The $30 Sale Is Just How You Buy the Customer

0:00Charles Bradshaw >> All right. >> Abyss Gaming It's gaming and SaaS. They are pre-revenue. >> Got it. >> And we're going to go. >> All right, gaming and SaaS. Oh, pre-revenue. Okay. Well, this sounds like a >> All right, Charles. >> What's up, Charles? >> How's it going? Um, so I'm working on a video game and we got zero revenue. It's so I'm pretty sure we're going to fail.

0:28>> Yeah. >> Um, what I I wanted to get your thoughts on two revenue models that that might affect me in the future. >> Okay. >> Um, so so for a little more context, I think I'm getting about $500 revenue in the next 2 years. Um, selling 25,000 units with uh $30 per unit and then the platform takes around 30% cut. So we need about $21. >> Is this Steam or what platform you're doing it on? >> Yeah, Steam.

0:54>> Okay, got it. >> Um So the the the first one is that I have is that it's very difficult to get customers to spend way more. Uh, I don't know how I could do what you did where like you're selling $30 books and like multi-thousand dollar up sells. >> Uh-huh. >> Um, right now I'm planning to like offer a four-pack bundle and extra content for arts for as an add-on. >> Yeah. >> if you feel like I'm missing anything obvious as a higher ticket option.

1:21>> So the first thing that I would do is I would look at um some of the you know, like the League of Legends, like some of the big games that have existed for a long time and look at their their basically their their money models. So whenever I enter a new space, I look at all of the biggest players in the space money models and then I think, "Okay, of these and usually they're fully built out." And you're not going to you don't like what you don't want to do is say, "Oh, they have this money model. Therefore, I will mimic that 100%." That took them years to get to. But I will look at, "Okay, of these, which one has the highest contribution margin and which of them can I most easily replicate?" And then just go focus hardcore on this one thing.

1:55>> Okay, that makes sense. Yeah, I think cuz the software's really in Chicago, I I won't be able to do the same money model, but I I think that that principle applies as well. >> That's how I think through if I'm going to a brand new market that I don't know anything about, that's where I start. And if I'm using my meta concepts like like when I think about it from a utility perspective, most monetization is going to come from speed, risk, or um or ease, right? But in the game that you're playing, a lot of it is going to come from status and entertainment.

2:24>> Mhm. >> And so most of the things that you're going to sell are going to be how can I have more status, how can I have more entertainment? Now status is going to be in some ways like skins and things like that, but there's also like tools, you know, weapons, etc. like I'm just using this figuratively speaking, right? Um those are the things that I think um ultimately drive the most, but again, at the end of the day the game has to be exceptional. If the game's exceptional, then long-term it never matters um because that's the only thing that matters in the big picture.

2:51>> Okay, so what what I'm getting is that for games, you don't think the back end matters much much and and value and virality more. >> Yes. For cuz in in the game business, think about it like this. In the game business, you can either win on LTV or you can win on low CAC. And almost every major game that exists in software, they win on low CAC. Like enterprise B2B SaaS, Salesforce, they won because of insane LTV, right? So it's not like Salesforce is viral. They're just so expensive they can spend so much money to acquire customers, that's why that business works. But for a low ticket business, right? You're going to win on low CAC, which has to be word of mouth, which only comes from being really really good and having people talk about it.

3:35>> That makes sense. That that brings me to my second potential leading metric. Um do you think that I can um is it possible to profit from direct response ads if I'm only getting >> Yeah, is it possible? Yes, but what will happen is that you will slowly well okay, let me like I'm going to I'm going to draw this so everybody else who's at home can see this. So, fine. You want to put Yeah, put him there. There we go. So, in the beginning, let's say like day one, you run ads and you you know, let's say you actually figure out a way to make it profitable, right? So, you've got, you know, your cost and then you've got your revenue and that seems like you're like, "Okay, cool. This is working." The thing is is that as you go to colder colder traffic to people who are less and less likely to convert, what's going to happen is that this cost basis is just going to keep increasing until eventually you reach this point and so the scale of your business is going to be dictated by how cheaply you can acquire customers.

4:32And so, the like all of this, if you're looking if you're on the live stream, is the only excess kind of gross profit that you're going to be able to realize in the business and then quickly you'll cap out. And so, the long-term play, especially in a high-volume game type software, is going to be on word of mouth virality, which is why it is, to your point, a winner-take-all market if you are really good. Otherwise, you kind of play these onezies, twozies, you maybe you saturate a couple of tiny markets, some players that really like it, maybe you do like a gorilla marketing on on Reddit forums and you school communities that are into games, whatever. Um and that is a way, but the whole point of if you're going to run ads in the beginning is you want to run ads to get the customers in so you can learn their behavior so you can improve the game.

5:12>> So, you're saying do we want to think about an upsell right now or >> No, that's almost like the core the core engine has to be exceptional. That's the main game right now, pun intended. >> That makes sense. Uh can I ask what's your like the most selling for like how much profit margin per customer do you need before it makes sense to start doing ads? >> Well, I mean, you should have I mean, your incremental margin should be really high, right?

5:38>> Maybe I I used the wrong term, but like like would you expect to make $20 per like per purchase before you run an ad? Like obviously you would run out of a purchase price. >> You're saying what should you price your software at in order to run ads to be profitable? >> Uh yeah, I'm asking which a great general like at what dollar of profit per unit would you consider running ads?

6:03>> It wouldn't be an absolute profit per unit, it would be a percentage. >> Okay. >> And fundamentally, if you can if you can acquire customers at break even or better and then you still have more things to sell, that's the point of a money model, right? >> Okay. >> So if you get customers for free, then everything else is juice. >> Sounds good. Yeah, that's all the questions I have. I just want to say that I love the work you're doing and I I really appreciate it. >> Thank you, man. I appreciate that, dude.

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