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…

 

 

 

10 Responses to “Virality, conversion rates, LTV and why I care”

  1. Tom H. says:

    Only 1 in 11 people who hit the buy button end up buying the game? Sounds really, really leaky!?

  2. mrstarware says:

    Agreed. Sounds like a good marketing focus group/company may be good.

  3. Andy Brice says:

    >Some people used to say you needed to see an ad 5 times before it worked.

    I believe that’s BS dreamed by an account exec. See:
    http://successfulsoftware.net/2010/06/03/do-customers-need-to-see-an-advertisement-seven-times/

    BTW I have found that my adwords ads are more profitable if I include a price in the ad (puts off the tyre kickers).

  4. mrstarware says:

    I do often click a buy link to see what the price is right now. A price feed would be nice for people like me, and help you narrow down the leaks. btw you didn’t mention how many demo downloads you get? How many sales come from buy now within the demo?

  5. cliffski says:

    Democracy 3 doesn’t actually have a demo.

  6. mrstarware says:

    Did you not want to add a demo?

  7. bobo says:

    It all comes down to how committed they are to playing your game. If you make something that consumes them, they will find a way to buy it. If the game is not that good no matter how many ways you entice them, it won’t create the spark that makes them want to get it.

    How good is the game?
    how good is it really? (your opinion doesn’t count, the punters are going to buy it, not you)

    How well are you are you showing them how good it is?

  8. ac says:

    Something doesn’t add up. So 10 people click buy and then don’t buy. I don’t think a buy click should be the point after which you are told the price, so I assume they know the price before clicking buy. And if so, why they then suddenly decide not to buy? Are they actually human clicks or some bot traversing the site?

  9. ac says:

    I’ll answer my own question:
    If after clicking Buy I get multiple pages of forms of forms with crap load of entries, I tend to get second thoughts and then go take another look if the price is really the best I can get. Another possibility is that the shipment cost is revealed after buy, or that the payment methods are revealed and paypal or sepa(ach is similar in US I believe ) is not among them.

  10. ac says:

    One last possibility is that if the price was presented in some currency value of which fluctuates radically (GBP) every year, then after currency conversion and transaction fees etc, it may be that “cheap £” price turns out to be not so cheap when compared to other games *after conversion*. In some types of business you might lock in a currency rate with hedging allowing you to stay competitive in the pricing in the other currencies. (eg, it’s quite typical that 12-15 pounds seems cheap from UK perspective, but at times, from euro perspective that can wind up being 20+ EUR and there various big “AAA” titles available for that price in brick and mortar if you can wait for sales).