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You a game studio focused on a new developing game market? Stop coding, read this first!
I recently received a message from a game developer in Pakistan who mistook my excitement about using game narrative to teach local history years ago to mean I was
You a game studio focused on a new developing game market? Stop coding, read this first!
I recently received a message from a game developer in Pakistan who mistook my excitement about using game narrative to teach local history years ago to mean I was a proponent of Urdu language games for the local market. In the interim he had quit his government job, hired a full game studio and just released iPhone and iPad Urdu games for kids aged 0-5.
As is common in my exchanges with most new game entrepreneurs, I was asked to look at the game and provide feedback on design. While I did this briefly, my bigger concern was that this super smart developer had made a large bet on a nascent smartphone market without establishing any market sizing or planning tests for his business assumptions in the product launch lifecycle.
This scenario is not uncommon. From my network alone in the last year I have personally seen about 6 such companies across various parts of Asia and the Middle East. The YetiZen accelerator program which sees about 1500 accelerator applications probably sees much more though we haven’t been tracking for such cases as our focus is on post product and post traction companies.
Such startups generally run out of money by the time they finally learn via trial and error everything they should have planned and tested for from the get go. At that point they go for asset sales or shut down. A lot of the founders then come back with their next startup, all the more smarter from learning from their failure.
I am all for learning from failure. In fact failing forward is the only way you can really innovate on the given paradigms of any business space your startup is functioning in. I am not however, for failure that comes from jumping to action without doing some basic thinking. This is the category startups like the one in the first paragraph fall into before they talked to me.
So what are some questions you should ask yourself to force you and your team to think things through if you are in a new gaming market:
The market--if you are a game developer in this day and age, unless you have a legacy feature phone business you are probably considering developing games for the smartphone market. Some of you realize smartly that your team does not have the cultural understanding that game developers in EFIGs countries would have about their audience. Because of this you are building games with a focus on your own country or region market. This is smart. However don’t stop at this, you must also figure out:How much can you make from this market--Assuming less than 5% of you owning this market what average spending would you need the user to make in order for this to be a strong cash flow business for you? How about for multi million $ returns per month (which will be the new holy grail for acquisitions in low disposable income markets)? Factor in any ecosystem restrictions on payment penetration, carrier cuts etc. Numbers come out too high? Well then you either need to make a game where you see them spending that much or monetize in ways other than free-to-play. Your other options are subscription, paid update packs, or sponsored game content. Not all monetization options work for all demo and all audiences. Make educated hypotheses, test and iterate. Talk to people like me on what you learn.
Current market penetration of smartphones in the new gaming market of interest--what has the penetration been in the last few years. Don’t tell me there is no market research on your market. You are the entrepreneur, unless you want to navigate blindly through your market jugaad your way to an answer--carriers, manufacturers, large sellers. Find a good enough set of numbers to bottom up or top down your way into current market size.
Estimate the rate of growth--the entrepreneur in paragraph 1 was excited about the possible smartphone growth in the Pakistani market as there is a new initiative that is bringing down the cost of Android phones to Rs. 10,000. I get the excitement, but that doesn't mean diddly squat without an estimate on how many people will be able to afford the new Rs. 10,000 handsets. You should be able to guesstimate this based on incomes and current sales for equivalent items at that price point
How much can you make from this market--Assuming less than 5% of you owning this market what average spending would you need the user to make in order for this to be a strong cash flow business for you? How about for multi million $ returns per month (which will be the new holy grail for acquisitions in low disposable income markets)? Factor in any ecosystem restrictions on payment penetration, carrier cuts etc. Numbers come out too high? Well then you either need to make a game where you see them spending that much or monetize in ways other than free-to-play. Your other options are subscription, paid update packs, or sponsored game content. Not all monetization options work for all demo and all audiences. Make educated hypotheses, test and iterate. Talk to people like me on what you learn.
And remember despite my holier than thou attitude above I am super impressed and amazed at the heart and courage with which you are embarking on this journey. I want to see you succeed and if you don’t I want to see you fail with strong learnings so that you can be smarter in your next startup run. Keep in touch. Let me know how things evolve and I hope to see you wow me with your traction in a few months so much so that I want to give you an offer for the YetiZen accelerator. And yes then you can say I told you so (though I will probably say it right back ;))
Best of luck!
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