CEO & Co-Founder, G5 Entertainment AB (publ)
Mobile Downloadable to Mobile Social | Vlad SUGLOBOV
In only few months, G5 brought its most popular downloadable franchise Virtual City to Mobile Social space with the new product -- Virtual City Playground. After millions of downloads and millions of dollars made in a few months after the release, G5 is sharing the experience of taking a popular casual downloadable game to Mobile Social space on iPhone, iPad, Android, Mac App Store and other platforms.
Delivered at Casual Connect Asia, May 2012.
About Vlad Suglobov
Vlad Suglobov, CEO and co-founder of G5 Entertainment AB, has stated that the company plans to spend between 17 and 22 percent of its revenue on user acquisition in any given quarter, with a goal of not exceeding 22 percent. He noted that G5's development capacity continues to grow, citing a "very strong base in Eastern Europe" that allows the company to hire developers at a "fraction of the cost" compared to some developed countries, which he described as a "tremendous advantage." Suglobov also said that the company capitalizes development costs on its balance sheet and writes them off evenly over two years after a game's release, adding that G5's games typically generate revenue "well beyond even three years." Suglobov has described the company's strategy as continuing to release four to six new games per year, testing ideas in the market to eventually produce larger successes. He characterized the success rate among new releases as "very healthy," noting that over the last 10 years, only about five games lost money, while a similar number generated "amazing returns" of hundreds of millions of dollars in revenue. He also stated that the company's target audience is women aged 35 and older, a demographic he described as "quite untypical" for a gaming company.
Transcript (24 segments)
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Vlad Suglobov0:01
Hello, my name is Vlad Suglobov. I am a CEO and co-founder of G5 Entertainment, G5 Games. So what we do is we publish and develop free-to-play and casual games. Within casual downloadable games, we focus on games of hidden object, adventure, time management, strategy, genres. And here are some of the games that we've published over the past couple of years. You can find our games on the app stores like iTunes App Store, Amazon App Store, Google Play, Nook App Store, and we focus on selling our games and distributing them through the app stores. Our vision of the market is that by 2020, we're going to have 10 billion mobile connected devices—smartphones and tablets—and it's going to be an unprecedented gaming platform in the history of mankind. We're already making 90% of our revenue from smartphones and tablets, and we focus on selling our games through the app stores as we believe that the app economy is the one that will grow the most.
The company was founded to develop mobile games, and the first mobile game that we published was in 2003 in the United States on Verizon Wireless. After that, we spent several years developing games as a contract development studio for the largest mobile game publishers at the time. We listed the company in 2006 in Stockholm and started publishing casual downloadable games on iOS in 2009. It really took off, and in 2011, we started doing it on Android as well. We also launched our first free-to-play game. We've been doubling our annual revenue for the third year now, reached 50 million US dollars market capitalization in Stockholm, and we have offices in San Francisco, Stockholm, Moscow, Kiev in Ukraine, and about 120 people.
So as a publisher, what we have right now is 50 million downloads on iOS and Android. To put this in perspective, the first 4 million we achieved in the first year, and now we're making about 4 million downloads per month. We have a portfolio of about 150 game apps, mostly casual downloadable games. A number of games crossed over 1 million US dollars. We are releasing one game a week. We have enough content for about a year and more, and we're licensing new games every month. Millions of dollars paid in revenue share to developers. We have 50 studios that we have contracts with, and this number is growing fast.
Our revenue by geography is rather diversified. We see one third coming from North America, one third from Europe, one third from Asia and the rest of the world. Asia has been growing, probably one of the fastest-growing areas in the past year. We have achieved some success on Android, and I think it's quite remarkable. With casual downloadable games, it's not even been a year since we launched our games on Android. We only had 20 games, yet we achieved about 20 million downloads through the Android app stores. Millions of US dollars in revenue. We are actually selling games at a high price point of about $4.99 on Android. To compare, the downloads we have are about 50 times more than what Big Fish had on Android. You can see these numbers on Google Play and actually compare them, so go check us out on Google Play. We also had success on Android on Kindle Fire and Nook, and we constantly have a number of games in the top charts on these devices as well, so you can check that out too.
So my story is going to be about how we moved from premium games, which was our focus, to free-to-play games, and now we're putting more emphasis on that. The first free-to-play game we released was actually a free-to-play version of our premium game, and the game was called Virtual City. We released it in September 2010 to quite a success. It's been top 10 grossing game in 34 countries, millions of downloads, made $1 million rather quickly.
But in 2011, we noticed growing popularity of free-to-play games in the US and Europe, and we decided that we want to go there. We've chosen this game as a basis for our first free-to-play game. So this turned to be a game called Virtual City Playground. It's a free-to-play game, and we released it about a year later after the premium version. We achieved top 10 grossing game rank in 86 countries, and then we got our millions of downloads and the first million dollars made in a much shorter period of time compared to the premium game.
So I actually put together these two charts which compare revenue from the free-to-play game and the premium game. The orange chart is Virtual City Playground, the free-to-play, and the blue one is the premium game. Although both games were a financial success and in terms of downloads as well, you can clearly see that the premium game revenue falls off rather quickly. It stays at a certain level, it's not zero, it's making money even now, but the free-to-play game is definitely sustaining revenue much better. We're actually able to push it up with regular updates and certain marketing actions. We've seen that with the free-to-play game, basically the engagement of the users was better and people played longer hours. Monetization was much better because we removed the upper ceiling. It's really remarkable that the free-to-play game was actually made completely from the same content that we had in the premium game, with just a small addition which I'm going to explain.
So as we were going from a premium game to free-to-play game, we worked out a five-step process to convert a casual simulation premium game to a free-to-play game, which we applied and which worked for us. Ideally, you would want to start with a great casual simulation game, and by the end of the fifth step, you're going to have a successful free-to-play game on your hands. What's good about this process is that on each step, you're going to have a version that you can actually play and evaluate. So these are five steps, and now we will go through each of them.
The first one, which I call 'Create a Sandbox,' is about removing your mission-based structure, because premium games usually have missions, so you will not need that. We had about 50 missions in Virtual City. We threw them away. We only left the sandbox mode. We also limited the space where the player can play, and we made them unlock the rest of the territory. The idea is that you want to create a certain persistent world that the players could invest into and then return to what they have invested into, so that will drive retention and continuous engagement of the players.
So this is a zoomed-out screenshot. The first thing we did—we actually, the only map that we left was 3 by 3 iPad screens, about this size. And we thought, this is the largest we had in Virtual City, this is going to be enough space for the players. Then in the update, we actually had to increase that by one more screen, effectively doubling the size of the sandbox, because players really wanted to build huge cities. So we're probably going to expand it further. You don't want to put any limits on the players. If you can give them a bigger world, it just makes sense.
The next step, which was kind of counterintuitive for us as premium game developers, is that we made the game balance more realistic. And that was actually making the game more sort of more painful for the player, because we slowed down the construction time in the game and slowed down the resource production cycles. We increased prices on upgrades and construction substantially. The original game was quite unrealistic in its balance. The mission structure was made so that you could build the city from scratch in only 5 to 10 minutes. Everything was happening instantly. You were creating a building, it was built in about 2 seconds, then you could upgrade it almost immediately. You were routing a truck, it started making you money immediately, and this money was enough to upgrade the truck after two roads were completed.
So the thing here is that you have to make the game more realistic in the sense that the construction process would take hours to complete, upgrades would cost so much that you would actually wait to accumulate enough money to upgrade your structures. And this is something that you cannot overdo. You can always shorten it later, and you can always later charge money for the users to make it easier. And because a large part of our audience was coming from premium games, we included this on the loading screen—we included hints which explained the changed game mechanics compared to the premium version. For example, on this screen, we can see that the upgrade of the bakery costs about $27,000, and in the premium game it was about $300. So we have changed the balance dramatically.
The second—third step is converting the game to run in real time, or make it seem like the game is running in real time, so that the players could actually go out of the game, and when they return to the game, they will see that the businesses were working, the goods were delivered, and the city was living, and they made some extra money during this period of time.
The next thing is to introduce energy to limit gameplay sessions for the game, so that the players could spend like 15 to 20 minutes in the game, but then they will run out of energy and will have to close the game. And meanwhile, the game will actually make them more money, more energy. They will return and do something in the game again. So by this, we achieved this feeling that the city is alive even when the player is not there, and we made the player want to return to see the progress of their actions and the changes they made to the city. We stretched a 3-hour uninterrupted casual game experience that we had in the premium game sandbox mode into about 1 month of engagement through shorter game sessions where they play for 10-15 minutes and then they have to wait until something happens in the city and they get back to make more changes to their city.
This is a good thing because really, the longer the period of time that users are engaged with the game, the more money they are making for us and the more likely they are to monetize. Spending $3 for 3 hours of gameplay might seem like a lot, but if you play for a month, spending even $10 makes much more sense. So we achieved this effect basically. Some social games have servers and the game is on the server, so the client just pulls the current status of the city or the world. Our game was very resource-intensive, so we kept all the logic on the client, on the tablet and smartphone, and the game was just using the previous timestamp and recalculating the status of the city when the game is launched. We again tried to explain it to users, telling them that the minimized game continues transporting goods and it's making you money even while you sleep.
Then you're ready to add monetization, because you have a gameplay experience which is limited to short game sessions and which takes quite some time to wait until something is completed. So you have opportunities to monetize by selling more energy, by selling the ability to speed up the construction, the ability to unlock new content ahead of time, to unlock more space on the map, to build exclusive buildings that are not available for the in-game currency. And important to remember that you want to keep those people who want to play for free—just keep them playing, give them the ability to achieve everything for free. But there will be people who value their time more, and they will be actually spending money in the game to speed things up.
So here's an example of what we did for monetization. We introduced those landmarks and we charged people the premium currency to build those landmarks. You could also buy extra energy in order to lengthen your game sessions. And we also gave them the ability to buy not only premium currency but also the currency that they could actually earn in the game. We found out that a lot of people would actually buy the currency that they could produce themselves in the game, because it would save them some effort.
The fifth step is adding some additional content. In our case, it was important because we had a premium game with the same content, and we wanted to make sure we have something that would attract the users of the original game to this game, something to give them a feeling of a sequel or expansion pack. So we created some landmarks which not only looked good but they also had a function to them—they extended your energy bar. A lot of spending in the game now goes towards the purchase of these landmarks, and we also could use them to advertise the game, because this is the kind of screenshot that you could not achieve in the premium game. And then we attracted people by showing that there is extra content in the new version.
So after the fifth step was completed, we released the game only to find out there is so much more that you have to really do about a free-to-play game to make it really work well. It took us a number of updates to get things right and polish out the small details. We have added quests, special pricing was changed a lot from the original version, we made special deals, lots of updates. You're going to have to take care of viral distribution, social interactions, customer acquisition, and user retention. You have to go cross-platform. So these five steps are just the initial step towards having a free-to-play game, and there's a lot of work after you launch it.
So what G5 can do for developers trying to convert from premium to free-to-play is we can definitely offer advice and share our experience with developers. We provide great terms, advances, revenue share. We have a cross-platform Talisman technology which allows you to really quickly port—like in two weeks—from iOS to Android, which is really cool. We have tens of people working in QA in our Ukraine office. We have tens of devices. We can test your game on all the real phones to make sure it's going to work on the users' devices. And then again, we're going to take your game to multiple platforms. For example, Virtual City Playground right now is top 5 to top 10 grossing game on Mac App Store pretty much around the world, and it's a free-to-play game. Who would have thought that in the Mac App Store you can do that? But it's one of the top grossing games in the world on the Mac App Store at the moment, and this is where you can also make money with a free-to-play game.
We also have this huge number of users, like millions of active users, and through our cross-selling system, we can quickly get your games in front of many users on day one to make sure it's downloaded and people play it. This is not limited to simulation games. We have multiple free-to-play games coming out before end of the year, none of them simulation. There are other genres as well, and you can apply it to pretty much any genre with maybe different amounts of effort.
So this is basically the result of the story of a conversion of Virtual City from the premium game to a free-to-play game. And as you can see, if you compare the success that we had to what CityVille from Zynga had on iPad, you can see that your casual game can actually become a free-to-play hit on mobile platforms and on tablets. We've been to number one top grossing game in 26 territories, CityVille to 29. We've been to number 5 in 72, CityVille to 66. And top 10 for Virtual City Playground, 86, CityVille 79. So you can really compete with other brands, and it's such a new market. It's a really good time to actually start making and publishing free-to-play games on mobile through these app stores and in the App Store ecosystem.
Thank you. Here is the contact information. If you have any questions, let me know.
Okay, no questions. Thank you very much.