Financing UA is a relatively new concept, so we thought we’d explain how it works, why it’s a good idea and how it could apply to you.
UA, or user acquisition, is the process by which you acquire installs or customers. Nowadays you can’t simply release your game or app and just hope people see it. UA is your digital marketing, it’s your strategy for advertising your game. Typically, this is a mix of Facebook, Google, Snap, Apple Search Ads, Unity, Vungle etc
UA should be managed in a very data driven way, and is a real mix of science and art. Once you’re ready to launch, test and scale, you will need to constantly iterate to find the best channels from a ROAS (Return on Advertising Spend) perspective. Focusing on mobile for a second, you will have ideas about what your CPI (cost per install) and LTV (lifetime value) should be, but we guarantee they will prove to be wrong. The key thing is not to be rigid about hitting those CPI and LTV targets, but focus on the ROAS of your UA campaigns, and know what levers to pull to get it there. You’ll need to constantly A/B test, add creatives, try new things, test new channels and be flexible; but you will eventually find that sweet spot – it just takes time!
THE KEY PRINCIPLES & BUZZWORDS
Knowing how your CPI moves as you scale your UA spend higher is important, as is knowing how to measure your K-Factor. The K-factor is a measure of virality, and it tells you how many extra users indirectly download your game as a result of your actual UA spend. So if you spent $100,000 on UA, and acquire 100,000 users directly, there will be an amount of organic installs who see your game in the charts, on twitter, or are sent it by their friends. Lets assume it is 30,000 in this example.
These installs wouldn’t have happened without the UA spend, so must be considered . We have an amazing model for this – but that’s something for another blog. So your K factor is (100,000 + 30,000) / 100,000 = 1.3.
In theory, you should aim for a ROAS of over 100%, ie you acquire users for £1, and make more than £1 out of them. Then simply buy as many of those as possible – easier said than done – but that’s where the financing bit comes in.
OPTIONS FOR FINANCING UA
We can keep this short (and we know we’re biased). Unless you’re one of the big studios, if you have big UA ambitions, then you will need to find the finance for it all:
Option 1: raise equity from VCs or angels and give away a (hefty) chunk of your business.
Option 2: credit cards and overdrafts. This will only get you so far, and won’t allow you to scale very high. It will also be really expensive and punitive.
Option 3: specialist debt funding (from Sugar!) which is built for your game and is fully aligned with your goals.
Option 4: use a publisher who can manage your UA, live ops, social channels etc. Sounds great but they will want a big percentage of your revenues and take a lot of control.
HOW DOES UA FUNDING WORK?
Sugar’s approach is totally data driven, we just need full access to your platforms to do it (which is very easy to do). SugarBoost – as we call it – is there to boost your UA campaigns to far higher levels than you would be able to do yourself. Our technology platform analyses your game metrics and UA channels, and we make a financing decision based on the results. In essence, we are looking for games where the ROAS is above 100%. We include a K-factor in our analysis; we have a great model for that too, and we know it will be of interest to you anyway.
If your game’s ROAS is above 100%, you will want to buy many more users, and we will want to fund you to do it. We give you the money month by month, for as long as the metrics are good, and we are repaid by the revenues of the game. No equity. No punitive terms. We’re in it with you.
You can start and stop whenever you want, as long as the metrics make sense. The beauty is that you keep your business structure as it was, and yet get higher revenues without the bad stuff that normally comes with it. We obsess over the data the same way you do, and so our interests are totally aligned. We only win if you do, so get in touch and let’s see how we can help you scale up quickly.
Get in touch at email@example.com and let’s chat about how we can help you scale up.