Jeremy Zuckerman, the founder of WINR Games, was a management consultant at Boston Consulting Group last year when a eureka moment led him to quit his job, raise money from family and friends and become his own boss at 26.Darren Calabrese
The startup story of Jeremy Zuckerman sounds like it came out of a central casting description. The McGill University graduate was a management consultant at Boston Consulting Group last year when a eureka moment led him to quit his job, raise money from family and friends and become his own boss at 26.
Mr. Zuckerman thinks his mobile-gaming startup WINR Games has a disruptive idea: Reward players with cash.
The company's free game, Big Time, is built on a revenue model that is essentially a raffle: Players can try several mini-games – navigating space-based obstacle courses or puzzles – in which collecting raffle tickets is the goal. Every week, a randomized draw rewards one player with about $1,000 (the pot varies). "Big Time Cares" allows players to pick a charity to receive a share of the game's revenue.
"I see no reason anyone wouldn't play this game if they knew about it," says Mr. Zuckerman. And therein lies his challenge: Helping people discover a game they don't already know about can be the most bedevilling element of any game developer's path to success.
Research from games analysts at Newzoo pegged 2014's mobile revenues at more than $21-billion (U.S.) globally, and some of the top games in the category pull in a million dollars a day. But those success stories are rare in the increasingly crowded industry where a handful of popular names dominate and experts say formulas that have driven profits in the past likely won't work for companies trying to break in.
There is no shortage of games nor entrepreneurs like Mr. Zuckerman fighting for survival in the mobile world. According to the Entertainment Software Association of Canada, there are 329 video game companies operating in the country, employing more than 16,500 people. Canadian firms finished 910 games in 2012 (ESAC's most recent data available), which is a tiny drop added to the more than 340,000 games available just in Apple Inc.'s App Store.
Research firm NPD's recent surveys of the U.S. market suggest 60 per cent of smartphone users between the age of 2 and 40 play mobile games, though most are still playing on multiple platforms (only one-fifth are mobile only). And the average time spent playing mobile games has risen to almost two hours a day, up 57 per cent from 2012.
The rewards of making a winning game can be immense. Last year's most lucrative mobile game, Clash of Clans, has 5,645,615 daily active users, and is generating about $1,757,714 a day in revenue, according to analysis by Think Gaming, a game-ranking service. Supercell, the Finnish company that makes the game, saw its profits double in 2014 (to $565-million U.S.) and revenue triple to $1.7-billion.
They pull in that kind of money because the game offers a huge variety of so-called in-app purchases (virtual goods that can alter gameplay and are available for a one-off fee), typically for a buck or two. But there's a limit – 60 per cent of players say they will never purchase those in-app goods, according to research from NPD Group Inc.
Toronto-based WINR's game is free and there are no in-app purchases – there really can't be if they don't want to run afoul of contest laws in North America.
In contrast, Mr. Zuckerman's revenue comes from advertising. He believes the game will be sustainable when it hits 50,000 or more daily active users. Launched in November, the game is available on iOS and Google Play and has fewer than 10,000 users so far.
Albert Lai, CEO of Big Viking games, a serial entrepreneur and one of Canada's more successful indie games developers, calls WINR's model "very idealistic," particularly because it relies on advertising revenue.
"It may make sense from the outside, if they haven't seen all the carcasses of ad-support [games]. If it was 1999, it would work; the advertisers were much more naive about how they spent their money. These days they have gotten a little more sophisticated.
"I want to play games because I enjoy them," says Mr. Lai, who thinks that ultimately no charitable or cash-prize gimmick can make a game succeed.
Trivia Crack, for example, is one of the most popular free games in the mobile landscape, and it relies on advertising revenue like WINR intends to. According to Think Gaming, a ranking service, Trivia Crack makes less than $50,000 a day, despite having more daily active users, 6,584,881, than Clash of Clans. A game like Big Time with much lower user numbers will find it much harder to attract ad rates that will earn it significant revenue.
"I'm not going to say if it is a bad idea or a good idea," Liam Callahan, games analyst with NPD, said of WINR Games. "The problem has nothing to do with the business model, it has to do with awareness."
Mr. Callahan believes there's no magic formula that game makers can follow to make their product stand out and attract players. "Clearly, there are success stories that are sustainable." The King.coms or Rovio Entertainments of the world grew to scale and use a variety of tactics to stay there, from licensed characters to robust online and conventional marketing plans. But getting there from zero can require a good deal of luck in such a crowded market, Mr. Callahan suggests.
"One of the older ways of getting consumers is to be featured in the app store, or be a Top 10 game," but even getting there could be a combination of unique game play or that word of mouth lightning in a bottle.
And winning new users is getting more expensive.
The basic math of acquiring users for your game is called Cost Per Install. According to mobile marketing analysts such as Fiksu Inc. the price per user has hovered above $1 for most of 2014. However, a more difficult metric, Cost Per Loyal User, has risen steadily in recent years and now sits at almost $3 a head.
WINR has been trying to gin up buzz by paying YouTube personalities to do native advertising videos that focus on the game, which Mr. Zuckerman found to be a much cheaper and more effective method than traditional online display advertising.
But even with some luck, WINR could spend hundreds of thousands of dollars on marketing trying to generate user growth. Until that point, it is paying the weekly cash prize and charitable donations out of its own startup capital.
Mr. Zuckerman says the charitable association helps lend his cash prizes legitimacy among players. "People would think this is a scam. They would say 'this can't be real,' " he said.
So far, Right to Play and Plan Canada are among the potential recipients, and on Sunday, WINR gave $500 to the Hospital for Sick Children.
Mr. Zuckerman notes the highest-earning mobile games can have 60 or 80 per cent margins, but if his game hits a "tipping point," he says he's fine with taking a lower share of the profits, so long as the proceeds are going to a good cause.
Shane Dingman