So here are some harsh figures that will make you cancel your ad spending for your indie game.
In the last 8 days my figures show me this…
For every 100 visits to my index page for D3, 48 people will proceed to the register page. Of those, 11 will hit the buy button, of those roughly 1 will buy the game. That earns me about $22.
so the maximum cost per click that makes sense is $0.22, or £0.13, which is practically unachievable.
So how can ads make sense?
The beauty of ads is that the person who comes and buys the click is just one factor in the equation. There are many other factors, and the problem is they are hard to quantify. Here are the ones I think matter and the rough guesses.
- The life time value (LTV) of the customer has to include every other game they buy, including DLC. Assume D3’s DLC adds 10% to total income, and assume a 20% chance of buying another positech game eventually so LTV factor is 0.3.
- The virality of the customer has to include friends that he persuades to buy the game. This is hard to tell, but lets say it’s pitched at roughly 20%. So one in five people will eventually lead to another sale, either directly or indirectly through a forum post or tweet about the game, so this includes people they have never met. So this is 0.2
- The untracked sale. This includes people who visit the buy page at work/school, then buy at home, or view it on mobile but buy on desktop. I suspect that is around 10% so another 0.1.
- The delayed / wishlist/ bargain hunter. I crunched the numbers once for Democracy 2 and found roughly 33% of revenue was from sales, so thats 33% of income not being tracked here, or earned here, but stored for later, so lets say 0.33.
- The impression that wasn’t a sale. This is a big thing. Some people used to say you needed to see an ad 5 times before it worked. Other research claims even 1 impression has an impact, and >5 can still help. Because click-through rates are pretty low, we are totally disregarding the impact on brand awareness. Essentially you visually prime a customer with your logo to ensure subconscious recollection when viewing a review, portal listing or whatever else. Personally I think this is a big factor, lets say at least 25% to be cautious.
So if we add that up, we get 0.3 + 0.2 + 0.1 + 0.33 + 0.25 = 1.18, so an extra 118% of income generated by that sale. In other words our 0.22 is really 0.48. That *is achievable, although still not easy. What should be immediately obvious is that we have a LOT of fuzzy numbers and guesses in here that really cannot be tracked. Putting hard numbers to some of them would help a lot.
Looking at it the other way, we have to take into account the fact that a big chunk of site visitors are not ad related but coming from reviews, portal links, tweets etc. Ideally I need to deduct that traffic to get a better picture (which would make my figures much worse).
So for now, lets assumed that we break even at $0.48 per click, what are the possibilities for making an ad-based strategy work?
- Target traffic more cleverly so the people who arrive are more suited to purchasing. That would push up that 48% who go to the register page.
- Increase the lifetime value of the customer. More games. Cross-promotion. Maybe more DLC, or sequels, there are various strategies here, but I’m already doing most of them
- Reduce leakage points. Find out why people don’t hit the buy button, or then hit the actual order form buy button. A/B testing to improve both stages.
- An ad that more clearly prevents non-buyers from clicking, and thus targets better. I don’t want people who expect a free game, or a mobile game. Luckily adwords lets you analyze each ads performance. I should do this…
Fun fun fun…