Extending LTV in Hyper casual games

Last time we discussed how a game's LTV curve not only dictates the revenue margins and also the speed in which you can scale - taking less risk by acquiring more users in a short amount of time. It is a cycle hyper growth cycle - the higher the LTV, the more users you can buy, the more you can earn, and the higher the LTV. At the end of the day, it is all depends on the LTV of the game. 

Well known hyper causal game - Crossy Road

Let's focus a bit on hyper casual games and discuss some strategies on how to grow the LTV. Hyper casual games are games that are usually very simple, short lived and very easy to pick up and play. Their cumulative ARPU usually equals to their LTV. The life-time is short, roughly around D30 - D60. Only 12%-13% of players will retain after 7 days. There are 3 main ways to optimize these games - boosting retention (lifetime), optimizing interstitials ads, and refining rewarded video placements.

Since hyper casual games are so short-lived, it is too risky and most of the time, not worth the effort to monetize from IAP (in-app purchase) because IAP usually needs more than 7 days to gain momentum. Therefore, hyper casual games rely mostly on ad monetization. Boosting retention will be a key way to extend the cumulative value gained from those eye-balls. Tutorial funnel analysis, game economy and content progression tuning will be some game design tactics in attempt to extend retention. 

Ad monetization in hyper casual games falls into 2 main buckets - interstitials and rewarded videos.

Interstitials are unsolicited ads that pop-up usually after a user accomplished something in the game or did some action. These type of ads has a very strong negative correlation to retention. Therefore, it is very important to AB test them to find the sweet spot of gaining the most ARPU while minimizing impacts to retention.  As mentioned, having them pop-up after an in-game reward is given is one good strategy since there is a "cliff-hanger" / anticipation of checking out the rewards recently obtained. 

Rewarded videos on the other hand are much more forgiving. It is considered to be the secret weapons in mobile games since it is a ultra rare monetization feature that could lift both LTV and retention at the same time. Even if the placement is not fully optimized, it will not hurt your retention as long as the ad is not too long and has a proper 'x' button. If properly tuned, rewarded video can even help solve retention problem by helping players understand the game better. Because rewarded videos are user triggered, user also enjoys them more and therefore, other advertisers are paying more for them. 

TikTok Marketing

 

    TikTok is a fast growing social media platform that has become incredibly popular with younger generations, especially.  The marketing that I have seen on TikTok is quite different from the type of marketing that I see in more traditional digital marketing channels (tv / web) and even quite different than other social media advertising (Instagram / Facebook). 

    TikTok provides a unique marketing opportunity for brands that can be opportunistic for early adopters and creatives. First, TikTok's algorithm is not based on the number of followers an account has, making it very easy to go viral very quickly. TikTok is also not as saturated or as "salesy" as Instragram. This creates opportunity, particularly for newer or smaller companies. A company can run a successful marketing campaign on TikTok not only by creating viral videos themselves, but also by collaborating with an influencer, or by starting a trend that gains popularity with every day users. Chipotle is an example of a brand that did this successfully. To celebrate National Avocado Day, they challenged users to create videos of themselves dancing to celebrate their love for guacamole. More than 250,000 users uploaded videos with the hashtag #GuacDance, and Chipotle had their biggest day for guacamole sales ever*.

    Another popular trend for marketing on TikTok, is having your corporate account run by interns or junior level employees. Who better to reach a gen-z audience than a gen-z member themselves? HBO Max and Lionsgate are examples of companies that have TikToks being run by younger employees. Some of the videos make jokes about spending too much time on TikTok and asking users not to show the video to their boss. Other videos beg users to like and share the video so that the employees don't get fired. This is an interesting marketing tactic - brands using junior employees in an attempt to be more relatable to their audience.

  Overall, TikTok seems to be providing a new medium for brands to get creative with their marketing and it will be interesting to see how it develops as the app continues to grow.

*Source: https://businessrecord.com/MobileContent/Sales-Marketing/Sales-Marketing/Article/Marketing-Smart-marketing-on-TikTok/180/856/94611

    

An Unlikely Duo

Crockpot - yes, that Crockpot - is getting into the NFT game. As they approach 50 years in business, the company is looking to diversify their consumer base by entering the oh-so-young-and-cool arena of NFT's. The open auction style release will feature designs that honor their past and future and be sold on OpenSea with profits going to charity. 

As the NFT/crypto world evolves, it's so interesting to see how major corporations react to the hottest thing in technology since the iPhone. Crockpot is probably one of the most unlikely players you'd see getting in the game but, surprisingly, it's also one of the first. By using this channel to build brand awareness, Crockpot is also, somehow, showing that the company is innovative and is willing to take risks to engage and broaden their target customer. This more than likely piggy backs off of the massive amounts of cooking younger demographic groups did at home during the pandemic. It's a strong, smart play and it'll be interesting to see how much success it brings. 

Source: https://www.prnewswire.com/news-releases/the-crockpot-brand-auctioning-first-ever-nft-to-celebrate-its-50th-anniversary-301399827.html

Twitter debuts new ad features, revamped algorithm ahead of ecommerce push

As Twitter is looking to embark on e-commerce, naturally it has sought to bolster its ad campaign strategy. With a new algorithm, Twitter is now able to target larger groups of users early in the campaign process to understand the level of interest through engagement levels. This will display more relevant ads to the user and increase the likelihood of more clicks.

The goal of this effort is to increase in-app purchases on Twitter.

Article read: https://www.reuters.com/technology/twitter-debuts-new-ad-features-revamped-algorithm-ahead-ecommerce-push-2021-10-12/

The Importance of Digital Marketing in Capital Raising

Crowdfunding platforms like Kickstarter and Indiegogo were disruptors in the technology space when they launched platforms almost a decade ago to allow entrepreneurs or artists or anyone with just an idea to use a global platform to raise capital to bring their ideas to life in exchange for a reward (usually a product). 

Crowdfunding platforms gave creators direct access to global capital which was not available to them before. With the success of rewards-based platforms like these came the advent of equity crowdfunding platforms like SeedInvest and Angelist that allowed startups to raise capital in exchange for equity from non-institutional investors.

While any of these platforms afforded the opportunity for creators/entrepreneurs to target a global audience, the success or failure of campaigns (i.e to reach or exceed the raise goal) relied heavily on the marketing efforts spent to drive awareness of these campaigns. 

For product oriented campaigns, some key marketing channels to consider are:

• Social Media - Creating business pages and posting launch dates / product updates on all social channels.
• Digital Ads: Creating Facebook and Google Ads and targeting based on audience will provide a solid foundation to build on content.
• Email Marketing: Creating an audience base via newsletter signups will allow backers to stay up to date on release information and any promotional content.

Is It Too Early to Start Planning Your Holiday Campaigns?

Spoiler alert: the answer is “No!”  This year digital sales during the holiday shopping season will be bigger than ever. As noted in this Entrepreneur article: 

“Insider Intelligence’s U.S. Ecommerce Forecast sees digital sales growing by nearly 18% in 2021 compared to 2020. Brick-and-mortar retail is also predicted to grow, but only by approximately 6%. The forecasters believe that the growth will continue after the pandemic subsides as it is likely to be a permanent shift in consumer behavior.”

Every year, most retailers see a majority of their sales during the period leading up to and including Cyber Week, the days around Thanksgiving and the following Cyber Monday.  With this expected growth for e-commerce, digital marketing strategies during the holidays should be defined and developed as early as possible.  This article highlights the importance of this for a few specific channels.

• Search-engine marketing (SEM): Unlike search-engine optimization, or SEO which often has a long lead time to deliver results, it’s not too late to start optimizing SEM campaigns for holiday. As noted in the article, “Generic keywords will be useful throughout the year, but during the holiday season, it is important to narrow them further and target customers even better than normal.” 

• Email: This tends to be a large channel for retailers during most of the year and they should be designing compelling content now for their holiday communication. Inspiration is a big part of holiday shopping, including finding unique gifts or great deals, and retailers can be optimizing email content and messaging to capture customers when their intent to spend is highest.   

• Social Media: As this article states, sales this channel is expected “to increase by more than 35% this year to more than $36 billion.” This is another opportunity for retailers to target the right customers during the holiday.  To do this they need to analyze where their campaigns perform best with their target customers because the same campaign may not be effective across Facebook, Instagram, and TikTok.  

As someone who has worked in ecommerce for the last 10 years, I can confirm that retailers are thinking about holiday tactics as early as June and July every year.  Black Friday through Cyber Monday is basically the “Superbowl” of retail and companies would be best served by focusing their holiday messages on relevant content and in the right channels for their business. 

Instagram problems for teen girls

 https://www.nytimes.com/2021/10/08/opinion/instagram-teen-girls-mental-health.html

The time I was a teenage, social media wasn’t as popular as now and the situation right now does make me feel worry sometimes. Instagram is full of lots of ‘perfect images’, such as girls with flawless skin, perfect body shapes..etc. As adults, we even feel bad sometimes comparing those with ourselves, not to mention the teenagers. Major social media like Facebook and Instagram do have responsibility to promote healthier online contents, which I heard before like Instagram is considering hiding the ‘likes’. However this approach becomes more and more difficult to achieve since those likes can be turned into money and cancel it can cause huge problems. Fortunately, I still see some influencers trying to convey right message like posting ‘instagram vs reality’ to let people know no one is perfect. Its good to get motivation and pursue better version of myself from those pics, but do not let it control your life.

Digital Marketing and PE Intersection

https://www.knopnews2.com/prnewswire/2021/10/13/rlh-equity-partners-invests-leading-digital-marketing-agency-imre/

Working in the field of Private Equity focused in investments in the retail and consumer space in conjunction with having weathered through COVID, I have seen first-hand the substantial importance of digital marketing across all the portfolio companies at my private equity firm. The partners of my firm like to think that COVID pulled forward the massive growth of digital and e-comm by three to five years and in looking at the financials of our portfolio companies, e-comm is by far leading the growth in terms of the different channels further emphasizing the importance of having a digital strategy. Three years ago, most of our portfolio companies were just ramping up their respective e-comm presences and fast forward today, almost every one of our portfolio companies have a head of digital alongside a team. What I found interesting it the attached is how private equity is taking it one step further by investing directly in digital marketing companies. While I believe private equity firms including the one I work for tries to leverage synergies across portfolio companies, what better way to do so than to have a digital marketing company as a portfolio company?

Email marketing with the holiday season approaching

https://www.digitalcommerce360.com/2021/10/11/7-tips-for-engaging-consumers-during-the-holidays-with-email-marketing/ 

This article provided some great tips on how to engage customers with email marketing with the holiday season approaching. The #1 tip, which we discussed in great detail during class last week, was optimizing deliverability. Since the holiday season is such a crucial selling season, businesses need to make sure emails are making it into potential customers inboxes and not getting stuck in spam. The article also points out to strategically plan ahead for increased email volumes during the holiday season, they suggest working with email service providers to develop a schedule that doesn’t overlap with some of their other clients.

 

What will the market think of FB

I mentioned in class that Facebook might not only be exposed from a regulatory perspective, but also from a markets / valuation perspective. The below article outlines such an investment thesis quite nicely. Here are some of the main points with a hint of my own editorialization. 

First, as the article notes "it has become fashionable among Facebook critics to emphasize the company’s size and dominance while bashing its missteps" BUT how is the Company actually performing? Might its size / valuation be unsustainable? 

Two key observations:

1. Facebook has been declining among teenagers for a long time; so much so that internal research indicates a 45% daily usage rate by 2023 - "FB is for old people"
2. A shift towards pushing users into content that was likely to generate "outrage" and "anger" has perpetuated this trend (think of your crazy anti-vax uncle becoming Facebooks primary demographic)

Second, where are its users going? "Facebook’s research tells a clear story, and it’s not a happy one. Its younger users are flocking to Snapchat and TikTok, and its older users are posting anti-vaccine memes and arguing about politics. Some Facebook products are actively shrinking, while others are merely making their users angry or self-conscious." So, in the face of new entrants the push is for further radicalization? A shrinking but higher margin user base will further expose the Company to losses if those users also become disenchanted. 

Third, and to the regulatory point, what should we make of the Company targeting 12 and under demographics? The answer is simple, they are trying desperately to find a new demographic...this isn't a sign of strength or that the Company is exercising monopoly power, but that is struggling to justify its own largesse. 

https://www.nytimes.com/2021/10/04/technology/facebook-files.html 

Walmart opens Netflix Hub to leverage the social network

 Walmart opens Netflix Hub with Stranger Things, Cocomelon merchandise; Squid Game shirts coming soon

https://www.usatoday.com/story/money/shopping/2021/10/11/walmart-netflix-hub-store-exclusive-items-stranger-things/6079601001/

Walmart and Netflix are forming a strategic partnership by launching Netflix Hub, an online Netflix branded store hosted on Walmart website. The products are collectives, action figures, toys, apparel, dolls from Netflix’ popular shows. The partnership offers Netflix an opportunity to expand its branded merchandise. For Walmart, partnering with Netflix provides its customers a place to interact with their favorite show and characters, expand Walmart’s brand recognition into new section of customers who might not usually shop physically and virtually at Walmart store. In addition, the partnership allows Walmart to stay on top of the social media trend, greatly supporting its content marketing efforts and amplifying its social media impact. Similar strategic partnership model is explored by Netflix and Starbucks as well.  

 Gaming - The Next Advertising Medium

Major clothing brands, looking to access customers in the home, are turning to gaming more specifically eSports as white space for advertising. In specific, Hollister is contracting with a world champion from the internationally popular viral video game, Fortnite, to be a gaming scout.  

What is a gaming scout you ask?  

A gaming scout is a gamer who is looking for other gamers to join Team Hollister and compete under the Hollister banner in gaming competitions.  On the surface, these seems like an eye-rolling, millennial-fueled fad of the moment but when we look under the hoodie, there is more at play here.

Looking under the hood, another advertising fad that has shown staying power appears: decals and branding on Nascar cars and sports jerseys more broadly. Why does Team Nike sponsor half of NBA players?  Why does Busch sponsor Nascar?

Because their brand image benefits from the association while spreading awareness en masse, especially when someone on their team wins.

But wait, isn't eSports a tiny niche?

Not at all - over 100 million people worldwide tuned in for the league of legends final last year (more than the superbowl). Suddenly a Chief Gaming Scout is looking like it makes a lot of sense.  I'm sure many other brands will follow suit and do the same, so we Digital Marketers will be smart to follow suit to figure out how to capitalize on eSports eyeballs to drive not just awareness but leads (and ultimately conversions).  

Emails Emails Emails!

I thought this link from a #tech FT newsletter was really insightful; apparently, research is showing that by 2025, we will reach 376 billion emails sent + received worldwide! 

Seems like email is here to stay. 

And if anyone forgot our lecture from last week, email might not be sexy, but it gets the job done! By 2025, email users will amount to 4.6 billion people globally. With higher click-through-rates than other digital marketing tools, email is king!

Interestingly, I just spent the past few days unsubscribing from most of the promotional sends in my inbox - email might be better at getting us to click through, but it's also a drain on our attention. Do I feel like opening my inbox when I want to unplug? Hard no. But do I scroll through IG when I want to numb my mind for a couple (read: 25) minutes? Yes. And am I seeing content there that might not make me click in the moment, but certainly (visually at least) it stays with me. Maybe that is the seed that leads to a delightful excitement when I open my inbox and receive an email from that exact brand I was thinking of buying from... 

The data doesn't lie, but I'd bet that email is strong because the forces around it are doing a pretty good job of reinforcing the messages it brings.

https://www.statista.com/statistics/456500/daily-number-of-e-mails-worldwide/

B2B digital marketing vs. B2C

 

Before I learned about digital marketing, I thought that marketing strategy was targeting consumers. While digital marketing is not only B2C (business to consumers), but also contains B2B ( business to business). 

B2B digital marketing: 

If your company is business-to-business (B2B), your digital marketing efforts are likely to be centered around online lead generation, with the end goal being for someone to speak to a salesperson. For that reason, the role of your marketing strategy is to attract and convert the highest quality leads for your salespeople via your website and supporting digital channels.

Beyond your website, you'll probably choose to focus your efforts on business-focused channels like LinkedIn where your demographic is spending their time online.

B2C digital marketing:

If your company is business-to-consumer (B2C), depending on the price point of your products, it's likely that the goal of your digital marketing efforts is to attract people to your website and have them become customers without ever needing to speak to a salesperson.

For that reason, you're probably less likely to focus on ‘leads' in their traditional sense, and more likely to focus on building an accelerated buyer's journey, from the moment someone lands on your website, to the moment that they make a purchase. This will often mean your product features in your content higher up in the marketing funnel than it might for a B2B business, and you might need to use stronger calls-to-action (CTAs).

For B2C companies, channels like Instagram and Pinterest can often be more valuable than business-focused platforms LinkedIn.

From my own perspective, I thought about an example of B2B digital marketing. Third party administration will use B2B digital marketing more since it's clients are other business companies instead of direct consumers. I worked in an insurance technology company before. Our company needs to cooperate with other third party administration to design a new insurance product with healthy activities. TPA is responsible for providing healthy services and they are willing to add flyers or posters in the introduction page of new insurance products instead of being paid. Their purpose is making more insurance companies who will use our design to know their healthy services and use their services in other products as well. I am curious about how they quantify their outcomes through B2B digital marketing, hope I can learn more in the future.

Reference:

https://blog.hubspot.com/marketing/what-is-digital-marketing 

Digital Privacy and Who Pays for the Internet?

I missed this great piece on the tension between digital privacy and firms on Madison Avenue from Brian Chen of the New York Times when it was published late last month.

Chen summarizes the recent privacy changes implemented by FANG companies and the impact on the effectiveness of digital marketing for big and small businesses.

In April Apple implemented the ability to turn off tracking for particular apps on iOS devices. Google announced plans to block cookies to its Chrome web browser in June. And Facebook announced last month plans to target ads to users without knowing any user specific information.

These changes have come about through a willingness of governments to regulate big tech more, the most well-known example being Europe's GDPR legislation, and through shifting consumer preferences toward privacy.

However Chen rightly points out that this change impacts the effectiveness of digital marketing spend, providing the example of Georgia pastry shop Seven Sister Scones whose Facebook advertising became significantly less effective after Apple's iOS changes, resulting in a drop of monthly revenue from $40,000 to $16,000 in May.

Naturally the implications here are that if digital marketing becomes less effective, then naturally more spend is required to sustain the same conversions and revenue, and thus cost of acquisition increases.  For businesses with tight margins, this may mean switching to more traditional forms of marketing in preference to digital, or if that is untenable, price increases.  Indeed, Seven Sister Scones raised prices 25%.

In this respect, these privacy changes couldn't come at a worse time for the economy, as treasury bond yields begin to increase and inflation fears begin to take hold. 

Advertising revenue sustains a great deal of the internet, so the question becomes - if digital marketing becomes too expensive, who pays for advertising-supported digital products and services?

"I know who has done this"

Apparently, Maxine Waters’ twitter account has been hacked and erased. She “knows who did it and will take care of it.”

I am not sure I believe this, but one thing is for sure, cyber threats are real.  Nearly every company today relies on the internet in some way or another. From the basic use of a computer to store customer data to the full reliance on e-commerce, digital threats grow in scope and complexity every year, and it’s only a matter of time before some criminals target private companies and their ads.  What would it look like if criminals altered a company’s digital ads?

One of the ways to prepare for cyber threats is to better understand what threats are out there. Unfortunately, these threats are constantly evolving as criminals get smarter and more creative to stay ahead of detection.  So, keeping up with the latest cybersecurity news and trends is a must.  While companies are pumping money into digital ads, perhaps does it makes sense to allocate a portion of the budget to cyber security?

 https://www.foxnews.com/politics/maxine-waters-claims-twitter-hack-bizarre-tweet

Progressive Web Apps - PWAs

Going through digital marketing articles, I came across trends of Progressive web apps or PWAs. This is a relatively new digital marketing trend in that it started in 2018 with large companies like Twitter, The Financial Times, Flipkart, Wikipedia, and with great results. Treebo launched a PWA and saw 4 times increase in conversion rate year-over-year. Conversion rates for repeat users saw 3 times increase. Petlove's PWA resulted in a 2.8x increase in conversion and a 2.8x increase in the website’s time. According to the article, PWAs will become lucrative in 2021 and beyond for smaller businesses as well. Having a mobile site or ideally, a responsive site can help the user experience, but even then there can be hiccups. And a site that is lagging or difficult to navigate in the slightest will still leave a bitter taste in a customer’s mouth, leading to a missed opportunity or even a tarnished reputation. With the large influx of customers on mobile, Progressive Web Apps, which are an amalgamation of the benefits of browsing on a mobile browser and mobile app, are increasing in appeal. However, when it comes to reliability, a web app is only as reliable as its network connection. If you have a slow or uncertain connection, the PWA might also load or function slowly. If the network connection is strong, the PWA will perform very smoothly. A PWA that is reliable and fast will be able to keep users engaged. It does this by efficiently and quickly responding to their requests.

With PWAs, it is relatively much easier for anybody to find you as compared to traditional mobile apps for which customers have to go to the app store and search. All they need to do is search for you on Google, and they will be directed to the website. The website immediately launched into a PWA, with no downloading and no waiting. The user also does not have to factor in the usage of additional data for downloading purposes. Most importantly, you prevent the user from getting lost in the App Store and directly guide them to your official website. The web browsers also provide an option wherein you can save the PWA on your home screen as a shortcut so that you can access it instantly. The PWA will then ping you with push notifications as well, should you agree to that. So, it is safe to say that you get all the flexibility of a native app with a PWA without installing it.

Luxury brands are focusing more on digital marketing since Covid

Luxury brands traditionally focused more on physical marketing such as print, billboards and in-person events are shifting more rapidly to focus on digital marketing since the pandemic. 

Customers now expect a well thought-out and executed, and consistent omni-channel experience. 

An example of the investment into innovative digital marketing campaigns is Balenciaga releasing its fall 2021 collection in the form of an online video game, which has taken brand awareness to a new high and allowed the brand to tap into a wider audience.

https://www.thedrum.com/news/2021/09/15/the-future-luxury-marketing-according-marketers

The Impact of Covid-19 on Digital Marketing

Since Q1 2020, a majority of businesses had to rethink their marketing strategy and quick decisions needed to be made as remote work became the new normal. Firms that might have relied heavily on offline marketing had to reallocate budgets and find new ways to target audiences relying solely on technology. 

A Salesforce report that surveyed over 8000 marketers found that over 48% of respondents believed that their marketing strategy has fully or partly changed since pre-Covid. Over 91% of marketers surveyed used social media and digital ads, 86%+ used digital content, websites and applications and over 75% used email. Over 90% also use video which is the medium that seems to have gained the most traction in recent times. 

Covid-19's impact on many B2B firms for whom in-person events was the primary marketing medium was also quite extensive as they had to pivot quickly to try and attract customers via digital strategies. This included increasing presence on social media (Instagram, Tik Tok etc) and upping the spend on influencer marketing.

Overall, all signs point towards the pandemic fundamentally changing the game when it comes to marketing strategy. While the pivot to digital marketing might have happened eventually across the board, Covid-19 accelerated the shift much quicker than expected.

Sources: https://www.retailwire.com/discussion/did-the-pandemic-change-digital-marketing-for-good/

Mobile UA strategy

Last time I have learned a bit more about ad-monetization channels - how can we maximize $ / Imp (CPI) by balancing fill rate and the CPI threshold through ad mediation platforms. The goal is to earn the most revenue by providing ad space to other advertisers.

This week I have interviewed one of my former colleague in the user acquisition team to learn more about the strategy on advertising our own game in other platforms. Basically the other side of the story.

What I have learned is that the strategy is mainly about how much risk you are willing to take to grow your game. It all starts with a foundation curve of LTV. The most fundamental aspect of calculating LTV is the cumulative ARPU - measuring the amount of money you can get over the life time of an average user. 

The growth of the LTV curve highly depends on the by-day retention of a game. Say a Hyper-causal game that only has $5 LTV until the curve flattens out, it doesn't make any sense to spend more than $5 CPI on a channel to acquire a user since it will not make any money.

If my game's LTV is still growing after 3 years, the usual strategy is to think about how much to spend vs. how much risk and growth I am willing to take. For example, if I do a 60 days payback strategy (60 day value = $10) on the 3 years $30 LTV game I've mentioned, I can only acquire users with $10 CPI with low risk and high profit per user over time. However, growth would be suffering since I can't acquire that much user with $10 CPI. On the other hand, if I do a 2 years payback period, I can spend $20 CPI, which allows me to buy a lot more users but I am also taking more risk at the same time and earning less per user. 

In the end of the day, LTV is king. It controls how much you can grow a game and also how much and how fast you can regain those ad dollars spent.