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Feature: 'How To Compare Online Gaming Businesses'

When MMOs all had monthly subscriptions, comparing financial health was easy -- a simple matter of revenue numbers. But the issue gains increasing complexity given new business models and the prevalence of alternative revenue streams in today's online gam
When MMOs all had monthly subscriptions, comparing financial health was easy -- a simple matter of revenue numbers. But given new business models and the prevalence of alternative revenue streams in today's online games, it's now a lot more complex to compare. Ron Williams heads up the U.S. division of CDC Games, one of the market leaders of online and mobile games in China with more than 120 million registered users. The company pioneered the "free-to-play, pay-for-merchandise" online games model in China with Yulgang, and also launched Special Force, the first free-to-play, pay for items FPS (first person shooter) in China. Now, the company's expanding to the West with Lunia, and in this Gamasutra-exclusive feature, Williams highlights the essential measures of online games' health: "The key metrics to trend month-to-month, and more importantly the handful of metrics that can be compared across game genres, game operators, and online game business models are: the total number of unique visitors (UV) to the game's web home page each month, average marketing cost per unique visitor on a monthly basis, the total number of registered users (RU) for the game, the number of new registered users gained each month, percentage of unique visitors that convert to new registered users of the game each month, average marketing cost per registered users on a monthly basis, number of new RUs that convert to new paying users (PUs) of the game each month, the average marketing cost for new paying users on a monthly basis, and the total number of paying users for the game." Total monthly unique visitors may be the key value indicators for sites that generate their revenue from ads. Yet ad revenues are still a relatively minor part of most gaming companies' income -- so why is it so important to understand the trend of unique visitors for a free to play, subscription, or micro-transaction based online game? "Any web-based business with aspirations to earn revenue is, at the end of the day, following a very simple formula: find something someone wants to pay money for that can be sold online (content), get customers to look at the content, and then convert viewers of the content to content buyers. This is Google's, Yahoo's, eBay's, Amazon's, and every for profit online game operator's business model. Most of the best web-based business models are 100 percent digital -- the entire transaction from marketing to consumption of the content is all done online. An online game is just online content that you need to market in order to sell. The number of potential customers you can drive to the game's website either through word of mouth or through marketing spend is the key driver of sales, just like any other online business. The UV trend line is the best indicator of sales potential of a game." You can now read the full feature, which includes Williams' thorough treatment of this complex and issue, sure to become increasingly essential as business models for online games continue to evolve.

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