Finding Life for Game Monetization Beyond the Megahit

[Music] Thanks. Morning everybody. See a lot of people still uh kind of wiping the sleep out of their eyes. I feel the same way. Um I am Scott Mlullen. I'm the director of ad operations at Rocku. I'm here to give this speech on finding life for gay monetization be beyond the mega hit. Uh, unfortunately our CEO, Lisa Marino, couldn't be here today, so I am subbing in. So, a little bit of background on Rockyu. Who we were when we got started was a top Facebook app and game developer. A lot of you might have might be familiar with the Zoo World franchise. We did that. We did a poker game. We got into reward-based gaming with Bingo by Rising. Since then, we have become the world's largest in-game video ad platform for premium brands and also a game operator. So, we're no longer focused on building new games,

per se, but we have been acquiring existing games that had a successful like fan base and user base that with strong DAU and building off of that and integrating our ads SDKs into them to monetize. So, the current state of gaming, especially with smaller app developers, is you build a game and you really really hope that it's a hit. And with the bigger app developers, you might have a lot of a lot of marketing behind it. You might have a lot of research say these are the type of games that work. These are the solid hits. Let's copy them. problem is a lot of times when that happens you might look and see what appears successful and it might have a lot of reach but it might not monetize and sometimes it's hard to figure out what is actually working. So everybody's familiar with the upsell and roughly 98 and a half% of

users will never spend a single penny on your game or my game or anybody's game. It's just how it is right now. So, it's interesting to me like why is that? Because you go to a coffee shop and you get a coffee and they ask you for a shot of espresso or something, it's like sure, I I don't have any problem at all. It just it seems natural to me. I'm used to it. But when it comes to spending like a single dollar towards something you've spent hours and hours and hours playing, is it because it's a guilty pleasure and people just are not used to, they just don't want to contribute to something that they already kind of feel guilty about? Um, so I have an image of somebody pulling teeth because that's what it feels like sometimes. So you you build all these great features. You put out all this content and it seems like the same people who were buying before continue to buy where the people who didn't buy before aren't

buying. And that can be really frustrating as a developer. So a little bit about my background. I come from game development. So I've been in the industry since 95 and I worked as a developer, a designer, a producer, an animator, an artist, a sound guy, pretty much everything across the board. Um, but speaking of pulling teeth, um, I actually had that done about a week ago. I'm not really proud to say, but sedation dentistry, that is a great upsell. So, talking about intangibles, television, pay-per-view faces a very similar issue that we do. And I always try to look at other industries and see how they've dealt with problems. And it's interesting to me that even though I come from the background of development and I know how hard it is, I will sit in front of my computer sometime or in front of my TV and say, "Do I really want to spend $5

on this movie that's going to keep me entertained for like 2 hours?" I'm like, "Well, I'm already paying for cable and I have like stuff on my DVR, so I could probably find something that's not going to cost me any money." instead of spending $5, which I have no qualms about spending five bucks at a bar. I'm in a bar, so I'm gonna get a drink and it's going to be gone in a matter of minutes. And so, I mean, it's funny just I have the background and I still have problems spending money on something that's going to go away for entertainment cuz I guess I feel like maybe I'm wasting time and it's not something that I should really invest money into if I'm already investing my time into. So, how do you get over that? How do you how do you get players to actually spend money? I mean, there's been a ton of studies on it, but to me, I think the best way is trying to make it feel as natural as possible. So, obviously, you

want to walk them through it. You want to make them feel like it's not painful at all, and you want to let them experience the benefit immediately. You don't want you don't want there to be any confusion about what they're actually getting. And in our games, we convey to the players like if you're if you don't want to see ads cuz we're going to try to monetize the people who don't don't spend any money, then pay a dollar, pay $2, buy the smallest package there is, and all that will go away. except for like incentivized ads that people actually want to see because they can benefit from it. Um, and then you want to of course create a core loop that brings them back into the purchase flow in a very natural way. So a lot of you are probably familiar with this story. Um, anybody the $300 million button? I see some head nods. Yeah. So

this is a pretty famous story in UI design. And they found on this famous e-commerce site that by removing the registration flow, they increased sales by $300 million a year. And it was not obvious to the designers who did it at all. And basically, instead of having to go through this flow where you say, "Oh, yes, I want to buy this, but first you have to register." And if you don't register first and you're not already logged in, then it forces you into this whole other flow. And that was had a huge huge drop off. And this was happening like well before they started really like putting metrics into games or websites or apps. I mean we're a lot smarter about that now. So we can actually see where the funnel drops off and we can address that. However, it's still not completely obvious what to do about it. So, it's important to realize that players have not spent hours and hours and hours working on your app and you

should never assume that they're going to know just what to do. So, obviously the simplest UI is the best AI because you will lose a ton of people right off the bat if they don't know where to go. And a lot of people focus on the tutorial and they kind of forget about the purchase flow. And if you want to if you want some entertainment, we've done this before at Rocky multiple times. We'll bring in people off the street. We'll have a focus group. And your designers and UI artists will just get incredibly frustrated. It's like talking to your parents about technical issues with their computer over the phone. They're so flustered by how people just don't understand where to go when it seems so so obvious to them. explosion. So, in Hollywood, there's a term about starting with a bang.

And basically, you need to hook viewers right off the bat from the opening frames. And it's it seems less important for Hollywood to do this because they've already got the user to like start watching the movie. But with games and apps, like there's so many games and apps out there, just thousands upon thousands. If you don't get their attention right away, they're, as Meg Ryan would say in Top Gun, and take me to bed or lose me forever. It's the same kind of idea. Like, if I'm not hooked right off the bat, I'm going to uninstall it and I'm going to find something else that's out there unless I've heard such great things that I can actually get over that. So, one of the things that we really focused on on the game side at Rocky for a lot of the games that we've acquired is trying to eliminate as many steps as we possibly can from the tutorial as well as from the purchase flow. So, if you feel like your UI or requires

a lengthy tutorial or even a brief tutorial, like really the best tutorial is no tutorial at all or a tutorial that makes you feel like you're playing the game immediately. You don't ever want to feel like you're just teaching something and they're not actually in the game playing. Um, the other thing you can really do that helps the length of the life of the game is if you have a game that has just a ton of features and you're really excited about the player getting into them and learning all about them, that's great, but you do not want to overwhelm them. You don't want them to go into your app and look like they're trying to learn Maya or something. So re-evaluate the design and see if you can spread out some of those features over time. So maybe level 10 they learn about combat. I mean a lot of games have done this very well. Um but I still see games out there on Facebook, on mobile

that still fail this horribly, especially games that are complex like RTS's or any kind of RPGs. So if you are one of the lucky ones and you actually are successful, it's really tough to keep that up. So you make a hit, mega hit. What do you do now? So you have a lot of challenges ahead of you now. You've got growing community costs. You've got constant content updates. The players want new stuff. Otherwise, they're completely bored out of their minds and they're going to leave. They're going to find something else. And another important thing to know is dealing with community and putting a face on it can be very rewarding for your side as well. So, one of our games, Bingo by Rising,

we have a community. Sorry. Thanks. Please silence your phones if anybody still has their phone on. Thank you. Um, I was going to say putting a face on the community can really help, too. It can also be dangerous. I've I've been in both situations where I have flat out had to tell people like, "Oh, no, that was somebody else you were dealing with back when I was a developer for a very small game on Facebook years and years ago." But when you put a face to it, people are more understanding. They're not looking at the company like just some some corporation out there to take their money. They actually like, "Oh, I'm dealing with a real person and they appreciate it." So, our Carla is so loved by the bingo players that we actually like opened a bingo room just around her that was

extremely popular. So, Candy Crush, even though it's huge, it's going to taper off. It's going to Wayne regardless of what you do. I mean, even though you're adding new features and new content, people are still going to get bored of it. It's just that's what happens. And I mean, the same goes for the development team sometimes as well. Things kind of get stale. And the developers want to make great new exciting stuff, but at the same time, you can't alienate your loyal users that are expecting something from the game. So, we found that games are still highly val valuable after their apex. So, these are a few games that we've had for a while except for Gardens of Time. We

just acquired that um about 6 months ago now, I guess. And you see from the launch date, the DAU at the time of launch and they are substantially lower now. However, oh, I'm sorry. They're not substantially lower lower now. We've actually managed to keep these afloat and by how we did that was by stabilizing the DAOU after any kind of ad spend, finally to the ad monetization and make sure that we are not spending too much on production. And by doing that, we've extended the life of these games. They're not quite as high as they used to be at launch, but they are still sustaining a loyal fan base. So, another game that we acquired fairly recently is Zombie Lane. So, one of the things we did to keep the cost down was offshore it to our Bangalore studio. They've been developing almost

all the content. They have worked with our San Francisco office and the creative team there to come up with a lot of this and work off their designs, but they also have their own design input and do all of the development there. Um, since we picked it up, we've been doing special events, sales, content releases, and as you can see, the DAU has been climbing and the uh, US ad impressions from the ads that we put into the game are bringing in about $850 to $10 CPM and and climbing. It's actually going up with the end of the year. Q4 is always a really great time for ads. Um, we're also looking at 85 to 90% fill for most of the ad placements in the game. And recently, since Burley went away, most of the games that we picked

up had Bersley integrated with them. And so that was an issue because obviously Apple deprecated that. So we had to find a partner quickly. We went with ADM Mob because they for one are close by. They're willing to work with us. A lot of our games use the Adobe Air uh platform which has challenges since it's not really supported by anybody anymore. And what we've been seeing is very high revenue coming in from the mediation that works within ADM Mob. So with Words of Wonder and Gardens of Time, we've been netting ourselves about $15 to $20 RPM, which is what they referred to as CPM basically for our game load interstitials in the US, which was higher than we expected. So it's very nice. So rule number one that we've learned is trying to stabilize the DAOU and the payers. you see

that titles that are over two two years old, they start decaying at about two to three% per month. Really, regardless of what you do, obviously you can save off some of that by adding more content features, keeping them involved, adding virals. Um, but yeah, it's uh it's impressive what our design team has been able to do with some of these older games. We also found that the earliest paying players are are most loyal. So you see the percentage breakdown of each month's payers and you see the ones that have been around the longest. The ones that have been around for over two years for all of these games pretty much make up almost all of our revenue. So the secrets of ad monetization, this graph shows the uh

decline of DG and the increase of ad money. So right now 90% of Rocky video revenue is programmatic. The rest is coming from display and direct sold. This also shows the impressions per DAU for our ad units and we have been going up very very actually very rapidly. I wouldn't say steadily um we've been climbing very very rapidly over the last year really. So you see Q1 compared to the beige uh Q1 of 2014 and it's nearly the size of Q3 and then Q2 is the size of Q3. So we really like where we're at right now. We have 5x video impressions delivered from Q1 to Q4. year-to-year year-over-year growth has been 2.9x and

Q2 has been 2 uh 0x. So, video performance for the ads that we have in our games right now, we have several types. We have the pre-roll, and it's strange to refer to some of these as pre-roll considering that it's really comes from the video world. And that was one of the biggest problems we've had dealing with with demand side partners is explaining the model. So in the video rule in the video world, you'll be watching a movie or something. You'll watch a YouTube video and you'll see a video before the video starts. And if they can't load a video, then for some reason it just goes on to the actual movie that you want to see. and then somewhere in between you'll see an interstitial and then maybe a post roll. So we deal with that world. However, in ours a ad will pop up and

the user will see it and it's really all considered pre-roll because it's not actually before anything. It's an all-encompassing video ad that's playing inside the game. But since the the audience is captive for these games, we see very high completion rates and decent CTR. Um these are two metrics that are very very important to advertisers. We also have the incentive ad. So incentive video ads allow players to watch a video in exchange for goods. I'm sure you're all familiar with this. It's pretty big in mobile right now. And for those, we see even higher completion rates because they're in an even more captive audience. So, this is talking about strong months and weak months. So, as I

mentioned before, you see Q1, Q2 are usually decent. Q2 ends up being fairly strong in June, but really it's Q4 where things really, really pick up in the ad world and come January, most advertisers have spent their money for the most part. So, it usually starts off pretty slow. So, anytime we we're integrating with the pub, we always warn them, get it in before Christmas, as early as you possibly can because you won't see the same returns come January. So this was our Q1 US ad arpoo. You can see we're actually bringing in more money than Twitter or Facebook at the time. It's even higher now. So something else we've learned with the low cost production I mentioned offshoring some of the work to our

Bangalore studio um building new features evaluating the economies see where you can tune things there we have a lot of PMs that have gotten really good at that um making pipelines more efficient eliminating steps that could be preventing users from getting through the flow and like Carla, invest in community management for long-term players and really put a face on it and let let them feel like they're part of the community. So, something else I learned that surprised me when I was working at on a uh Facebook game about 5 years ago now called uh Fast and Furious. We found that some of the lowest cost items that we sold made way more money than the ones that took us forever. So we could create tuning kits that would allow users to customize their car. And what

it took was about five lines of text and a lot of design work. So, I'd go into pivot tables and compare all the stats for all the cars, balance it out, but it was really only about two hours it would take to really get things honed in. And compared to getting a new car in the game, so getting a new 3D model, I'd have to find the model. I'd have to render it, take four hours or so to actually do the design work and pivoting it all out. more hours of scaling it to the right scale, uh, rendering in different colors and whatnot, and then another two hours of flash work. And as you can see, it made basically four times what the car did. And not to say that we just stopped making cars. We still had to make cars, but we knew that we could do something relatively quickly in a bind and make a lot of money and stick with that and end up extending the life of the game and

extending basically development costs. So, another technique that a lot of of game companies have done is allowing users to create their own content. Obviously, it doesn't work for every game, but the ones that it works for works very, very well. I mean, that can really add a ton of life to the game, even after the game is no longer supported really. So, obviously Minecraft and the Fast and Furious game we worked on, we had car shows and people would would dress up their cars using the available decals and color schemes that we had and then we'd have contests and giveaway cars and that kind of thing. and that really helped grow the community. So once we follow all of our rules and we apply these to new acquisitions that we have, we see the same behavior happening. So keep the game going by adding new

content, new features, growing the community, offshoring what you can, and implementing ads to non-payers. So Rocky will exit 2014 on a 100 million uh run rate for ads. We are now 20 to 25% um margin and we are serving 1 billion impressions per month across our entire ad network at the moment. And that's it. Questions? Yes. How do you go about finding a good um overseas group to help with affordable costs? How do you how do you like how did you find the people in Okay. Um sorry what is your name? I'm Alexis. Okay. Alexis at Nodespace asked if how

do how do you find a good studio overseas. So that is a very difficult question to ask but the best way is really word of mouth. Like talk to other developers find out who's good who they've had good experiences with. Um, I don't think they have like Yelp on that, but that that's an idea for an app out there. Somebody rate foreign studios. Um, we basically found out from working with several studios. And a lot of the people that I work with now, I've worked with for like 15 years or so. So, we have a lot of resources that we can talk to and find out who's good and who's not. But really, I mean, that's the only way that I really know. You mentioned a couple of games acquisitions that you guys had made. Can you talk about the process and how those came about? Yeah. Sorry, what is your name? I'm Brad. Thanks.

Um, so basically we look for games with a lot of reach. They don't necessarily need to make a lot of digital good money, but obviously that's a huge plus if they do. Um, we reached out to Disney, played them and purchased several of those games. You can see Words of Wonder, City Real Life, um, Gardens of Time, and we're in the process of another one right now. The transition process is another difficult thing to answer. It really it's a the CEO will describe it as a snowflake. It's nothing's exactly the same, but we do have a process in place where we have all of the heads of all of the different parts of the company get together, make a central dock, and go over everything that's going to be needed to make this happen. So, that includes how are we going to migrate the servers? Are there legal issues to deal with? Um, transferring user info from

databases to databases, what do you do during the interim? Like, you've got to do you have to code freeze. Can you store their data here and then merge it together so there is no downtime? How do you minimize that? There are a ton of questions that have been asked. We've been doing it really we we got started doing this about 3 years ago with Bingo by Rising. We learned some lessons there. We also acquired some games from 50 Cubes which was Mall World and Fashion Designer. Learned more lessons there. We also integrated those teams into our office. So that helped a lot too when you bring in some of the people who have been working on it. I wouldn't ever recommend just buying a game outright and saying thanks. See you because there's going to be major problems. There's also contracts to deal with. Do they owe anybody anything? Um in my situation with the with the Fast and Furious game, that was back when nobody was getting licenses from the for the from the car companies. So I we started getting cease and desist letters

and that's pretty much when we started shutting the game down because we couldn't afford to pay all these things, but I was a team of two. So um I hope that answers the question. Any other questions? All right. Um, I've been reminded to ask you guys to uh fill in a questionnaire of sorts. I guess it's electronic. So, thank you for your time. [Applause]