EGD News #63 — Predicting success
It’s Joakim here. Greetings from snowy Helsinki!
I hope you all had a relaxing break over the holidays and the new year’s. I’ve spent the week, doing research for a few big articles that I’m planning to write and publish during Q1. I’m putting more emphasis on product, which is an area where I believe I have yet to share all the hard learn lessons.
Besides the work on the articles, I’m also preparing a few other things.
- The first webinar of 2021 is taking place soon. The topic is M&A and investments review of 2020 and predictions for 2021, and I’m joined by Anton and Sergei from InvestGame.net. The webinar will happen on January 14th, and you can secure your spot on the webinar by going here.
- There’s a second webinar happening on January 28th, when I’m going to go through my workshop on “How To Create A Game Studio Pitch Deck”. It will be a guide into the right approach that you should take with your game company pitch deck if you want to have that second meeting with the investor and to eventually get funded. Sign up for that one by going here.
Now, let’s get into the news of this week.
🔮 Predicting success
Predicting the success of a game is hard.
Lots of games are worked on for years until they ship. For two or three years, you’re going to be working on a game without knowing if it’s going to work. Who would want to do that to themselves? Why do we keep on embarking on these monolithic projects?
It’s mostly out of conformity. For decades, game developers embraced the idea that we have to see something through to the end once we start a project. Possibly, as a consolidation, receive recognition for carrying on, for persevering.
Part of the blame is on the publisher-developer model, where the publisher carried the financial burden. The developer needed to hit their milestones, and all was good. As the industry has moved to more of a self-publishing model, the risk-bearing has moved closer to where the actual game development is happening.
Developers have started noticing that the longer you go without knowing if your game is a success, the more consequential the results will become.
What we know can’t harm us. What we don’t know, can.
Which game will work?
Game developers try to predict outcomes for their games. But to predict if a game will be a success without knowing is naivety.
An acquaintance of mine, a prominent games company executive, once told me that he’d been surprised that Ilkka Paananen, the CEO of Supercell, couldn’t predict which of their new games in development would become a hit game.
The games industry is hits-driven. There’s no way around it. You can’t predict game development, but you can minimize long stretches of uncertainty.
Roadmap with rapid development
Hyper-casual and hybrid casual game studios focus on rapid development principles. They optimize their cash runway for shots on goal, for a high batting average. These developers get five or six tries at finding success with a game, whereas the developer who works on a game for years gets 0.5 shots a year.
II was recently talking to a hybrid casual studio that has built a validation process that takes two months from the start – to having a build in the App Store. It’s a rough build with limited content, but it provides engagement and retention metrics for the early gameplay.
The team lives with data from a live game. There are no twelve-month stints of uncertainty on a game. They are long past the point of saying, “If we build the game, the players will come.”
They have clear points defined in a roadmap, where they can have decisions made based on data.
Questions that help
Nassim Taleb wrote in the Black Swan,”I disagree with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or “incentives” for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.”
One should ask: How do we change direction quickly when evidence emerges that our current path isn’t working?
🐦 Most engaged Tweets of 2021
Last summer, I wrote my 50 Principles for Gaming startups. During H2/2020, I continued from where I left off. To do this, I’ve been using Twitter quite a lot. Here are the top tweets from H2 that I published on Twitter, which got the most engagement.
Here are the top Tweets.
Gaming companies should determine their mission from day one.
It should be lasting, aspirational, and possibly unachievable, but it unites the company to work towards it.
Istanbul will be the next big gaming hub 💪 Right after Helsinki 😉
When a game dev has a game idea, it should always be treated as hypotheses in need of testing.
What you can do with your gaming startup before you have investor money:
– Fake app store tests
– Bring on ”no salary for now” co-founders
– Discuss and form a hypothesis
When a game launches, there can be lots of reasons for false positives:
– ”Golden cohort,” the people eager to try out new games, skew numbers positively
– Small cohorts, not scaling for long term growth
– Perfectly suited for early adopters, not for mainstream
We need more experienced game founders, helping new ones. Ways:
– Signaling (angel checks, intros to VCs)
– Being there for them in tough times
Most game startups get formed because the founder had an idea for a dream game. That’s all fine, but it does get risky when you’re entertaining yourself and not an audience.
Fundraising for gaming studios:
You need different investors when you only have a prototype, versus a game that is making money.
As John Collison said, investors are like Pokemon, each with different powers.
Reading Day-1 retention numbers on a pitch deck:
> 60% (These devs are geniuses)
> 50% (They got something)
> 40% (Needs more work)
> 30% (It might never work)
> 20% (Why did you launch? What was hard to uncover in playtesting?)
I’d rather be a failed entrepreneur than someone who never tried.
That’s it for 2020 reviews. Lots in store for 2021 🙂
🎙 Shanti Bergel, Transcend Fund
In this week’s podcast episode, I’m talking with Shanti Bergel, Managing Director at Transcend Fund. Transcend is an early-stage venture capital firm focused on games and digital entertainment. Shanti has a long career in gaming and has been working in free-to-play for almost twenty years. We talk about Shanti’s approach to investing and how he evaluates companies for an investment.
“A startup in its early stages is fundamentally a learning organism. It’s trying to find something out about the market, or product, or its audience, and then derive strategic advantage from that faster than other people.”
“If you don’t believe in getting somewhere quickly, you don’t believe in kind of that step function of an action resulting in a hockey stick. It might not be a good fit with venture.”
“The fit with ventures is that you want to create something that’s going to do something eventually resulting in this kind of hockey stick moment where the company grows considerably. And hopefully, that happens in a timeframe, like between kind of three to seven years.”
Listen to the full episode by going here.
📃 Articles worth reading
+ Notes on technology in the 2020s — “It all depends on execution. The underlying science is there. The engineers are willing. Even the funding is available in most cases. But, as a society, how much urgency do we feel? Our culture does not prioritize progress—it fights, destructively, for status. And our politics reflects our culture.”
+ The Birth of Chinese AAA — “Games like Honor of Kings, any of the mobile battle royales, and also NetEase’s Identity V (a mobile Dead by Daylight clone), and many others became successful by pursuing a very basic high level formula: 1) Don’t waste time or money trying to be innovative on core gameplay. 2) Look at what players are already enjoying playing on PC or console. 3) Copy the key core mechanics, and 4) Port and adapt the game for a mobile audience”
+ Mark Pincus talks about Farmville — “The real innovation of FarmVille was in making games accessible to busy adults, giving them a place to invest and express themselves and be seen by people in their lives as creative. People thought of FarmVille as a sort of Etch-a-Sketch.”
💬 Quote that I’m thinking about
“Most people can learn a lot more than they think they can. They sell themselves short without trying. It’s important to view knowledge as a semantic tree. Make sure you understand the fundamental principles, i.e. the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.” — Elon Musk
Sponsored by ironSource
We all know that developing a great game is one thing, but developing a great game business can be something else entirely. That’s why some of the top game developers in the industry use ironSource’s game growth platform, which takes care of both sides of the business, helping you monetize to fuel user acquisition, and vice versa.
From their ROAS Optimizer, the only product on the market built to optimize UA campaigns towards ROAS according to both IAP and ad revenue data, to LevelPlay, their in-app bidding solution, they offer everything you need to supercharge your growth. See for yourself at ironsrc.com
Sponsored by Opera Event
Looking for some great new authentic video creative? Try something totally new with Influencer Generated Content (IGC) by Opera Event. Influencers or actors will make specific creative content for your games and Opera Event will deliver you high-quality video ads that highlight the best parts of your game.
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Go to www.getigc.com to see some examples and get more information.
That’s all for this week. Take care and stay safe!