Friday, March 6, 2009

Powerball vs. Moneyball

My friend Rick Heitzmann sent me a blog post by Stephen DiMarco from Online Metrics Insider titled Powerball vs. Moneyball Marketing. It is interesting reading. DiMarco's point is that there are two approaches to marketing: the Powerball approach, which is a high risk/high return, "swing for the fences" strategy; and the Moneyball approach, which (hat tip to Michael Lewis) is a metrics and measurement-driven strategy designed to "engineer outcomes."

I'm no marketer, so I can't really comment on DiMarco's post from that perspective, but I think his analogy is broadly applicable to the current state of the video game business. The packaged goods publishers are playing a lot of Powerball -- buying lottery tickets for new IP, spending horrendous sums of money up front with very little understanding or measurement of audience dynamics, and hoping for home run outcomes. The fact that every so often a new game becomes a monster success keeps everybody buying lottery tickets.

Conversely, the approach that companies like MiniClip, or some of the social network-based publishers are taking looks a lot like DiMarco's Moneyball strategy. I'd be willing to bet that MiniClip knows exactly the amount of traffic they can drive to a game featured on their home page, and structures their economics accordingly.

We once had a meeting with some senior executives from a well-known video game publisher when we were running JAMDAT. The head of studios for that publisher finished getting demos of our best-selling products and famously said, "A monkey could make these games." What he was responding to was the lack of whiz-bang 3D graphics, the lack of fanboy, nerd-core "innovation". He was used to playing Powerball. We, on the other hand, were playing Moneyball. We knew from studying our customer data that our audience didn't care a rat's ass about the kinds of things that Gamasutra editors cared about. They wanted simplicity, accessibility, and value. So we made products to "engineer" that result. And we acquired IP that fit into that mold, like Tetris.

What Michael Lewis described the Oakland A's doing in Moneyball -- buying players who were undervalued by other clubs but who were overachievers in the metrics which actually produced results -- is really quite similar to the the ideas of customer acquisition leverage and audience measurement in the entertainment business. I think there's going to be a lot of value created exploiting this in the future.

4 comments:

Anonymous said...

Lewis points out that the undervalued asset can be sold for a large gain with little risk. If you make solid singles (games), do you see these sales as one off's like a pitcher, or the wrapped up library/IP?

theLotter said...

A stumble and a mixx!
Awesome runthrough, definitely worth a try. I have a friend who frequently goes over the power ball results and runs some excel formula he made up - he never won the jackpot yet but he gets 3rd and 4th prizes all the time. He wouldn't tell me what the formula is but the dude does this full time and lives nicely.

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