There was a time when game key activations were a single revenue event. However, as we have seen the industry transition from ‘games as a product’ to ‘games as a service’ models — so then the industry goals have shifted from ‘sales units’, to a ‘user acquisition’.
The games as a service model has created many opportunities to generate revenue far beyond the first sale or install of your game. With each update and added items your audience can be energized and motivated to re-engage with your IP which in turn can deliver more revenue and extended lifecycles.
The entire business is in transformation and its being led by the big traditional box publishers. In EA’s latest earnings call (May 2017) Andrew Wilson stated his optimism for the shift in the industries model “EA’s games today are live services — amazing experiences that we update and evolve to deliver ongoing fun that keeps players engaged, connects them to friends, brings them more content and grows our network,”. He went on to state further “This strategy has been at the core of our digital transformation, and today our live services are some of the strongest and most vibrant in the industry.”
Take 2’s latest earnings statements went further and gave some indications of the splits, stating “Recurrent consumer spending (virtual currency, downloadable add-on content and microtransactions) accounted for 50% of digitally-delivered net revenue, or 24% of total net revenue.” By no means a small amount.
With all the controversy surrounding the resale of keys, I want to stop and consider the role of these resellers, and bundles in the process of user acquisition.
If we are to consider the cost of user acquisition is what has replaced the cost of marketing, the challenge now is for developers and publishers to find economical ways to acquire users without paying too much for the privilege. This is where key reseller sites come in. A traditional acquisition would be the cost of having that user click on a paid link in a google ad or Facebook ad. The user acquisition is a sum of marketing asset spend plus the click cost of the user moving from a content distribution platform be it YouTube or Google to the developer or publisher check out. Of course, traditional marketing is not going away anytime soon as some type of traditional marketing must always be prevalent to engage audiences — but what if there was a way to engage audiences cheaply and reduce your overall acquisition spend? What if there was a way to take advantage of a whole series of platforms whom specialise in the re-sale of keys? Well, there is.
Online marketplaces are thriving and offer a very economical way to acquire new users. You have to understand how marketplaces work however and tailor a strategy that works for you. Games marketplaces are full of young people that are very price conscious — so you have to ensure that you price competitively. But, does this mean less money for the developer? Even with deep discounts, the net position on the sale would roughly work out the same, as you are not paying huge costs for the user — all you are doing is feeding the ecosystem by introducing your game keys and everyone in that ecosystem does the heavy lifting for you.
When I have spoken to large publishers about these ecosystems and the effects that they have on the business, the answers are still mixed. Most publishers know of and in some cases condone the massive volumes of codes moving into these marketplaces for the very reasons we have discussed. They present a very cheap user acquisition platform. By supplying marketplaces game developers and Publishers can take full advantage of the psychology of the marketplace to deliver themselves lots of users in a short period of time.
I am not saying that this is a fact and this is already being practiced by major publishers and game distributors but there is a reason why the big publishers and developers aren’t pursuing or openly criticising game code marketplaces.
Like them or loathe them Marketplaces are here to stay and whilst they remain efficient ways of acquiring users should always be considered part of an overall strategy to engage with a global audience.
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