Comment & Opinion

Why Kabam chose LTV over ARPDAU

Why Kabam chose LTV over ARPDAU

Recently major F2P publisher Kabam issued a candid press release about how its business had operated in 2014 and its plans for 2015.

A small - but significant - part of this, was the revelation that it had eased "monetization requirements on several games to generate greater long-term customer loyalty".

A good opportunity then for our Monetizer Mavens to answer the question...

Do you think this signal a wider shift in terms of engagement/retention versus monetisation within the F2P industry?

 

Ethan Levy Monetization design consultant, writer of FamousAspect.com

If you've heard any of my GDC talks on game monetization, you know that I've long talked about the importance of valuing long term player happiness ahead of overly aggressive monetization tactics likely to burn your most valuable players.

I think it is a choice that a many games have made in the past, and it is difficult to tell if this statement from Kabam will signal an industry wide trend.

The math here makes perfect sense.

The monetization tactics which are most aggressive are generally those targeted at high-spending veteran players engaged in a competitive elder game.
Ethan Levy

The monetization tactics which are most aggressive are generally those targeted at high-spending veteran players engaged in a competitive elder game.

These players represent the most valuable cohort in most free-to-play games. If a particularly aggressive event causes those players to churn, a game has done immense harm to its ecosystem.

Short-term, it may have helped that game make a monthly revenue target, but in the long term those churned players would have spent even more money if they stuck around for another 6 or 9 months.

In the statement, Kabam CEO Kevin Chou says "As always, we take the long-term view to ensure satisfied customers, sustainable growth and a slate of new games that will lead the market."

My assumption then is that Kabam analyzed some game features or tuning and determined that they were churning players at a high rate.

Given there status as a private company not as slavishly tied to quarterly earnings estimates as their public peers, they were able to make the smart decision and change those games to value long-term retention ahead of monetization.

Ben Cousins F2P game consultant

Ben is a 15-year veteran of the games industry - he's worked as a senior executive, studio head, project lead, creative director and game designer at companies like DeNA, EA, Sony and Lionhead.

He started working on traditional games, but has been focussed on the free-to-play business model since 2006 - an extremely long time by western standards. During that time He's worked on a total of ten separate free-to-play games across five different platforms reaching over 50 million users.

"We did an LTV calculation and realized we'd make more money per user lifetime if we had a lower ARPDAU but with a longer average player lifetime."

Massage that into earnings report language and you get the quoted sentence.

Justin Stolzenberg Director, Product & Monetization Flare Games

I read that press release as Ben does.

LTV in a mass market audience is what counts, and Kabam will boost its production values to maximize market appeal and LTV over ARPDAU and other short-term KPIs.

We [Flaregames] have a similar strategy.

Jordan Blackman Lead Designer Adrian Crook & Associates

Jordan Blackman is a lead designer and producer with over ten years of experience designing, producing, and managing hit content for companies like Zynga, Ubisoft, NovaLogic, & Disney.

Over 80 million people have played games that Jordan worked on as either a producer or designer.

Jordan’s credits include Lead Designer on FrontierVille & CastleVille, Senior Producer and Original Concept on CSI: Crime City (Facebook), Producer on Delta Force: Black Hawk Down, and Writer on Joint Operations: Typhoon Rising.

What happens is that the bigger publishers look at the DAU of their entire network as more important than any one game.

If the entire network DAU starts to go down, it's bad for the company both in terms of perception and in terms of reality.

Kabam just added 10 units of in-game hard currency to all players of The Hunger Games: Panem Rising

Zynga did a great job driving revenue from games but a bad job creating long-term customers.

Sitting on so much cash, they would have been better served building a durable network of brands and fans. Kabam is trying to do the right thing for their business which is also the right thing for their customers.

Zynga did a great job driving revenue from games but a bad job creating long-term customers.
Jordan Blackman

Another interesting angle is that Kabam is pursuing a licensed game strategy on mobile (as is Zynga now). Players who like a The Lord of the Rings game will be highly qualified to play other Kabam games if you can keep them as loyal customers.

It would be a shame to spend money on a license only to churn those new users by driving a little bit of extra revenue. Also, most license deals involve some kind of revenue share. So the publisher has even less to gain with each extra penny spent in the app.

Better to leverage that license to build a loyal customer base for your company and drive revenue for years to come - if you can actually do it.

Finally, as I’m sure others will be quick to point out, retention (and DAU) is just another part of the LTV calculation, so it really isn’t opposed to overall monetization.

They want to keep customers loyal so that they can spend more with Kabam. But it is a shift in focus from shorter term to longer term thinking, and that’s probably in everybody’s interest.

Nicholas Lovell F2P consultant Gamesbrief

It is in everyone's interest - except those people who are not in the lucky position of already having a large installed base of players for an existing game.

The longer Kabam keeps its customers, the harder it will be for new games to get large audiences.

I'm all in favour of this change for the good of the players.

But for all those people out there who wish companies would be less aggressive with their monetisation, be careful what you wish for.

What you seem to be getting is companies who are laser-focused on keeping players inside their ecosystem forever, making it even harder to break a new title.

Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at PG.biz which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.

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