Metrics For Online Games

From " How To Compare Online Gaming Businesses" ; When MMOs all had monthly subscriptions, comparing financial health was much easier. But, as CDC Games' Ron Williams usefully explains, metrics for online games are a lot more complex than that for today's microtransaction and ad-supported titles.] Several metrics to track the general financial performance of a PC-based online game are easy to come by. However, there are different business models for every game genre and until a game has significant profits, it is very difficult to understand the financial potential of a game. More importantly, determining if a game is being managed to its full potential by the game operator is even less clear. In particular it seems there is little ability to compare how well one online game in a specific genre compares to any other game -- even a sequel to a game operated by the same company. What are some of the most useful monthly metrics for understanding how well an online game is being operated by management? This model is of particular interest to me because I head up the U.S. division of CDC Games, is one of the market leaders of online and mobile games in China with more than 120 million registered users. The company pioneered the "free-to-play, pay-for-merchandise" online games model in China with Yulgang and launched the first free-to-play, pay for items FPS (first person shooter) game in China with Special Force - and is now expanding to the West with games like Lunia.
To understand how well management is driving users to the game, converting precious marketing resources to paying customers, and keeping possible subscribers happy, there are several data points to track. The key metrics to trend month-to-month, and more importantly the handful of metrics that can be compared across game genres, game operators, and online game business models are: the total number of unique visitors (UV) to the game's web home page each month, average marketing cost per unique visitor on a monthly basis, the total number of registered users (RU) for the game, the number of new registered users gained each month, percentage of unique visitors that convert to new registered users of the game each month, average marketing cost per registered users on a monthly basis, number of new RUs that convert to new paying users (PUs) of the game each month, the average marketing cost for new paying users on a monthly basis, and the total number of paying users for the game.

Total monthly unique visitors (UVs) are seen as key indicators of the value of websites that generate advertising revenue on their content. With advertising revenue still a minor part of most gaming companies' income statements, why is it important to understand the trend of unique visitors for a free to play, subscription, or micro-transaction based online game? Any web-based business with aspirations to earn revenue is, at the end of the day, following a very simple formula: find something someone wants to pay money for that can be sold online (content), get customers to look at the content, and then convert viewers of the content to content buyers. This is Google's, Yahoo's, eBay's, Amazon's, and every for profit online game operator's business model. Most of the best web-based business models are 100 percent digital -- the entire transaction from marketing to consumption of the content is all done online. An online game is just online content that you need to market in order to sell. The number of potential customers you can drive to the game's website either through word of mouth or through marketing spend is the key driver of sales, just like any other online business. The UV trend line is the best indicator of sales potential of a game. Additionally, if the same formula for determining unique visitors is used -- there are a few debated methods out there -- it is very easy to compare how well one game is attracting potential customers versus another. In fact, unique visitors can be compared across entirely different web businesses, which gives investors that ability to see where an online game stacks up against the best business on the web. If you looked at a chart of the top 100 for profit websites ranked by total monthly unique visitors, you will quickly see that there is a very strong correlation between number of unique visitors and web-based revenue and even market capitalization (for those sites that are public). Of course any web site with a large monthly unique visitor metric also has significant potential to sell ads, market merchandise, and most importantly be a major portal in the move to digital convergence now underway. OK, so unique visitors are very important. Going beyond the concern for sustaining unique visitor growth on a limited marketing budget, why did you list the tracking of marketing costs per unique visitor as a key metric?
Marketing budgets are certainly limited, and cost per unique visitor is a quick way to figure out how many unique visitors an operator should be able to drive to the site with next month's marketing budget, but the key insight gained from trending this metric is the efficiency of the marketing campaign relative to other games with a similar business model, play mechanics, and genre. It is important to understand that the ability to obtain users from online ads has a finite limit -- the number of gamers who view ads in a given time period. In particular, when you think about pay per click rates (PPC) of ad campaigns, there is a fairly limited number of potential online game customers and there are a lot of online game operators trying to buy ad inventory for those customers to click through to get to the operator's game. As the online game market continues to expand and larger operators with bigger ad budgets enter the fray, we expect to see the PPC and Cost per Thousand ad views (CPM) start to creep upward. So the operator that has the lowest marketing cost per unique visitor is likely the most efficient at buying the limited online ad inventory and in the process driving up the cost of ads to their competitors if not locking them out of critical ad inventory altogether. Lots of unique visitors is no doubt a good thing. Getting visitors to engage with the site's content is even better. You mentioned several metrics concerning registered users. What is the best way to leverage them to gain a better understanding of how well a game is being operated?
Registered users of a game, even users who have never played the game or have not played for months, represent the current customers of the game. This is the group of people who are the best to market new releases of the game, products related to the game, and most importantly the next game you want them to try. People tend to skip past the total registered users of a game to get to current active players and paying user counts. However, there is still some important information that a close look at registered users will reveal. In particular, a breakout of the number of new registered users each month trended over time will be a strong indicator of if the game is peaking. Tracking the percentage of unique visitors that convert to new registered users of the game each month and comparing it previous months can provide insight into the effectiveness of various marketing campaigns. In addition, tracking the average marketing cost per registered user on a monthly basis in addition to understanding how well the marketing budget is performing, can also indicate how well word of mouth and other free sources are driving users to the game -- if registered users are stable or increasing when marketing costs are stable or decreasing, it is good indicator word of mouth is starting to drive users to the game.

One of the most important metrics is how many paying users a game has. How can someone dig deeper with the paying users metric?

Understanding how well the game coverts the number of new registered users each month into new paying users (PUs) of the game, when trended, provides insight into initial user satisfaction of the game. Calculating the average marketing cost for new paying users on a monthly basis provides an important tool to understand how far management can grow revenue based on the marketing budget.

The total number of paying users for the game represents the most valuable core of the game's customer base -- the ones who have proved they want to spend money on your products and have the means to do so.

Are there any other metrics that should be of interest to someone trying to understand how well a game is being operated by management and help them compare one game to another?

A more fine-grained view of the metrics discussed earlier would include the total number of UVs from marketing efforts including paid search and online ads (MUV -- marketed unique visitors), the number of new registered users that come from marketing unique visitors on a monthly basis, the percentage of marketed unique visitors that convert to registered users which are due to the marketing efforts (MRUs percentage), and the average marketing cost per marketed registered user.

All of these metrics put the spotlight on the effectiveness of the marketing budget. They also can provide insight into which marketing efforts deliver unique visitors and registerd users most cost effectively.

So all of the metrics we have discussed in this article can be used to compare one online game to another even across genres?

Yes. These metrics allow someone to understand how well a game is being operated and can be used to compare any online game to any other.
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