The top companies make it look easy, but monetizing mobile games is a complicated beast. One of those that has managed to do this well so far — moving from social games on Facebook to mobile games on iOS and Android — is San Francisco’s Kabam.
In just five years, it has grown to more than 900 employees, and it recently raised $120 million from China’s Internet giant, Alibaba, in a deal that valued Kabam at more than $1 billion. Kabam said the company is targeting $500 million in revenues, compared to $360 million in 2013. Part of the way it will do that is by creating more games based on movie intellectual properties. The Hobbit: Kingdoms of Middle-earth has generated more than $100 million in revenue for Kabam, and it is working on properties such as The Hunger Games and Fast and Furious.
That kind of growth doesn’t happen for most mobile game companies. So we talked with chief operating officer Kent Wakeford in an onstage interview at the Game Monetization USA Summit in San Francisco recently. We covered the ins-and-outs of how to think about mobile monetization for game developers, and we also talked about the differences between the Asian free-to-play mobile gaming market and the West. Here’s an edited transcript of our interview with Wakeford.
Above: Marvel: Contest of Champions
GamesBeat: Kabam is known for strong game monetization. This is how you get to 900 employees, right? What’s the matrix of things that a game developer must pay attention to in developing games with high monetization?
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Kent Wakeford: When you think about a matrix of areas that we look at, it starts with, what game do you want to make? What genre are you going after? The genre has a lot to do with getting monetization into the game. Then, going to the development stage, on the monetization we could talk a lot about system design and how you think about that. That could follow into distribution and marketing and how that impacts ultimate revenue per install. We’re in the business of games as a service, of course. Running games and the live operation of games becomes critical. When we think about games we think about those four key areas. Each one plays an important role.
GamesBeat: There are optimal game genres. Could you talk about that?
Wakeford: As you think about the games you want to make, think about the genres you want to develop—genres have a lot to do with the ultimate lifetime value (LTV). In North America and Europe, strategy games have the highest revenue per install of any genre. Something like $3.98 per install. That’s a lot of revenue per player, so there’s a lot of strategy games out there. Second is RPG at about $3.82. Then you drop down to casino, which is a long way behind.
Strategy games tend to have the lowest number of installs, though. The highest number of installs comes in action games, like infinite runners. Those games tend to have a revenue per install of about 25 cents. It’s a trade-off. When you think about a game, you want to think about the monetization side, but also the customer acquisition side. Action games have much wider appeal.
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GamesBeat: With less revenue from in-app purchases, that’s why you see a lot of advertisements in action games.
Wakeford: Exactly right. Now, I mentioned North America and Europe. Asia is very different. In Asia, the number one genre from a revenue perspective is RPG. Revenue per install is $7.92. That’s almost twice the leading genre in the U.S. Second is strategy, but that drops down fairly significantly, and the third, surprisingly, is sports.
As you think about what genre you want to go after, you want to think about geography and competition. Have that as part of your initial plan.
GamesBeat: What about game development and monetization?
Wakeford: Now that you’ve picked the genre you want to go after, you start building a great game. There’s a lot of different components that go into that. There’s the gameplay itself – great, amazing gameplay that wows consumers and is a lot of fun. But we’re mainly talking about monetization. On the monetization side, though, you want to focus on, first, the system design. You want a system design that is deeply linked to your core gameplay loops. You want to make sure there’s clear early-stage gameplay made, and then even more important is your elder gameplay, making sure the elder gameplay loop is tied to monetization.
Equally important to that system design is the inclusion of social mechanics and social play. What I mean is, think about guilds. Think about alliances. Think about game environments that create competition and motivate people to want to spend so they can be better than someone else. Think about group dynamics. If you’re in an alliance, your alliance is going to want to get you to play, or they’ll kick you out. You’re encouraged to play and engage and potentially spend depending on who you are and what you’re doing.
GamesBeat: How do you look at distribution and marketing impacting monetization?
Wakeford: Similar to where I started with understanding genre by geography, distribution is an extension of that piece. With any game, you can look the geographies and understand if consumers in different geos will spend on the type of game you’re building.
We have a really fun, exciting game in beta now and launching soon, our Marvel game, Marvel: Contest of Champions. We launched it in Canada, Sweden, and Denmark. If you study action games in general, they under-index in Sweden and Denmark and over-index in Canada. So we launched the games in those regions, and we saw three times difference in the LTVs for the respective player bases.
As you think about your marketing and distribution — where to put capital, where to emphasize with the platforms and get featuring — think about where your players will spend, where they will engage, where you can really help the LTVs. The data’s out there. As you think about where you’re putting your capital and your resources in terms of localization, map it to where consumers are willing to engage with your game.
Above: The Hobbit: Kingdoms of Middle-earth
GamesBeat: You mentioned Marvel. You also have the Hobbit and Fast & Furious. Licensed intellectual property seems like a great way to monetize and reduce your user acquisition costs.
Wakeford: Kabam has a long history of building licensed IP. The Hobbit is a good example. What we’ve found is that the biggest impact of licensed IP is on the customer acquisition side, getting a more effective CPI. You get a lot more organic traffic, better search engine optimization in the app stores, more people coming into the game. You can spend the marketing dollars more efficiently because there’s already brand awareness.
As far as monetization, when you find the true fans of an IP, they will engage. They will engage and play and spend and get their friends to spend. There’s a core group of players who you’ll see overindex in terms of monetization. But the key benefit of licensed IP is much more on the acquisition side.
GamesBeat: The last part you mentioned was live operations impacting monetization. This seems like the fun part, where you’re trying lots of new things and turning some knobs and doing events. It’s an area that can be a little more creative as far as impacting monetization.
Wakeford: You’re right. When we think about building games, we think about when the game launches as the beginning. We’ve done a lot of work. We’ve figured out a genre. We’ve gone through the data and optimized and tweaked the game. But when we go live, that’s the beginning.
If you think about, there are two core areas we focus on when the games are live from a development perspective. One is new content and systems creation. The other is what we refer to as “live ops” — tournaments, specials, discounts, packaging goods.
I can’t emphasize enough how important the investment of new content and new systems into a game can be. We’re all in this industry with our average revenue per paying user (ARPPU) curves and the degradation that goes along with the curves. You can change the slope of your curve by adding the right system design. Thinking about what’s happening in your game — are people hoarding resources? Create a drain for those resources and a system that enables that drain.
Thinking about game systems, and there are great examples out there — I’ll use Supercell’s Clash of Clans. They’ve done so much right. If you look at the LTV curve and degradation curve, you see changes. You see a change when they launched clan-versus-clan combat. From that day on, they were making more money per user across the board. It’s that kind of big shift that, if you get it right and invest in that system design, you’ll see a sustained increase in monetization.
On the live ops — tournaments, events — that’s an art and science in itself, and critically important. It tends to be much shorter-term, with things like holidays and special events. You usually get a smaller blip in revenue growth, and then it’ll go back down to a steady state. But also important with tournaments and the like is thinking about, are you investing in the right way? Are you really engaging your userbase to play, creating that competitive spirit that will get people to pay?
Above: Kabam’s Fast and Furious