What Game Studios Still Get Wrong About DTC

[music] Welcome to the Navit Gaming Podcast, where it is our mission to explore the business and future of video games. We bring together the industry's brightest builders, investors, and thinkers to keep a pulse on current events, dissect emerging trends and games, share lessons learned, and have a great time. This podcast is also part of Navik's growing ecosystem which ranges from free and premium research to consulting and advisory services. For more information, visit www.navic.co. This episode is brought to you by metal.tv. Built by gamers for gamers and used by over 15 million gamers per month. Metal is the fastest way to clip, save, and share gameplay on PC. Millions of clips get shared every week, turning your game's moments into word of mouth at internet scale. With Discovery being one of the biggest challenges in the games

industry today, Metal is building a platform where publishers, studios, marketers, or anyone looking to reach gamers can find the right players across multiple genres and geographies. For more information, head to metal.tv or check out the link in the show notes. Now, let's jump into the episode. Hello everyone. I'm your host Devin Becker and today I'm delighted to be joined by David Stelzer, CEO of Appcharge. Appch charge is an AI native DTC platform trusted by Top Grossing Games. And today we're going to explore some interesting data and predictions around DTC related to a recent report released by Appcharge. But just to start things off real quick, uh David, could you give us just a quick overview of your background and Appch charge?
Yeah, absolutely. Um I've been around the gaming business for quite some time now, about 30 years. um started off as an attorney and then moved over to becoming an agent where I helped uh game makers find means to make their games, get their money, put their presentations together. moved to Epic Games for about

eight years where I ran the Unreal Engine business for Epic all through Fortnite and then moved into the direct to consumer space on the payment side was the president of Exola for two years and have moved over to uh Appcharge uh almost a year ago now at this point.
Definitely a lot of interesting stuff going on then from from all your former stuff as well as your current. So
yeah, must must be interesting to watch from the from the side. It's [snorts] been a journey. I've gotten to I would say I've gotten to touch almost every stage of of the business from uh ideating what you want to make through, you know, getting the basics of making that thing to finding capital to make it, the production cycle. And now is the great part. That's this post-release and making money portion.
Something everyone wants to do at this point, especially in the games industry right now. um you just uh you just you guys just released uh an interesting report that we're kind of like focusing on a little bit at the beginning here. Why don't you just kind of quickly tell about the report and and kind of some

maybe high level things about what it mentioned.
Yeah, it's available for people to read and uh it's basically a post report coming out of GDC and what we saw at GDC this year back in March. Uh but summarizing all of that data and the title of this report kind of says it all. direct to consumer is already a 17 billion mark 17 billion market for mobile gaming. Uh and then it goes on to break down what we're seeing within that mobile market. Um how much revenue is there, where the revenue is coming from, how people are making that money, etc.
And where can people find this report?
You can find it at our website on appcharge.com.
Perfect. Well, uh, one of the things I found interesting, you know, going through the report was, uh, that 52 respondents or 52% of respondents still haven't made significant changes to their monetization strategy. Why do you see more than half the industry just seeming to stand still on monetization here?
I think there's a couple reasons here. I

think one of those reasons is uh, they're happy with the way that things are going. I think organizationally they haven't quite wrapped their head around what's necessary to do it. I think it's a very difficult thing to do. Uh I think fear of what's going to hap happen from the platform side. Would there be retaliation? Will I lose my organics or things to that effect? Uh will I confuse my consumer in that regard? Will I turn them out of my business? I think all of those things help to make that up.
Makes a lot of sense. Definitely a lot of concerns there. Um, and you guys split the field into innovators, operators, and late adopters. With 62% of people showing up behind the curve, what actually separates the 14% pulling ahead? Is it is it budget, talent, timing, something structural, or just not caring as much about those those risks?
I think timing and early adoption is really proving to win like it does in a lot of other places. You have uh it's different though. I think in like in

certain places where you don't have a crowded field, you can get ahead. TOC doesn't really matter for that. But what is winning is the fact that people are trying something different than what their competitors might be trying. And we see this really making a big difference in areas like social casino. And so the early early adopters here are really pulling ahead. Um, they're showing that they can get pretty large percentages of their business moved to direct to consumer because they've been doing this for a bit. They've trained their consumer about how to go into the direct to consumer channels and get better deals on the things that they want, which makes them enjoy their games more, play for longer, and ultimately spend more time and money with that product.
Definitely sounds like a win-win, assuming you can navigate the the hurdles and everything there.
Correct. Well, in that topic though, like I think a lot of the hesitation sometimes comes around just understanding DC DTC. I know we've talked about a lot uh at Navic and

I think it's something that I mean everyone should be paying attention to whether they're doing it or not, but only like a quarter of respondents to that uh survey said they're truly confident in their DTC understanding. Where's like the biggest blind spot you see and and I think studios like maybe think they get but they don't or just just some of these misunderstandings? I think because it's still, you know, it it's become a more accepted piece of the business, but when you're not in it doing it every day and looking at it from the outside, you have a very narrow view of what it is and how it works. So, you think, okay, I I build a website and comes my web store and then, you know, uh my customers just move there and it's great. Um and then you want you wonder well what if they don't and then you know I built this thing and I built it and they didn't come but the promise was they would come and they didn't come. Um the people who are successful here realize that this is another line of

marketing and UA and what the things that they need to do in order to move customers to a place in order to train customers to a place in order to make it part of the customer loop of how they behave uh when they're playing and and interacting with your your product. And so new teams need to be built for this. In addition to new teams, you need uh different ways of doing your marketing, different ways of doing uh your UA that's specific to getting people into web stores or getting people to pay off store. So you're you're retraining them to a certain extent. And I think a lot of companies see that as either a lot of work that they're not ready for. um they think that to build that team, maybe they don't have the money to hire yet or the the bandwidth to hire for that or they they just don't understand what's going to go into that uh

having this other kind of thing on the side and they just they're they're afraid to attack it at this time. Do you find yourself having to do a lot of education or like appar as a whole on these subjects? I mean training them or like just better educating them on the the subject.
It's gotten easier over time, right? So the ones who are in uh well, let's let's back up even like I don't have to explain direct to consumer from its beginning to everybody anymore. You know, there was a time and it wasn't too long ago where it's like what do you mean direct to consumer in games? you can't do that because and now it's become more of a what are the different ways that I can do it and how can I do it without breaking the rules while I do and so that that's become a bit easier to explain the rules haven't fully fared themselves out completely so we work within what we have at the moment uh but that's part of our job at upcharge is to explain those to the customer uh where they can play where they can't play where if they play it could be a little

bit more risky Uh, and then it's also to help train them. What does a proper stack look like? So, what do you need to do this? What do you need to do it? Well, what's the part that you do? What's the part we do, etc.
What is the the part that you do? Just to be clear for people that aren't familiar with Appcharge.
It's magic. No, [laughter] we The thing is, you know, there's a number of companies who do what we do. Um, I worked for another one of them. What I find that's special about Appcharge is it's the only company that I see in this space that the technology and the people that are here to give the advice that they give have made these types of games before in their career. And therefore, our stack is built from game makers who have released these types of games who understand what it takes to do real monetization, understand what it takes to do real payment processes and and the M process, the immersion of record process and

ultimately web stores and how they need to continue to grow and evolve uh over time. So I think that that's kind of Appcharg's superpower in that regard. And then we advise the companies based on what they're doing in terms here's what we see through a swath companies we work with who are the top top companies in the market and what's working within all of these groups and we can segment that you know what's working in mobile games what's working within uh casual mobile what's working within casino uh what are the nuances we've seen that [clears throat] others have tried that are making progress on and through that, you know, we can help them build things into their stack that help them uh get out ahead of their competition and ultimately keep engaging with their consumer better because that's the ultimate goal here, right? Is we want to make something that number one helps the company build more net revenue because

they're saving money off the platform fees, which is the promise of DDC. But the the uh unexpected thing that's happened through that as well is you're now keeping all the information regarding your player. You can have a direct relationship with your player. You can figure out how to segment your player better to give better offers to each of those different players, which is what will help you. And then in addition to that, not only you're getting the the market economics of the better net, now you're getting happier customers who tay longer. You tend to spend more. And so your gross revenue is going up at the same time your net is. And it's a win-win there.
Well, that makes sense. It I mean, it sounds like a lot of it also is not just the service, but like best practices. Uh especially when you're dealing with I mean, are you dealing with like a lot of people that are new to DC? Are you dealing with people that have done some and are looking for just a different platform? Like how much would you say is is kind of new versus experienced? I would say it's probably about 60 to 70% uh experienced people that we are

transitioning into a better experience with about 30% that are completely new to the space. Um and they're not new to monetization. They're they have very very successful game products on the market, but we're helping to make them more profitable. We're helping them to kind of get into this scenario of how they control, you know, dealing with their customer, how they control the flow of information, how they track spend, how they market to people. Uh they create a bifurcation almost of like different types of UA, right? of you know I have UA that takes the customer to download the product and take them through the initial flow and then I have other means of doing things that push them to my other sources of direct to consumer revenue ultimately to a web store where I take them out of that that initial platform experience alto together. Has it gotten to the point with um you know pushing this more and more into the

products that uh you're ever taking uh new new players into uh web shops or things like that during the first-time user experience or is this still more like a advanced users kind of thing?
No, you're getting them within I would say even within the training portion sometimes. Right. So, um, I did another podcast earlier in the week where we we went through this live on on air and looked at a couple different games and, you know, some of them waited until they were into the gameplay and hit a payw wall and that's the place where they pushed them. Some of them in the initial onboarding as they were doing the training sessions gave a bifurcation of, you know, go here and here's your offer or go here and you can get a better offer. And you know the other piece too is in the in the in the onboarding flow. Um you're kind of doing some training as well where you can you have opportunities to push over to the web stores and other TOC portions where it's you know if you give us your email and

you get an additional bonus if you load your credit card in you get an additional bonus. And those loadins you kind of move that cycle back over to the web store. And in doing so, you've now trained them that, hey, when I'm over here and I'm giving information or I'm doing things, I get better economics.
So, I mean, obviously, like the focus for game developers is usually about, you know, the the fees from platform holders and trying to reduce those um as well as getting a bit more direct relationship with the with the players, right? But, you know, as you mentioned, some of it is marketing to the players of like a better deal for them. I mean, are you seeing players generally find that that's the case, that they're spending more even, uh, that they're finding that like this is like a deeper relationship with the game, that just overall like better impact on the players and not just a well, we're cutting our own costs over here kind of thing?
No, it's not cut. I mean, cutting your own cost is just the beginning. Yeah, that's like Okay, that's and I think that's where most of the companies think their value is in coming to DTOC and

it's just the tip of the iceberg, I would say. um by getting players to have better offers and know you're doing a a mental change in the way that they operate. Right? So there there was this whole shift that had to be done and it is kind of this this play over here on your device but pay over here in this other environment, right? That takes training to get people there. And in doing so and taking them to their environment, you've shown them every time, hey, there's a better value proposition for you over here. And that better value proposition might have been more expensive than what you were getting in on the platform, but you're getting more as a result of it, right? So you can see that you're getting better economics for both the player and for the game maker in that scenario. They might spend more. That higher spend gives you greater margin at

the same time. So your gross re like I said your gross revenues would go up as well as your net margin. And then happy customers tend to come back and repeat those experiences. So it grows grows and grows your margin again. Um so that's part of it. And then I would say the data that you get from all of this over the long term I think is going to be a real value uh and something that becomes you know very protected by the game makers in the same way and Google have been protecting it now for years.
I mean it sounds like it's definitely been effective so far and something worth continuing especially for players if they're getting a better deal out of it. But I'm kind of curious, like you mentioned a little vaguely about some of that better value proposition. And I and I'm curious like what do you find is kind of not necessarily the most effective, but just kind of the best win-win for both players and game developers when it comes to that value proposition being like discounts? Is it loyalty bonuses? Like things you get for repeat purchases? What do you find is like kind of the best strategy? It seems

like so far that
it's a mix of all those things and I think different segments of of players have different things that work better for them.
Um, whales want, you know, the best offer that you can give with the best loyalty and the best things that I'm going to get as trailing. Um, there's bragging rights that come with it and all things. Um, I think starting players who are used to grinding, um, want something that finally pulls them out of the grind that makes them spend money and it's too good to pass up. Uh, and then the idea that you can still grind and get stuff, you know, if you go through processes, give information, and then come and play, you know, where are you going to check your loyalty points? Well, I'm going to check it over here um platform. Uh, and then I'm going to get more offers that are thrown at me through there if I do stuff or maybe I can spend just a little bit. So, it really just depends. I think knowing your player, which is what

you're getting from this, being able to do uh the proper segmentation. I think that's where we're seeing a ton of value right now, is the companies that can make the thinner slices of segmentation are able to provide the best value to the best group of players because they're really getting to know in smaller bites and they're they're performing better as a result. So you're finding that like more customized offers are being beneficial like where you're offering something to a player that you're not offering to another player for example
right now I mean onetoone segmentation would be the holy grail and it's just not there but groups of players I would say and the more that we can slice these groups down into small genres of of what we can cohorts of what we we can understand then we can give a a an offer to that group that we believe uh we're not leaving people out, right? Or if we had too big of a sample, part of that sample at the top, part of it at the

bottom would drop out statistically because it's not for them. So the more that you can get down into the science of okay, do we have the best offer for the best group of people? Have we matched those things together properly so that the you have the most effective use of your your marketing basically in your funnel? Do you find it to be an effective strategy or a deterrent sometimes to offer certain things on say a web shop that you don't offer in game? Whether that be like a certain item or not necessarily just a certain offer, like not necessarily a certain price or a certain bundle, but really like something that you can only get if you go there versus in there in terms of like really getting people to go there, really getting people to make a purchase. Uh like an exclusive to that.
Yeah, absolutely. Um, you know, and console games, PC games have been doing that for a while, right? You know, come to the store, buy something as opposed to an offer that's that's uh through your normal flow. Um, Fortnite would be

a good example of that, for instance. So, those things work have worked on the PC side well, and they work really well within the mobile space, too. Yeah, I just always wor worry about um you know people complaining that like that that's the only way they can get that thing and that they can't make a purchase through the web shop for some reason or another like payment processors being obviously not the same.
Well, you push that through through loyalty or other types of things where you don't have to pay but yeah, you come to a different location to do things um to allow us to see more of what you're doing and who you are and we reward for that. If it's not the instant reward of buying, there's the do things for a little bit and then we might get
Nice. Well, I want to talk briefly about some predictions you made a little while ago that I think are worth revisiting now that you know it's been a little bit of time.
See how well they've stood up since.
Yeah, I'm not sure the exact date you made these, but it was definitely not just yesterday. So,
yeah, I want to say probably around January at at uh at a conference or something like that.
Well, things move fast, so it might as well have been five years ago, right? So, uh, we just we'll just start with a

with a simple one like around some of the stuff we've been talking about, which is you said web stores are becoming basically native to to games and then the psychological barrier for most players is basically gone. Like it's just another place they they spend. Do you think that's true for the average player yet or still mostly just like the really engaged spenders, people looking for deal, people that are already loyal, things like that?
I don't think it's hit quite where I predicted, but it's moving there, I would say. um we are seeing more uh I would say more of the transactional value or more of the overall transactions that are happening with our customers over time being moved to direct to consumer which would support that thesis right um and you know within the industry we're seeing an average of like 10% up to 25% but some companies moving into 30% 40% all the way up to almost 60% % uh companies that I'm talking to now would love to to get

themselves to, you know, 80 to 90% in in the direct to consumer side, which means that they're bought into it. And if they're bought into it, then customers are going to be pushed through funnels that will get them there. Um, so I think over time we'll get there. Maybe, you know, it's not going to be within this year, but it's definitely moving in that direction. um in terms of like the barriers uh and the retraining of the customer, I think that that's getting better over time, too, because the more it's being done and like we're just talking about, the more you can get segmentation and understand the segmentation of your players, the easier those offers become. It's less of a like, well, do I really want to go over there and do that? It's more of like, oh, yeah, yeah, I know I'm going to get something better over here. Um, and maybe they don't make all their transactions within the DTOC space. Maybe there's some quick things that it's just easier for them to do within

the game itself, but you know, at least within the United States right now, we can do direct payment links from there. Uh, so we don't have to push them to uh a web store and they can actually still pay off platform. It's helping the developer side of things. Their credit cards information is already saved in there. Their geographic information is already saved in there. So they have a fairly seamless experience in the same way they would going through Apple Pay or Google Pay direct platform. And so we have various ways through through the the funnel to be able to make this an easier process for them for the different ways that they want to pay based on what they're doing.
Well, as you say, it's like it's not anywhere near 100% yet, right? And it may take a while to get there outside of just education of like this is a better deal here. And I think let's say let's say everyone gets to the point where it's like obvious it's a better deal. What do you think personally is the biggest hang-up that stops people? Is it just convenience? Is it just I don't want to go to another place? Is it I don't want to set up another payment thing?
Yeah, I think I think

that's always a bit of friction is oh, I have to give my credit card again if that's one of those things or oh, I have to give my email again. So, I think that um when you're getting to that point, making sure if it's at the beginning of a game, like you've just brought in a new user, make sure that you're making it easy for them in that process of onboarding and becoming part of the norm of their onboarding process that doesn't feel weird. I think we are starting to get past the point of wait, I'm playing this game right now and now I'm being pushed to go somewhere else. this feels fake or fraudlike, you know, we seem to not be getting that anymore. So, that barrier is starting to go away. Um, the more and more that things become uh less frictional, the more that they become part of the way people understand that this is how the game flow works. I come in, they teach me how to do stuff, and oh, I need to

create an account right now. Well, here's the benefits of creating an account. tell the consumer what those benefits are, but at the same time game makers getting great benefit from that.
I mean, outside of just time and normalization, is there anything you think whether it be industry-wise, regulation wise, technology-wise, is there some thing that actually needs to change to really get that up to 100%. uh like outside I mean even if it's just a hey some way they don't have to enter their credit card in again or like what do you think if if something there was there was some one thing that changed that would make a huge difference in that outside of just time. It's it's hard to say like in the immediate future, but if we look at where this process has gone in the last few years, we've seen it get better. We've seen it get easier. And part of that has happened through regulation or deregulation, however you want to call it. Uh the lawsuits that have happened with uh Epic against Google going

against Apple. Uh, and by way of example, like at the start of this, you know, when Fortnite came out, this couldn't be done at all. Okay. Um, Epic decides to put a a different way to pay for uh for your Fortnite currency and Google Dellists them, pulls them off the store, right? Lawsuit happens. As we get going through this lawsuit, the next stage happens, which is, well, you kind of have to allow for these other means of payments to happen. We don't know what that looks like yet. Great. We think we've won in this process. So, developers start to work through how this is going to look with some trepidations. Is Google really going to follow this? And so, they start to offer outside payment methods. And you get these big scare screens that come up and it's like stop you are leaving the ecosystem. We can't we can't you know we your safety is not guaranteed and all

this kind of stuff. And that went back to court was like hey you can't do this. So the screens had to go away but they never really went away. They just went somewhere else because the court wasn't clear enough. And these things have kind of migrated over time to the place we are now, which is basically, you know, in the United States, you can have a link within the game now that says buy something and it takes you to an alternative payment. Customer has to be notified that they're going to an alternative payment, but it's clean notification now. There's it's not scary or anything like that. Uh customer sees what they're doing or they can stay within the ecosystem and keep doing what they do. I think over time, uh, if things were the most seamless, you'd even get rid of that screen of like, hey, you're moving somewhere else. It's just, yeah, this is where my credit card is. I know that I'm going to pay here. I've done all the signups already. I know this. Um, you might see, you know, more general places where credit cards

are stored as a service that the game companies can kind of hook into where, you know, oh, if you're and we see it in in consumer apps, right, like shop or things like that, just put in your your email address. Oh, all of your information now populates. Great. You're good to go. Like a shared service or something like that. So there's, you know, these things are are are constantly moving and it's not like this has happened over 10 years. This is over like the last two years that a lot of this progress has happened. So it moves fast.
Well, I mean that's good to hear. I guess as a big fan of uh opening these things up and being able to offer better deals, I think it's a good thing. I am curious though as someone who was formerly from Epic, uh obviously you've benefited from the whole strategy. Just just out of curiosity, in your personal opinion, do you think that was the right approach for Epic to spend such a an ungodly amount of money fighting that and that they were kind of fighting the good fight and that ultimately it benefits kind of everyone or was that

just a well were maybe they were kind of protecting their own bottom line sort of thing?
It's funny. I was with Tim Sweeney uh CEO of Epic last week and we were having a chat around this and um you know I thanked him for and I I hope all of the companies in our place get to thank him at some point for opening up this opportunity that you know but for that I don't think it would have existed. Um I think his principle in nature of you know this is wrong for the games industry and uh it's wrong for the developer uh it it holds true. It's it doesn't it doesn't allow the freedom of commerce uh and commerce to grow and and business to grow in a way that it should when there's a tight lock on the way that things can be done. And I still think that there's a ways to go in this space to get it truly open. Uh and Tim's going to continue and Epic will continue

fighting that across the world. I think we have a a settlement coming up fairly soon uh with them and Epic where the court is reviewing their current settlement terms and from that we should have uh some finality in terms of the Google and Epic side and what what uh Google will be allowed as their their rules going forward for developers. Um, and again, that's the finality from the court case, but legislation could change over time, and legislation could start to make this even more open than what Google is asking for and what Epic agrees to through this. On the Apple side of that house, uh, Apple hasn't agreed to anything. That lawsuit's still going on and my guess is Epic will continue to fight that all around the world. um not just through uh through the lawsuit, but through lobbying and hopes of legislation and things of that. Um and I applaud them for doing that. They're doing doing that on their dime.

Uh and companies like ours are are benefiting through the creation of these businesses. And these businesses will also, I think, help that crusade in the long run, too. Because as we validate that these businesses are not causing harm to the consumer, as we validate that these businesses are helping economic growth and showing that uh you know it's it's improving the technological world to a certain extent, uh I think that will help shape legislature and help educate legislators as to what this business actually looks like. Um so I think it's good overall for the future. Well, it'll be interesting from the regulatory side because obviously the court side, you know, made some decisions and is kind of just finalizing a lot of that stuff which definitely we'll all be paying attention to because it will, as you, as you kind of point out, will have a lot of knock-on effects. And it's like you've got, you know, the EU trying to do a lot, but these are American companies, right? So, I imagine if we can get something going over here that's positive, that could

have an even stronger effect on these, you know, US-based companies. But
yeah,
for a lot of these businesses, you know, the West is their biggest market. So, United States, Europe, um, and the EU is fairly stringent. So, it's not like they're going to walk away from having their business set up in the EU,
right?
Um, they have to figure out how to comply and what the minimum level of compliance looks like for them and where can they skirt it, where can they be in the gray area, what can they push on before it breaks. Um, believe me, they will try all of that.
Well, we've definitely seen some stuff. They actually force changes on Apple, like with the type-C connectors and things like that. So, it definitely seems to be more than just paper pushing when it comes to this stuff. So, I look forward to seeing where it goes. It obviously has made a big impact so far and that's why you're sitting here now. Uh, so we'll continue to see that. But, uh, you made some other interesting predictions that were like a little more, I think, uh, unconventional around this. And I think one of the more interesting ones to me was uh that an

organizational change rather than just a consumer level change which is where you see more like DTC teams maybe even a VP of DTC uh in the company. Why do you feel like the org chart is such an important part of this battle as opposed to just legislation or consumer education?
It's interesting when when I started in the direct to consumer space and the payment space uh I was equally naive. I hadn't come from that side of the house. Um, it was kind of a different process for me to learn and it put me very much in the situ in this in the the seat of kind of where the where our customers are right now, right? I was on the production side of the house. I was on helping people build things and get to this release portion and when it goes into the market, you market your game and that's the way it works. you do UA marketing, you get your users and you know my website or my web store was just an extension of that

and I quickly learned how that was wrong. We would see um in the early times we would see you know companies get excited about oh and they would think about it this way like somebody's going to build my website for me right and so company like ours would go and build this web store which company that the publisher might see as a website and when they see it that way they continue to market as usual right and then they'll come back and complain like hey you sold us on this this dream and we're not seeing any lift from it. We're not seeing any new customers from all what we found through that is we had to start training the companies before we could train the consumer as to why you needed to look at this differently. traditional marketing and even as we were going through the process of th those early days I was talking about of litigation that marketing said you know you can't

take a customer from within the game and move them to the web store so you had to get them there through other traditional means so through your social channels through traditional advertising and things like that and then you could move them to that well your marketing flow wasn't set up for that you didn't have a team that was really set up for that team was set up to give you awareness of the game and then go tell you where you could get that game, right? And so it was really a UA funnel pushing to download and get people within the game and start playing it. And so you had to start either take that traditional marketing team and and bolt on these new practices to them. But as this became a full-fledged channel, it made sense that it should have its own team. Now it could live within the marketing team, but it's it's a hybrid of of marketing and it's also piece of product at the same time. And that shift

that it's part of product took a while to get to as well. And now it's one of those things because like I said, because we come from gaming DNA at our company at Appcharge, uh we do understand that. And so whenever we're building these, we're working now with the product team, not the monetization team, not the marketing team. We started with the product team.
Well, it makes sense. I shift over a time, right? Where where it's slowly making your prediction come true based just people. So it's not just consumer educations. It's company education and figuring out.
It has to start with the company education. Company's not bought into it and has a full strategy,
then they're only in it half-hearted and the consumer will feel it at the end of the day. It's kind of funny even you pointing out the thing about websites because it makes me think about how especially in mobile people treat their store page like in the in the app store or their Steam page or whatever as kind of their website and and kind of forget about like there's their afterthought or they're like oh it's a marketing thing for a website like if we need to pull people in from socials or whatever. Yeah.
We just pull them to there and then it's

funneling them to the store.
I think they forget that it's not really their website either,
right? It's Apple's portal to your game that Apple has gotten you to pay for to make.
Yeah. The 30% you're paying for that website basically.
Uh and then you you get nothing back from it. So,
right. Interesting. I just appreciate the different like approach in thinking about it. Um but like on a similar topic, you predicted that the playbook would kind of finally standardize and DTC would kind of have like a product roadmap more so than just a marketing wish list.
Yeah. which I was just talking about like that, you know,
um product first, I think, is is the way that it's being seen.
Um you're looking at, you know, what is my most basic version of the web shop look like or the web store. And then what what features am I going to bring into it that I know? That's my road map. Um what wish list things might I have? What does the future look like, etc. uh

and you're you're growing those as your game grows or as your customer base grows or as you're able to start bringing more traffic to that channel.
What do you think like the just the future DTC stack kind of looks for everyone when it's like fully integrated when people have this sort of organizational changes and these road maps? What does that look like for games going forward? In the ideal world, you know, the the platforms will be just a distribution mechanism and a means to get certain organics. You'll be able to bring your own kind of programs to be able to do the things you want. Payments uh come in there seamlessly and then the data gets granular enough. I think AI is going to be able to help with this as well. uh understanding your customer enough that you can get down to that smallest slice of segmentation. You know, that holy grail of do I know each of my customers in here enough

through AI that the AI knows and sees the patterns in their play, what they're doing, I can go at the right time at the right place to make them the perfect offer that they will take, you know, 90 plus% of the time. That would be, you know, the ultimate uh for credibility and forecasting and being able to know that you have growth and being know and knowing that you know your players are are really digging the things that you're doing. And when they're not in and when you have them segmented to that and they're really not engaging, you know you have a problem. and then a big enough of those segments coming together and you know you have a bigger problem and what needs to be changed and course corrections made etc within your product um to get those those things back on track but I think that's that's a great place to see where direct to consumer can go and where future technology comes

in pretty readily
I guess that goes to that whole idea of like uh owning the customer relationship being really important for that segmentation but not only that but for communication for being able to to sort of work with them on that onetoone basis. I mean, I like this idea of like AI basically being allowing you to have a customized salesman essentially on on tap for each player like that idea of like a one one teacher per student kind of thing.
Yeah. And you can make it not feel salesy like this is your personal concierge within the game. How can I help you? you know, um, and I've seen some of these already where it's just this this conversational thing about, you know, oh, hey, and nice to have you back and, you know, good to see you again. I see last time you did this. Did you want to go play with this player again? It gives you this journey, you know, so you don't feel like I'm just coming in and seeing a pop-up screen, you know, buy more gems, right? Becomes very personalized.

Yeah, it'll be interesting to see where that goes. Obviously, that's going to take some time to get there. But, um, one of the things that was interesting going back to the report itself, you know, outside of the just the predictions that you made, uh, was that it argues that it doesn't really stop just at games. Why do you think games themselves outside of regulatory issues and stuff like that have been kind of the proving ground and why copy instead of staying in the walled gardens for like apps, especially in subscriptions and things like that? Yeah, look, games have always been a great proving ground uh for a lot of different pieces of tech. Um, and they make it makes their way a lot of the time into other areas uh of consumer behavior and consumer products. So, I think that definitely as you start to look at what's in the app market, right? You have things that start to not just look like your basic product, they're starting to feel a little gamified. So, you know, you've got language learning

apps that have leaderboards that have streaks to them. Um, you know, my son is on Snap and he's constantly doing things that that have gamified mechanics with that with with the social components that go with it. Um, so how can you take the DTOC components of giving more of having that direct relationship more so into that side of the house, right? I don't think it's right yet for all consumer apps, but things that are more on the gamified side. I think like these micro dramas that are out there is a great place because their business models are, you know, watch a bunch of stuff for free, hit a payw wall. Uh, oh, I'm hooked on this. What do I do now? Well, do an offer, you can buy gems, you can get a subscription, and all those things will take you forward. Wow, those are things we do in the games industry already. So finding ways to do it better than what they're doing it because we

see it at a better scale. Uh and and we've engaged I think our players more than uh the app folks are engaged with. Uh and I think over time we can help those businesses get a much bigger lift than where they're at right now by bringing in all these different mechanics that we've learned through the game side of the house. makes sense that there's a lot more focus on behavior in general with games since that's pretty much what games are as opposed to apps which are sometimes a bit more of a product than a game and and obviously we kind of have that middle ground you mentioned of sort of gamified apps.
A lot of the apps are are you know set it and forget it subscription is their business model.
We think there's more to that out there and we want to be able to show them that how we do it in games and why it's you know why it makes sense for you as well. Makes sense. Well, uh just looking further into the future, like maybe three to five years out, maybe that's too little, maybe that's too long. Uh what is what do you think winning looks

like uh for DTC? And I think what do you think could derail that? Like what are there some big like potential black swans that could be a problem uh for that as well?
You know, regulation and court cases are always out there as something that could happen. Um, and you have to be mindful and stay on top of what what is uh doable and what's not. Um, we saw a little bit of it like in the EU around loot boxes where that was moving pretty well and it was a pullback. Um, it didn't kill anything. It just it caused a change in how you were able to push things to the consumer, how much, which segment of consumer, etc. So things like that. Um, I think ideally, you know, less reliance on platforms, more ability to be able to serve the consumer directly, um, discovery at the beginning of a of a game, getting more people in uh, at scale faster, getting them uh, to

a place where they spend faster and spend more. Um, all those things over time would be kind of the holy grail.
Makes sense. It's definitely uh something I think we hope to see going forward just because like in theory it's better for the players, it's better for the the game companies and Lord knows at this point I think we could all use some some more wins in the game industry uh for everyone's sake. So be good. The good thing is like and and I know there's so much doom and gloom out there, but this is a space that is continuing to do very very well and the companies that are adopting it using companies like Appch charge to move it forward are winning very strongly. Uh they're seeing their revenues increase. They're seeing their net margins increase. Uh these are games that are already making really good money going into like very very good money. uh and it will only get better for them over time. It will also make uh how the game evolves better because they now have

that direct interaction with the customer when they're ready to make new games. They'll be able to better understand what their audience likes to be able to shift them and their audience is getting bored or tired with something. And then the games that are lucky enough, I think, to make it out into other areas of entertainment, film, television, shorts, anything like that, they can be distributed and marketed now directly to the consumer through the channels that they're already using. So, it's a great piece to think of for that future. And for the games industry, this is kind of one of the better places to be right now.
We'll definitely see. I don't imagine everything goes perfectly smoothly for that just because that's not been the history of games and regulation and everything else financials. So, uh we'll hope that at least it gets to the to the right place at the right time. Um we like to kind of end things off here with just kind of some rapid fire questions that are more maybe maybe some hot takes, maybe not. But, uh you know, feel free to just be a little more off the cuff with these. But, uh we'll start with like a I think an easy kind of yes no sort of one, but feel free to

elaborate a little if you want, which is uh 2030. Do we see Apple and Google's 30% cut effectively dead? Yes or no?
Dead's a strong word. I think um we see it drastically reduced either by force or by uh the push of the consumer and and the public perception of where what is fair. That makes sense. I don't think I don't think it ever gets fully killed,
right?
They still run a business. They still run a service. There's there's a certain amount that that value has to it. It's just not 30%.
Right. There's some amount of justification that they can make. It's just finding where that that number actually should land on. That makes sense. Well, all right. So, so why don't you name uh one studio that you think is crushing DTC right now and one big category that seems to be kind of asleep at the wheel.
I think uh I think a company called Huge is crushing it right now. Uh if you look at their public filings from over the

course of the last year, just what direct to consumer has done through their revenue, their curve is just kind of hockey stick as a result.
Wow.
I think they're doing great with that. Um I think uh sleep at the wheel. It's hard to say, just not as big yet is um I would say more of the uh the core and the midcore type games that are out there. um as those grow, being able to to access those consumers better, they do less transactions, but they spend more per transaction. And uh when you can get the right consumer within that flow who feels that they're getting really special things, you can really unlock a lot for your game.
That definitely seems like a category that absolutely could benefit from that relationship, especially with the the sort of whale type players and and the way that they integrate into those games. I could definitely see that being
Yeah.
big thing. It surprises me if they're if they're not really doing a good job of it yet.
You can see it being done really well

with some of the older games that are out there. Like an Eve Online, for instance, is just
Oh, yeah, definitely. What do you What would you say is the dumbest reason you've heard of for studio not wanting to do DTC?
They're just too busy.
Too busy to make money.
Yeah. Too busy to make more money.
That's that that is a pretty stupid reason. I think that that that needs that organizational shift you were talking about, right? to actually if you're too busy then that means you need to hire someone that could that could do that.
Yeah. And you know it just takes some education that the hiring of that person is the investment you make to make a lot more money than what that person is being paid over time.
How quickly can you get there? And it's pretty quick.
Well, I mean it sounds like you guys' game background may help with that a little bit in terms of like, hey, this is not some weird outside business sort of thing. Like we get it from a game's point of view. we can kind of help you figure it out from a game's point of view so you're not so busy uh maybe you could be like you know busy with other things when you're already making some money from this.
Yeah, absolutely. Absolutely.

Well, cool. Well, thanks so much for joining us today. I I I hope everyone gets a chance to read that report. Great to get actual solid data from people. Uh as you know, there's a lot of talk about this stuff, but the more data we get, the more I think we can convince those people to get past some of those dumb reasons. So, really appreciate that. And we'll uh I think we'll we'll maybe we'll check back another time and see how those predictions are going on timelines.
And uh if people need any more information on this, like we said, you can get the report at app outcharge.com. Uh there's a lot of other resources around what direct to consumer is and how we operate. And if you're interested in doing business with us, you can get in contact with us through there.
Cool. Well, if you're looking for anything more than than what you heard on this podcast, sounds like David might be a guy to talk to. Uh so so give that a look and we'll we'll try and make sure to link to the uh the report here in the uh show notes for those of you listening. But in the meantime, uh thanks again for joining us, David. And uh we we look forward to seeing where DTC goes from here.
Great. Thank you.
Thanks everyone for tuning in.
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