Successful monetization in the mobile gaming industry

24

October

2016

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When taking a look at the chart of most grossing mobile games  in the Google Play-store and Apple´s App store we see that almost all games are based on the free-to-play(F2P) model. This model is based on giving users free access to the game in a basic format, where the user can spend money on in-game purchases that enhance the experience later on. This model is not new and has existed for a long time next to the traditional large sum upfront strategy, but is being applied more and more by game developers in 2016. It is currently still turning the industry around and makes both consumers and developers consider their positions and incentives surrounding financial questions in the mobile gaming industry. But what makes this model so successful? And how is revenue collected in this model where most players will probably play with spending almost nothing?

The success of the model comes from multiple factors. The ones I will expand on in this post are advertisement incomes and micro transactions. The fact there are so many variables to choose from when using the F2P-model is actually also one of the inherent success factors of the model, because it gives the developer the opportunity to focus on earning on some specific variables or accumulate revenue from a lot of variables at once. We will see that the income from mobile games is not just the selling of the actual information good, but also giving other companies the opportunity to target advertisement at a specific market segment that relates to their product. When focussing on generating a product with a long-lifetime value and a steady user-base spending on in-game purchases, a worry for developers is that in-game advertisements will cannibalize in-game purchases. In this post I will try to look at the two different forms of incomes and how they interact with each other.

Advertising in a F2P-game is very interesting for companies, since the free model usually creates a large base of users that play the game for free. In addition, the type of player that plays a certain type of game is usually very predictable, thus making the targeting of advertisement through this channel very effective for third parties.

The advertisement comes in two forms. The first form is where users get incentivised to click on an advertisement by receiving some (for the developer free) in-game currency, which they can spend. The other form is where the advertisement get pushed in front of the game, and the user has to click to leave the add and continue playing. The developer then get a small amount per click or view of the advertisement. A large user base in this way can sum up to a steady flow of income for the developer of the mobile game. The most important factor is to create a game that has a high level of positive user experience, where the user keeps playing the game and gets a psychological reward during the game. This can for instance be demonstrated by the hook canvas:

 

This shows why a user keeps playing and the game has a high level of player retention, so the adds keep being viewed for advertisement income.
Another point I found very interesting, is that the limiting of playability for a game by , for instance, incorporating a number of lives into the game actually makes the game more desirable to play. The mandatory taking of a break increases desirability to play for the gamer (Matrofailo, 2016).

Micro transactions are a second form of monetizing on a mobile game. This consists of users paying small amounts of money for expansions of the base game or in-game currency to speed up in-game processes. Because 5% of the user base is responsible for 95% of the revenue generated by mobile games.

This creates only a really small segment of paying users(named whales) in applications, and this user base is not very loyal to a certain game but tends to keep moving from mobile game to mobile game. In addition, data also indicates that 60.2% of a player’s total spending occurs in the first 24 hours after downloading a game. Players who are going to make a second purchase typically make it an hour and 40 minutes after the first. By day three (of 14 tracked), players had already spent nearly 75% of the total money they’d spend in-game, assuming they spent any (Extremetech, 2014). This makes creating a long lifetime value of the game for paying users not very interesting.

For designers this thus implicates that when designing a game it is important to capitalize on the paying users by creating incentives to quickly invest in the game early on for segments that are prone to spend on mobile games. In addition to this it is important to create a game with a high lifetime value so players keep playing for free and advertisement income keeps being generated. How to successfully design a mobile game this article on Gamasutra provides a lot of good insights and aspects: http://www.gamasutra.com/blogs/IgorMatrofailo/20160107/263164/5_Criteria_of_a_Successful_Mobile_Game.php.

A personal conclusion is that when designing a mobile game it is very important to look at behavioural and psychological aspects of the segments you are trying to reach with the game, since these influence financial success of the product just as much as quality of the mobile game itself can.

 

(Extremetech, 2014) http://www.extremetech.com/extreme/177409-only-0-15-of-players-account-for-50-of-free-to-play-game-revenue

(Matrofailo, 2016) http://www.gamasutra.com/blogs/IgorMatrofailo/20160107/263164/5_Criteria_of_a_Successful_Mobile_Game.php

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IoT-devices and the opportunity to create massive potential for online attacks

23

October

2016

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As the world witnessed with yesterday’s attack on the cloud-based internet performance management (IPM) company Dyn, the possibilities and dangers of attacks on large server companies can become standard practice in the future if the cybersecurity of Internet of Things-devices is not improved. The scale of yesterday’s attack was unprecedented and shows the massive potential of using IoT-devices in so-called DDos-Attacks. This led to companies like Spotify and Twitter being unreachable in the US for hours.

Firstly, let me briefly explain the aforementioned subjects. IPM-companies are companies that give IT professionals visibility into Internet traffic patterns that can impact a sophisticated online infrastructure including ISPs, cloud hosts, content delivery networks (CDNs), web pages, apps – and, ultimately, customers, employees, and all other end users (IDG & Dyn, 2016). Companies like Spotify, Twitter and Soundcloud all make use of these services.
With the opportunity to connect more and more objects to the internet every day, the internet gets more and more unique IP-addresses every day. The definition IoT-device is linked to every device or object that can be linked to the internet, mainly for more convenience or efficiency. Examples that nowadays are turning into IoT-devices can be thermostats, speaker systems and security cameras. It is estimated that by the end of 2016 6.4 billion IoT-devices will be online, 30 percent more as in 2015. Every day 5.5 million devices get added to this number, leading up to 20.8 billion devices being online in 2020 (Gartner, 2015). The problem with these devices is that they cannot run traditional cybersecurity software and attempts to improve this cybersecurity is by far ranked less important as income because of the commercial aspirations of the companies producing them (DeCesare, 2016).
When we then bring DDos-attacks into the mix, we get an interesting situation. Distributed Denial of Service (DDoS)-attacks are attempts to make an online service unavailable by overwhelming it with traffic from multiple sources. They target a large variety of important resources, like banks and news websites and are a major challenge when making sure people can publish and gain access to important information and online services. There are four classes of DDoS-attacks, these are TCP connection attacks, volumetric attacks, fragmentation attacks and application attacks (Digital Attack Map, 2016). Besides that, there are two amplification methods for the use in DDoS-attacks, namely DNS reflection and Chargen refection. These are not explained for scope purposes, but if interested can be researched online.
In this scenario the type of attack used was a volumetric attack, which attempts to consume bandwidth by simply causing congestion by the large number of requests from different unique IP-addresses. In addition, Chargen reflection could have been used since this is usually found on printers with outdated software, which are seen as IoT-devices.

Secondly, now the subjects are more clear, let’s look into the situation of yesterday’s attack and the potential problem for the future. The people behind the DDoS-attacks mainly look at three focal units, namely building capacity, launching the attacks and selling silence (Digital Attack Map, 2016). Building the capacity is made easy because of the ease of hacking of the IoT-devices. When trying to gather capacity for a volumetric DDoS-attack, the person behind this can easily involve your smart-tv, security camera and online speaker system and use their unique IP-addresses in generating large volumes of traffic for the target of the attack. This is exactly what happened yesterday when the actual attacks where launched and bandwidth was congested by requests of the volumetric attack.
‘The DDoS attack force included 50,000 to 100,000 internet of things (IoT) devices such as cameras and DVRs enslaved in a botnet, as well as an unknown number of other devices that are parts of other botnets, says Dale Drew, CTO of Level 3. He theorizes the mastermind behind the attack hired multiple botnets to compile the number wanted for the attacks’ (Networkworld.com, 2016).
This hiring of botnets falls under the last focal unit of selling silence. Selling silence is the selling of DDoS-attack capacity by people gathering and managing botnets, which can be collections of IoT-devices, to attack a target and create a successful attack. This creates a financial incentive to start gathering these devices into attack-ready bundles and selling this to the highest bidder to dismantle internet-based operations of the party this bidder designates as a target. However, we see that social and revolutionary groups use the attacks as a form of protest without financial goals in mind as well.

Finally, we conclude what we saw in the attacks, the developments in the area surrounding the discussed subjects and what this could imply for the future.
The attacks on Dyn show a new level of DDoS-attacks unprecedented in the past. The competition in the market is leading to the large-scale production of unsafe devices by commercially driven companies that can be bundled into attack-ready botnets due to their nature of not being ready to provide traditional cybersecurity. The creation of these botnets is done by people with financial or revolutionary incentives and these people make use of the weakness that the market creates by focussing mainly on higher profits. The large volume, which keeps on growing in the future makes the power of these botnets stronger and stronger every day, yet no one is willing to start with turning the situation around.
As the internet is turning into the backbone of the economy and digital companies take over more and more market share, shouldn’t we be considered in providing more safety and stability in this area. Companies like Amazon and Paypal being down in the attack show that a lack of insight and action in this area could well predict large external threats for the functioning of the digital market in the future. In addition, the anonymity of the internet traffic and incentives show that for the future, the use of these attacks for darker reasons could become more occurring. This could well be between countries, companies or individuals. Because one of the biggest mysteries that remains after the attacks is: Who and why?

 

(IDG & Dyn, 2016) http://resources.idgenterprise.com/original/AST-0166058_WP_IDG_IPM-Maximize-Online-Performance_Feb_2016_1_.pdf?SOURCE=01434520166058CIOUTK8YWZBJR

(DeCesare, 2016) https://techcrunch.com/2016/10/22/how-massive-ddos-attacks-are-undermining-the-internet/

(Gartner, 2016) http://www.gartner.com/newsroom/id/3165317

(Networkworld.com, 2016) http://www.networkworld.com/article/3134057/security/how-the-dyn-ddos-attack-unfolded.html

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RMC and autonomous vehicles: DTP Group 39

14

October

2016

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RMC B.V. was founded in 2003 as a joint venture between the Rotterdamse Taxi Centrale N.V. (RTC) and the Rotterdamse Elektrische Tram N.V. (RET) Rotterdamse Mobiliteits Centrale is Dutch for ‘Rotterdamse Mobility Centre’, a name that covers the company’s goal: directing the safe transport of customers towards a reasonable price by high educated and responsible drivers in reprehensive vehicles.
To better understand the services that RMC provides, we visited the company for a detailed explanation. It became clear that RMC is an information hub that provides many different kinds of transportation for different kinds of customers, varying from entrepreneurs ordering private transport to customers that require transport with special needs. As we visited the company for an interview, we also discussed their views on autonomous driving, which we used as a base for our analysis of the technology.

The service of RMC can be roughly divided in two different parts. On the one hand RMC has the regular taxi service and on the other hand they perform transport with special needs that they win in public tenders. For these different services, two different information system strategies are used.
The value proposition of RMC is so, that it is a mobility provider that offers the customer the special transportation need it seeks to fulfil. In fulfilling this need the main costs are that of the cars and drivers and, in the case of RMC separately, the cost of developing and maintaining the information systems. Revenue streams are mostly dependent on customers that receive subsidised transportation and public tenders. Customer service is a key activity in this process and the customer relationship is successful if the communication is timely and clear. For RMC developing and maintaining technology in the form of front- and back-end information systems is managed by partnering.

For the digital transformation project we introduce a new revolutionary technology, namely autonomous driving.
The rise of self-driving vehicles is going to have a major impact on companies and households. Self-driving vehicles could replace delivery or transportation employees, and employees can improve their productivity by working during hours where they would normally drive. The different options for autonomous cars however, offer many great possibilities to companies that make use of transport, like for instance taxi companies.

Based on our analysis of RMC’s business model, the IT structure and the emerging technology of autonomous driving we came up with four managerial recommendations for RMC:
• Do additional research and keep up with the latest news on autonomous cars from car manufacturers, governments and specialists. To achieve this, partnerships can be of a positive impact.
• Focus on the customers/business model and not the technology. It is important that RMC keeps their focus on their customers, as there are multiple risks/challenges associated with their current customer base (transport with special needs) and not be to focused on the implementation of this new technology.
• Integration with current IT-system. If implementation of autonomous vehicles will be started, it is extremely important that the vehicles correctly communicate with the current IT-system of RMC.
• Security should have priority. Security should have a high priority by the implementation of autonomous vehicles, since hacking of the system has disastrous consequences for the society/RMC.

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