Friday, 28 October 2011

The Golden Touch - Looking at Valve

At a time when most companies cite second hand gaming and piracy as major concerns and seem to be struggling to keep high profits, Valve seems to have no problems keeping themselves in the green ... Even with one of its most popular and successful franchises going free to play. So what's the secret behind its success?

Well, it's no secret that Valve has been doing quite well for itself lately. They set the bar high in terms of products, and Steam remains the juggernaut of online distribution and the model to actually follow in terms of businesses looking to earn a measure of success. Valve has cemented a reputation as being a company that actually cares about gamers, listens to them and responds. Sure, there are some low points (Valve time, the Golden Wrench thing, etc.) but on the whole they're doing a solid job. So, what's the secret to their success.

Well, the funny thing is that on top of all the things that I've mentioned, that even the big man himself Gabe Newell recently admitted that sometimes they themselves are mystified by just how gamers react to things they've done. In a recent panel interview Newell recently admitted that:

"The most recent thing that also is really puzzling is that we made products available for free on numerous occasions, without significantly impacting the audience size. We recently said, we’re now going to do something different, we’re not only going to signal that it’s free but we’re going to say, ‘it’s free to play,’ which is not really a pricing signal, even though that’s what you would ordinarily think it is. And our user base for our first product that we made free to play, Team Fortress 2, increased by a factor of five. That doesn’t make sense if you’re trying to think of it purely as a pricing phenomenon.

"Why is free and free to play so different? Well then you have to start thinking about how value creation actually occurs, and what it is that people are valuing, and what the statement that something is free to play implies about the future value of the experience that they’re going to have.

"And then the conversion rate, when we talk to partners who do free-to-play, a lot of people see about a 2 to 3 percent conversion rate of the people in their audience who actually buy something, and then with Team Fortress 2, which looks more like Arkham Asylum in terms of the user profile and the content, we see about a 20 to 30 percent conversion rate of people who are playing those games who buy something."

To basically sum that up, what Newell is saying is that while some growth was to be expected from making a game like Team Fortress 2 free to play, the growth in this case was explosive beyond all previously determined hypothetical trends. Then you factor into that 20 to 30% of those players then turn around and buy at least one item and you have an interesting (and profitable) business that seems to buck the trend of people being reluctant to migrate from free to play to a paid model. Gabe admits that he doesn't quite know what's going on, but that it's worth researching further.

Here's a thought though: by making a good game free to play, and then giving a descent amount of free updates, your customers will happily spread the game through word of mouth. Also, buying something from the store drops a lot of the limits that free to play has. It might only be one purchase, but it stands to reason that once someone has purchased something once, it's easier for them make another purchase again, the barrier of the initial purchase being broken and giving users greater comfort.

Of course aside from the mystery that free to play seems to be offering, it doesn't hurt that Valve is just actually smart when it comes to things like this. For example Gabe believes that piracy is countered by simply being more responsive and having good customer service. When asked about Russia -- a place where piracy of games is a growing concern --  he responded: "The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates. For example, Russia. You say, oh, we’re going to enter Russia, people say, you’re doomed, they’ll pirate everything in Russia. Russia now outside of Germany is our largest continental European market."

It's not a hard concept to wrap your head around, and yet it's something that few developers aside from Valve are actually doing. I mean, releasing games on time, localized, and actually providing customer support; come on these things should be a no brainer, and yet Valve seems to shock people by staking claim in a market that everyone says is unclaimable by offering these things.

Treating gamers like actual people, and responding to their concerns, who'd have thought that'd be the recipe to success, hmmm?

No comments:

Post a Comment

Note: only a member of this blog may post a comment.