Know Your Numbers: KPIs for Esports Startups
Amid the Coronavirus outbreak, the world over, sporting calendars have taken a significant hit. Top football leagues, Grand Slam tournaments, the Grand Prix and now even the Olympics stand postponed.
Interestingly, the void left by the cancellation of sporting events has somewhat been filled by Esports and virtual gaming. They can provide a similar adrenaline rush while keeping people confined to their four walls- it’s a win-win situation!
It’s not only an increase in the user base but also an accompanying increase in viewer base. Multiple channels are streaming matches and allowing individuals to get a taste of online competitions. While a majority of sectors are losing business, Esports startups have been presented with an opportunity to expand instead.
It will not be surprising to see new startups pop up in this segment, leveraging the sensitivity of the situation. Let’s talk about the Key Performance Indicators (KPIs) that are integral to these Esports startups.
Number of Downloads
For any Esports startup, the first crude measure of its popularity is the number of downloads it gets, followed by the number of installations of the application among the downloads. With a growing focus on seamless user experience, applications nowadays install directly after downloading, making this metric easier to track.
Registered User Base
A more useful metric that is often valued by investors is the number of registered users on the startup’s platform. While the number of downloads and installations give a rough estimate, most Esports applications require the user to register before commencing with games.
This gives a refined view of the number of individuals who were willing to use the platform and registered for the same. A higher percentage of registrants among downloaders is a sign of a healthy company.
Users Engagement
Esports startups need to take note of how well they can engage the audience on their platform, i.e., how frequently they are using the application. This can be measured by tracking the Daily Active Users (DAU) and Monthly Active Users (MAU).
The importance of measuring user engagement stems from the fact that a higher engagement may lead to higher customer retention rates and an even higher number of paid users. If a company has, say, X number of downloads but has only 20% MAU, it poses a problem when it comes to monetisation.
Another popular metric related to the given 2 terms is the stickiness ratio, which is simply the DAU divided by MAU. Although this metric was popularised by Facebook back in the days, it has caught momentum among startups recently. Less the gap between DAU and MAU, more the stickiness and hence, more the engagement.
Stickiness Ratio: (DAU / MAU) X 100
Average Session Length
Assessing the average session length of users is another crucial engagement metric. It is generally calculated by measuring the time from opening the app, playing game(s) and closing the app. As is evident, a longer average session duration will mean greater engagement on the app.
It is important to note here that the average session length cannot be generalised for Esports startups. It depends on the offerings on the platform. While some categories are played for a shorter duration, others may require a longer one. Depending on the same, an optimal session length can be estimated for comparison.
Customer Acquisition Cost (CAC)
A metric which is tracked in almost every sphere, the customer acquisition cost for Esports companies measures the amount spent on acquiring a new application user. CAC is often used to judge the effectiveness of user acquisition strategies and see if resources are being used optimally.
The aim is to keep CAC at the very minimum and try and reduce it as the startup gains momentum and popularity. Average CAC can be calculated by dividing the money spent on marketing and sales with the new users acquired in that period.
Simple to calculate, it is a significant number to track.
Revenue Earned
Revenue is a holistic term that refers to the income of a company. Higher revenue in a shorter period signifies strong standing of a startup as compared to one that has a lower revenue.
Esports startups can earn their revenue from different sources, such as subscriptions, advertisements, in-app features, paid downloads etc. A break down of the income helps understand how much income can be accorded to which aspect of the business.
A more polished metric to track under this is the Average Revenue Per User (ARPU). It reflects the average earnings for a startup given its current user base. A higher ARPU is an indication that the startup can generate good revenue from its users.
The ARPU may be calculated over any specified period, by dividing the revenue encashed with the number of users at that time. ARPU helps the startup understand if it can bring more income on an average as its user base grows further.
If the ARPU is merged along with the stream-wise revenue breakdown, it gives the best possible measure of the startup’s monetisation efforts.
Churn Rates and Retention Rates
While Esports startups look to provide excellent user experience, technical faults, glitches, download failures, incorrect pricing, bugs, among other factors, can cause people to leave the platform.
Churn rate measures these individuals that uninstall the application and are no longer interested in using its features. Retention rate is the opposite of this metric since it measures the number of users who choose to continue using the application.
It is common sense for any startup to minimise their churn, but again, there is no one-size-fits-all approach to calculating the optimal rate. It depends on the product features, competition, retention tactics etc.
Number of Tournaments/Leagues Conducted
Esports startups conduct tournaments and leagues for players, both online and offline. By keeping track of the same, the startup itself and potential investors can get a good overview of how active they really are.
By reporting the different places where these events are conducted and seeing the audience that was involved in the same, it gives an idea of the startup’s expansion and popularity. This metric can also help ascertain the effectiveness of the team since they lead the charge in conducting such tournaments smoothly.
Cash Prize Pool
One of the key attractions for an Esports player is the end reward. If a startup can provide a growing prize pool and lure players with lucrative cash prizes, then it is a positive sign.
An Esports company that can generate enough funds to increase the pool and garner additional sponsorships will be able to stand out from its competitors. To put this into perspective, the prize money in Indian Esports grew by 180% in 2019, owing to a surge in players and startups.
Bottom Line
Numbers are crucial for an Esports startup, just like they are for others. But tracking is more important in this community given its recent gain in popularity. In unusual circumstances, like the one the world is facing right now, it will be interesting to see how these numbers stand for Esports startups.
Ending with a fun fact- investors over the world invested $1.95 Billion in Esports startups in 2019. That’s equal to the economy of the Central African Republic. Pretty massive, right?
