The article will be more useful for those who are just thinking about creating their first application or game, which will necessarily (in their opinion) be a unicorn and take off right away.
I'll start with my story of the loss of $ 50k and almost a whole year. At some far green moment, my friends and I decided to make our own, perfect game, which the whole world will definitely play (Well, how else? Ours is the best idea!). We created a concept, came up with a completely new game mechanics in the form of a symbiosis of many genres, created a game dz-dock, found developers, artists, 3D artists and flew to saw the game. After 9 months of fun developing with constant new features, we suddenly realized that our initial budget of $ 50k was coming to an end, but the product was not yet. They sat down, calculated how much more time and money we needed, and were horrified - there was still as much ahead. After long thoughts, we decided to change our shoes and do something more approximate, because We have already gained experience in game development and put together a team - the most appropriate decision for us at that time was to outsource and work on a custom model, and leave the product “unfinished” for better times. In parallel, learn and gain experience in approaches to developing your own products.
While studying, we understood for ourselves important concepts in product development:
- Our idea is the best, we are experts - one way road
- Any statement should be based on numbers, only facts should be taken into account
- Having a good idea alone is not enough to make a product profitable.
- It is much cheaper and less painful to realize that the idea is losing before the start of development than after the release of the product.
And now in more detail:
- According to statistics, 80% of startups do not live up to 2 years. 60% of all failures in the food business are related to the fact that the product turns out to be unclaimed by society, and 40% of the failures are distributed among all other problems that led to the closure of the business or product. You, as the creators of the idea, are biased towards your product and cannot be its target audience. Your opinion should be excluded immediately after the idea. Do not be afraid to ask if others like your idea, they already have enough of their worries to steal your ideas. The more information you get at the beginning of your journey regarding your idea, the more chances are that you will come to the right decision to start implementation. We found a cool question for ourselves in order to evaluate the idea: “Will you give [a specific amount of money] NOW in order to receive the product AFTER its implementation?”. It is important to ask about specific current intentions: “Will you buy a product when it comes out?” Is not a valid question in this context. If the product is worth it, people will be ready to give money right away.
- Statistics are much more important than opinions. Any opinion is the individual thoughts of individuals. Very often, the opinion of even industry professionals can be erroneous. A huge number of "significant" people considered Uber, Pinterest, Facebook, etc. failed businesses, but the current state of affairs shows that they were wrong. It is important, it is always worthwhile to conduct experiments with many people, the larger your audience will be - the more accurate and specific data you can get. Analytics is not built on small numbers. Any hypothesis requires verification, since the same improvement in different, even similar applications or businesses, can lead to completely different results. What worked for some does not mean that it will work for you either. “Everyone does it!” Is not enough for you to do it! Check your intentions with your audience. Check your audience. Form statistics from a variety of opinions.
- Even a good idea can crash after the launch due to the fact that at the moment the market is so arranged. The market and market price has one of the most important components on the path to success or failure of a product. To expand on this point, I will give an example for illustrative purposes.
Imagine that we are releasing a casual, simple game. On average, a user plays a high-quality and well-made game of this genre for 5 days, after which he leaves it. As a monetization, we have an advertisement after a certain number of rounds + an advertisement, after watching which the player receives some advantage in the game. According to our data, from the average gaming user, you can get about 30 cents a day on the US market with this monetization model. It turns out that if each player plays a game for 5 days, you can get $ 1.5 for the entire period (LTV) from him. But the market can be so overheated by competitors or it is not selected correctly that a “converted” user will cost us more than $ 1.5 (CPA). Accordingly, even having a good, high-quality game, we can go negative because one user costs us more than how much he can bring. And this is a fundamental law - the user must be cheaper than the amount that he brings. As aggravating factors, it is worth taking into account that not every user will play for 5 days, and there are many more factors affecting the final amount (often even affects the order of amounts), which can be obtained from the user.
Conclusion - immediately consider your user's CPA, its price can be significantly higher than the amount that it will bring at the exit. Realistically evaluate how much money a user can bring in your product. - The key conclusion we have made for ourselves. It is much more profitable to understand that the product will be unclaimed or financially failed until the product or prototype is sold (this approach is called “PreTotype”), even if it strikes pride rather than spending time and money on what will later be just as disastrous. Now, before implementing a future product, we first test the idea:
- test the product value hypothesis,
- We check the advertising markets for the acquisition of users,
- understand CPA (user price for future product),
- we compare the user's purchase price with the potential (average) amount that the user can potentially bring within the product,
- we check the interest in the product itself,
- in the final, we compare the results with other results of our other ideas for future products scrolled in the same way.
Having found a leader among all the ideas, we make a decision on the implementation of the product. And only so! We do this by creating “fake” eppstore pages with our game - as if our product is already ready and released. We drive targeted traffic to such a page through advertising on social networks and analyze the behavior of users on the page (users themselves do not understand that the page is not real until the “download” button is clicked). As a result, we get the user's CPA and very relevant statistics, sufficient to understand the interest of users in our product for an incomparably cheap price compared to product development. Insight - we used to use splitmetrics, now tryit.app for this.
Returning back to our ideal game from the beginning of the article, after all our knowledge, we decided to test the idea after the fact. The lowest CPA turned out to be ~ $ 7, and in none of the realistic scenarios does it seem impossible to receive more than $ 7 from each user as income. As a result, knowing that it is possible to obtain statistics on the price of a user and having relevant data on interest in the product as a whole before the start of implementation, we would not be able to dig in $ 50k and 9 months of development, but concentrate on other ideas. Do not make our mistakes.
I really hope that this article was useful for beginners and those who want to create their first ideal product. And I really hope that it turned out to save you money on products that should never be implemented.
To prepare the article, materials were used from the following sources:
- The methodology of pretypes and how to verify the hypothesis of the value of an idea in a minimal amount of time, effort and investment are described.
- An article about the reasons for the collapse of businesses.
- An article about businesses that no one believed in.
- Another article about startup failures.