What are KPIs?
KPIs stand for Key Performance Indicators. Basically, they help you select the most relevant sets of data to assess how well your company is doing. We are going to focus on a first, basic approach, and then with the eye set on a specific example for a video game company.
What KPIs should we be looking for?
Let’s start with the most basic:
Seems quite obvious, right? To know how well your company is doing, you see how many revenues you have, this is, how much money comes it, what your costs are, or, money that goes out, and what’s left. Pretty simple.
However, with these metrics we do not have enough information to improve the company. We might now if we are gaining or losing money, but we won’t have a clue where our problems or opportunities are. We need to dig a little bit deeper.
If we were talking about a normal company, we could start going into the different departments and consider cashflow as a KPI, or maybe new customers in a set period of time, what the sales life cycle is, how long it takes us to produce the product, etc.
But we are here to talk about video game companies, so let’s focus on the KPIs for them.
KPIs for Video Game Companies
Defining the KPIs for a video game company will depend a lot on the company, the game and how it is monetized. For example, a company that sells physical copies of a game will focus on very different KPIs than one one that sells digital copies. Both need to look for development costs, marketing costs, product life cycle, etc., but the first one will have to focus a lot on the distribution and manufacturing costs, while the second one will have to focus on which platforms are selling better and the related costs.
Since it would be barely impossible to cover all different scenarios in one posts, let’s focus on one specific scenario:
KPIs for companies selling mobile games with a freemium business model
If you have no idea what I’m talking about, let me quickly explain.
Mobile games are games sold for mobile phones. Between iOS and Android, you cover about 99% of the mobile market.
The Freemium business model is based on giving free access to the game. In other words, you can purchase the game, install it and start playing without having to pay a single cent. However, once you start playing, you are presented with in-game purchases. These can be anything like cosmetic changes, more powerful items, extra lives, reduced waiting times, etc.
With this scenario in mind, let’s see what KPIs would be especially relevant here:
Users: You want to know exactly how many users you have. This means, how many people have downloaded your game and are playing it. But this is not enough by itself. You want to know how many (daily/hourly) active users you have, and compare it with your inactive users. This information will let you know of the ones who downloaded your game, how many are actively playing and when, and how many have the game on their phone, but are not interested enough in playing anymore.
Furthermore, you also want to know as much as possible who your users actually are. All possible segmentations (age, gender, location, other’s game they might play) you have the information for will help for a better analysis. Additionally, any sort of comparison between monthly users, daily users, hours when more users play, etc. can be very valuable to assess marketing campaigns and special promotions.
User Acquisition Cost: The mobile video game market is extremely competitive. It has very low barriers for new players to enter and the players have, literally, millions of alternatives where to chose from. This means that reaching the players is one of the most difficult tasks a mobile game developer has. Which translates in a very high marketing/promotion cost. You need to promote the game to reach the player, get him to register and ideally, you want him to purchase something. On average, it costs about $3 to acquire a user and around $5 to get a registration. The in-app purchase cost jumps up and would be around $100 (Data from 2018). Purchasing users only amount 2,9%, which is another very important KPI to control. Keeping a good track of these costs and merging this information with all other KPIs might allow to find better targeting/marketing strategies.
Revenues: You want to know everything you can about the money that comes into your pockets. You want to know how much revenue you make per month, day and even hour. You want to track variations. When is the time that users purchase the most? What was taking place when they purchased? What triggered that purchase? How much was it? If there are different packages, which ones sell the best, when, and why. All this information is essential and again, comparing it and combining it with other sets of data will help you devise better monetization strategies.
Example: If you see that most of the players who perform in-app purchases do so after reaching level 20 and during night time, and you were targeting mostly level 10 players and during the morning, you can easily refocus your promotion strategy to increase the revenues.
Retention rate: You want to know how many users you gain, but as important, or more, is to know how many still play after X time. X being minutes, hours, days, weeks, etc. You want to study at what point users normally stop playing. And why. Is it at a particular level that users get frustrated? Is it a set amount of time where users get bored? All this information is essential to improve the game and keep your users hooked.
Gaming User Experience: Analyzing the average game session, whether purchases happen during or after longer or shorter sessions, whether attrition of players take place after longer or shorter session, etc. all add up to close up the analysis.
As I said before, one particular set of KPIs can help a lot to answer a very specific question, but the best results come when you are capable of bringing everything together. The real key is to interpret all these very different metrics in a way that allow you to find better strategies to improve your growth and profitability.
In short, asking the right questions and gathering the right information, using KPIs to group this information and make it suitable for analysis, is essential for any video game company. And every company will need to ask different questions at different points in time to find the right answers based on facts.