Games industry veteran Vladimir Nikolsky and gambling traffic expert Alex Riddick have discussed the state of these two different markets during the recent WN Conference Cyprus’24. Here’re the main differences in terms of competition, user acquisition, and other issues.
Vladimir Nikolsky (left) and Alex Riddick (right) at WN Conference Cyprus’24
Note: This is an edited version of the conversation moderated by Julia Lebedeva, COO and partner at WN Media Group.
Julia: Hey, guys! Let’s start with a few words about yourself.
Vladimir: I’ve been in the games industry since 2003. I was the CEO of MY.GAMES, which I founded. Now I’m the founder of Utmost Games, where our team makes strategic investments in global gaming projects.
Alex: I’m new to the industry. My team first invested in a video game a little over two years ago.
I’ve been working with traffic since 2008. I started out as a freelancer, and that’s how I got into affiliate marketing. I also worked as an ad publisher for years, with my focus ranging from mobile subscriptions and disc distribution to marketing goji berries, green coffee, and much more.
In 2013, I stepped into the gambling industry. I had the first gambling multi-vertical affiliate program. At that time, we were number one in selling download traffic.
Since 2016, I’ve been the CEO of the PIN-UP Partners affiliate program, which today has transformed into the flagship project of PIN-UP.TRAFFIC. We now also provide various products with multi-sources of traffic through media buying and SEO.
Great! Now let’s move on to a more complex topic. What do you consider the most important thing in the games industry?
Vladimir: Let me put this in perspective.
Everyone involved in development or publishing sees the same picture: a dozen new games launch every day, most of which do not meet even the minimum forecasts of publishers.
But why is that?
Players have become very selective and demanding. They are looking for vibrant, new experiences. The time spent on each game should be worth it.
So the main thing in the gaming business today is everything that can evoke emotions in the player: characters, world, plot, how much the game embodies their fantasies.
Only if the player is emotionally stimulated will they be ready to tell others about their experience and their vivid impressions.
This is how a hit is born, an event that literally “sells itself” organically. The problem is that creating a real hit is largely a matter of luck.
Of course, there is always the option to buy traffic. But it’s important to understand that while “feeding” a hit with traffic helps the product, pouring traffic into a mediocre product is a waste of money.
Alex: I’d argue with that despite being new to the industry.
Based on my experience promoting gambling projects, I’m sure that there are no bad products, there is only bad targeting.
Of course, you can’t spend tens of millions of dollars on a bad product with a positive ROI. However, there are always niches with little competition where you can make a profit with the right target.
Let’s stop here. You say that there are no bad products in gambling. And what distinguishes a great product from a mediocre one in this area?
Alex: Let me talk about failures/successes now, not the quality.
In our industry, 90% of all projects fail to succeed.
The reasons for the failure are different. Here are the four main ones:
- Weak operations management;
- Inability to work with traffic;
- Lack of working capital;
- Underestimation of risks in various regions.
In general, if your GGR (gross gaming revenue) is less than a million dollars per month, you’re a small operator and most likely in the red. At the same time, 90% of products don’t even have such metrics.
Most often, failure occurs when a former manager of a particular gambling product finds an investor and sells them the story that they can create and manage a casino if they just invest money.
I’ve heard hundreds of similar stories. Most of them resulted in money losses.
A successful product in gambling is one with a GGR of $20-30 million per month. There are no more than 200 such products in the entire market.
Hits are those with a GGR of more than $100 million dollars per month. There are about 30 of them. These are the market leaders.
When looking at the top 5 products, their monthly GGR reaches $300-500 million.
All figures are approximate because nobody discloses their revenues. But the assessment, I think, is as close as possible to what is happening in the gambling market.
Vladimir, and what’s the situation with video game revenues?
Vladimir: 95% of games earn nothing.
You can count the number of mobile games that generate over $100 million per month on one hand. These are: Honor of Kings, Monopoly Go!, Royal Match, PUBG Mobile, and Roblox.
There are less than a thousand games on the market that make over a million dollars in monthly revenue. And there are around 5 million games across all platforms.
So we are talking about fierce competition?
Vladimir: “Fierce” is too soft a word.
The market is oversaturated and oversupplied. Games are made by absolutely everyone — individuals and large studios, enthusiasts and professionals. Any student can put together a game, immediately put it on the store and, in theory, start making money.
Why in theory?
Most projects are filtered out by users based on a very simple criterion — quality of execution.
The idea itself isn’t a costly matter. But Implementing it efficiently is a completely different matter, since it’s both expensive and rare.
Good gameplay — both in terms of idea and its implementation — is only the beginning. Monetization, marketing, LiveOps, and working with the audience are no less important.
Even if the team does a great job with all of this, the game can be killed by the main form of modern-day competition — competition for traffic. Monetization of many genres doesn’t allow them to recoup the constantly growing CPI, because — along with games — Netflix, TikTok, and YouTube are now fighting for users.
This is the ideal picture, but in reality, it turns out that working in such a market is extremely difficult.
Vladimir: In fact, despite the huge competition, it is much easier to work in the global market today than ever before.
Let me explain why.
The fact is that another mandatory factor for success today is operating worldwide, which implies finding a balance between the size of the audience and its solvency.
Previously, publishers had to enter each market independently. Today, there are platforms and stores that take much of this headache off your hands. For example, they solve payment issues.
Of course, there are markets for such platforms that are relatively closed and require an individual approach. China is one of them, but it is rather an exception to the rule.
Before we stray too far from the topic of competition, let’s talk about what’s going on with it in gambling?
Alex: There are thousands of products coexisting on the market, of which just under a hundred are visible.
In other words, there was competition, there is competition, and there always will be competition.
The main areas that products compete in are rates for partners (which are based on the payback prediction) and the budgets that each company has. There is a direct correlation: the larger the company, the higher the traffic budget and the longer the payback periods it can set.
Vladimir has already touched on the topic of operating globally. What about gambling? Is it also necessary to think globally there, to focus on the whole world at once?
Alex: I often see product affiliate programs operating across all possible markets. In the gambling industry, this is impossible; it sounds like complete nonsense.
For almost any gambling product, entering a new region takes several months of work. You need to conduct audience research, adapt the product to it, and connect local payment systems.
The main problem is precisely payments. Of course, this is much easier in the video game industry, because the problem of accepting payments is solved at the level of stores, which take care of issues related to payment methods in various regions.
It is worth emphasizing once again that for gambling, expansion usually implies a fair rework of the product itself, because player behavior patterns vary from country to country: what seems to work in one region may not work in another. And this applies not only to the product itself, but also to its promotion.
By the way, how are things going with user acquisition now?
Vladimir: When it comes to video games, marketing as a tool is now used in a very limited way. To make it clearer, I will start with a brief historical digression.
Initially, this tool implied bold decisions and the search for new promotion channels. Marketers formulated branding, a unique selling proposition, and looked for an audience and ways to interact with it.
Then they started treating it as something too general. As a result, the word “marketing” has come to be associated primarily with user acquisition.
Another thing is that the creative pipeline, churning out pictures to grab people’s attention, worked effectively primarily in the “wild” years.
The popularity of this approach among those involved in marketing games led to three things:
- Emergence of many restrictions (the advertising market began to be regulated, including by law);
- Increase in supply;
- Changes in user behavior.
As a result, using visual promotional materials to attract an audience to the game wasn’t enough.The market has become oversupplied. This led many market participants to the idea that it was time to return to the roots, to learn classical marketing.
Look at how the pages of well-selling games on Steam are designed — they are partly examples of “classic marketing.” Or pay attention to how much effort and resources Supercell invests in brand awareness, so that users unmistakably associate the company’s IP with its games. It is also important to note that Supercell has long been working with classic advertising, interacting directly with the community. Just a few years ago, no one saw the point in this.
The problem is that there are very few specialists capable of building such marketing strategies. Such professionals must be nurtured in-house.
How does gambling attract traffic? Are the problems there the same or is the situation completely different?
Alex: For me, as a person who has been working with traffic for more than 15 years, it is very strange to hear that games, having the opportunity to use advertising channels without the threat of a ban, manage not to recoup UA investments.
I’ve already said that there are no bad products (almost none), there is crappy targeting.
Ad campaign settings and traffic control with positive ROI are the basis. We have thousands of affiliates, most of whom stay in the black. Of course, everyone has different volumes, but the minimum ROI is usually 30-50%.
I mean that properly executed media buying, with the right analytics and KPI, can always be profitable.
It is clear that no one will provide an instant return on investment. It is necessary to correctly calculate the model, take into account the influence of the media component on the performance, use the appropriate payback period depending on the channel, etc.
Are there any tips on traffic sources? Which ones are video game publishers using now, and which ones are considered the most efficient in gambling?
Vladimir: I don’t think I’m going to reveal anything new: Facebook, Google, AppLovin, Unity, TikTok, CPA networks, influencers. Publishers use all of them.
But it seems to me that the emphasis should be on the ROI for which the purchase is made. Everyone remembers the times when companies purchased traffic for the long term, expecting their investment to recoup in a year or two. The downside is that any shock in the market could destroy the entire economy behind such a strategy.
Alex: When it comes to traffic sources in gambling, companies in this industry use absolutely everything: search, media, influencers, etc.
Affiliate marketing is especially helpful because each affiliate is essentially a separate marketing agency, with its own approach, methods, and sources.
I see. Thank you for the interesting conversation. We’ll be able to dive even deeper into online gambling and its intersection with the video game industry the next month as WN Media Group will be hosting the WN iGaming Summit in Cyprus on December 11.