Part 4 – “The Predictable Contradictions”
A series on why the layoffs are happening in the gaming industry.
Again, would love to reference more people helping out in the space:
Internationally, I see a lot of amazing posts by Jordan Mazer.
If you want a job, he might be The One.
Locally, I’d like to shout out to someone who guided me here in Finland,
Arja Martikainen. Who went above and beyond what you’d normally expect from the listings at gamesjobs.fi
1. The industry has been here for a while – and its money flows have become increasingly predictable. We optimized revenue offers and acquisition funnels to a large extent, which helps us forecast and model what happens next.
2. Venture capitalists, the lifeblood of many startups, can juggle ROAS models in their sleep. One would argue, if you know the cost of acquiring users and know the cost of how much they’ll generate, you start to map out the whole P&L structure, evaluate the business, and establish what you think are fair multiples for that business.
3. If you know the multiples and margins, could you not maximize by increasing scale, and multiplying the revenue and profit?
You could invest now in a project, via its marketing and expect it to grow predictably.
4. The time of random hits like Flappy Bird is over.
5. And it’s the responsible thing to do, to wait for actual numbers before making any big bets.
6. The time of easy money is over, ergo: Wait until games are out and generating revenue, before giving them the money to develop. First revenue, then investment.
Now, let me contradict every point I just made.
1. This industry will never cease to teach us new ways to advertise and monetize, while also figuring out better and better experiences for players. Innovation is hard to price.
2. Game designers sometimes figure out new incredible ways to improve their numbers. (Shout out to Brawl Stars)
3. Acquisition costs change with scale. It’s not unit economics.
And markets change over time. All it takes is one competitor or channel changing something in their algorithms to change the equation for your product.
4. Palworld came out last month.
5. The crypto bubble is still a recent wound that didn’t fully scar yet.
6. And my ultimate point is – it is incredibly hard to predict what games will be hits.
There are ways to test for success sooner and sooner but…
…if there aren’t any vehicles for experimentation, how are we supposed to create new hits? How would new companies and jobs be formed to figure out new ways to enter the market without starting capital?
There is still space in the market for disruption, not everything is predictable.
I would actually argue that, with the privacy disruptions, it’s still an amazing time for startups to compete.
