Sometimes it’s good to try something new—to take a risk. That’s exactly what Canadian studio Hothead Games did back in 2011, sensing a swing in the market and pivoting from creating critically acclaimed PC and console games such as Penny Arcade Adventures and DeathSpank to tackling the relatively young and unknown world of mobile gaming.
That risk has paid off handsomely. Hothead Games now employs over 130 staff in its Vancouver studio—up from just 30 back in 2011—and is considered among the top mobile developers in the world. With established mobile brands such as Kill Shot, Big Win Sports, and Hero Hunters (winner of Google Play’s Most Innovative Games of 2018 award), Hothead’s games have been downloaded over 300 million times.
Kenneth Wong, the studio’s Director of Research and Monetization, joined Hothead as the company began its transition. Wong eagerly jumped from a career in retail to the mobile gaming industry, despite not owning a smartphone at the time. “My friends and people around me were playing games on their phones all the time. I thought—this is interesting, I want to work in this industry.”
Hothead originally hired Wong as a business intelligence analyst. His corporate retail background working at Best Buy and other retailers turned out to be a great fit for Hothead. He helped them focus on utilizing data to gain insights from the emerging app stores.
Retail is about creating a need and a want for the consumers, demonstrating a clear value proposition and differentiating the product from its competitors. These lessons, learned in retail, apply directly to mobile gaming.
“Mobile gaming is very different from traditional gaming. In mobile, the launch of a game is just the beginning of the product life cycle,” Wong says. “Most games are now free-to-play, and the success of a title is generally directly tied to retention and monetization metrics. Retail is about creating a need and a want for the consumers, demonstrating a clear value proposition and differentiating the product from its competitors. These lessons, learned in retail, apply directly to mobile gaming.”
Learn fast, fail fast, fail cheap
Hothead created many fan-favorite titles during its period as a traditional game studio. However, good reviews don’t always result in huge profits. Wong gives kudos to Hothead’s CEO Ian Wilkinson for making the bold decision to pivot the company and pursue the mobile games market.
“Wilkinson believed that the next big opportunity would be creating and publishing games on mobile platforms.” Wong says. “‘Learn fast, fail fast, fail cheap’ is Wilkinson’s mantra. One of Hothead’s core values is ‘take risks, always learn.’ This means we’re constantly trying new things and running postmortems to ensure we learn quickly from both our successes and our failures. Over the years, Hothead has had projects that have failed quickly and cheaply, products that launched and underachieved (failing slowly and expensively), and products we like to talk about—the ones that are extremely profitable.”
Back in 2010 in the early mobile days at Hothead, the studio felt like it was learning at lightning speed. Initially, the company created and published paid mobile games. Quickly, Hothead recognized the audience reach and uncapped earning potential of creating and publishing freemium games in the app stores. “Even though the games were free, the challenge remained the same—create a core loop where players play a game, understand it, enjoy it, and then actually want to spend,” Wong explains.
“It took us more time than we expected to figure out how to attract, retain, and monetize players,” Wong says. “That was a challenging time. We kept building and launching games every other month that were not achieving our goals. With each project, however, we learned more and more about user acquisition strategy, data analytics, and monetization. Everything changed once we had our first hit. Suddenly we measured success in the tens of millions of dollars. It was like, this is a whole new ball game.”
Keeping the game alive
Hothead’s first big breakthrough game was Kill Shot, which released back in 2014 and shot up the App Store charts straight away. Almost immediately, Hothead began building the next Kill Shot game, Kill Shot Bravo. Between Kill Shot and Kill Shot Bravo, the franchise has reached 100 million downloads to date.
Hothead soon realized that they didn’t need to keep churning out new games if they kept their existing games fresh and healthy.
Bravo also taught the studio that, with mobile, sometimes less is more. “When Bravo launched, we intentionally tried to shift all the Kill Shot users to play Bravo.” Wong says. “We believed Bravo was a bigger, better product than Kill Shot—it had more social features, better graphics, and more events. Ultimately, we learned that Bravo performed differently than Kill Shot.” It kept players engaged, and its performance improved month to month. Hothead soon realized that they didn’t need to keep churning out new games if they kept their existing games fresh and healthy.
Kill Shot Bravo’s live operations team updated the game with new missions, items, and in-game events, and the team grew bigger and bigger until it became the largest team in the company. “We realized we don’t need to develop a new game, Bravo is our new game,” Wong says. “Before Bravo, Hothead hadn’t had a game generate higher revenue in year two than in year one. Now we strive for this in all our games.”
“Our approach to mobile game development has changed,” says Wong, citing the increasing cost of user acquisition and operations. “Once we know our game is popular and is resonating with the audience, we don’t let the game lose momentum. We allocate more resources to keep improving, reimagining the game to make it even better.”
Brands love brands
With the Big Win Sports series, Kill Shot series, and Hero Hunters, Hothead has tapped into a unique group of mobile gamers—mostly males aged 15 to 35. It’s a core demographic that also helps Hothead build relationships with advertisers.
“We have a very unique proposition that we can sell to brands and advertisers,” Wong says, “basically saying if you advertise with Hothead, we can cross promote your brand in various games to the same kind of audience.” Wong is a serious fan of rewarded video advertising—in fact, it’s the one thing he says he wishes he’d introduced sooner.
The casual feel of the Big Win Sports series is a great fit for rewarded video, resulting in a “strong rewarded advertising revenue stream coming in,” according to Wong. Although the Kill Shot series and Hero Hunters are midcore titles that rely heavily on in-app purchases, Wong says rewarded video is a “perfect complement” to their closely managed in-game economies.
“For me, rewarded video is a bridge to allow users to understand the economy without pulling out their wallets,” he says. “In addition, rewarded video can be used as a tool to retain and engage users.”
But rewarding players who watch video ads requires a careful economy balance. “At first, we didn’t know any better, so we just put a button in the store that says ‘Free Gold,'” Wong says. “But we learned it’s not about just giving currency. It’s more than that. If you just say, ‘Click here to get some free currency,’ it might help you on a small scale, but the engagement rate and frequency upside will be limited.
“Even if the player watches video after video, the economy may suffer because the rate of return for advertisement never approaches the rate of return on in-app purchase.”
We’ve done plenty of A/B testing with rewarded video advertising on Bravo and Hero Hunters. It all comes down to the reward value, the placement of the button, and the frequency we offer certain types of rewards. We use the A/B test result data to optimize our offers.
So, what is the secret to getting the balance right? Well, Wong is naturally a little cautious about divulging Hothead’s recipe to their ad monetization experience, but he says you need to really look at your data and see how users engage with your game. “We’ve done plenty of A/B testing with rewarded video advertising on Bravo and Hero Hunters,” he says. “It all comes down to the reward value, the placement of the button, and the frequency we offer certain types of rewards. We use the A/B test result data to optimize our offers.”
After recent experiments in rewarding players through mobile video ads, Wong discovered: “We now know it’s not just about currency. For example, we considered options like shortening the timer, doubling the rewards, and unlocking exclusive content. These things have nothing to do with the primary currency but allow users to improve their in-game experience. Our goal is to find a way to use rewarded advertising to help players progress and enjoy the game. That’s the key.”
Trying something new (again)
Hothead tried something new in 2011 with the pivot into mobile game development, so why not try something new again? In January 2019, Hothead announced the launch of a new publishing division, a move geared toward helping smaller mobile game developers achieve success in the fiercely competitive app stores.
With eight years of experience under its belt, Hothead has learned a thing or two about how to run a successful mobile gaming business—it was time to pay it forward and help indie game developers scale their businesses. “We believe that we have the resources—user acquisition, analytics, mobile advertising, and live ops experience—to help younger, smaller, or less experienced companies.” Wong explains. “We want to help other studios succeed.”
He continues: “Because of the rising CPI costs, a lot of game studios might build a great game, but they might not have the UA expertise or the financial backing for user acquisition. We’re basically saying ‘Hey, we have the knowledge. We have the resources. Let’s make it a win-win situation for both parties.’ That’s why we started our publishing division.”
Interested developers can learn more about the publishing arm and get in touch with Hothead here.