Very interesting article, Monument Valley team (game voted the best game of 2014, doesn't mean it was the most profitable though), revelaed their full financial costs and profits made from the game.
I wasn't really shocked that the game made over $5mln, considering Flappy Bird was making over $50k per day at its peak, but I was shocked by the costs. Holy shit. Also, the difference in income based on market is insane.
Moral of the story - hire eastern european people to do the same job for 10% of the costs
Anyways If some of the team had a contract in which his salary would drastically go up in case XXX sales were made there s no wonder the costs are so high. No way the development itself was that much
On January 19 2015 22:04 Baalim wrote:
if you are spending 800k developing a shitty mobile game you are doing something wrong
yeah who wants to spend 800k to generate revenues of $5.8mil at a 76% profit margin when you could make a shitty game cheaply while living in your parents' house like the other 3289423875 wannabe rich app makers and generate a revenue that values your time lower than people who gather recyclable material off the streets in China.
On January 19 2015 17:47 Spitfiree wrote:
Moral of the story - hire eastern european people to do the same job for 10% of the costs
Anyways If some of the team had a contract in which his salary would drastically go up in case XXX sales were made there s no wonder the costs are so high. No way the development itself was that much
it's pretty likely at least some developers were paid in equity since it seems a pretty large business risk to hire eight people for a year paying $100k p.a. to develop a game that may or may not even sell in a winner-take-all marketplace.
but if anything the actual 'moral of the story' is most app makers will lose, only a few run great (and have a great game) will win big. But the people who won big last year were very well resourced, so even in the mobile space barriers to competition are going up
On January 19 2015 17:47 Spitfiree wrote:
Moral of the story - hire eastern european people to do the same job for 10% of the costs
Anyways If some of the team had a contract in which his salary would drastically go up in case XXX sales were made there s no wonder the costs are so high. No way the development itself was that much
LOL
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NMcNasty United States. Jan 20 2015 13:45. Posts 2039
Not sure if its analogous to gaming or not, but I remember reading about how with American TV right now how networks lose money on basically every show. It doesn't matter too much, because when a show does become a hit, like the Simpsons or Family Guy it can literally be worth billions. So networks are basically gambling it up searching for the one big cash, and that's why we see new crappy shows basically every week.
On January 19 2015 17:47 Spitfiree wrote:
Moral of the story - hire eastern european people to do the same job for 10% of the costs
Anyways If some of the team had a contract in which his salary would drastically go up in case XXX sales were made there s no wonder the costs are so high. No way the development itself was that much
it's pretty likely at least some developers were paid in equity since it seems a pretty large business risk to hire eight people for a year paying $100k p.a. to develop a game that may or may not even sell in a winner-take-all marketplace.
but if anything the actual 'moral of the story' is most app makers will lose, only a few run great (and have a great game) will win big. But the people who won big last year were very well resourced, so even in the mobile space barriers to competition are going up
I was wondering if they would be paid in equity, but equity wouldnt be added to costs in this scenario. Would make no sense :/ Only makes sense if they got a huge salaray raise since salary is costs. Its not necessary that their contract are 100k/year, they might be 1k/year and have a clause to sky rocket to 100k when 2mil sales are done or smtng ilke that
Stocks are a part of the company either way
Last edit: 20/01/2015 17:19
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Silver_nz New Zealand. Jan 20 2015 19:56. Posts 5647
True, it is as Nassim Taleb says, to gauge actual EV of the decision to make a game such as this, you have to look at the graveyard. How many similar mobile games tried and died? we don't see them. We only see the winners. This biases our sample so that we can't make a good decision about dropping everything to start a game company.
But I think the $800,000 development cost is legit, to make a decent game, you need skilled people. Skilled people have options, they can demand high pay. 100k per year sounds about right for a good developer. And making a decent game is much more involved than it seems. A friend of mine used to work for a company making crappy flashgames to put up on newgrounds etc. Even they had a budget of $50k per game. Infinte art, sound, design, programming, music.
On January 19 2015 22:04 Baalim wrote:
if you are spending 800k developing a shitty mobile game you are doing something wrong
yeah who wants to spend 800k to generate revenues of $5.8mil at a 76% profit margin when you could make a shitty game cheaply while living in your parents' house like the other 3289423875 wannabe rich app makers and generate a revenue that values your time lower than people who gather recyclable material off the streets in China.
Because the EV of a 800k mobile game is obviously 5.8M... this post coming from a poker player is just baffling.
What Im obviously trying to say is that 800k isnt needed to develop that game... advertizing and other things like that you can go much higher but that isnt development
On January 19 2015 22:04 Baalim wrote:
if you are spending 800k developing a shitty mobile game you are doing something wrong
yeah who wants to spend 800k to generate revenues of $5.8mil at a 76% profit margin when you could make a shitty game cheaply while living in your parents' house like the other 3289423875 wannabe rich app makers and generate a revenue that values your time lower than people who gather recyclable material off the streets in China.
Because the EV of a 800k mobile game is obviously 5.8M... this post coming from a poker player is just baffling.
What Im obviously trying to say is that 800k isnt needed to develop that game... advertizing and other things like that you can go much higher but that isnt development
and im saying it is idiotically arrogant to claim you know better than the developers of this game how to distribute costs in order to maximise expected roi. you are in effect claiming to have a knowledge edge in the mobile game business on specialists in that business who won big, even if there is a lot of rungood in their win
852k$ in 55 weeks if developed by a western/usa team would probably be slightly above average for a team of 5-6 HIGHLY qualified people ( talking about 7-8+ years of experience ) including the needed hardware to support their start up, im guessing the support was out-sourced though, and the developers are like 2-3 people so they can distribute costs towards marketing
- thats a pretty rough estimate though
thats why most of the companies that develop such stuff are based in eastern europe or south & east asia where the salaries are literally 10x less for the same qualification
Last edit: 22/01/2015 12:25
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MadeInPolanD Poland. Jan 22 2015 14:52. Posts 1383
Oh c'mon, the guy has 29262 posts, he knows everything, he saw everything, in every topic, on every planet, in all universes.
You guys are all looking at the wrong things and talking about the wrong things. In start-up it is not about the money that the firm makes. It is just about their users base and the company potential to grow. The startup investment scene, specially in silicon valley, is INSANE. But that is what it is.
First of all almost all these apps and teams are financed by investors. Who make money from the equity in the firm when they flip it to the next investors, so they dont give a shit about the profit/loss and neither should you! They only care about things like brand or active user base. or churn etc etc. So you are looking at all the wrong things when you look at the revenue and cost and profit and sales etc etc. It is ONLY about the users.
The founders and employers and the developers of the app are not spending their own money. They are spending their time and risking their time while working on reduced salaries in exchange of equity. The investors just spend money and get equity hoping they hit a jackpot. The hope is to hit a "hockey stick" graph for users and get millions of users and then turn around and sell their shares. So THE ONLY important graph in the article is this one that shows how fast the app gets users:
All that being said this is a GREAT investment. If you have a heartbeat and a team behind you in silicon valley your "company" worth around $2-$10million dollar at the idea stage depending on who you know. If you have millions of active users like this game. I would say the valuation of this company would be MINIMUM around $100 million. So based on a VERY conservative valuation you are making 10x returns on your investment when you give this team the money they needed to make the game in 55 weeks.
In US everyone is happy as long as all the prices are rising. Unless its crude oil - Marc Faber
somewhere at the end of the line PnL is going to matter. Your argument sounds like nasdaq exuberance in 1999. how much further do you think a mobile game can go? It's a crowded market with new games entering all the time, and people get bored of the same game fast. Look at what happened to omgPOP (guys who made draw something), they got acquired by zynga which has since gone on to lose 85% of its share price from peak by making large losses on its "investments" as a public company.
Im not here to argue the integrity and sustainability of the current system. You can look at companies like Groupon or Zynga. Or you can look at companies like Instagram and Whatsapp. It is what it is. And when you are very small start up this is a sustainable model cause like I said the investors don't care about your revenue and cost, and neither should you.
In US everyone is happy as long as all the prices are rising. Unless its crude oil - Marc Faber
ye sure if you're small and looking for whale buyers or public markets to ipo on, you don't need to care about profitability of the game you're launching now.
But since the whale buyers and public markets do care about profitability and they may learn over time that it isn't as durable or large as they thought in mobile games, they will become smarter buyers and stop paying $100mil or whatever you currently consider a reasonable "valuation" for a large number of transient users. then the overoptimism on profitability will over time start coming back to reduce the viability of the business model from the small guy perspective.
the only reason whatsapp and skype and viber and all of those programs were bought for absurd amounts is that they enable the owners to track their users and"spy on them that way they can manipulate their needs and blah blah, too lazy to go in depth ... thats what capaneo means i guess however i don't think that is the case with games so i have to agree with Romm3l
just because two things are considered "start-ups " doesn't mean they have the same goal and purpose , its a pretty wide spread term
On January 19 2015 22:04 Baalim wrote:
if you are spending 800k developing a shitty mobile game you are doing something wrong
yeah who wants to spend 800k to generate revenues of $5.8mil at a 76% profit margin when you could make a shitty game cheaply while living in your parents' house like the other 3289423875 wannabe rich app makers and generate a revenue that values your time lower than people who gather recyclable material off the streets in China.
Because the EV of a 800k mobile game is obviously 5.8M... this post coming from a poker player is just baffling.
What Im obviously trying to say is that 800k isnt needed to develop that game... advertizing and other things like that you can go much higher but that isnt development
and im saying it is idiotically arrogant to claim you know better than the developers of this game how to distribute costs in order to maximise expected roi. you are in effect claiming to have a knowledge edge in the mobile game business on specialists in that business who won big, even if there is a lot of rungood in their win
it is a mobile game not Battlefield 5, how much do you think it takes to develop Flappy Bird, like $200 bucks? Before the mini-purchase system started by mobile games you would see this kind of games for free on flash everywhere obviously you can spend millions "developing" a simple game if you take things like advertizing and many other things that dont really fall into the developing tag which is very likely the case on thise 800k number
Zynga is a great example against people saying that monopolies can just buy their competitors, see what happens when you buy competitors and stop producing quality stuff.
On January 22 2015 10:30 Nazgul wrote:
Baal how do you know what it costs to develop games?
Its not very hard to get a rough idea of how much it costs to develop the actual game, EA spends from 300 to 500% the actual production cost in advertizing which is probably the case of that bloated 800k figure, you dont really think they spent really 800k on salaries of people actually coding and designing that simple game do you? especially since you have 0 distribution expenses.
On January 22 2015 15:58 Romm3l wrote:
ye sure if you're small and looking for whale buyers or public markets to ipo on, you don't need to care about profitability of the game you're launching now.
But since the whale buyers and public markets do care about profitability and they may learn over time that it isn't as durable or large as they thought in mobile games, they will become smarter buyers and stop paying $100mil or whatever you currently consider a reasonable "valuation" for a large number of transient users. then the overoptimism on profitability will over time start coming back to reduce the viability of the business model from the small guy perspective.
I know what you are saying. But I work with startups on a daily basis. I many many investors first hand. And I know alot of VCs. And I can tell you that you are wrong. They don't care. The only thing that matters is the user base and the user base growth. They don't even care about the business model or if you are profitable. And if you have 10,000+ user for ANY app they will close down a 100-300k investment for 1-2mil valuation with you on the day at the launch table down in SanFran.
I am not arguing right, wrong, sustainability, future, economical impact etc. Im just telling you what it is working in the industry first hand.
In US everyone is happy as long as all the prices are rising. Unless its crude oil - Marc Faber
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milkman United States. Jan 22 2015 22:01. Posts 5719
paying for software developers costs a shit load of money.. my company at one time spent over a million a month on our development.
i like it.
Its hard to make a easy buck legally, its impossible to make a easy buck morally.
But before people keep jumping me, what I tried to do with my first post is mock the way they report "developing" costs
Ex-PokerStars Team Pro Online
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TimDawg United States. Jan 23 2015 03:50. Posts 10197
On January 21 2015 20:21 FrinkX wrote:
clash of clans got like $1200 from me lol
i uninstalled, fml
i was #9 in US at one point tho. lol
got me for about half that amount but i still haven't uninstalled it yet lol
online bob is actually a pretty smart person, not at all like the creepy fucker that sits in the sofa telling me he does nasty shit to me when im asleep - pinball
On January 22 2015 19:53 cariadon wrote:
How many layers of tin foil do you have on there Spitfiree ? Ur like an onion. Onion of conspiracy. Tears.
Dunno one of the creators of Telerik a bulgarian IT company that just sold for 260$ million explained everything about that on a C# course i took, guess the guy is a moron he probably goes home and thinks of conspiracy plots to tell people...
fucking ignorant fuck you are
no- they bought whatsapp for 19 billion because they ll end off profiting off it true story, its not about all the user data you can use for tons of things like marketing in the first place
No honestly
How do you think marketing works, people are attracted to it or marketing attracts people ?
On January 22 2015 23:36 Baalim wrote:
But before people keep jumping me, what I tried to do with my first post is mock the way they report "developing" costs
It is a Techcrunch article. Everybody who reads techcrunch would/should know exactly what developing costs include. It even clearly said the cost goes into "team salaries and incidentals" So there is nothing to be mucked it says it right there clear as day.
In US everyone is happy as long as all the prices are rising. Unless its crude oil - Marc Faber
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casinocasino Canada. Jan 28 2015 19:59. Posts 3343
I think marketing costs are bigger than most people think. Flappy bird didn't just become popular overnight, Beiber posted it in his twitter so lots of people actually downloaded that stupid game from the eighties. The developer lucksacked that one like he won the lottery.
There are hardly any "new" games coming out but marketing plays like 90% of how the game performs in sales. Also game companies don't work on just one game at a time so basically when you do buy a game that makes it, you're also paying for the 20 shit games developed by the same programmers that don't even make the stores.
United States. Jan 20 2015 13:45. Posts 2039
