Category: business

There seemed to be a time where everyone worked in, or owned factories. Those factories would make widgets. You would build a widget factory that could make 10,000 widgets a year, and it would need to sell 5,000 widgets to break even. If you were unlucky, you sold less, but you probably had upgraded from a 2,000 widget shed/living room/small workshop, so that was unlikely. The best scenario was you sold 10,000 widgets, making perhaps twice the expected revenues and four times the profit. Maybe next year, you can borrow the money for a 20,000 widget factory, assuming widgets are still popular. Over a decade or more, you may end up tripling your salary, as owner.

Now it’s different. If my widgets are digitial, I can scale my factory far more cleverly. In terms of physical workspace, I need none, because bandwidth can be bought per MB and per second in ‘the cloud’. If I need more staff, I can recruit online, choosing from the estimated 1,966,514,816 people who are online, rather than the 2,000 people in my town. My ad budget can scale upwards by a factor of 100, or even 1,000 in the click of a mouse. You can even hire people online on a piece-work basis, and happily outsouce the customer service, the usability testing, the payment service, product fulfilment…

In short, a purely digital business like mine can just scrape along earning $10,000 a year, or thunder along earning $10,000,000 a year, like minecraft, and it can go from one to the other within weeks. WEEKS.

Obviously the reverse is possible too. The zero-infrastructure means there is nothing to sell when things go bad. The benefits of zero physica assets can also be a curse, in terms of the company having no real physical assets of any worth whatsoever.

It occurs to me that this is leading to far wilder income disparities for entrpreneurs than ever before. Only the most hardcore socialist thinks that everyone who runs a business is somehow evil and rich. We all know our local corner store that looks a bit ropey and probably doesn’t earn much. Generally, with the exception of bankers, we consider that competition works, and that businesses are making a reasonable profit, but not likely anything extraordinary unless there are outside signs, like a 10,000 strong workforce or huge headquarter offices.

Online changes that. Its only the publication of his sales data that makes it clear that minecrafts creator makes so much money. It’s only the l33t published office pictures that hint that puzzle pirates brings in some decent cash.

Online is different. People running a business online may be (often are) barely breaking even. They may also be multi-millionaires. I know quite a few people with online businesses, and their profitability varies dramatically. Despite my awkward admission I paid £75 for some jeans once, only me and my family know if positech is any sort of financial success.

Just as there may be more minecrafts than we know, there may be more penniless businesses too. If your corner store drops down to earning $100  a week, the rent is too high and your business folds. I know MANY people who have an online business that earns under $100 a  MONTH. The businesses still exist, albeit as part time ventures. Website rent is trivial compared to bricks and mortar, and the businesses remain active. The spectrum of online business success is far far wider than it is in the real world.

We live in interesting times..

Red buttons are NOT better than blue buttons. I have hard data for my gratuitous space battles index page demo button:

In fact they are much worse:
original
variation

Nothing beats hard data. Extrapolating from this is probably less helpful, given that my page is mostly blue so it might have ‘jarred’ but I had guessed that might be a good thing. it wasn’t.

Here are two assumptions you can (wrongly) make as an indie game developer:

1) If you show ads to someone, and they buy your game for $22, you earned $22 for showing them that ad.

2) If you spend $1000 on ads/marketing in december, and made $1200 worth of sales, you made a profit.

lets look at 1) first.

Obviously, you need to compare PROFIT not revenue, so we can assume that you got $22 after paying the payment company / portal royalty for that sale. But is that $22 the real profit from that customer? No, it’s only the start. If you release some DLC, a sequel, or just another game at any stage, you already ‘have’ that customer, in terms of them being aware of your business, and happy to purchase from you. What you need to do is to look at the average value of a customer over the customer lifetime, not that one sale. My maths tells me that a straight analysis of my google ads in December 2010 shows me losing money…. on the single purchases that derive from those ads, but I definitely make money on the long term. You don’t know the average revenue per customer? Find out…

Now 2)

There is a tendency to look at the total sales and subtract the ad budget and deduce the remains as profit, but there is another deduction to make, and thats ‘sales you would have got anyway’. Obviously we all get word-of-mouth sales, review-induced sales, and search-engine related sales. You need to look at your analytics *only* for the paid-traffic segment, and work out what proportion of sales to assign to the ads, THEN work out if you are making a return.

Don’t think that you can make assumptions there either, the paid traffic might be more(or less) likely to visit the buy page, so you need to actually analyse that. Again, my december stats look pretty awesome if I assign all my sales revenue to the ad budget, but if I only assign the sales that came from the ad traffic, it’s a different story.

These are just two more, of the fourty-million ways in which people can not know the numbers, and thus lose money on ads. This is time well spent. It also makes a change from debugging :D

In a recent discussion amongst indies, someone had stats showing that by switching to a cloud-based file host for their demo, they got a lot more demo downloads than before. I was naturally intrigued.

As a result, I set up an account with Amazon cloudfront, which requires an account with Amazon S3, and a lot of complex nonsense. Eventually, I worked out how to do something simple, like let them host a file, and link to it. grrrr… I lvoe the way you can’t actually see how many times a file was downloaded, or at what speed. That’s awesome reporting they have there….

Anyway, it’s cost be $9 so far, and I’m only doing it for the GSB demo link. Basically, if you download the GSB demo from here, it’s from my server, but the GSB demo from here, is from cloudfront, and theoretically much faster. If anyone is bored/curious enough to test, could you say if there is an appreciable difference?

Also, would it make a difference to you? I have 7MB broadband, and I have very very often cancelled demo downloads if they look like they will take > 30 minutes. I don’t really know why, it just bugs me. I’ve also likely downloaded demos on a whim then forgotten about them. I’m trying to quantify the extent to which a fast download of a demo matters to people.

In other news, I’m coding like mad on LB. Can’t talk about it yet, until it looks anything worth looking at, and thats likely 2 months off. I’m also arranging those extra GSB maps, and dreaming about getting planning permission for something, anything, one day.