"When the game is released, we are going to make millions and billions!!" - that's the sentiment that game developers are used to kid themselves with. While a couple of millions would be perfect (a hundred thousand would be nice too), in fact, most will be happy with just the amount of money to cover the development costs.
Creating a game, even a mobile one, takes a great amount of time and of course, money. It is a risky business. And no matter whether you want to become rich or just earn enough for a living, it's always useful to make revenue predictions. Knowing the cost, the potential income will help you estimate the risks, check how good your business plan is, and will let you make right decisions about the game you are going to create.
Once you decided to develop a mobile game, a F2P (free to play) title will be the best choice for a start. According to the statistics, the largest share of revenue belongs to F2P games with their micro transactions. Mobile gaming has its own peculiarities and mobile gamers, unlike hardcore PC or console gamers, tend to have frequent but short gaming sessions. Of course, a P2P (pay to play) title can also have success, however, it must prove that it's worth buying before you even played it. And F2P title, on the opposite, let's you play for free, and you start making purchases only when you are sure that the game is good, and you want to invest in it.
Here are 5 tips which can help you find out the amount of money your game can earn:
1. Know Your KPI.
KPI is a key performance indicator. There are 2 standard KPIs:
- DAU (Daily Average User) which shows a number of people who play the game every day.
- DARPU (Daily Average Revenue Per User) which indicates the average revenue generated by 1 player each day.
Let's say the game makes $5,000 and the DAU is 15,000 per day, this means your DARPU is $0.33 (5,000 / 15,000 = 0.3333).
Once you have DAU and DARPU, you can make some calculations on gross revenue. Just multiply the total amount of days in the game's life cycle by your DAU and DARPU. Usually, a cycle of 18 months is used, as the largest part of lifetime income will be made in this period.
Here's the example of gross revenue calculation: Take the approximate lifetime period, for example, 18 months (30 days per month) and multiply it by DAU * DARPU. So, in the end, you will get this: 30 * 18 * DAU * DARPU = gross revenue for the 18 months period.
2. Choose Your Genre.
Making forecasts is easy when you know your KPIs. But what if your game is not ready yet and you don't have the numbers? In this case, you can refer to the statistics. Hardcore RPG and Strategy titles like Dungeon Hunter or card games like Hearthstone tend to have less daily users, but higher revenue per user. While casual games and puzzles like Fruit Ninja, Subway Surfers or Cut the Rope have a larger number of daily players, but less revenue per user.
Here you can see the contrast between these kind of games:
Hardcore: DARPU = $0.3, DAU = 15,000 Total revenue per day = 0.3 * 15,000 = 4,500 dollars/day
Casual: DARPU = $0.03, DAU = 150,000 Total income per day = 0.03 * 150,000 = 4,500 dollars/day
The reason is that hardcore gamers usually spend more time playing, and tend to spend more money on the game they like. However, the number of such players is not very large.
And casual gamers tend to play less but more often, because casual games were designed for short gaming sessions, and they are perfect to play in a public transport, queues, etc. Though the number of casual gamers is huge, the amount of money they are willing to spend on the game is very small.
3. Create an Ad Campaign in Facebook.
The more specific your target audience is, the better. Let's say your game appeals to all people of all ages from small kids to elderly people. In this case, it's too broad and you won't be able to make any predictions and calculate potential revenue. Be more specific. For example: "I am going to develop a game for 20 to 35 years old male gamers, single, who like medieval war games and who live in the USA, Canada, and Europe."
There is a good trick in Facebook if you need to check the market reach, just create an advertising campaign and choose the audience details. At the bottom, you will see the approximate amount of people you can reach.
Once you have got some ideas on your audience size, it's time to set the goal for your release installations. For the game that's been described above with the size of the audience is 500,000, I'm aiming of 140,000 - 160,000. The installs of the release month are very important for making forecasts, this first wave of players that will give you the most accurate predictions on your potential success. This first install base is called your “golden cohort” – these users have the biggest potential of becoming customers, real masters of the game and its loyal fans, who will invest in the product they have loved.
4. Check Release and Retention Installations to Predict a Number of Daily Users
Retention allows you to see how exciting your game is. It is the percentage of players that come back to play your game. There are 3 retention days that are usually measured, they are:
- D1 - the number of the users who came back the next day after installation.
- D7 - the number of the users who came back 7 days after installation.
- D30 - the number of people still playing the game after a month.
All these Ds are measured in percent.
D1 usually indicates how good was the first user experience, an impression of the game. How comfortable was the control? How good are the graphics and gameplay, was the game exciting and interesting enough to play it again? If half (50%) of the players came back the next day, your game is doing good. As for D30, it shows the percentage of user who will stick to the game for a long time if you get to 8% - consider it a success.
At this point, we can calculate the approximate DAU. Let's take a number of first month installations - 160,000 and multiply it by D30 (in our case it's 8%).
In the end we get 160,000 * 8% = 12,800 players per day.
5. Estimating the Daily Income
Measuring DARPU can be a very difficult task if you don't have deep knowledge of the industry. We can't call DARPU a real spending scenario. I real life you never think "I'm spending 25 cents per day on this game", it's more like "if buy 50 gems for $10 it will be a great deal!". Let's imagine that all the users have the same thoughts. In this case $10 will represent the metric called Daily Average Revenue Per Spender (DARPS). So, to calculate the approximate daily income we need to take our DAU multiply it by DARPS and multiply it by the Spender Conversion (the amount of users who makes purchases in the game measured in percent, for free 2 play games it's usually less than 1%, however for hardcore titles it's 2%-4%).
This is how the formula looks like:
- DAU * DARPS * Spender Conversion = average daily income
- In our case it will be like this:
- DAU = 12,800
- DARPS = $10
- Spender Conversion = 2% (let it be a hardcore medieval strategy).
- Our average daily income: 12,800 * $10 * 2% = $2560 per day. And for 18 months (540 days) period we should get 2560 * 540 = $1,382,400
Sounds pretty awesome, but it's only gross revenue, we haven't taken into account development costs, application store commission and many other things. Also, how can we be sure that our game will make $1,382,400? In the worst scenarios, the amount can be a lot smaller. So, what to do then?
We will discuss these issues in future.