Yevgeny Peres, VP Growth at ironSource, explains why game developers just look at growth as a funnel and not a loop, how he came up with the concept, and how developers can start implementing it into their growth strategy.
Read on for edited highlights from the podcast:
What is the role of VP Growth?
“We started with this title four or five years ago. The idea was to focus on our growth strategy from the company perspective. It's impossible to grow the company without knowing what makes our clients grow. For us, that means spending time with developers, our clients, to better understand their challenges and translate this knowledge to our product strategy and roadmap.”
Growth in the mobile ecosystem
“My personal starting point is 2012, which is definitely not the beginning of the industry. On the business model side, this was when things started transitioning from paid apps to free-to-play. People were realizing that nobody wants to engage with premium apps. More recently, within the last couple months, we're seeing an increase in gaming subscriptions.
When you think about the transition period from paid model to free-to-play, the biggest shift was that gaming companies’ product managers realized how valuable integrated ads can be for the users. Unlike system-initiated ads or other ads that may interrupt the user experience, rewarded ads can enhance the player’s experience.
Today, rewarded ads are a big part of the initial product design. It's part of the core loop design of those games. Rewarded videos and offer-walls are features that improve retention engagement. In some cases, if users are no longer seeing those placements they react poorly because they want the help to progress in the game. This helped break down the understanding between the two different strategies.
It’s why we now see much much more successful businesses out there that are based on ads. We don't see them in the top grossing charts because that's based on in-app purchase revenue. If those charts would combine ads and in-app purchase revenues together, however, those charts would look completely different.”
What is the growth loop?
“I was looking for a way to visualize how apps turn into a business. The growth loop tells the story of when a game or app or any new business is finally ready and waiting for customers.
Let’s use the example of a bakery opening…”
Step 1: Acquire users
“The bakery is ready and smelling good. People start coming because you advertized around the block and some of them walk in organically. That's the first time your product engages with the world.”
Step 2: Monetize users
“It’s time to monetize those customers. Not everyone is going to buy something - some may buy a croissant and others may just look around. After the first day, you can see how many people came in and what they bought.”
Step 3: Optimize monetization
“Now, it’s time to prepare for tomorrow. How can you optimize everything that is happening within the bakery for day 2? Let’s say nobody bought the pistachio cookies - maybe that shelf should have something different tomorrow. It’s time to use your new insights to analyze and optimize your product.”
Step 4: Optimize UA
“Before tomorrow morning, consider if you should change anything in how you bring people back in. Do you need to change the name of your bakery sign? Maybe that will increase the organic customers coming in. Some people from yesterday may come back, so you can measure how they engage with the product the second time. The better you are in analyzing behaviors and optimizing product, the faster the loop accelerates.”
Does merging monetization and marketing lead to accelerated growth?
“It very much depends on the market physically, whether it’s Europe, China, etc, and the company size. For smaller companies, they almost naturally have the same person doing both because they don’t have enough working hands which, in a way, makes things simpler.
For the bigger ones, even if these departments are still split, I think the paradigm shift starts with having this understanding of where your money comes in and comes out. As long as there's good collaboration between those teams, it can still work.”
Good game = good business?
“ There are thousands of amazing games out there, but they're not in the top free charts because they are not successful as businesses. For me, this was the biggest lesson as someone who plays games and meets with many developers globally.
The main issue is that they’re not understanding and executing on the right performance marketing strategy. The basic strategy would be measurements in place to analyze everything that is happening in and out of your bakery. Did your customers arrive organically or from a specific ad that you put out there?
For ad based games it’s critical to also understand how you can price users. The next step is figuring out how to translate all that measurement into insights then taking action on those insights.
We've seen a lot of games that are very simple, not very polished, but they spend a lot of time in the top 10 generating six or seven figures a day in revenue. How?
A good app business can be created with a mediocre game because it's not only about the game’s quality. There are two layers to a game’s marketability: how well does that game monetize combined with how will the market react.”
Is it necessary to spend big on UA?
“Your bakery doesn't have to be ready at all. It can just have the sign outside and the smell of a bakery wafting out. But when you put ads out there, if you have a thousand people seeing those ads and one guy comes into your bakery or a hundred, that will tell you the strength of the product market fit. People have seen there's a bakery here, then they react by trying it out. That gives you the IPM metric. Sometimes, you may need to invest in one of the UA platforms to test the marketability.
Another big part of that is understanding benchmarks. This is something that people should feel free to reach out and ask about.”
Are marketability tests a standard practice for studios?
“Marketability tests are is naturally becoming part of the soft launch process. Once the app is ready, it needs to be tested - usually it's launched in some smaller market. The test is not only about acquiring users and evaluating retention but also seeing how well users react to my ads.”
Is there a step 5 of the growth loop where you see acceleration?
“The next step after stage four is back to step one. This time, you have the better insights, so you know what to do better. Benchmarks are a great tool to use for understanding where exactly you are behind so you know where to focus. Each time you ask yourself, ‘Where am I behind?’ it's going to be different things. The more focused you are on the loop and where you’re behind, the smarter you can be tomorrow.”
Important benchmarks in the growth loop
“IPM is a really important one for marketability. In terms of other metrics to be looking at, it starts with retention and ARDAU. Those are horizontal metrics of people that are coming in and understanding engagement rates.
For example, your game launches with three different rewarded video placements. If people are not engaging with one of them, it may be because the reward is wrong or the placement is hidden or it's interfering in the gameplay.
The usage rate is for each user, how much does he engage with ads? How can that be optimized where you are behind benchmark?
When you look at people that are getting to the store but deciding not to download the game this might point to an issue with your app reviews, your app ratings, etc. These are leading metrics that can point you to where things are broken, but things can be broken in many places - your creative, your app store page, etc.
It's a constant process. You need to keep your eyes on the metrics. If something changes then you need to understand why.”