Collect Stickers – Earn Privilege or Prize
- Karate Develop Skill – Earn Rank, Prestige, Powers
- Scouting Complete Tasks – Earn Badges, Rank, Prestige, Powers
- Frequent Flyer Programs Spend Money – Earn Points – Redeem for Flights
- Arcade Spend Money – Earn Points – Redeem for Items
- Text RPG Complete Missions – Earn Points – Redeem for Items
- Contest/Raffle Take Action – MAYBE Win Item
- Contest/Raffle Take Action – Maybe Win Item
- Tournament Play Sport – Enter Tournaments – Earn Ranking/Trophies Leagues & Teams are part of this
- Tournament Play Sport – Enter Tournaments – Earn Ranking/Trophies
- So how do you design a Metagame?
- Metagame Design Framework Viral Outreach Feedback & Rewards Points
- Metagame Engagement Loop Post updates, give gifts, send taunts Get feedback, earn rewards Take actions, earn points
- Act React Customize Create Earn Spend Step 1: Assign points to actions Viral Outreach Feedback & Rewards Points
- Which ACTIONS earn points?
- Which REACTIONS earn points?
- 3 Types of points
- Experience Points (XP) – earned directly via players’ actions – track & reward socially/economically useful player actions
- Skill Points (Score, Rank) – earned via interacting with the system – based on mastery of the activity or game
- Influence Points (Rating, Reputation) – earned via the actions of other players – proxy for quality/reputation/influence – track & reward socially valuable contributions & actions
- Is your points system tracking skill, experience, or both?
- Is your points system assigning ratings to people or objects?
- Can you Spend your points?
- Levels Leaderboards Roles Reputation Missions Challenges Achievements Collections Step 2: Add Feedback & Rewards Viral Outreach Feedback & Rewards Points
- Levels are shorthand for participation and achievement
- Leaderboards identify, motivate and reward your most devoted players
- Social Leaderboards drive competition and enable missions
- Leaderboards can cause problems – don’t be afraid to remove/hide/change
- Missions tell players what to do next
- Mission-driven engagement loop Post updates, give gifts, send taunts Get feedback, earn rewards Accept Mission Update Mission List Take actions, earn points
- Reputation and Ratings track quality/skill + motivate contributions
- Achievements provide short-term goals + sense of progression
- Motivate newbies with easy-to-earn rewards
- Motivate power-users with scarce resources
- Motivate contributors with a rating system
- Updates Gifts Sharing Invites Step 3: Grow through Viral Outreach Viral Outreach Points Feedback & Rewards
- What are the ‘social moments’ in your game?
- Competition Bragging, Taunting, Challenging
- Cooperation Sharing, Helping, Gifting
- Self-Expression Check out my character/outfit/farm/page
- Case Study: Farmville
- XP + coins earned by completing tasks
- Customize your character
- purchase seeds
- Plant & Harvest Crops
- Help Neighbors
- Design & Develop Your Farm
- Buy exclusive items with $$$
- Tutorial introduces pts, levels, rewards
- Earn coins, level up, buy more stuff
- Leaderboards facilitate social interactions
- Achievements come early & often
- Achievements displayed as collections
- Achievements displayed as collections
- Help your neighbors, then brag about it
- Many opportunities for self-expression
- Gifting pulls people into the game
- Case Study: Stack Overflow Technical Q&A site w/crowd-sourced moderation
- Ask/answer good questions to build Reputation
- Leaderboards for Reputation score
- Earn badges by performing basic site tasks
- Question: why no viral outreach?
- 5 Tips for Designing a Compelling Metagame:
- Create a coherent experience that unfolds over time
- Define a points system (XP, social pts, redeemable pts) that supports your purpose and audience
- Introduce feedback and rewards that motivate newbies, enthusiasts, and contributors
- Design rewards that players will be eager to share
- Use “game pacing” to grant rewards over time
See Amy Jo Kim’s profile on GDC 2010.
Understanding Social Game Player Dynamics
Mar 8th
Understanding the behavior of players of social games has been an expensive lesson to learn by many companies, often picking up bite-sided pieces of insight through extensive A/B testing and internal metrics over time. Many companies have also tried to better understand the viral invitation process and successful virality of social games both on and off the Facebook platform. An academic paper entitled “Diffusion Dynamics of Games on Online Social Networks” was recently written by Xiao Wei and Jiang Yang from the University of Michigan, Ricardo Matsumura de Araújo from the Federal University of Pelotas, Brazil and Manu Rekhi, VP of strategy, marketing, business and corporate development for Lolapps.
The paper analyses the viral spread of an application and how/why are these processes occurring. SocialTimes.com did a great post that summarizes the academic paper. Alternatively, you can view the entire paper here.
Some of the key findings are summarized below:
- On average, each inviter has invited 26 friends while the median number is 10
- Just 10% of users account for 50% of successful invites
- Around 90% of users share their locale information
- Around 40% of users share their friend list
- Only 1% of users share their relationship status
- Invited users remain in the game longer: over 50% kept on playing for more than a day and 20% of all invited users were still playing 80 days later.
- Around 80% of non-invited players leave the game within the first day
- Overall, they find that invitation strategy is more important than demographics in determining invitation success rate
To determine how to create a profitable social game, please explore my previous blog post on the importance of Customer Acquisition Costs for startups.
The Importance of Customer Acquisition Costs for Startups
Mar 8th
I recently came across the blog of David Skok of Matrix Partners and was inspired to write this post by an article on customer acquisition costs. If you have not yet read through his blog’s vast resources for entrepreneurs, I suggest you do so – particularly if you plan to pitch your startup to VCs anytime soon.
After being pitched countless times by startups, as a VC I’d like to identify a common misconception that web-based startups often have about their own growth potential and the costs associated with their plans. Management of web services companies, SaaS companies and mobile (web-based) applications commonly believe that because they are situated online, customers will come across their service, submit a purchase order (or subscribe) and notify friends or other companies to use the service as well. Although this may happen from time to time, it is very rare for any company to experience sustained viral growth.
Many companies don’t understand the difference between viral marketing and viral growth. Viral marketing is essentially “word of mouth” or “person-to-person distribution” and is the latest buzzword. Viral growth implies a K-factor greater than 1 (i.e. for each new person who tries a product/service, they will each invite more than 1 registered user of the product on average). Since true viral growth is so hard to achieve in practice, many companies miscalculate the actual costs it will incur to acquire customers. As David points out in his article, the majority of startup pitches lack detail/emphasis on how much it will cost to acquire customers. I second this statement entirely.
Business Model Viability
For a business to be profitable on each new customer, startups must balance two variables: (1) Cost to Acquire Customers (CAC); and (2) Lifetime Value of a Customer (LTV).
CAC can be calculated by taking the business’s entire cost of sales and marketing over a given period (including salaries and other employee expenses) and divide it by the number of customers that the business acquired in that period.
LTV can be calculated by looking at the Average Revenue Per User/Customer (ARPU) over the lifetime of a business’s relationship with a customer.
As Steve Blank mentioned in his recent post, an early indication that a business has found the right business model is when the cost of acquiring customers becomes less than the revenues generated from the customer. “For web startups, this is when the cost of customer acquisition is less than the lifetime value of that customer. For biotech startups, it’s when the cost of the R&D required to find and clinically test a drug is less than the market demand for that drug.”
Credit: David Skok.
Zynga is a great example of a company that has managed to decipher the business model of online social gaming. After thousands of A/B tests and experiments, Zynga finally found a business model where CAC was less than LTV. Once they cracked the nut, the company spent so much on customer acquisition that it was rumored that they accounted for upwards of 30% of Facebook’s revenue in 2009 though its aggressive social ad buying strategies. Similar business models and opportunities exist in virtual worlds, massively multiplayer online games (MMOGs) and many other online businesses. Many social games, such as those created by Zynga, leverage virtual currency, micro-transactions, emotional response mechanisms and social influence to promote the sale of decorative and functional virtual goods.
Before investing in a web-centric startup, good VCs will look deep into a company’s business model and know to look for CAC and LTV metrics. In fact, Trident Capital recently held a meeting with their online advertising and ecommerce companies to help exchange best practices for customer acquisition and improving LTV. My advice to startups: prove out your business model and you will have a much better shot at raising VC dollars. Skok suggests that two key equations be followed by web startups:
- CAC < LTV (3x appears to be a rough minimum for SaaS businesses)
- CAC should be recovered in < 12 months (for subscription businesses)
Startups, if you’ve already figured out your business model and how to make CAC < LTV, stay very quiet and add as much fuel to the fire as you can afford. Your competitors will likely try to hone-in on your tactics and fight back for their share of the market.
Credit: Steve Blank.
Leverage Startup Metrics
Startups are different from larger companies and therefore need different metrics than larger companies. Metrics will give startups a lens into how well the search for the business model is going and help to identify when to scale the company. Besides CAC and LTV, some essential metrics that startups should be familiar with include Viral Coefficient (K-factor) and Customer Lifecycle. Dave McClure from Founders Fund recently updated his Startup Metrics for Pirates presentation for web sales pipelines. Take a look!
Questions to my Readers
Please consider the following questions and share your perspectives with my other readers and the tech community at large.
- What metrics do you consider the most valuable?
- Do you use any tools to help measure specific metrics for your business?
- What mistakes have you made (and corrected) that can help others succeed?