Panel: Source Of Truth – Navigating Conflicting Financial Data

[Music] so another panel next this time with Martin McMillan from mobile Finance Collective uh Justin Stenberg from metica um a Gilda DOA from fractional Eric ludig independent and mariio gajeski from Google um they're going to be talking about the source of Truth navigating conflicting financial data welcome everyone and thanks for um uh showing up to our panel uh on um the source of Truth navigating conflicting

um user acquisition and financial data um I'll just give you a quick introduction I'm Martin McMillan founder of the mobile Finance Collective we're a community a global community of uh CFOs and finance leads and gaming um the very potted history to the community was I'd run a lending business called pollen VC for 10 years and always struck me from working with hundreds and hundreds of CFOs over 10 years um that very often well there was no Community for CFOs there was lots of community if you work in user acquisition or in in ad monetization but basically nothing in in finance um so that's uh that's where the sort of community idea was born from um and we launched about eight months ago um and growing really nicely so we're getting we're teasing out some super interesting insights um uh across the communities so um in this panel today um we were we got some a very interesting uh group of panelists who I'll introduce themselves in a moment um with a bunch

of different um uh experiences and viewpoints on the topic and this this topic within our community is something that had has come up a number of times over the over the last few months in a number of different guises so we thought it would make an interesting take um because you know whether you're on the UA side or the finance side there's a um it it raises some sort of deeper questions within um you know within the sort of wider context of how everyone's communicating with each other and so on as well so um without further Ado I will um I will introduce or well let the panel introduce you um introduce themselves and then we can uh we can get into it from there we just go down the line all right yeah my name is Justin background of uh game Operation product monetization analytics and marketing uh since 2002 browser on mobile gaming um and more recently uh I run an AI startup that um personalizes inapp experience in real time and grows lifetime value then pushes all that back to networks to

Target better um hello marki from Google uh I will actually look at that from three perspective uh one is like I work with top clients of Google from central eastern Europe so I will talk from the perspective of someone who works with big companies but for many years I was working with a lot of startups and startup initiatives Google so I was working with many like Mobile gaming Studios and the third thing is like no I'm angel in many like projects so I'm looking that from the perspective of someone who is paying for something so then like looking at what it means in the reality yeah hi I'm and I work as a fractional CFO in the gaming industry and also as an independent board member um I was prior to taking this role on I was a head of fpna both at supercell and also at CCP games awesome uh Eric lewig uh I've been in the industry for 20 years mobile games industry I was CFO and coo at glue

Mobile in the states public company grew it from10 million to $700 million and we sold it to EA about three years ago for $2 and half billion dollar uh and now I've started a game studio in India uh kind of lowcost offshore Outsourcing cool so lots of experience lots of uh insights to um to share so I thought it' be interesting to start with um you know we talked about this idea of conflicting data um between between you know multiple different sources and so on and and that you know as we'll unravel can manifest itself in a number of different ways so we thought it would be interesting maybe to just start down the line with some empirical examples if you like or context about how conflicting data can lead to real life results or misinterpretations or so on so basically stories from stories From The Trenches if if uh um would would probably the best way to do it who should we just go the line Justin

you I would call out maybe two examples um that I encountered in um the previous company that I co-founded that was an m&a business um where I looked at 50 odd Studios a year um it was a really jarring experience because the studio was enthusiastic when they showed us their numbers about user acquisition but when looking at it more closely they had just switched their MMP they did not import their attributions and it turns out that if you look at UA only through what's in the MMP under the attribution date that is not necessarily reflecting your actual user based growth and so they over spent to the order of magnitude of a million a month for a couple of month and unfortunately went out of business and that's personally that breaks my heart uh actually I can share a few stories like one is uh uh for example the studio that like you know when we're having like know RPG games and like with very loyal audience and uh like they

were kind of looking at very basic data but finally what actually Founders were expecting extremely unrealistic realistic results like they were expecting to have more than 100% day uh 100% Ras on day 30 in RPG game so finally no one nothing was really can be game made but on the other side uh like for example I there was like the startup that I invested in as the as as the angel and uh they were like you know uh like one month one month they were spending like know 20,000 another month they like 4,000 like know because they were not really looking at uh uh what is the actual for example cost of the UA like what is the cost of people who were higher day what is the cost of creatives like what is really the the true cost and and finally actually when when uh when they uh uh uh the they hired like CFO even for for like no few hours per

per per week actually they they someone put that on order and actually create them really nice uh plan okay how much should they should spend to really you know grow the value of the company how it should be done in the way that they could they could be sold like in four years yeah so uh but of course like I I I I saw the cases when uh people were U overspending uh uh quite heavily like know adding some uh unrealistic key factors for example from the organic or like uh uh not understanding uh how to actually compare uh the uh the the cohorts because like on one side someone just got the budget for the for the for the UA and then like the the the the budget was kind of created for the whole six months but meantime the situation in the company changed so actually the the same even Ras on one month totally had actually totally different perspective of the financial situation of the company like 3 months later

yeah so I'm going to take the perspective from from Finance so that's where that's my viewpoint here and from strategic Finance so um it the difference in the seriousness of conflicting data and how it gets used it's very different if it's a Indie studio if it's small or if it's more mature like there are different problems that you're tackling um I have an example of um rather young studio um still like you know 60 people working there and they had a good game out there uh golden cohort was great um they they were really On The Rise uh they had a good game out there and when they're looking at the data um and they're using inputs from their UA channels to factor in okay actually what is our what's the lifetime of lifetime value of our players and like what can we expect to be the payback period and how much can

we invest like these are serious uh conversations you need to and decisions you need to make and what happens is that they've thought they had a Runway so a cash Runway if uh just to explain what a Runway is in normal terms it's it's how much can the company live on the cash that you have in your bank and you make Revenue projections right and so they expected the Run which you be about 18 months but then something really weird was happening like they're investing in their UA channels and they're expecting the revenues to continue to grow and they they had big Milestones to hit but something was just really wrong so we go in and we start to dissect like what's exactly happening so we see from like a modeling perspective like they have the right data but it's being used wrong so their um cost per acquisition was actually factored to be 30% % lower in their modeling and they

expected the lifetime value to be a lot higher and the payback period to be a lot you know uh shorter than it actually was this had the grave um the grave seriousness is this is that they thought they had a Runway of 18 months that got shortened to 8 months so that means the studio had to make very serious and brave decisions a lot faster than they thought they had to do yeah I think I think um data this Topic's about data and how do you use data and finance uses data UA uses data Studios use data and I think you got to really think about the inputs the throughputs and the outputs of the data and this topic is about inconsistency and in uses of data and you know the the how how you process the data and do the calculations is as important as the data you're getting and you know an example I would give here is if we had three games and you ask me what's my day 30 and I

say it's 10% and you say yours is 15 you say yours is 30 of course you're going to think that his his is the best game out there but if his calculation if his throughputs are not using the denominator of installs it's actually fou complete and if he's got a huge deductions from install to complete his 30% day 30 might be 10% and you know so I think it's really important comparability and definitions are really important on top of just making sure you're getting the right data and that you're processing that data correctly and then kind of one one example I'll also give would be a company I was advising and their UA head was saying we have we have a six-month payback on our UA like I'm like this is fantastic let's pour gasoline on the fire let's let's add more because that's a great payback and we they did that and a month later it's like oh the yield curve flattened completely there was no impact from that extra UA spending just didn't make sense didn't make sense and it kind of went on for six more months well it turns out later on when they finally dug into it

the UA had and this was a sophisticated hundred million a year Revenue single game company um the UA head was using paid and organic in the denominator not just looking at the paid and when they stripped out the organic it was like a 720 day not six not 6 months it was 2 years so like that's where definitions really matter and making sure you're you're using correct definitions yeah so you can have the right data but if you're well it can be or vice versa or the wrong data used correctly or the right data used incorrectly so um okay so lots of different pitfalls in there so so the the the one thing then that in talking this through and and and the community discussions so is this idea like the way to the way to navigate around all the different conflicts is there's potentially a part of it which is you know an organizational so like the idea of having not just the UA team saying here is my model and then everyone taking his

gospel but for finance to be able to interrogate it and you know and you know vice versa it's it's a joint effort one of the key things again that's come out in the community is this the intersection of finance and UA so let let you guys talk about that a little bit but but but but maybe to add you I think it's in this case it's it's really important like in the why I saw it in many companies not only important to align on those metrics but I think it's aligned really on the on the approach to the risk because I think on you have find finally you have two points you have risk and opportunity yeah so if you if you put double down on one you have you increasing the other one yeah but on the other side if you want toase the like decrease the risk very often you are decreasing the opportunity yeah so so like if you talk about like really operational and practical outcome of like no payback it's very simple yeah the the shorter the payback the the more traffic you can buy for for specific amount so again it's you lowering the risk but then you are incre like

decreasing your opportunity as well that maybe you can even lose opportunity yeah because you you are creating new game and uh you have just some time before you know it gets really known on the market before like other company starts to look at that uh and try to do something uh similar yes I think it's really about uh how to align the not only the metrics but how to like okay uh are we going like know heavily making sure that you know we are using opportunity but then of course Runway will uh will can really decrease heavily especially in those genres where you the payback is longer and then then then that takes longer to actually uh pay back those those cohorts or when uh uh the traffic is is very expensive so either we uh we buy a lot of traffic if we want to have enough data to optimize theas campaigns or we don't do at all because there's nothing between risk

reward is interesting and part of it is down to Stage right in terms of you know can the company afford to take the risk or is it Bas are you are you basically betting the farm on some kind of UA trade but um Justin like predicting and modeling ltvs and so on is uh having some certainty to do that is a topic I know that's close to your heart so if I reflect on my own Journey um from very Hands-On Performance Marketing to then a pretty scaled organization across eight Studios one thing had to learn is that operational people product marketing teams often live on a completely different time Dimension compared to our finance colleagues we think in cohort lifetimes and finance lives in calendar time and those don't align easily so if I have a crude forecasting model that uses kind of calendar slices of monthly size for example that is hard to translate into how will my January cohort then unfold in January February March revenues and my cash flows um and so where then tools have become

much more uh uh easy to use is in today you can just go and upload your Cort data to CET gbt and ask make me if it's daily granularity make me a calendar-based revenue pivot on that data and that will then help you understand okay takes a long time for the revenue to unfold and become cash so I think I'm six month profitable but the cash is coming in in month eight that creates empathy so to me definitions are crucial the correct data instrumentation is crucial and then working towards each other trying to speak the same language and understanding the different time Dimensions is the next layer on top of how to treat if I have correct data how to treat it together yeah I mean I I think what are this side of the panel where the finance people what are the biggest things we do with data it's about resource allocation for headcount deployments and for user

acquisition deployments and the last panel which I wasn't here for but about fundraising and how much runway do you have those are the lifeblood of a studio and so you know being able to accurately compare internal games whether it's for launch you're in beta and are we going to launch we're in beta are we going to deploy a lot of capital launch or we going to deploy a little bit of capital to launch and do we trust the data or I've got three titles for this quarter and I want to spend I can only afford to spend $2 million whe whatever the numbers are how am I going to allocate that amongst my three titles these are all resource allocations or I got three teams begging for five more headcount each how do I go about that doing that so when I was at glue it was really important for us to have standard definitions across every title and every studio so that we spoke from the same language and then secondly would be on m&a so it's another use of capital is when I'm looking at companies we we acquired 18 companies in my 18 years AG we diligence probably 200 companies we

were very very acquisitive and having definitions that I could look at the data and say I can compare this company's data and feel confident that I can trust that data or internally um this is all why def definitions are so important I think maybe like one more aspect I totally agree on the resource allocation because it's like it depends a lot where a studio is at at its maturity um and typically uh companies they have constraints you have constraints on your cash and you need to make an informed decision it's U it's not only UA that needs to be used you have other methods as well you have Community you have branding um Creator economies as well Creator programs like there are many other ways to create value and actually drive revenue and growth it's not only your way although it's the most popular one in particular with mobile games um and what I wanted to kind of share is that um you're always making decisions on

those constraints and relating back to the topic of like data and conflicting sources um from a kind of leadership point of view it creates tremendous noise if it's there's not alignment there and what does this noise do it just takes a lot of time to kind of get to a place of understanding and a Baseline and actually make a really good informed choice how much are we allocating in UA in branding in marketing creatives and like everything else and headcount so that's my two cents I it's super important the message that keeps coming out is this the importance to all be on the same page so whether it's organization that you've got an understanding of an appreciation of each other's business again it's not all about UA but the the the biggest kind of misunderstanding that again empirically I've seen in 10 years is is UA not standing understanding finance and particularly

Finance not understanding UA some of that due to an organizational kind of silo or kind of like an artificial um thing in post there but the thing we keep coming back to is a set of of definitions so everyone's on the same page and the way to or a very helpful way to avoid misinterpretation is to write it down right so you've got you've got a standard set of definitions now that obviously has impacts in an internal B just in terms of everyone talking to to each other um but then also on an external basis as well so so what one of the things we we've teased out and we're putting a little bit of of work into is you know having spoken to some of the m&a guys as well um how many how many people pitch up with an m&a data room saying here's our standard set of definitions virtually none even for some like really big transactions so one thing we've figured out is like as a piece of diligence that's CFOs or whoever is leading the finance function or UA

should be doing is they should be owning that kind of set that document right so I don't I mean you guys have seen loads of while you 18 of them mer you probably choked up more than anyone else here yeah I mean you're talking now about data that's confidential or inside the company that's trying to get sold I'll use an example just of public data and how if you are diligent you can use public data to your advantage so glue in 2016 there was a called crowdstar they had a game called covet fashion which is doing about $50 million a year they had a game in beta called design home and it was in Canada anybody could have looked at the data on appan at the time and looked at it and they were they were trying to sell the company for the better part of a year we looked at that Canada beta data public data that wasn't company definitions it was just app anny data and we saw that that data was spectacular like we knew that that game was going to be a hit and nobody else was looking at that data at that time we ultimately bought the company for $45

million so they were doing about 45 million on covet design home wasn't launched uh we bought the company for $45 million two weeks after we acquired the company they launched design home did $100 million the first year did $200 million the second year did about $250 million the third year I would argue that probably 70% of the 2 and half billion dollars we got when we sold the company to Electronic Arts came from those two titles and that was using public data that other people weren't looking at at the time and we used it it was a phenomenal probably a top a top acquisition in the industry but about data I mean yeah data like so understanding it using it correctly understanding everyone else's kind of point of view um we talked a little bit about you know this idea of like very often the kind of UA teams are kind of the the gods and the finances seen as a more of a kind of service function which is a wrong but B changing

and this idea of like the finance Finance business partner do you want to maybe elaborate a little bit on what what you've seen there and how how that can work more of a best practice tip really yeah so um I mean every single function inside a company has its own Viewpoint right I mean we learn something and we use different types of data but there are different viewpoints and from like when people typically think about Finance you think about accounting and regulations and annual reports that doesn't sound really sexy does it but um there's a lot of knowledge to be shared and there's a lot of power in involving Finance with the operations as well that's where strategy comes into play so one method how to strengthen the the leadership of a studio is actually to implement something called Finance business partnering and this is comes stems from the idea that um these

different viewpoints coming together and creating like strength anded Alliance so Finance having a say and having actually a partner in every single function so for UA typically and that's one of the things that I've been doing in my work is to triangulate and work like really closely with uway to really understand all the drivers behind there so that when someone comes and asks us hey you know should we actually invest more into our user acquisition channel should we do it differently we can bring uh a perspective from Financial allocation into that decision making and we also do it in terms of headcount planning and and any kind of strategic planning and obviously this becomes increasingly more important as a best practice as the studio matures and I would say a pivoting point for someone to have a system up and running like this is definitely when you have had count maybe around 200 you're opening up maybe

different offices in different countries and you already have one title out or maybe you're opening up your another one that's exactly the point where this becomes very efficient and useful Martin I've got one topic I think it's really important um this is call it trust but verify um I I grew up in the stage where Studios were the gods um and then then UA became the gods but you know we glue and a lot of other companies have a separation of church and state when it comes to UA dollars so you have a studio team that's building a game for a year or two years or whatever it is we never gave them any allocation of UA that they they controlled they had to prove as they were going into Alpha and beta that their title held up to the metrics that we thought was worthwhile to then give them funding when they wanted to go past beta and into Global launch because you know a student that's worked on a game for two years if they if you gave them a million bucks they're going to spend a million dollars even if the metrics are terrible and that's where I think it's really important let those UA gods have the the studio Gods kind of trust a

verify and make sure they don't sort natural bias right you must all the time natural bias wanting it to succeed and you know yeah but but I think it's like know again it's coming from different motivation because I finally the uh like the gaming Mobile gaming special is defined by by the growth yeah so it's very easy even to compare what is the valuation of the company that is growing versus that is not yeah which is like uh either you grow as the company or you have the problem and the the value is much much much lower so so in this case again the uh uh the purpose of the growth team is really to grow the company of course like know on the other side like the the financial side is really to to make it secure way yes so so that's why again uh profitable growth right profitable growth yes so so uh like you know but but but again that's again we're coming to the to the uh to those definitions here what it means to have Pro profitable growth yeah what it means to because it can mean different things for different people and again we can it can means different things for

different people if we talk about different timing yeah because again depending if you take three years five years or one year that will be meaning different actions for the people yeah Horizons is defin I think the big takeaway for everyone definitions and is the if you to sum up this panel in one short um guys we have like a couple of minutes left um maybe whilst we've got these guys here if there are any uh any questions from the panel um I don't got yeah a roving mic thanks so yeah you you all talking about definitions right and the thing is where do we get those definitions to be aligned with the rest of the world so to say that's kind of like my question where do we get those those definitions so we we're working on a set of not not in any way intended to be like industry definitions but a framework of definitions that you should have yourself even if you take them and morph them and adjust them and all rest it just like a basically like a ra man to say here's the sorts of things we

need to think about just to use as a like a community resource for uh for folks so stay tuned but I think at a minimum if you're a studio that has more than one game team you need to have consistency you acquire somebody you know consistency on an acquired company to make sure you're all talking from the same page whether my definitions are slightly different than her is that's less important but having in yeah but I I think like it can even start early like let's see new U like even in UI you still don't have very like always consistent definitions like let's see engaged view for example like for conversions means a bit different at Google and Facebook and in Tik Tok yeah Facebook and Google is like 10 seconds for example uh in Tik Tok is 6 seconds yeah and in in meta is if it's less than 10 second it's like 97% of the the the movie in Google is like 10 100% yes so so like there are those slight differences and it really starts from understanding those differ is and how can really influence the data yeah

because finally once you start from that side you need okay you know what is kind of this in this UA picture so then you can get to the point when you uh align with this financial people and uh okay you you understand what is the more or less the maybe not final output but at least range of those out outputs cool um I think we're probably out of time but um if anyone is feel free to come and kind of badger us after session or if anyone's interested in would like to find out more about the community please just Reach Out directly to me on uh on LinkedIn it's probably probably the best thing hopefully that's been uh some useful um takeaways for you guys because it does t it does touch this topic touches a lot of very different areas within uh within the studio so um yeah quick Round of Applause for our panelists thank you [Applause]