It seems my last post on The Numbers Behind Steambirds has made a few waves!
“[...] A few sponsors have recently been complaining that developers aren’t required to pick the best bid, considering all the terms and conditions. Sometimes developers just pick bids that are clearly worth a lot less, just because they like a certain sponsor more! To businessmen used to a more traditional bidding model, that is absolutely unacceptable and should be banned.” – From an FGL Thread, emphasis my own.
The core of the issue is discussed in a private FGL thread, which is debating the nature of FGL itself. Is it an auction site? Is it a bidding house? Should it be purely by the numbers? The short answer is “no,” but I won’t be discussing that directly here. I’d like to address the issue of value.
Allright, perhaps that particular quote wasn’t pointed directly at me, and maybe my experience with SteamBirds had nothing to do with it. But maybe it’s a direct response to my last blog post, so I figure I’d better clarify the issue of value and why exactly I chose to go with Armor Games.
When I say “I like Dan (at ArmorGames) better” it’s a shortcut to saying “their offer was financially beneficial in the long run.” Yes, I do like him better on a personal level. But I would have gone with another offer if I actually thought I’d make more money that way. I am running a business here, after all. I find my personal lifetime revenue will probably be higher if I’m with a sponsor I “like” because we’ll have a better working relationship, and more possibilities will blossom. Having a good rapport with you sponsor means more opportunities, more flexibility, and in the end: more value.
As a quick aside, my personal, friendly, awesome relationship with Dan has earned me thousands of dollars in extra revenue (by giving a bit of extra flexibility in his already loose contract), and even earned me some new personal equipment and other joys in life. I would say the “external value” here is worth four times as much money as I’ve earned from advertising revenue.
I should address what is perhaps an unavoidable issue in this debate: the semantics behind the word “value.” When I think sponsorship value (in SteamBirds’ case), it looks like this:
Notice how small my blue circle is and how large my green circle is. I’m not particularly concerned with the size of the dollar-sign-bag; I think I can get much, much more money in the long run with good business partners and built relationships. I’m not looking for a quick fix, nor am I looking for recurring revenue [on this particular game]; I’m looking to get my foot in the door of the industry, and build a brand.
Also notice how small the ad-revenue slice of the pie is. I get the distinct feeling that the average sponsors view looks something a bit more like this:
In this (totally theoretical, based-on-my-experience-only, probably offensive to some) visualization, note that potential ad revenue is as big as the primary sponsorship. External value is nearly disconnected and incredibly tiny; some sponsors even seemed to imply that by taking any deals for “long-term business” reasons would exclude me from obtaining any secondary revenue. It’s like you have to make a choice: Big bucks, OR good business contacts… not both.
During the bidding process for SteamBirds, many sponsors told me I could “Easily double [my] money!” with ad revenue. Considering how low my ad revenue is (around 5% of my total), I’m thinking that’s nearly a complete fabrication, or it simply doesn’t apply to my game’s circumstance.
I’ll grant you that different people have different objectives. Some folks only care about recurring (ad) revenue; some folks only care about up front payments. What I’m trying to say here is that your personal Venn diagram is going to look different than mine, and allowing sponsors to dictate what an appropriate value is is completely retarded.
“To businessmen used to a more traditional bidding model, that is absolutely unacceptable and should be banned.”
I can see how businessmen would like to ban me from realizing and calculating the definition of value on my behalf. According to sponsors, business partners are worthless and ad revenue is king. That simply isn’t the reality for me. Businessmen that want to lock me in to their value systems does nothing but increase their revenues at my expense. I won’t even get into the fact that Dan @ ArmorGames had the best licensing terms (the least stringent contract), so it’s not even like someone equally matched him, dollar-for-d0llar.
That’s not to say that my green-circle value wasn’t limitlessly large or infinite; in fact, I took great care sizing those circles in the first Venn diagram. Two sponsors, very late in SB’s bidding process, approached me and said “What would it take to win this bid.” I responded honestly, if not slowly. It was a tough few days for me (just ask my girlfriend!), having to sit there and sum my emotions and my ethics, and provide sponsors with a pricetag for my morals and potential future. But I did it, and the price wasn’t incredibly steep or unattainably high. Both my offers were seriously considered, and thankfully (for my soul), declined.
I did meet up with one sponsor after the bidding, while attending the Game Developer’s Conference in San Francisco. He mentioned they didn’t submit a bid in the end, because the pricetags on the upper bids were simply too high and they thought they had no chance. When I asked him what he would have offered, he was right in my range, and would have been a real contender for winning.
I’ll double-facepalm that little tidbit. Not only did the other sponsor potentially miss out on my game, but I missed out on them because of my unusual business tactic of not taking the highest bid. My own methodology shot me in the foot here; but hopefully the last few articles here will help correct that for the future.
For everyone.
Let’s make this industry a double-win instead of a double-fail!
EDIT: Eric from FlashGameLicense made an excellent comment to clarify some of the quotes coming from their site. It seems my sponsor-rage is directed at sponsors that possibly don’t exist, which I suppose is a very good thing. ;) Thanks for the clarification, Eric!
Yes. A thousand times yes.
Hey Andy, nice post. I wanted to chime in on the original FGL forum post.
First, it isn’t clear from the quote, so I wanted to reiterate that FGL has no intention of actually banning developers from choosing whichever bid they like best. :) The thread was discussing an aspect of FGL that seems abusable by sponsors, and I was pointing out one of the many ways that FGL can also be “abused” by developers, if we think of FGL as a pure bidding site (which it definitely is not). I wasn’t pointing out a problem that we feel needs to be fixed necessarily.
The other thing is that as far as I know, none of the bidders on your game complained about you, and this quote wasn’t aimed at you! Sometimes sponsors do complain that a developer’s evaluation of a winning bid is very different from theirs, just as you have hypothesized here. But the actual complaint I was thinking of came from a bidding process where the winner was already known ahead of time. Let me give a made-up example of such a scenario:
Suppose next year you make SteamBirds 2 and you think it’s worth $25k in sponsorship money. You have a good working relationship with ArmorGames so you ping Dan first before even putting the game up for bid on FGL. But for whatever reason, Dan only offers you $10k for the game.
So you put the game up on FGL, and it quickly gets into a bidding war between Dan and … I dunno, say CrazyMonkeyGames. Soon ArmorGames has bid $20k and CrazyMonkeyGames has bid $25k. Dan PM’s you to say, “Sorry, I just really can’t afford to go over $20k, so I’ll have to bow out.” But you were just using the auction to get Dan’s price up. You further haggle with Dan, and over the course of another week, you get a few other minor concessions from him. Then you tell him you’ll accept his $20k bid.
Meanwhile, on FGL, the bidding has taken on a life of its own, and now CrazyMonkeyGames and AddictingGames are in a bidding war, and the game is up to $33k. Finally AddictingGames bows out. CrazyMonkeyGames stands triumphant. John from CMG pings you and says, “Hey, if I toss in 2k more can you put the game into Last Call immediately? I’d love to get the game launched this month.” So you can imagine his surprise when you reject his bid, and accept the bid for $20k.
This scenario happens a lot in the business world — for instance, this is a very common tactic when trying to get a raise at your job. You may love your job and want to stay, but your employer is dramatically undervaluing you, so you get other people to offer you better spots in order to convince your current employer to raise your salary.
It’s a little different here, because sponsors have a strong need to know whether they’re winning a game or not, so they can plan their finances properly. Suppose CrazyMonkeyGames has a budget of $35k to spend on sponsoring games every month. He blew his entire monthly budget on your game, and when you rejected his bid, he found himself in a bad situation: he didn’t have time to bid on more games to meet his quota for the month. Your actions caused him real financial harm this month because his financial forecast was based on spending $35k a month (because that’s the sweet spot for his site — spending more or less in a given month brings less ROI), every month of the year. And for this month, his spending is almost zero. That means his site’s growth stagnates for the month, and it’s not his fault. Does he have a right to be angry with you?
This is more like the situation I had in mind when posting. (Of course, the specifics are entirely made-up!) It’s not a problem that’s so common we feel the need to fix it, though if it happens a lot, there are lots of little things we might do in order to keep it under control. For instance, we might require developers to accept the bid that they (the developer) already marked as being the Best Bid. That way, developers still get to decide for themselves which bid is best, but developers can’t string somebody along, letting them think they have the winning bid, when in reality they have no chance. That’s just an off-the-top-of-my-head solution, I’m sure there are more we’d examine if we needed to fix it.
FGL isn’t a “real” bidding site but neither is it an open-ended casual meet-and-do-business site; the tension between these two poles is what makes the site work, in my opinion. However, it does mean that we have little scenarios like the one mentioned above, and we occasionally have to tweak how the site works to better meet the needs of developers and sponsors. And I’m sure that process will continue, as the market evolves.
Right on, thanks for the clarification Eric. I wasn’t sure exactly what the context of your quote was, but it’s nice to hear the backstory. It seems the sponsors I was calling out are (at least, mostly) fictional! That is good news. :) I’ll put a note at the end of the article.
To be clear: I wasn’t calling out FGL on anything (they definitely have our backs here) and though the quotes may have been a bit misguided, the article still stands — based on my experience with SteamBirds bidding. :) People’s concept of value seemed skewed wrongly, and I still want to fix that. :)
I agree with you 100% Andy. I had a similar experience with Chronotron. The terms of the sponsorship are ultimately more important than the number written on the bid.
Yes, yes, yes — there’s a lot more of value than the bid. Chasing the highest bid is like public companies going for short term profits. It looks good for their earnings reports and then makes them worse off in the future. You did the right thing by considering the long term and non-monetary value of the deal.
Awesome article, I couldn’t agree with it more. I’ve done a lot of rethinking on which sponsors I’m willing to sell to based on a lot of what you’ve said; better business partners is just a lot more valuable than a few extra thousand dollars. Awesome follow-up post, thanks for sharing your views.
The fact that every person values things differently is what makes a free market work so well. People trade with each other because their valuation of the items/services being traded differ. Trying to tell a developer which offer he should value most is tyranny on a fundamental level (and it’s also the way things work in modern socialist countries). In our experience with sponsorship offers, it’s very difficult to judge the longterm financial income of an offer, because you can’t know how well a game will be liked, how much traffic it will get, etc. There are too many variables.
While the definition of “indie” is debated, many “indie” developers do what they do for more than just financial return. We have turned down opportunities based on the people involved before, and we’re big fans of Dan at ArmorGames. My “green circle” is also large compared to the other two.
This