[Presentation]
[Presentation]
[Presentation]
[Presentation]
Welcome to Stillfront Group's Capital Market Day. We are so pleased to see you here. Not as pleased to tell a lot of people that they were not able to make it to the room because we are sold out. Hopefully, they will follow us on the web. I am here together with my group management, large parts of that, as well as some people from our studios as well. This is what we intend to speak about today. We hope to provide to you a deep insight into the exciting industry of gaming. We hope to provide to you a deeper insight into Stillfront as a company, as a group, what we intend to do, how we intend to do that, the core strategies and the processes, and the models that we have refined for some time.
Of course, we will also talk about financials, financial targets, and more things to come. We are also moderated today by Charlotte, so she will help us through the afternoon. I will start off with talking a bit about the overview of our group and our core strategies and our core models. We intend to create a Stillfront which is 3x what it is today within the next coming three, sorry, five years, maybe three years, who knows? There are some characteristics in the gaming industry, which is a fantastic industry, we think. For instance, you can see that there is a tremendous pace in the structural change that this industry has gone through, but will also go through the next coming 10 years. It is also paired with still being a large industry. It is a quite unstructured, unconsolidated business.
When you have the combination of a very high degree of change, and even disruptive change on one axis, and a high degree of not being too structured, fragmented even, then clear strategies, sharp strategies with strong deployment and a strong corporate culture could really yield significant value. We aim to take on that challenge. We have prepared ourselves. We have set up a target to create a 3 x larger group within the five years, and we should talk about how we aim to do that and give you some insights in that. We think besides the general change pattern and the pace of change, I would like to emphasize a couple of things. Besides what I just mentioned, we also see that it is not only changing the market, it is also converging. Let me explain what I mean by that.
If you divide the market in a quite easy way, but still very relevant way, to look at, on one hand, traditional AAA+ developers of typically downloadable games on one side, and on the other side, you have free-to-play, data-driven, process-oriented businesses like ourselves. We will get closer and closer and closer, and the business and the industry will converge into being in one way. If that takes four years, five years, seven years, we do not know. If it will happen, we are convinced. If you are not on top of this change, if you are not acting sharply and with power, it is a high risk of being squeezed in the middle. Then you have to be a niche player, or you will be pushed out of the market.
But if you are able to take advantages of this change to move rapidly, to accelerate, then you can go for a market-leading position in a global, really exciting industry. We intend to be on top of this wave, not under the water. We have developed, since this company inception, models, processes, and things we think are needed to accelerate our business. We think that we have a unique set of models that we have developed over 10 years since this company inception. We have refined them over and over and over again. We have prepared ourselves and our group for accelerating into a market leadership. So I will talk, and we will talk, all of us, from several different angles about these models. Our business model. We are a free-to-play powerhouse already, but we intend to accelerate that. I will talk about our business model.
We will talk about our operational model, which is really, really key and important, based upon entrepreneurship, scale, and structure in a good combination, supporting us to achieve the goals. We will talk about our financial model, which is geared to be superior in the risk-reward balancing, to creating the best risk-reward, but also to be flexible enough to support what we have in our plans, flexible enough for us to grasp the opportunities that we see come to us or that we grasp. So these are the three core models that will support us in this ambition. We also think that there is a number of decisive factors. For us, it is for sure, but I would expect it would be for many of the actors trying to be in market leadership the next coming three to five years.
One key thing is you have to have the ideas of how to take this position. If you do not have an idea leadership or the concept of how should we act on this very disruptive, rapid-changing, but exciting market, you will never succeed. But that is, of course, not enough. You have to have the capability of transforming that into operations, to deploy your ideas into actually working operational business.
I would like to highlight some of the areas, and we will touch upon several areas, but some of them I would like to emphasize already here. Size will matter even more in the future. It matters today, but it will matter even more in the future. That is why we have formulated this vision of taking this company to a size 3x of what it is today within the coming five years, because size will be one decisive factor.
For us, that is very much about that we intend to increase the addressable market to which we can offer our great entertainment, to which the customers that we can interact. We intend to increase that addressable market. We intend to do that through genre broadening. We are very strong in one part of the market today. We should broaden that. We will do this to add to our existing business without forgetting about or compromise with the core strategy that we call PLEX, that has been in place and supporting us since this company inception, from the very first day, and it will be there for additional 10 years at least. That is what we call PLEX. That is that we are systematically building a portfolio of long-life-cycle games.
If you have games that last for decades, not only a year or two, or even several decades, that provides you with a superior stability and the predictability in developing your business. That we will not compromise on. Having said that, we still think there is a good opportunity to broaden our footprint. Another thing that we will never let go of is to be really agile to consumer preferences. This is a super-fast consumer market. If you are not close, you do not have the market proximity. If you do not understand the preferences, if you cannot analyze the user data, you will not stand a chance in our view. We will not compromise with that either. A few more words on the genre broadening.
If you look at the 200 largest mobile games, you can see that approximately 43% are so-called mid-core games, 40% are casual, and then social casino is approximately 17%. Out of the mid-core area where we are, approximately half of that are represented by strategy games. We are really strong at strategy games at Stillfront. That means that to start with, we have 20% addressable in this chart, but we are not very strong in China, we are not very strong in the female audience, which we would like to be stronger to have a better offering to the female audience. We have only two out of 36 games focusing and have a majority from female audience. As we heard on the movie, that is a huge chunk of the industry and the market. In practice, we maybe have, say, 10% of the addressable market we do address today.
That is why we intend to increase that addressable market. In what direction do we think we should do that? What we are looking and have been looking at for a while is the very exciting combination of casual elements with strategy elements. We can use what we are really, really good at, how we monetize, how you make such a game work and develop and last for a very long time in the strategy area. But we have seen very exciting examples of how you combine that with casual elements and a casual language, and there are some examples of huge successes. We think that is really, really interesting for us. That is how we think about increasing our addressable market to increase our opportunities to have and support us to get to the 3x level.
Looking a bit deeper into our business model, what is a free-to-play powerhouse? What is needed? Of course, it is a lot of things, but I would like to emphasize five. Of course, we need the technology knowledge. Of course, we need experts in technology, which is very complex indeed for online games at scale. Of course, we need the capabilities of being able to develop first-class entertainment. That will always be the case. Further, we need, and we have already, but we need to expand our portfolio of evergreen games that last for a long time again. That is really, really key. I cannot really see many of the leaders in this race that I spoke about that will not be able to have games with a strong longevity. There will be players that are very good in other areas, but we think that is a very attractive attribute.
That's a very important thing to be able to build systematically. Our portfolio, our PLEX strategy stands, as I just mentioned. In order to get that, and Phillip will later on in the afternoon go further into what is needed and what the attributes is for an evergreen game. Nevertheless, you will not be able to do that or build that or increase your portfolio if you're not excelling in performance, marketing, and publishing. That will just not happen. It will not happen if you're not also mastering Live Ops. Live Ops is absolutely key, and as you have heard, we have spoken about several times that the combination of achieving organic growth through performance marketing, the other main lever to achieve organic growth on existing products is Live Ops. This has to be built upon data and creativity in combination. We are an exceptional data-driven company.
We have collected data from more than 600 million registered users that our studio have had lifetime. Data is one of the core assets of Stillfront today, and it will be for a long time, and we constantly, as we speak now, maybe 700,000, 1 million individuals are playing our games as we speak, and we collect data on their behavior, what their preference are every single second in every single game all over the world. That is an asset that is not so easy to try to build afterwards. Basically impossible. All this has to be put into your processes, put into your organization, and work in a system and a process that continues one day after the other to be in a leading position. Our organizational model is a key competitive mean for us.
It's very, very important, and we are, I would say, quite unique in the way that we organize ourselves. Alexis will talk deeper about this just after my initial session here, but I would like to emphasize a few things before Alexis will go into the more detailed and deeper look into this. We strongly believe in the value of decentralization. Try me. I tried the opposite. Then you become slow, monolithic, and not so close to this super-fast-moving market that you're needed to. You will not be able to be agile to consumer preferences. You have to be decentralized. Being decentralized also will not work if you're not having a culture and a spirit of entrepreneurship. Entrepreneurship is an unparalleled force of achieving results. The tricky thing is to do it at scale. That is what we're building.
You also need a structured governance, which is not too much of governance, because then you will kill the entrepreneur's power and passion about building your businesses, the passion to build the best games possible, if you're over-governing things. Of course, we need the governance to be a professional organization, professional and structured enough, governed enough to fulfill the requirement on the main market. Continuing on this route is that it's so key to have a culture in our group which is empowering. Every single programmer, every single game designer, every single artist that creates our games should really feel that they are empowered. They are encouraged to take initiative. They should show their initiative and drive to create the best possible entertainment that fits their audience in their regional market with their specific game.
We need to have a culture where we empower these individuals, and we empower the studios, otherwise our group structure will not work. Last but not least, from a group perspective, if you create something that does not scale with another next studio, you will run into problems. We have proven so far that we not only linearly are scaling with the number of studios that we are, we are increasing exponentially. Of course, that will not go indefinitely exponentially, but it is really important that you scale positively with the size. Otherwise, basically, you shouldn't conduct M&A because then one plus one will be at tops two. This is really a key element. As you know, we think M&A is a core process.
Continuing on the scaling thing, that is to create and draw synergies from the fact that we are growing, that we have a better reach, that we are stronger the larger we are, and not that it creates a slow us down or something like that. Today we are 12 studios, more than 650 people. We have 30 games live, earning money every single hour, every single day. We have a couple of things that I would like to highlight when it comes to creating synergies. We have established center of excellence as part of preparing ourselves to be a significantly larger, positively scaling group. We have today several center of excellences. Alexis, I think, will come back to this further. But I would like to mention, of course, performance marketing and live ops, which is, as I mentioned, key capabilities that our group must master.
Of course, center of excellence is where we structured our sharing insights and knowledge is absolutely key. But it's also within cross-platform development of games, because we think that is a key success factor as well. We have more niched or narrower area, but still important, such as influencer marketing. We have center of excellences that we have developed. We will develop more of those because they are really making the synergies happen. We're also sharing a lot of things. Of course, data, one of our core assets, as I said. That is a key thing that we share across our studios, making it possible for each studio to be even more sharp, take more fact-based decision at a higher quality because they have so much more data when we share data.
We also share knowledge about product development, so we can be more rapid, we can build with the best possible architecture and so on. That is very important. We have also other elements which is very tangible and important in practice. However, it not so often is seen from outside, perhaps, but such thing as a payment shop that is very efficient, that have redundancies and a lot of things that is super important to have a higher conversion when someone make a payment, we share throughout the group. I think we have one shop solution now used by three or soon four studios. That is saving money, increasing conversion, and hence our revenues. Very closely related is our anti-fraud solutions.
Anti-fraud solutions is a really complex piece of software to develop. You have to be really, really experienced about what you should do yourself, how you should build machine learning techniques to detect anti-fraud, and what pieces you can buy from outside to put that into a solution is complex. That is typical an area as well that we share and knowledge we share in our group. Has this worked so far? Well, we think it has. I would like to share two views on this, two studios. One which is joined in December 2016, headed by AJ, who will be on stage later, and we will talk about synergies and how you joined us, et cetera. Here are the actual numbers. Since December 2016, the compounded revenue growth rate has been 135% compounded annual growth rate since then.
The profitability, EBITDA, has grown by 256% compounded. Looking at Bytro Labs, which is a smaller studio, but a very important studio that joined very early, has been able to, which is a great achievement indeed, to achieve nearly 30% compounded growth rate over six years. That is really hard to achieve. We all know the challenges in doing things great over longer time. In parallel, 153% growth in EBITDA. That is great performance. That would not have been possible without our models, without sharing things, without our center of excellences, without the great knowledge in Bytro Labs. You can also see some of the areas where the collaboration really have paid off in these two particular cases.
The unique position and ability that Babil Games have proven in the MENA region, which is a super exciting area and a super exciting market, very hard to get into if you do not possess the knowledge of that market specifics. Also, they have drawn synergies in the other direction by the help and the support and the collaboration with Goodgame Studios in marketing. It is a grand example of what we can achieve by collaboration between the studios. In the Bytro Labs case, they have been extremely good at building games and also unique war strategy games on an engine that is so reusable that the whole engine has been able to be transformed to another studio that have had great success and great growth, which is the Rotor Games from the engine from another studio. It is a very massive piece of software that has been transformed.
They have also been very good at cross-platform publishing. Just briefly, because Andreas will of course go deeper into our financials, we launched today our revised or our new financial targets, and those targets are about total growth. The reason why we talk about total growth and not only organic is not because organic growth is not important. Of course, it is. The main task that we have that lies in front of us is to take Stillfront to this 3x level. Hence, we think it is more logical and rational to look at the total growth. We intend to grow to a revenue of SEK 4 billion in 2022. We should do it pairing that with a good profitability of at around or approximately 35% adjusted EBIT margin as we work on.
It will vary from different quarters depending on how much we spend in UA, et cetera. Andreas will elaborate on that. Then we will have our unchanged, our conservative, but still leverage target that we have. We have built this company thinking long-term from the first day. If we are not thinking long-term, we will never, ever succeed. You must think long-term, and we have for sure. Very closely related, an integral part, I would say, in that is sustainability. If we are not building a sustainable business, this will not be a successful business, and this is increasingly important. We have accelerated this work by examine internally by all employees have been able to give their input on what areas we should focus on, and also with external input.
I think we are taking really strong steps in the area of sustainability, focusing on the three things on the left side. Smart resource use. We are a digital company. We should be able to have ambitious targets when it comes to carbon footprint through the whole value chain. It is creating games for all, which for us is very much about both how we serve our community. We should be able to serve a community with a large diversity, and of course, we need to be diversified and open to that in order to serve with really good content. Of course, it is about creating a really, really good and stimulating work environment for our key individuals. The individuals make up this company, so that is absolutely key.
Then finally, living our values, which is very much about that we should be able to pair operational excellence with operational ethics. If we are not doing that, we will not be a long-term successful company. For instance, anti-fraud, as I touched upon, but also other things relate to that is key for us, and it is on its way to partly already integrated in our model, but we will emphasize and accelerate that work as well.
Finally, now I have been talking about our models, our targets, our strategies, the models we work with, our priorities, and I have a lot of nice slides here. But as you know, you do not win anything if you do not put in the efforts, if you do not put in all the hard work needed to achieve great results. That is why we often say when we wake up the following: wake up, kick ass, repeat. Thank you. Welcome, Alexis.
Thank you very much, Jörgen. Thanks for that great introduction. Good afternoon, everyone. My name is Alexis Bonte. I am the Chief Operating Officer of Stillfront. I am an entrepreneur, so everything that Jörgen said about entrepreneurship is very, very close to my heart. I was actually part of one of the first internet unicorns in Europe, called Lastminute.com. I was part of the founding team there when there were not many internet unicorns, when it was difficult. In 2007, I decided to basically do a childhood dream of mine. When I was 16 years old, my friends would make a bit of fun of me because during my holidays, I would write the business plans of the games company I would one day have, and that was eRepublik Labs in 2007. We were one of the free-to-play pioneers.
Fast forward 10 years, eRepublik Labs joined the Stillfront family. I still remember that actually my first meeting after a conference was with Jörgen and Sten in this same building about three years ago, so this feels very special to be here again. Going back to what Jörgen said, this very special entrepreneurial DNA that we have, how do we scale the company? How do we scale Stillfront? How do we scale the group 3x and still keep this DNA? How do we not lose that? It is actually quite simple. It is power to the studios. Power to the studios. It is not by chance that we say that we are an alliance of semi-autonomous studios. This is really what we are. We are an alliance of studios. An alliance of several founders, several studio professionals that basically get together and do something together.
One of the things that in my past experience, for example, Lastminute.com, very similar to what Jörgen had in his first company, we acquired, I remember in the space of four years, I think something like 14 companies. I can tell you of the 14 acquisitions that we made, 12 were a total failure. Only two worked out. Why were they a total failure? Because we tried to force integrate everything. We tried to force people to use certain technologies. We tried to force people to do certain things. That doesn't work. You kill the entrepreneurial spirit when you do that. That is not the solution for a scalable organization. This is very different to what we are doing here at Stillfront. A key component of this is ownership. If you give someone autonomy, then they can really have true ownership.
Ownership works not just with making sure that many of our key executives have incentives and/or shares in Stillfront, you also get that by giving them autonomy. It is extremely important. The result of that is you really have an organization that is built for decentralization. That secures speed, market proximity that Jörgen was mentioning, and agility. The group resources, the people that now work in group, we really are here just to provide support and governance to the studios. That is really what we do. So power to the studios. There is a second element to that. What we are really creating, and very often when with Marina we meet potential new family members, one of the things that I explain to them because as a studio head, as a founder of a studio, I tell them what we are creating is not just a portfolio approach.
It's something much more powerful. What we're creating is an entrepreneurial platform, something that is not hierarchical. Jörgen was mentioning how important it is to have market proximity. If you really look at how the Stillfront organization is run, the way it works is the people, it's like really an inverted pyramid. The people at headquarter, our job is to support the studio heads. The job of the studio heads is to support the game teams. The game teams really are the ones taking the decisions because they're the ones who understand their markets, they're the ones who understand their games. This is extremely powerful. Having this kind of way of working gives ownership, gives empowerment, and makes people feel responsible. There is nothing worse than having a team that is told what to do and therefore doesn't feel responsible for the results. That doesn't work.
That is also key, not just to attract, but also to retain the best entrepreneurial talent. When you have the best entrepreneurial talent, especially in this industry, especially in the games industry, that's when you get superior outcomes. Actually, funnily enough, Jörgen and I are probably the least powerful CEO and COO combination that you will ever see in a games company. But that's good. That's the way it should be. Our job really is, again, support governance and yes, connecting the dots because we do have an overall view of what's happening in all the studios, and we can help them connect the dots, help have more collaborations, more of that sort of thing. But really what we're doing is we're removing obstacles. The day Jörgen or Phillip or myself start telling a studio, "This is the game you should be doing.
You should change that," we kill the spirit. I know as a studio head, if that had happened to me, I definitely would not have stuck around. So what has really made me stuck around, what is making me step up to becoming Chief Operating Officer of Stillfront is the proof is in the pudding. I've been three years here, and I see this really works. As an entrepreneur, what I like is tools. I like to have the possibility to accelerate my growth. What I think Stillfront added is quite unique is we really have what we call a distributed growth acceleration engine, which has really two main components. The first component is at the level of the studios. When you're part of Stillfront, you're basically able to leverage the collective intelligence that is at Stillfront. That's through the shared data that Jörgen mentioned.
If I can just stop a little bit on the shared data, I still remember at the beginning when it was just eRepublik, and I was trying to figure out, I have a game in soft launch. Is 35% day one retention good enough for my type of game, or is it not good enough? Is my monetization okay? Then obviously, I've been in the industry for a long time. I have friends in the industry. I would ask them, "How are you doing?" I would go to conferences and get information and all that. But could I really fully trust that information? Was that information really relevant? Were they giving me all the information I need? Could I genuinely base a major decision on the game on something I'd heard at the conference? Not really.
But if we are part of the same family, then I can really dig in deep. I can really get that information. It is extremely powerful. Jörgen spoke about they are sharing tech and sharing platforms. Another really powerful thing is because we are all parts of the same family, so we have this portfolio approach, which I understand quite well because I have some investment experience, but this is so much more powerful when it is a portfolio of game companies that at a time or another, have faced similar challenges, similar problems, and on top of that, are aligned because we are all part of Stillfront. That just generates a secret magic where as entrepreneurs you want to win.
If I see AJ and his team doing extremely well by doing more ambitious marketing than what we are doing in eRepublik, I go to AJ and like, "How did you do it?" And to the team, we go like, "If they can do it, we can do it. Let's ask them." This happens in a really natural way because we have the information, and then AJ will help us, Goodgame will help us because we are all aligned, and that works very well.
Another thing that is incredible is obviously the studio centers of excellence that Jörgen mentioned. There is quite a lot more. To stay with Babil, for example, one studio center of excellence that is in Babil is they are extremely good at doing video ads. They just have a process where they will be able to do incredibly high quality, almost Disney-like video ads in one week.
That is something they can offer to the whole group. Another center of excellence, one of the biggest challenges that you have as an entrepreneur is access to developers. It is very hard. Well, it just happens that Imperia, the founders started a developer school in Bulgaria, so they get first pick on the best developers that come out of that program every year. So that means that they can be a co-development center of excellence that helps other studios that are struggling to get developers, and with many other examples like that. Super advantage. Another thing, quite honestly, is the direct access to top talent. One of the big frustrations that you have when you are an entrepreneur and when you are starting your studio, no matter how good your team is around you, it is very lonely. It is very hard.
And sometimes because of your size or maybe because of your geography, there is some incredible talent that you cannot attract. Well, by basically being part now of a network of 12 studios, you have 12 other game founders that you can talk to who themselves have incredibly talented executives that you can talk to, and you have access to that incredible talent. But that is not just within the studios, because another level, obviously, is the light and agile group services and support that you get access to. When you are a small studio of 40 people, 60 people, even 200 people, there is a level of talent that you do not have access to. You probably do not have access to a top-level investor relations and communication person like Sofia that can set up a day like this one.
That's not something that you'd be able to do as a small studio. You don't have access to the muscle of group finance that is led by Andreas that is able to do some very interesting things. M&A, I would dream of working with somebody of the caliber of Marina that has 20 years experience in running M&A processes. That's again, access to incredible talent. Strategic projects, we've got Christian from Goodgame that has stepped up to lead some of the strategic projects that we have that are very key here in the group, and obviously studio operations support and governance. I have to admit, Jörgen, that maybe we've grown the group team quite a lot. We've gone from two people to 14 people, which is, I think, 2% of the total group staff. Maybe we should slow down. I don't know.
Still, that shows you how light that is, and that's only possible because we have this decentralized approach. That's why we're able to have a small team of high caliber people, not just at group level, but also throughout the studios. When you're an entrepreneur, it's great. Okay, you're part of a decentralized entrepreneurial platform. Great. What I'm after is key competitive advantages. This is so hard. Mobile games is an amazing industry. Free-to-play games is incredible opportunities. You build something in one place, you have access to the world, but it's very competitive. I need advantages. We need advantages, and that's what we deliver with Stillfront. The first thing that you get is the best tools and services supporting further growth, and we've spoken about the growth acceleration, the distributed growth acceleration engine.
Another thing that you get is a really interesting governance and deal model where you're able to retain your operational independence. That, I assure you, for an entrepreneur, is extremely key and is very easy to say and very hard to actually do. Again, I can tell you that this is something that we're succeeding in doing. Another thing is access to a broad and extensive network of talent, and we've spoken about the internal access that you get in terms of internal talent. Think of the combined industry contacts, the 12 founders that have been in the industry, in certain cases, for 30 years. If we think of David, think of the contacts that these people have. The access that they have is just incredible. It's mind-blowing. It's extremely useful.
Combine that with the value creation realization opportunities of being part of a public company, it's a pretty attractive package, which gives you superior opportunities for continued success. This is working very well now. We have the Still talent distribution operations and scaling part that, through the decentralized approach, will be able to scale. If we have to scale 3x, that doesn't actually mean that we go from 12 studios- 36 studios, but probably to 20 or more studios. One of the key things that we need to do is we need to ensure that governance and management are very strong. Again, we're able to do that with the decentralized approach and then with a deeper HQ team. We've gone from two people to 14 people, so you're getting some backup now. That helps.
But the real solution to scale, especially when you have a tech background, is not just by adding people, it is through technology and tools. That is how we are going to scale. So I would like to speak to you a little bit about a project that we have been running, which is called StillBase, which is going to help us scale. So what is StillBase? StillBase is a tool that is going to help us power collaboration, growth, and governance at Stillfront. We will have succeeded in our mission with StillBase if I am part of Stillfront, maybe in a studio in KIXEYE, Canada, so I am actually a recent joiner, and I need to figure out how to do something. If my first reflex is I just go on StillBase and I will find the answer to my questions, then we will have succeeded in our mission.
That is the end goal of StillBase. But again, we are entrepreneurs, so we like to be very execution-oriented and start baby step by baby step. The first very simple thing that we are doing is in StillBase is a central place with a unique login, with anybody from Stillfront can basically know what kind of tools we are using. Because when you are building an intranet, one of the temptations that you might have is you try to reinvent the wheel. When you are an entrepreneur that is kind of used to working with more limited resources, you know that is not really the best way to do things. There are excellent tools out there that we can use and leverage.
So what we simply do is we connect them to StillBase, and then as a new member of the family, in KIXEYE, you know exactly basically what tools you can use and how you can use them. You do not need to remember what was my login for that or that tool. Sounds like a simple thing. Huge gain of time, I assure you. But another really important thing is where you actually have to go a bit deeper. Some of you are maybe in big companies, and you will say, "Yeah, address book, big deal. Yeah, of course, you need an address book. That sounds pretty normal." But if you think about an address book in the context of an alliance of studios where you are trying to leverage the collective intelligence like Stillfront, if you design it in the proper way, it can be extremely powerful.
Okay, so the basic thing is very easy. You get an email from somebody, you want to know who they are. You go to the address book, you have their picture, great. You see who they are. This is work in progress, just so you know. That is basic. That is helpful. What is truly helpful and what really is interesting and where is truly going to generate even more collaborations. There are already many collaborations that are happening in the studios that Jörgen and I do not know about.
It is probably tens or hundreds. We would like it to be thousands of collaborations that are happening without us even knowing about it. So one of the simple things that we can do is when basically our talent is putting in their profile in StillBase, we ask them what skills they have. Now imagine that you are a UI expert in Bytro.
In Bytro, there are only two UI experts, and you have a major challenge with one of your projects. You need to scale it. You are not really managing to get the UI correctly. How do you do it? You go to StillBase, you search who else is a UI expert within the wider family. You find out that this gentleman here is a UI expert. You see what kind of projects he has done, and then you start collaborating, and he starts helping you. Huge gain of time, extremely powerful. You do not need to wait to speak with a manager or something like that. We are really empowering everyone at every level of the organization. That is the vision for this. Simple thing, just an address book. Very powerful outcomes. Second big thing that we are working on is business intelligence. That is a huge thing.
We spoke about data and the importance of data. Data and creativity are key for mobile games. Creativity, you do not kill it by having the distributed approach, by keeping the entrepreneurship. Data, how do you make sure that you are on top of your data, that you really know what is happening? It is extremely important from, first of all, the governance point of view.
Some of you might be familiar with some of the numbers that you are seeing here, because that is actually some of the numbers that we use for our quarterly reports. The difference is this is live data. Jörgen, myself, Andreas, we actually have access to these sort of numbers by the minute. We know exactly where the business is, we know how the different franchises are doing, how different things are doing. That is extremely important. It is really the superpower of real-time data insights.
What is even more powerful is the fact that if we were a normal games company, we will be one studio, maybe two, with two, three, four, five games maximum. How do you benchmark? When you are 12 studios and you have 35, or I think even 36 live games, you can really, truly benchmark. Another view that we have is, this is a dashboard that we use to see how our studios are doing. Here, another key thing, and actually, this is probably time to mention another incredible talent that being an alliance of studios allows you to attract. We have, for example, the person that is basically doing our data is the person who was running data for a small startup called Spotify before, Simon. He is now basically running the data for Stillfront. He said something that I think is very true.
It is not about how many KPIs you have. It is about tracking the key ones in the correct way. One of the key things that we need to do so we can do not just a proper governance job, but also to give something really special for the studio heads, is making sure that we have common dashboards for every studio where we are following the same data. This is extremely helpful. From a studio head point of view or a game team point of view, this is gold. One of the things that we saw, for example, at eRepublik Labs at the time, we saw, wow, these guys are spending this amount of marketing to push Nida Harb 3. We have similar KPIs. Why do not we do the same thing?
But then we look at the data, and we look at the difference and realize, that KPI, they are way above us. Let us hold. Let us understand why they are way above us. Let us see if we can match it. That insight probably saved us hundreds of thousands, if not millions of EUR. Very important. And of course, it makes for much better quality reviews when we meet with the studio heads because we know live every minute. We do not need to wait one month for the numbers to come in. We know exactly how they are doing game by game in real time. That is it. That is all I have for you. I hope that was a good summary of operations.
It was a great summary. Thank you very much. Hi. You get an applause. So you touched upon this, Alexis. You have been with Stillfront for three years, but it is not until now, after Christmas, that you are stepping up 100%.
Correct.
You touched upon why, but can you elaborate a bit? Why now?
Yeah. I think coming back. So let us come back to eRepublik Labs. So about 10 years in, the company was actually in really good shape. We found our mojo. We knew how to basically do these historical-based strategy games. We knew that we were on the path to growth and all that. And we were starting to get a lot of interest from the market of different people trying to acquire us.
And at the time, to be honest, we did not know Stillfront. Apologies. There were two people here. But at that time, I also realized, okay, we are doing well, but there is something missing. I do not feel that by ourselves, just with the team that we have, we will ever be the next Supercell. We are never going to be huge. We will be a nice, good games company. And also, I was seeing that squeezing the middle, potentially coming in quite soon.
I thought, okay, I'll enter a process and do a proper process. All the different possibilities that we had at the time, and we had several options, they all were about joining a big corporate and being integrated, and you'll be our division that does strategy games and all that. That wasn't very appealing because I wanted to stay on. I felt that what I wanted was something that allowed us to spread our wings, and that's what Stillfront offered on paper. What we did is we opted for the Stillfront option, and then quite honestly, as an entrepreneur, you observe, you live from the inside, and you see if these things that Jörgen and Sten were telling me were actually true, and they are. That's why I'm here. To be honest, I think it's a unique opportunity to do something truly great.
I'm thinking on a personal level.
Yeah.
Can you cope with being COO, not being a hands-on studio head? Can you keep your fingers away, being that person with no power as you described?
Yes, it's liberating. No, seriously, I think I can, and I think one of the key reasons Jörgen really kindly told me, offered me this possibility to step up, is I know intimately what a studio head doesn't want to be told. I know intimately how a studio head doesn't want to be handled, managed. If you think that you're scaling this across several studios and all that, it's actually pretty busy. We're not very powerful, but we're very busy.
You have seen this work, and on paper it looks good, it looks fantastic, fluffy and all good. What are you worried about? What is the weak point of this model?
I think it's not really one single weak point. There's never one single weak point, the same way there's never a silver bullet. I think the difficulty and the challenge is going to be execution, always. Relentless execution. Making sure that we're able to execute on StillBase in the correct way. We'll make mistakes, but we'll fix them. I think the challenge is going to be in execution.
Kickstart and repeat.
Kickstart and repeat.
Do we have any questions from the audience? No. Okay.
Yeah.
Oh, there is one. We have microphones, sorry.
Just going to get water. Thanks. There is one there and there is one there.
Okay. You have 35 games, and you have a budget, of course, how much money you want to spend totally. Who decide which game to bet on at the moment? Is it you or the studio heads? They care about their game, but someone has to have an overall view.
Yeah. We've very simple rules, which everybody follows, where basically if you're going to invest in marketing to boost your game, you need to be in a situation where you're returning the money that you invested within 180 days. Then quite honestly, the studio heads are completely free to basically square their games as they see fit, as long as they respect that rule, and that's a sufficient rule to keep things within the boundaries. Then, we're all entrepreneurs, so it's also about what game has the best KPI, the best key performance indicator. So obviously if you have one game that's performing better than the other one, the studio head is best equipped because he's closest to decide whether to invest more in one game or the other.
So actually that decision is at the studio head level, as long as they're within the boundaries that we've defined together as being the right boundaries. If for whatever reason, the studio head or the game team hasn't identified that there may be a better opportunity with another game and all that, then we'll just raise the opportunity to the studio head, say, "Hey, have you noticed that you've got this incredible KPI there?" But then it's up to them to decide what to do. Normally, they want to do well, so they make the right decision.
Good. There's one more. Yeah.
Yeah.
Here. In front.
Thank you. I just wanted to ask what incentivization there is to foster collaboration across different studios. Why should people stick their hands up to say, "I want to help you"? How are they incentivized to do that?
Yeah. That's maybe a question afterwards more for Andreas in terms of the different incentive programs that we have and all that, but what I can tell you is forget the incentive programs. It's we're all very curious people. We all are extremely fortunate to work in an industry that is constantly changing, that is super interesting. And just the fact of having access to someone that is like-minded and has experience, and to be able to have a discussion with them about, "What do you think about this? How can I help you?" Is just that, and being part of the same family, is extremely powerful. Just that part. In terms of actual incentive programs and all that, I'd let Andreas answer that.
Doesn't that lead to a moral hazard of people getting distracted from their core job?
Yeah, not really because, A, as you are saying, you still have a core job to do, and basically we are able to do that in a way that it is pretty limited. It is almost like a version of the Google 20% time, if you want.
Jon.
Just coming back to the 180 days payback on investments.
Yeah.
How do you know that beforehand, before you do the investment?
Yeah. We have some very good predictive analytics that we are able to do that are different for each game, and usually within one week, we are able to forecast for a specific game what that payback will be. Obviously, the longest the game has been running, the more accurate that predictive algorithm is. The shorter lifespan we have on the game, the less accurate it is, so therefore, the more conservative we are. So, normally, depending on the game, it is 5%-10% error margin maximum. So it is very accurate.
Then you monitor it as you invest continuously.
Live data. I could have shown you another screen which shows the core data by game and how it's behaving and all that. We see that.
If you see it doesn't work, you just pull the plug under that investment.
Well, if we see it doesn't work, we pause, stop, wait, analyze, change something, and repeat.
Repeat. We are going to talk a bit about the opportunities in the gaming sector and with a person who Alexis would never have a chance to work with if he had not been in Stillfront. Marina Andersson, please come up. You are Head of M&A at Stillfront. Welcome.
Hello. Thank you.
Can you just start to tell us a bit about yourself?
Yeah. Marina Andersson fits very well with M&A. I joined in January. Before that, I had been doing mergers and acquisitions and investment banking for close to 20 years. My first job was at Carnegie. Then actually I worked with Jörgen at a Venture Company called D7. Then a Finnish Investment Bank, ICECAPITAL Securities, and latest it was Deloitte before I joined Stillfront. Since I joined, I have been keeping myself very busy. One thing I have done that I hope contributed well is I led acquisition of KIXEYE. Clayton is here and will speak more about KIXEYE, and it is our second largest studio.
Can you start about telling us about your process here at Stillfront? How do you select? What is the criteria?
Yeah. Jörgen spoke about this fragmented industry. Very interesting here at Stillfront is I have access to enormous pool of exciting targets. I saw a lot while working as an advisor, people like strategic buyers, peer players chasing for their daily food, looking for targets. Here actually we have this advantage of access to this enormous pool of interesting opportunities. I found myself in kind of candy shop where I have to select, so it is my daily job. For that, I have extremely well-fitted team, which is Alexis, which is Phillip, our CPO, who will speak later. They help me in this evaluation process, like screening of targets because we are very active and have a great pipeline.
That great pipeline, how big is it? What does it look like? Everyone is interested to know.
Yeah. What I know, it is both before my time and during my time with Stillfront, so we have looked at approximately 1,500 companies, which is quite a lot. On my growth list, out of those, I would say I have approximately 150 relevant targets. We are on continual basis in discussions or in close term, near term, with approximately 30, and then three or five of those are opportunities that may become acquisitions in a very close term. And those are top picks that we select with the help of the management team, I mentioned who works with that, and Jörgen of course, to mention him as well.
And those that you. From the 1,500, it is down to three to five. What are the criteria that they need to have?
Yeah. Going back to our philosophy about how we build Stillfront, what are the core criteria, core denominator, which we have in common for our studios. Those are profitable studios, founder-owned normally, so profitable and sizable revenues as of today, not in one year or two, but for today, with games that are evergreen, meaning that they have longevity, long life cycles, and of course, very important, it is a strong management team that we have good cultural fit with.
So it is profitability, longevity, evergreens, sizable.
Yeah.
I also think you, by buying and as you were saying, Alexis, you have a portfolio, so this is also a way to mitigate risk when you have different companies. Jörgen also talked about genre expansion. Are you selecting differently now than previously?
I would say so. It's the same basic criterion, but when we have to select those three or five top picks, maybe we have 10 that are very good, and then five, and one of those five or two of those five we proceed with, what's the value added? What can they contribute to us, and we can contribute to them? Genre expansion is one thing that we are looking for, so that's very relevant. Then probably in some way, geographic expansion, but genre, I would say highly relevant, yes.
I think if I can add on genre expansion, from an operational point of view, when you have a studio, for example, that is very strong at doing strategy games, it's very hard organically to get that studio to do another type of game, to, for example, do a casual game, even if it's mixed with kind of strategy games. It's very hard, and your likelihood of failure is much higher. So in terms of an engine of growth towards genre expansion, M&A is a lot lower risk. It's a much better way of doing that.
But isn't there still a risk because what you know really well is in another part of the market? So how worried shall we be that you're buying the wrong stuff?
Well, no, because the difficulty is the execution of doing the sort of games that will work. But when a game already works and is already functioning, all games share common KPIs that we can go through it, and we can really understand why that game is working, what the longevity potential of that game is and all that. So that's actually common datasets and information where we can basically use our experience. Also, we're very lucky that Phillip, our CPO, has actually some slightly more casual experience, which is also very helpful.
Okay. Can you elaborate a bit, because you said in previous jobs you had to go out hunting, you do not have to hunt as much here. So exactly how do you find these companies?
Well, I would say there are basically three sources. Most important of those is our internal work network. We have great internal network. So of course, it is our management team, our studio heads, individuals around studio heads, and then it is our business development people who are going out to fairs. They have an open contract book. So if I like someone, I could always reach out and ask. So another way to get our potential targets is actually they are getting more and more visible. People are reaching out to us, because those are studio heads that see that next step of their development is pretty hard if they continue on their own. So they are reaching out. And of course, another source is those bankers, M&A boutiques, and they are also getting more visible. They are also reaching out to us.
It is a virtual circle. We have truly incredible deal flow, and we have really, really good quality companies that are going through that deal flow. As we become bigger, as we become more visible and all that, the quality keeps increasing. So it is really a virtuous circle.
But there is also, you said already when you searched for somewhere to put eRepublik, there were other options.
Yeah.
So there are others out there. How does the competition in the M&A space look like, and what about prices?
Yeah. It's a fragmented space, of course, and it's a lot of consolidation going on. We see other consolidators, but we want to see ourselves as a leading consolidator, and there is something we can offer that we believe is very valuable. It's value-adding, positive scaling. As you asked about prices, we do not see much price increase because what we are offering is being shareholder in Stillfront, building something together, sharing incentives, and upscaling in a positive way. Alexis, anything to add on this?
No. I think on the numbers, you're completely right. And then quite honestly, it's what Jörgen and I were discussing about the entrepreneurial DNA that we have, that's very special, and it does, I think, give us an advantage, not with every kind of game company, but with those founder-led game companies, it is definitely a key advantage because they see that.
But say you have these 1,500 and it's down to these three to five, and you're almost there to do a deal. What is it that breaks the deal? It's founder-led, it's profitable, it's sizable, but what breaks a deal most often?
Yeah. For us, it is all about data and KPI analysis. We will dig into those. Very important is cultural and management fit. Once we go into due diligence, normally we would only do it on exclusive basis and have very good deal certainty. But of course, things can come up, and normally it is prior to due diligence. That could be a kind of gut feeling or knowledge that comes from one of the persons in the management team, this kind of hunch that Alexis or Phillip has.
Do you often disagree?
Yeah. Well, sometimes we will have disagreements because obviously, Marina has tremendous experience in terms of looking at what the numbers look like, if it makes sense, doing the due diligence process. She will see and they still say, "But everything is good. Look, the numbers are good, the margins are good, the trends are good, and all that." Then I will go, "I just have a bad hunch. These guys, they have only had success. They have never had failures. I do not feel it.
We have a word for that in Swedish.
But wait, wait.
Yeah.
Just before you go there, very clearly, data always wins over hunches, unless Phillip, Jörgen, and I have the same hunch, then maybe we decide not to do the deal.
Okay.
But you were going to say, sorry.
No. "Killgissning." But if you're three, then it's fine.
Killgissning." I need to work on my Swedish. Duolingo, it's not working very well for me.
Yeah. I will tell you later. Now we are going to have a break, and we are going to have some coffee. Please mingle, and all of you in management, please raise your hands so everyone knows who to go to talk to in the break, and please be back at 3:00 P.M. Thank you.
Thank you.
Thank you.
Off with the music. Now I start. The name is Phillip Knust. I am CPO of Goodgame Studios. Since a couple of months, I am also working on a Stillfront Group level. Today I will talk about evergreen games, what they are, and what makes them so special. Since I am with Goodgame in 2010, I had the chance to work on a couple of evergreen games from the very first line of concept until the maturity state. It would be Empire and Empire: Four Kingdoms, our classical medieval strategy games. I have a castle on a persistent world map. I can trade with other players. I can attack them. Everything is connected. Then also Big Farm, which is our Big Farm game. No pun intended.
The logo may be a little bit misleading in terms of being very cartoony, but at the end, also this game is more of a complex economy simulation. It is about optimizing processes, making profits, competing in the market. It is more than just a very toony casual game. More recently in October 2017, we launched the standalone mobile version of Big Farm: Mobile Harvest as an own game. We scaled up to 1.9 million SEK in bookings in September 2019, so 55% year-over-year growth. We are still in a big growth phase, and there is no sign of decline yet with this kind of game. Now, you may ask, what exactly is an evergreen game? Our definition is that a true evergreen game is a game which has been played for years by players, so they enjoy it for many years, maybe even decades.
Once such an evergreen game is established, it is almost impossible to copy it. There are many reasons for this, but I only have 20 minutes, so I will talk about three of them. First of all, the modes that we built within the Stillfront Group and within the individual studios that we need to do this kind of evergreen games. Then the longevity, which by definition is necessary for an evergreen game. We need the players to stay with the game for a very long time. The game needs to be able to bring enjoyment for a long time. Of course, live operations, which is basically making all of this possible. Without live operations, we wouldn't be able to have an evergreen game. I am starting with the modes.
First of all, I think it is pretty easy to look at a mobile game and think about, okay, it is just like a very simple game on my phone. But in reality, this is just the very first part, the part on my phone. For our kind of evergreen games, these are always online multiplayer games, which are very heavily connected. That means, in a game like Empire or Nida Harb 3, the people may have their small castle or their base or whatsoever, but it is then on a world map connected with everywhere all around the world, and this is interacting. It is very important. For example, I could right now pull out my phone and basically send an attack to a player who is in Brazil in Nida Harb 3, for example.
This player would then be informed about it in real-time, even so he may be at the beach because the weather is way better than here in Stockholm. This is very important. There are hundreds of attacks all the time or trade movements on activities, and they all need to be connected all around between the players on their phones and their tablets. In addition, we also need to assure that the latency is being supported because the internet connection at the beach in Brazil may not be as good as here. So we are also limited in terms of amount of packages that we can send. We need to be highly optimized to make this game possible. That is not all because the guy that I may attack right now, he also has a lot of friends who also are informed about it.
There might be a friend from India from him who gets the information, and then he is able to send his units to the defense. Basically, everything is interconnected. The beauty here is that this Indian player and this Brazilian player, they may never meet in real life. However, due to the games, they spent hours together. They are chatting, they are trading, they are defending themselves against my attacks. Basically, there is a lot of social glue happening here because there are friendships created, and that is why actually the sheer amount of thousands of players that we generate in such of an evergreen game over years itself is a big mode because these people play this game for many years. They have their friends, they have their connections there, and they will stick with this game.
They will enjoy this game and just not stop there and also generate new friends and just ever looping. This itself, these masses of interconnected users are a big thing just standalone itself. Now, of course, there is a lot in the background to what makes this possible. I just talked about already about the scaling system. All these thousands of players, 10 thousands of players doing all interactions all in real time, everything needs to go fast, but at the same time also with a very low requirement to the internet connection. There is a lot of technical background here. Equally important is the device coverage because it is actually not too hard to make a game which looks pretty nice. However, it is very harder to make a game which looks good and also runs on every kind of tablet or every kind of phone.
Because even if you look at only players who decide to pay a significant amount of money for a game, we still have a lot of them with very old devices. Every day, I basically see games released in the app stores, which looks very nice, but they will never be an evergreen success because they are limiting themselves too much in terms of only running on most modern devices or very small niches. While for a true evergreen, you need to open up the funnel. Everything needs to be open and very accessible for the audience. Now, with all this, 10s of thousands of users all doing these activities, this is obviously generating extreme high amount of data. We will want to work with this data. We need a strong analytics background. We want to know, okay, what features are the players liking to use?
What are they not liking to use? Coming back to my attack example, let's say I attacked the guy in Brazil, I lost. How was the punishment? Is this now very frustrating? Am I now churning out of the game, or is it motivating me to play further? We need to have a very dedicated system to work with this extreme amount of data, and steer it correctly and use it properly. The next step would even be real-time triggers. Imagine that I did this attack on the guy in Brazil, I lost, and now the game triggers me an offer in the game where I can directly rebuild my army. Directly case sensitive to my activity, I get an offer, which is basically exactly the needs that are currently required from me and directly catered.
This is the systems we have in place to scale these games. At the end, of course, because we have all those players working together, interacting together. They are producing resources, they are trading. I can steal resources. All this together is an extremely complex economy on its own. This economy is always online. That means 24 hours a day, 365 days a year, this game is online. This game never sleeps. That means also when people interact with each other or we add new features, we always need to assure that we are keeping the economy fun and long-lasting. In our studios, we have some experts who are all day doing nothing but economy balancing.
This is also an expertise, which is very precisely for a very individual game, be it like a strategy, military game, or a farm game, to really go through it and really understand the basics, and assuring that this stays fun for everyone and also stays fun in 5 years. Because with these big live games, when we do some changes, we cannot just take them back. We constantly need to evaluate with this and work with it. Now, this is the one part, the technical part, and then of course, we want to first need to build up this user base, because there are so many great games in the App Store, and we cannot just rely on that people find the games or our games by themself because they are just way too many.
We need to assure that after Christmas, when I got my new phone and I start installing some apps, that I am installing the right apps, the ones from Stillfront and the Three Gods. Performance marketing is the key here. Without it, you can have a very pretty game and still no one will play it. For performance, marketing means data-driven. The question also came up a moment ago. What we are doing is we are spending millions a month on performance marketing, and we need to be very sure that we get the money back so that we, after, for example, 180 days, also have a return of investment. Constantly, we are both on historical data and real data, predicting the cohorts. Let's say this week we have acquired 200,000 registrations. We need to constantly evaluate, okay, how are they performing?
Because every week we will need to update for the marketing team the goals in terms of, okay, how much can we afford on a single registration, or which channel is performing better? This is like a constant evaluation process that needs to be steered accordingly. It is not just about generating as much installs as possible and as much players, but it is also about finding and targeting the right players. So we want to not have many installs, but we want to have players who enjoy our game, who play our game at a very long time, and players, of course, who also decide to pay at the end. This is a very dedicated targeting system. One way to achieve it is definitely testing all the assets. So it is very important to realize or to understand how do we approach our users.
What banners do we show them? What text do we show them? But even tiny things like the app icon of the game that the player at the end has on the cell phone, this is very important. This all needs to be tested. This is also moving. So a marketing video which could work great this week can also be outdated in two weeks already. So it is a constant process of understanding where is the market shifting right now, what is the users interesting right now, and optimizing at this. Again, to find really users which will not only go and install the game, but actually play it, and then at the end, also pay for it.
It is also important to note that we are not just working with few big partners like Facebook and Google, but actually with Stillfront we are working with over 30 different marketing partners with all kind of different style, be it like classical banners or classical text when I Google for a great game, or be it videos I see on YouTube, but also pre-install campaigns and real-time bidding. So like a lot of different system where we have individual experts working on. Now that we have acquired all those users, of course, we need them to stay in the game. So we want our long liberty to work out. It is all about catering to the most valuable target audience long-term, because it may surprise a few of you that our best players are actually male 40 plus.
So we are not interested in catering to teenagers, but actually the players that are really good in our games are educated, experienced. They like the complexity of the economy. They like the trading, the diplomacy in the game, all as the meta level. They like having these contacts all around the world, and they are the one who often plays the game for many hours, hundreds of hours, and then also decide to pay. How long do people play? I can actually give you some value. The average Empire pay user, so user who decided to pay in his lifetime, is playing the game for 821 days. So it is like a long-term hobby to play these games. This is still counting, so I hope in a year I can give you an even higher average. The calculations are actually relatively simple.
We do a return of investment after 180 days, and the years after are profit. That is why we are able with our current system, as long as we have performance marketing ROI after 180 days, to scale our games as much as possible, as much as there is money to spend, and the performance still stays. So there we come back to our constant evaluating, forecasting, and steering, to optimize on this. Now to achieve all this, to assure that the people are actually playing for 820 days and more, we need to do live operations. When it comes to live operations, it is all about content, stuff in the games that I can enjoy. Because I want to play the game for many years, so I need to do something, and it must not get boring.
Content by natural in every game is limited because no game has an infinite amount of buildings I can build or levels I can achieve. So first of all, we need to use our data to decide clever. That means we have all the data in terms of what people like, which features work good, which features do not work good, which features should really get completely reworked. We also have all our users, our players are obviously telling us what they like, what they do not like, giving us suggestions. This all comes together, need to be funneled together, to an output to then do our roadmap for the games. On one side, we are just limited in terms of how many features we can do at time for a single game. We cannot just not create 100 features in parallel.
We better want to be very sure what we develop based on all this data. Because no one will just out of his mind be predictable what exactly the users will like and how exactly the users will use every single feature. Because of the global interaction, there are so much uncertainties and so much dynamics in it that we can just step by step evolve it, analyze it, see what works, and continue. That is the way to go. In addition, it also helps us with stretching the content because, again, our content is limited. We want to know, okay, how long can it take until I level up or until I unlock a next building? So how long is it still fun to play before it gets boring? And finding this time of fun versus content, basically, finding this arc.
This is the art of doing live operations properly. A good way for this is definitely events and offers. In a game like Empire or Nida Harb 3, every day there is a different offer and a different event. When coming back to my example of the attack that I did, today could be an event where I am incentivized for attacking other players, and tomorrow could be an event where I am incentivized to building up my army, so it is less frustrating that I lost everything in this attack. It is basically, every day I come into the game, I log into the game, I see, oh, there is something new. I talk to my friends in the game about, okay, these are the dynamics. What should we do? Again, a lot of daily interaction, keeping ourselves busy and entertained in this. Then as mentioned before, personalized content.
It could be offers triggered on my current need, but it could also be just the different ways how a player may enjoy the game. There are some people who just don't like fighting against other players. They may just want to trade or just build up their nice castle or their nice military base, or have a lot of helicopters. We can basically steer the content and the offers and the event also on what people at the end enjoy. This all comes together to never stop improving. A lot of our Live Ops games are five years old, six years, seven, eight plus years old, and we still can improve them. We also want to do this because we also want to stay relevant, right? The expectation of the player is also just shifting over the years.
Even the player is changing over the years, thinking about how much one changes over five years. We constantly want to stay relevant and stay attractive. That's why Live Ops is just never ending. I have a couple of examples for this. First of all is the Outer Realm event in Empire, which we introduced to the Empire family, and the team did a very good job here on understanding some of the player needs. This is about coming back to the example, I attack someone, I may lose, and then the guys all attacking me back, so I need to fear quite some heavy redemption. The Outer Realm event of Empire is doing a temporary server or temporary world map, where I have, for a limited time, my new castle.
I have a tournament which go for maybe two weeks, and in this time, there's a lot of fighting happening, and then it's over. I don't need to fear the heavy redemption, but for the two weeks I was really playing extremely attractive. With our analytics, we are able to very precisely track down the additional revenue just to this event. What I brought here is the values from the first three quarters of this year. This event alone in the Empire family generated SEK 7 million additional bookings in a game which is already many, many years old, just by a feature that the team introduced new to the game by reading the data and understanding the players' needs. Another example would be in-game KPIs, because it's not only about generating revenue, but also improving the game because we want to keep spending marketing.
We're going to keep investing millions in these games. We better assure that the game improve, and what I brought here is the LTV pay day 14 from Big Farm: Mobile Harvest. That means the average money that the Big Farm: Mobile Harvest player pays in his first 14 days. Here you can see how we improved it from October 2017 to October 2019 over the two years since we launched the game by 70%. This is on one side, of course, again, the Live Ops product aspect. We improved our offers, we improved content to the game. But it's also the marketing aspect because marketing gets better and better in steering the exact users that we want to get in the game to understanding, okay, this is the kind of user who is not only playing the game really much, but also willing to pay.
On both sides, we are getting these achievements together to constantly improve our game now after two years, and we will of course want to continue doing this by all kind of different events and measurements. Here I am showing the Halloween event which was just running a couple of weeks ago. A third example I want to show is new revenue streams, because even with these games, which are many years old, we can even re-experience and reintroduce completely new elements. In this regards, we introduced in-game advertisement subscriptions to the game. In-game advertisement we added at carefully selected places optionally for the player to watch an advertisement to get a reward.
Right now all our games are of course free-to-play, but the player has at some situations a choice to say, okay, instead of paying, I now watch an ad video and get my reward in return. On one side, this is a way for us to monetize players who usually would not spend anything on the game. On the other hand, also players like it because if they do not want to spend anything on the game, they still sometimes want some premium experience, maybe some nice items, so they can use this functionality to get what they want without leaving the game. Another aspect is subscriptions. In the Goodgame portfolio that is displayed here, we have now 20,000 active subscribers generating over EUR 130,000 a month. Also grew over 100% year-over-year.
The interesting aspect is here, again, it is an optional feature, so you can still play the game for free, but optionally you can choose to subscribe to a functionality, get a lot of boosters, get some permanent benefits from being so. The nice thing is here, this is a very reliable income for us. Because the reoccur payment of a subscription is something we can very nice plan with and steer on. While these new revenue streams in the grand scheme of the Stillfront Group are still relatively small, for me it is just an example how we can still with this pretty old games still improve, still learn. Both of the revenue streams grew by 100% year-over-year, and we will of course want to further increase it, further grow here and maybe find even additional streams.
Now, this all comes together on one point, doing an evergreen is very hard. Everything needs to be perfect in terms of the product side, be it the retention, the visuals, the monetization. This all needs to work out. Then on the marketing side, we need to acquire the exact right users for as cheap as possible with the correct channels for the correct time frame. This needs to be all working together, and this is just very hard. It is especially hard if you try doing it alone. What we have built when the Stillfront Group is getting the studios together, which have all different experiences, which are all trying out different things and can cooperate and collaborate all the time.
For example, one studio may be great on the technology aspect of assuring that we have those tens of thousands of people interacting in real time. Another studio may be super great in terms of the visual aspect to assure that the game looks very nice and still runs on an older phone. The other studio is very good at doing the marketing. We are pushing for getting all this together and doing all those collaborations. A lot of this is the obvious knowledge share. We may go to a different studio and talk about in-game advertisement, like what worked, at what places should we do it, what partners worked, what mediation partner should we use. So very detailed knowledge that we can share within the group.
Or when it comes to the Outer Realm event that I showed, we can of course show it to other teams like, "Hey, this event works so great. This is the reason why we believe it worked out, and maybe we want to try it in the other event too." Of course, there are also very practical collaborations that we also mentioned already. We already successfully transferred game technology from one studio to a different studio. We are right now doing marketing from some studios for other studios. These are all collaborations that we want to do to continue growing our evergreen games and to be able to launch and successfully scale new evergreen games. All right.
You get an applause. Thank you. Phillip, I am wondering, can any game become an evergreen game, or how do you prioritize between which games to focus on?
First of all, of course, an evergreen game needs certain assessments. For example, we need this multiplayer aspect, we need these collaborations of people that they can keep themselves entertained, that they can build this friendship on the level. When it comes to how to prioritize, at the end, we of course know we can spend marketing where we can spend it in terms of performance. If we can get the return of investment on the products, then we spend it. Then we are also able to select which games are in the growth state, which are scaling, which we put the most of our resources on it, and which games we are, which are games are more shifting into the life maintenance maturity state, where the game is just generating cash and then not scaling further.
You now moved up. You have been not even a year at Stillfront, and now you are Chief Product Officer. How much work do you put still in Goodgame Studios, and how much is on the Stillfront level?
I could not tell you an exact hour amount. I would still think that the majority of my time is on Goodgame Studios, on Still the games, on the Still the new games. I am right now mainly doing a lot of support work. Marina did this nice example of the candy shop. I am a product guy. I like games. She is constantly feeding me with games to look at, which is great. We are discussing this like, "Hey, this is great target. They have these five games. Would they be in potential evergreen game?" I love this. I just like looking at games. This is very cool. Then, of course, more and more we are evolving the synergy project. There is a lot of happening already, which is great. We just want to do more. Alexis did a very good example.
We would never, from the group level, say, "Hey, Clayton, your next game need to look like this," or, "Change the genre." This is not going to happen. But we can support. We can try identifying where can other studios give valuable input, and this is the time that I am spending on it.
You talked about in-game advertising.
Yes
that boosted your revenues in Goodgame Studios.
Yeah.
How much do you have in the group now?
It is still pretty small, I think about 2% of revenue overall, as it is just something we are currently exploring, and this is something we are sharing and that we want to rise. So here is more relevant how heavily we were able to scale it up during the last year and how we want to go forward.
When in that process of going forward, pushing something like that out in the Stillfront Group organization, how do you do that? Because the studios, they want to go by their own.
Yeah. We do have our bi-yearly StillCons, where we are really coming together, and it is about sharing all the successes. As mentioned before, yeah, the studios may want to work by their own, but they are all entrepreneurs, and they want to be successful, right? It is way more about like, okay, this studio had this amazing success. How can I get it? Give me all the information, give me all the data, give me the design document, and this is how it usually works. It is not much pushing on our side in terms of, hey, take this information. It is a lot of pulling. Our work is more to assure that we identify as, hey, this one studio has done a great job with a certain feature, and they may not even be aware that this is so great.
We need to assure that they are having the right platform to share this information.
Do we have any questions from the audience? Yes. We have one here. Two seconds.
Just on the, I think it was 821-day metric.
Yeah.
How is that actually calculated? What is the definition of that metric?
Okay.
Also, I think that was for Empire. Is that representative of the wider portfolio or the other studios?
I on purposely put Empire in here because I was talking a lot about Empire as an example. I am sure it varies from game to game. I would not be able to give you an average of the whole company. What we are generally looking at is the day of the registration, and then the last login of the users of the specific cohort that I showed here. This is where users from 2013 because we just need some time, otherwise we would not be able to show through a lifetime. Then the average of all paying users. All Empire users who registered in 2013, they on average have played 821 days.
We talked with Marina and Alexis about expanding genres. Live ops, do you think you could expand that as well if you expand genres within Stillfront?
That's a good question. I think so, yeah. Because already in the market, we see that genres are more mixing. Strategy games get more and more RPG elements, and this is something which we are observing very carefully. A lot of the elements that we are using right now are pretty neutral in terms of what kind of genre I have. Much the way, for example, how I do our trigger offers, and like that I want to have events exactly at the player's need, like exactly the moment where a player need a certain element, putting then an event on offer at this time. These are more general learnings that we could apply everywhere.
Great. Any more questions to Phillip? No. Thank you very much, Phillip.
I think we have-
Oh, we have one there. Sorry. Of course.
I just wanted to ask about your philosophy of monetization.
You've got paying players. How much are they paying? Are there limits on that? What is your thinking in terms of that monetization?
Yeah, so when it comes to my thinking about it, the first thing to understand is people who pay for our games are first mature. They really know what they are doing. On the other side, they are playing the games for hundreds of hours. So it's like an intense hobby because this is how our business model works, right? We are not interested in having people come, like a player installs a game, pay EUR 5, realize, hey, I don't like the game, and churn away. Then we have not gained anything. What we want is we want to find users who play our game for a very long time, so we really want to enjoy them. So like any other hobby where, like playing golf, I might spend hundreds of hours a year if I could. Same for this kind of mobile game.
We really want to find the right users who really enjoy this for a very long time, and then they are obviously also spending about it. I still believe that when it comes to amount of fun per EUR spent, a mobile game is one of the best thing you can do compared with golfing, for example. This is the idea. It is really about first comes that we want users who play the game for a long time to enjoy it because otherwise it just wouldn't work.
Thank you, Phillip.
Right.
Thank you very much. Now it is time for the latest and largest acquisition, KIXEYE. Please, Clayton, the scene is yours. Here is the clicker there.
Hello. Thanks for coming. Thanks for joining us online, and thanks to Jörgen for inviting me to this beautiful place. I expected snow, a lot more snow. There is no snow. My name is Clayton. You know that. It is on the program. It is on the handy pin that I have. I actually feel quite a lot of jet lag today, so I am glad I got the pin, right? If I should seem to forget who I am at any point, just point to the pin and I will figure it out.
The most recent family member, we have been here under five months, about four and a half months, and so it has put me in a good position. I am going to tell you about KIXEYE, where we come from, what we have done, but also what we are doing now and what it is like to be in the family.
I realized too, and I didn't talk about this, so I hope it's not wrong. I've been involved in an acquisition to a large gaming company in the past that was different than this. I have the experience of being on a team acquired in a much different way versus the Stillfront model where we get to be autonomous. Of course, I fit the model entrepreneur. Been at this probably 30 years of my career in total. A little over a third of that's in gaming. Here we go, introducing KIXEYE. Founded in 2007. That's a theme. Some brilliant folks in San Francisco, that I've known a long time, one close to 20 years. The opportunity was there to bring more intense games, mid-core games into the free-to-play market. It didn't really exist much at that time. They were much gentler games, more casual games.
They weren't combat games. We were able to bring that to the market and have an early mover advantage, which obviously is always helpful to everybody. Along the way, created a lot of the monetization mechanics that are now standard, the things that make free-to-play work, certainly in the mid-core. Again, we were there early and fortunate to be working with the people that were able to innovate and in some cases invent these mechanics, and it's done well for us. Along the way, of course, live ops is what we talk about all the time. It's a pillar. You hear it all over again in everybody's talks. It's the same with us. We've been able to get huge retention from people that we haven't advertised or bought users in some of these games for a very long time. We keep the content fresh.
We are a little bit different with our games than some of the family members. There's a little more focus on combat and there's real-time combat, so it's still got the strategy elements, but we figured out that if you have a bunch of people competing and battling each other and forming alliances, we figured out early on how to get the balance back and forth, how to keep that content coming that keeps it interesting and fresh. Like I say, we were fortunate to get to pioneer some of that stuff. So far, just under a billion, $850 million US bookings so far. I am Canadian. I should have put it in Canadian because that would sound much better. CAD 1.1 billion sounds better than $850 million, but of course, SEK is the best. That's like north of SEK 8 billion. So we've done north of SEK 8 billion.
Didn't think I'd ever get to say that. Today, we're no longer in San Francisco. We do have an office in Portland, Oregon, which is in the U.S., of course. 150 of us, headquartered in Victoria. We have four live games, and I'll talk about each one and give you a little more information. Now that we're here, we're poised with growth with these existing games because of the opportunities that we have in front of us, and I'll get into that and what that means. Of course, game studios make new games, so we'll also be developing new games. The first one we'll talk about, the earliest one, 2011 was when Battle Pirates came out, and it's a combat-based game, dystopian pirate future.
You are running out of land, so you have got to build your base, and you have got to go and attack your friends and fight over what is left. It has exceptionally high average spend across all players. It is an old game, and it has been incredibly valuable as an asset. It has still got very high LTV across all installs, and it even continues with new people, even though it is a 2011 game, new people that come in convert and show us really good metrics as they come in organically as well.
It is the highest profit margin that we have, too. This is always a fun thing. Highest grossing game per user in the history of Facebook gaming. Over $400 million, so billions of SEK in this beautiful old game, which is still going strong. Followed on fast next year with War Commander, same sort of theme, but not a dystopian pirate future.
Instead, good old-fashioned combat with tanks and planes and all sorts of things. It has got some interesting components about the user base. The average active player has played for about four years. That is across the entire player base on average. The average active spender, which thankfully is a large portion of the players, has played for almost six years. As Phillip was talking about, these are hobbies. People buy in, you do the live ops, you keep the content fresh, listen to your players, give them what they want, they stick around for a very long time. So we have that kind of tenure, where we have got on average 6 years for a spender in this game, and it is very consistent year on year with the profit it delivers. Then we went to Vega Conflict. We went to space. Why not take the thing to space?
We took it to space. Same sort of thing. However, we launched it as a web game, but we saw the opportunity to put this on mobile and make it a cross-platform game and prove to ourselves that the formula that we use on the web games could be just as powerful on mobile. So it does go all the way back to 2013, when we ported it over and started putting it on mobile not too long after. It is cross-platform today. You can play it on kixeye.com, Facebook, Steam, your mobile phone, Apple or Android, and you are playing the same game. So you can pick up the game anywhere you want to. Space is a little bit harder than war and pirates, but once people get in, they again tend to retain very well. We do the same live ops strategies. We keep the people interested.
It has exceptional feedback from the customers. The ratings from the customers have been very consistently high. Last but not least of the live games, Rogue Assault, the first pure play mobile title that we did. End of 2016 is when we launched it. Again, we are somewhat differentiated in that we have live combat in our games. Not all strategy games do. Some certainly do, but it is not that common. This one features some real best in breed. Please play it, and you will find out. I do not have to talk about it, right? It is best of breed in its combat and its graphics. A lot of players do report back to us they just cannot find something else like this, so they stick with this game. One of those people being Jörgen.
Yeah.
Yeah. Thankfully, it is our highest revenue per spender in the portfolio. This is particularly interesting because we knew we need to shift to mobile. The mobile market is much, much bigger than the desktop market. Well, it turns out that we monetize better in the bigger market. The formula kind of keeps getting better and better, from web to hybrid cross-platform, and now to pure play web, and the monetization, it is the highest in the portfolio. The users like it, 4.5 stars on average across the main platforms. We also have the web portal, kixeye.com. I mention this because it comes up again later. We launched this in 2013, haven't really done anything with it since. We have never driven any traffic to it. We have never marketed it.
We designed it and built it originally to put other games on it, that we would be like so many others, we would be a portal for game play. We never executed that strategy. We are too busy building the games. We did put Battle Pirates and War Commander on it, and it represents 20% of the revenue of both those games. Of course, we do not pay any platform fees.
That is why we do not give 30% to Facebook. That is why we built it. It is a dandy little profit center. It today has about 200,000 monthly users in 187 countries, which I do not know how many countries there are, but there are not that many more than 187. Most of them come from what we call tier one, U.S.A., Canada, U.K., and Australia, and I looked it up and added up all the European nations. It is only about 10%.
That seems to portend opportunity with our partners in Europe that we can learn how to get games in front of Europeans. This tells a tale, too. The average session time of all the people that play are on the site for an one hour and 22 minutes at a time. They come, it is sticky. It is a valuable property for us in a lot of ways. Now looking ahead. Reignite new user acquisition. We do user acquisition in the newest game, in Rogue Assault, and we have done for a while. But the other games have not received UA for years. We have done the content work and keep everything fresh in the live ops, but we have not put resources towards continuing to do user acquisition up till now. Well, now we are going to, because now we have the ability to do it.
There is also a focus on distribution because we are part of a family now. We are able to do distribution, much like we can distribute other things for family members, other family members can distribute things for us. I have an example I will talk about a little bit later. Battle Pirates and War Commander, the original games from 2011 and 2012, they are Flash games, so Flash is purportedly dying once again, so we have got to put it on HTML5.
Battle Pirates is already out in a closed beta, and we have a tendency, we care very much and nurture our user base, so we will put things to a private user base for a while. Battle Pirates is already out. It will go completely global. The users have an opportunity for a while. If they do not like it, if they have a problem, they can go back to the Flash client.
We phase it in. War Commander's following. We're finding out, too, on the HTML5 that the performance is considerably better. This is a very large, very complicated old game. Could I have predicted that the performance would be better after we did this conversion? No. I said that it would because I have to say that when I'm going to spend millions of SEK and convert to HTML5, but it actually worked out. Of course, looking ahead, new games. I'm always talking about new games. Performance marketing. Of course, we're partnering with Goodgame Studios for our UA going forward. We've been doing War Commander: Rogue Assault marketing through them for a while, and we've just started Vega Conflict as well. What's great is, again, the entrepreneurial spirit.
I don't have to use Goodgame because they're part of the family, and I suppose if the performance wasn't there, sorry, I wouldn't. I would go with something else. But the performance is excellent, far better than we've ever been able to achieve on our own. So we pick you not because we have to, but because it really works well, which is a wonderful thing. As I say, we're flashing up other games through different distribution and acquisition channels. We'll see how Vega Conflict does. Its metrics for organic users are very strong, so we believe that putting some UA behind us, we'll just take this older game and grow it again. I can say now with clarity, all future performance marketing is going to leverage the partnership with Goodgame, because again, the numbers are fantastic. They really are.
I guess we weren't very good at it ourselves, or I don't know. We were, but these guys are amazing. Distribution, I call this massive distribution. Again, partnered with Babil in the MENA region. Take War Commander: Rogue Assault, culturalize it. It's not just translating it's a lot more than that. It's putting the cultural elements that are attractive to the Arabic nations, and we'll be releasing this imminently. So this one's particularly interesting because would I have taken War Commander: Rogue Assault and tried to distribute it with a partner in the Middle East? Well, number 1, I don't know anyone in the Middle East. So that's okay. I am a businessman, I could solve that problem. I could go and meet somebody in the Middle East. Well, if I did that, would there be a complex and difficult negotiation? Absolutely there would.
By being partners in the family, brothers, in fact, AJ, we don't have a lot of negotiation. It's like, here's the money comes out of here, the money goes in here, let's get this thing done, let's get to work, and the money all stays in the family. So that is amazingly significant to me, like I'm not negotiating with external partners. Similar to what you said about not having to guess because you can call on other metrics. Not having to negotiate except just partner and work for the same company has allowed us to turn this around very quickly, and I'm looking very forward to it. I can't pronounce any of it, but AJ can. Thank you. Again, Goodgame will do the UA. So we have a tri-partnership here. We've started to leverage kixeye.com as well.
As I said, it was originally built to have third-party games on it. As soon as we joined the family, Imperia said, "Hey, let's put Imperia Online there." We did that. In terms of effort, took a matter of days. It was very low cost to put games on KIXEYE.com. The operating cost, we have got it down to nothing. We have been running this thing since 2013. I envision a future where there are a lot of tiles. There are a lot of basically every Stillfront web game. The relevant outcome that I would want to see driven out of that is that when you want to try a new game, you are here playing War Commander on KIXEYE.com, you should try another Stillfront game. We retain users exceptionally well in this business, obviously, but users do still churn now and again.
If somebody is leaving after years of War Commander or something upset them, I would want them to go to another Stillfront game, of course. This is an opportunity for us to have some network effect around that. Of course, new games. I am very confident that we will be successful in building the next title and titles because we have done it before, and we have maintained these games for a long time. They are profitable.
They have made a ton of money. What I could be confident about before joining the family is just an order of magnitude more confidence because I have all the other support. I am not distracted by figuring out distribution opportunities. I am not distracted with UA. We can just get to building the game. Although so far they do not tell me what to do, they keep saying they do not tell me what to do.
Five months in, it is true, they do not tell me what to do. That does not mean I cannot ask. Could you play through this? Could you look at this art? What is your opinion? Again, this is an entrepreneur's dream because I can just get all these opinions that are unvarnished. They are in partnership, right? I do not have to worry about whether I trust the source. We all work for the same company. The model fits KIXEYE incredibly well, and we are going to do everything to make sure KIXEYE fits the model incredibly well, too. Again, that is my name. Thank you.
Fantastic. We know your name now.
Yes, Clayton, if anybody missed it.
When you decided to go for Stillfront, what were your other options?
Well-
Or why did you want to go somewhere at all?
I think that the opportunity to join the Stillfront family was a pretty specialized opportunity for where we were at. We could've continued to go it alone. That was probably more an option than looking for an acquisition necessarily. But this was a particularly special acquisition, like it was such a fit. I think the other option would have just been to stay independent, frankly.
What won you over, that was such a fit. Or what won you over? What other options did you have and-
Well, there is always a lot of things circulating around the M&A sphere, but there is not anything that is going to come along that is going to go, "Hey, how about we take what you are doing and pour kerosene on it and do all these things that I just mentioned? Right? It was a pretty unique opportunity, and Jörgen is such a nice fellow. Those two things.
You have described now how you have used the other companies in the group. How they have helped you. You also mentioned that you did live ops yourself before.
That is right.
Practically, how does that work when you use other? Is it you take one idea at a time, or has it been a big change or?
Well, the live ops component of what we do is very much inside of KIXEYE, so we do have our own way of doing live ops. Now, of course, we have talked to every other studio in the family, and it is like, "Oh, you have tried that. I have never tried that." So we are able to augment it.
It's a bit of tweaking.
Yeah, I'm able to get an opportunity to see what we're not doing. Of course, we're able to see what the numbers are, because we were always data-driven before joining, and this whole family is data-driven. When we find another studio that's got something in their content cadence that's getting better retention or better revenue, it's like, "Hey, come and talk to me.
Any questions? Yes, Oskar.
Thank you. Yeah. So a question on War Commander: Rogue Assault. The previous game was cross-platform, available on all platforms.
Yeah.
Why did you make Rogue Assault pure mobile?
The main reason for that is the obvious market dynamic of the mobile market showing up, eclipsing the desktop market. Vega Conflict might not have been cross-platform, except it started as a web game, so we had the technology to do it across both. Now, over time, the people that play Vega Conflict on the web has dropped precipitously, to the point that we actually turned it off for a while. Pure play mobile made sense because the mobile market is the future. It is where everybody is playing, and it is so much bigger. I believe that the web market is a declining market, certainly relative to mobile.
Yeah. Can you tell us a bit about the status of War Commander: Rogue Assault now? Is it ready to really push marketing going into December and the important months?
Very much a discussion on the table right now. Yes. Yeah, for sure. We do intend to push it.
What are the strengths of the title and IP?
Well, the strengths, like I say, is a differentiated combat. Largely, it is a retention game. Live ops can keep you in, but you have got to be pulled in to start with. You need those moments. Often in consumer web as well as gaming, they call them Christmas tree moments, that sort of frontal lobe moment. One of the great strengths is as soon as you get in there and assemble your units and you go out and attack somebody, you get that moment. The explosions are special. That is one of the key strengths.
Okay, sounds good. Thank you.
Any other? Yes, Jon.
How much did it cost you to develop these games that have been successful for you, in dollars or SEK? How much does it cost to keep them up?
They cost a lot to develop. I am under strict orders to not speak numbers that I do not know I can speak about with you fine people, so they cost a lot. They varied as well, because we have had studios in different cost centers. We are in Saigon now. We used to be in the U.S. so the numbers would not line up to what the cost to do it again would be. As far as maintaining them, they have got great profit margins. So keeping them alive, we have been doing this a long time, so we have got it down to a science. The operational footprint is thankfully considerably less, excuse me, than the revenue.
When you have done it a couple of times, when you do a new game now, does it cost less than before?
Absolutely. Absolutely, because we can reuse things like technology stack as well as all the knowledge that we have. It does get easier.
Becoming a part of the Stillfront family, has that altered your way of deciding how much to invest in new games, et cetera?
Yes.
Do you need to show another payback profile or something like that?
Yeah. Well, part of the magic is the simple fact of being able to look at the collective experience of everybody else. Rather than going it alone and having to make all these decisions yourself without any other valid source of data, I can see whether or not my assumptions are correct based on the experience of everybody else. So it does have that impact. It certainly lets me know that my thinking is not in line because here's how others have done it. It's very useful that way.
I just want to ask about outsourcing localization. Is that all kept within the family, or do you sometimes go outside family members for that kind of work?
Currently, we localize to a lot of languages, and currently, we do use external partners for a lot of it.
That tends to be local studios and local players in different markets, or.
Well, we use just some off-the-shelf translation companies that we upload the strings to, and they bring them down. It's a process we haven't looked into changing yet. It's not a very expensive process.
Hi. Lars-Ola Hellström from Pareto Securities. Two questions. First, on games development, what is the lead time for a new game, and what is the lead time for a sequel, typically? The second question is, we are early into the synergies of Live Ops, but what kind of feeling do you have that how much will you be able to improve Live Ops? How much is there to be extracted? I guess Goodgame and the other studios will be able to gain from you as well in terms of Live Ops. Can you give some flavor on that?
So the first question, lead time for a game. It is very difficult to predict, depends on the game. We would like to be inside of a year for the next title. But you have got to take it out to test market and make sure it is successful, so it can vary quite wildly. As far as sequels, we have never done a sequel. Even though War Commander: Rogue Assault technically is a prequel to War Commander in the storyline, they are completely different technologies, different games, like top to bottom. So I have no idea about a sequel. I do know that building new IP, if I am using the technology stack existing from one of our games, that can shorten development time by far more than 50%. So maybe that is like the sequel question.
As far as if I was a modest on the live ops question, I would say that a lot of the studios in the family are going to learn more from us than we are from them, in terms of live ops. But I am not a modest, so I am not going to say that. It is early on. It is hard to say. I have already learned a lot of tips and tricks from some folks, and we have been able to share some stuff that has raised some eyebrows for others. They are like, "Oh, that is cool." So, so far it seems to be pretty symbiotic.
That will develop over time, too. Because we also, we are running the business, semi-autonomous game studio. I have got to run the business. So we cannot just stop everything and like, what are all the things we can do with our new friends?
We have got to take them one at a time. So I think a lot of that, if you ask me in a year, I will have a valid answer.
Okay. Thank you.
Very good. Any more questions? No. Let's move on. Thank you very much, Clayton.
Thank you.
AJ, you've been in the shadows for too long. Come on up.
Yeah.
So, Jörgen as well, please. We're going to discuss a bit about how Stillfront accelerates synergies.
Of course.
But you are AJ from Babil, one of the Co-Founders with your brother. Please tell us a bit about yourself.
Of course. First of all, if you saw me twitching my left eye, it's okay. It's because of the light, not because I'm wearing curtain shirt and I'm crazy. Okay? Let's make sure. Hello, everyone, here and online. I'm AJ Fahmi. I'm Co-Founder of Babil Games with my business genius brother, MJ. We started seven, eight years ago, and we joined Stillfront in 2016. We are a proven success story. Yeah. Hello, everyone.
Hello. Tell us a bit, how has that time been? It's three years, approximately.
Okay, well, we are businessmen at our core. We are publishers and it has been a great journey, to be honest. We would not have went in another company in the way we understand business because we were making profit. We were happy. Well, we did not want anyone else to give us orders. We are not order takers. We are entrepreneurs ourselves. We made up the most successful publishing company in, sorry, in Middle East, MENA, and North Africa. What we wanted was to go to the next level. We wanted to expand more. We wanted to take some knowledge that is not available in our region because there are not much of development and publishing in our region, and we wanted that help, where we are still independent, and can have help from others.
I think we did well, and we excelled and did a lot of good stuff with them.
We saw those fantastic figures. It was almost going downwards, and then Nida Harb came, Stillfront came, and everything went upwards.
Exactly. Yeah.
How much is it your Because of you, Jörgen.
It is obvious that the knowledge that Babil Games and AJ and MJ provided about the market is absolutely unique. That was also what we searched for because it is a fantastic market, which is very hard to try to address if you are not having the very specific knowledge of the cultural differences and how you market. There are special channels and everything. For us, that was super relevant and super interesting.
We did not expect everything to change overnight because then I think you will get disappointed in every opportunity. I am happy to see that we managed the first month where we tried out, I remember very clearly when we had this strategy meeting and figured out to prioritize certain types of games, and that was the beginning of the Nida Harb 3 super success that you guys have delivered. It is them doing the work, but we have jointly explored it to the maximum or-
Yeah
to a large success, I think.
To add to the story, when Nida Harb 3 came, we know that this is different. We found some different KPIs, and we need a push. We were on a level that, okay, we need somebody who has more experience in that because we want to conquer this time. We do not just want to get into similar segmentation. We had two kind of help. First was from GGS, from Goodgame Studios, in matter of marketing and their knowledge, analytics, whatever. The second was from Stillfront. We did not have that amount of cash to wait for, to spend and wait then ROI of 180 or 240, whatever that. But we know we had something special. We had a jewel, and we should invest in that jewel, and that what happened. The synergy, everybody understood. We gave them the confidence that this is different.
Stillfront helped with the cash. Goodgame Studios helped with the marketing knowledge, and it led to a huge success. At the moment, our competitors is not even from the region. We already surpassed that. Our competitors are Tencent, Supercell. We are the top five grossing in our region. This is what we want to be. If you talk about success of Babil, we are even like, I am not very good at English, please. We are more aggressive. No, it is not the word. Ambitious? Yes. We do not feel yet we reached the success that we want to reach, not even scratched the surface. We are more ambitious than this.
More ambitious than this.
Yes.
What you have brought into Stillfront is Nida Harb 3, of course. It is a big success, and it is also the knowledge about the region. But you are also a center of excellence for the rest of the group.
Correct.
Can you talk a bit about that?
Yeah. While we were doing all of the marketing and stuff for that with Goodgame Studios, the marketing is ever-demanding. It needs analytics, it needs knowledge, it needs tools, it needs knowing what is changing within everything, within your game and stuff. One of the things to tackle this problem was creatives. We needed as much as creatives to follow up with this amount of money we are spending as well. We want to tackle every angle.
We have figured out ways to bring super high quality, as one of my colleagues described it, like Disney, kind of like, not in matter of cartoonish, but in matter of the quality itself. We reached that level with a very short time. We are using different technologies with some great talented people from MENA region, and we are doing it within a week, where others, when you go outsourcing, it takes about a month to do the same video. We are doing this video per weeks, and now we are excelling as well. We are doing 2 and 3 videos per week.
For example, you are doing 3D video ads.
Exactly. It is, in other words, we are doing the marketing video creatives that we need in matter of movies, 30 seconds, 25 seconds, GIFs, creatives, all whatever needed and necessary when you guys go online within Snapchat or whatever, or Instagram, and you see others are giving you advertisement. I was going also to say that we're doing this great job. It has two parts of it, for this job. The first part of that is that we have brought more revenue, because when you have better ROI and KPIs in your marketing, this will lead, of course, I guess most of you know. The one that doesn't know better CPIs or CPLs, that's a less cost we pay to get an install, and then we get better, all of the store is better, and the revenues at the end of the way.
This is as a part. The second part, which I come to answer you, is the part where we are started to be a center of excellence. We are helping other people within the group to have some of those good videos that tend to give them better results in the market as well, with fraction the price and with this high quality.
I would like to emphasize that because when, as Babil joined, you saw the jewel opportunity with Nida Harb 3. You then work with a third-party marketeer, different one, which was one of most well-established at that point globally. It was a natural and good pick, I would say. Then I just said that talk to the Goodgame guys because I think they are quite strong at UA. Since MJ and AJ are businessmen, they said cautiously, "Let's look into some facts." After two months, you came back and said, "I think we switch." They saved the money to pay for the other services, but even more importantly, it was a superior performance on the marketing that Goodgame provided to take this game to a completely new level.
I was a bit scared, however, when AJ picked up the phone and called me and said that, "Could you please send more money?" That's usually not what the call that you would like to have from a studio, but it was for a very good reason. I said, "Show me the data," and he showed the data, and we saw that the return on marketing spend is probably the best I've seen for any game so far.
Yeah
it is just to make it even better the next.
True. There is something else we did not mention, that money is still in the family. My cost is some subsidiary's revenue. It is flat, it is zero. Nothing has changed to my own shares as well, not as yours, but you know. Yeah. Cool. I think it is cool, right?
It is super cool.
It is so cool. It is like zero. It is cost zero, it is revenue, nothing happened. We still have the money-
Yeah, that's great.
We're doing better things.
I think you're describing in a very good way what has been described here earlier today.
I move my hands a lot, yeah.
the pull within. No, that's fine. But the pull within the group, not the pushing on stuff to you, but you see what others do, and you want to do it yourself.
Yeah, exactly.
Is there something in this that has been negative?
I don't know, maybe the
I know. When you have to go to Stockholm and it's so cold for you.
Exactly. Something like this maybe, yeah. But no, not to my knowledge.
And dark.
I don't guess. Yep.
Thank you very much, AJ.
You are welcome.
Thank you again.
Thank you. Okay.
Andreas, the audience is eager to hear your last 15 minutes. Please.
Well, I think Oskar actually told me that that's the thing a CFO should not say. This is what you've all been waiting for. I will not say that, and I hadn't planned to say that. Before we move into the Q&A and the panel discussion, I am here to provide a financial overview of Stillfront Group for the last two years since we last set our financial targets, which was in December 2017, as part of the Goodgame Studios acquisition. I'm Andreas Uddman. I joined only six months ago. Prior to this, just to give a short introduction, I spent eight years in the Kinnevik group building companies, two of them. The last one was a fintech company. I like to build stuff. That's my background. This presentation has two components.
The first one is just to give you the historical review of the momentum we had, and the second part, I will touch upon our financial targets going forward. I think the how of that, I think my colleagues have presented extremely well. You've seen Live Ops, et cetera. I will just look at it from a financial performance perspective. We have grown our revenues from SEK 1.1 billion to almost SEK 1.8 billion during this period. We're showing this graph rolling 12 months, because I think that actually is the best way of describing our business. It takes away the seasonality effect, and it also shows the evolvement of the business and the evolution. That's why we show these, and we've shown this before, so many of you have seen them. This is a 60% revenue growth during the last seven quarters.
This has been achieved through a few things. We've talked about Nida Harb, which has been a massive success. Phillip talked about Big Farm: Mobile Harvest, also very massive success that we had. We also have another component, which is our medium-sized games. Actually, they made up year on year in Q3. They contributed 13% of the total growth of the group was due to these games. These games are the same as an Empire, and they contributed also to 15% of the total revenue of the group. I think this is a very important number to remember because that also provides a de-risk, and we have more diversification in our revenue streams. We also had some acquired growth.
We had Imperia Online joining us October last year, Playa, December 1st, and then we have KIXEYE, and they contributed to the SEK 246 million in the last 12 months as well. We managed to have this growth by also increasing our EBIT margins. It has improved during the period with 11 percentage points. We have gone from SEK 250 million to SEK 600 million in EBIT. This has been driven, we talked about it before as well, and Phillip has talked about it. I think Alexis talked about it. It is three things: efficient and capital-efficient user acquisition spend, Live Ops, but also our cost-efficient platform. Third key area we look at is obviously our balance sheet. We managed to keep our leverage on a very conservative level for the whole period, even if we in the last 12 months have made cash acquisitions and earn-outs of SEK 1.2 billion.
That was looking back just to give you a sense where we stand. Since my next section of this is the new financial targets, these are the old financial targets. Just to reiterate, we in the last 12 months grew organically with 24%, and then we had acquired growth on top of that. Our EBIT margin here has increased nine percentage points. This is the old definition, how we defined when we set these targets. That is why it differs a bit from the previous slide. We have kept our leverage ratio at a very good level, and we are ending up at 0.9. We did not distribute any dividends, but we acquired three companies during this period. I know I am last, and it is getting late, so I hope you are still watching, and that you can continue to watch for a bit longer.
Going forward, looking at the financial targets for the next three years, 2020 - 2022. Jörgen has touched upon these. I will give a bit of a brief overview and then go down in some of the key drivers post this. SEK 4 billion of net revenues in total revenues, both organic and acquired revenues, by 2022. I think for us, this is a key value. It drives shareholder value, and it also helps us drive consolidation in this business, which my colleagues have also touched upon in much more detail. We improve. In full year 2018, we had an EBIT margin of 30%. We are seeing that over time we will get that to 35%. We reiterate our leverage target. We believe that it is a very good and conservative target to have in this business. We do believe also leverage is a way to increase shareholder value.
We believe this is very conservative, and when we look at leverage, which I will go more in detail to, we also not just look total, but maturities, et cetera. I think I jump in to the most crowded slide, but I think this is very important from our revenue growth, but also from our profitability. This is about user acquisition and Live Ops. Firstly, from a macro level, which is the top left slides here. I think we will touch upon in a few questions, the 180 days, that is a hard target that we look at from a portfolio perspective, but that is a choice. We choose to get our money back within 180 days because we believe that is capital efficient. We can deploy those resources into other areas, more marketing, Live Ops, product development. But that is a choice.
Also doing marketing at scale, in the last 12 months, we spent 365 million SEK. That is very difficult. Doing marketing and scaling marketing at a small level, that is easier. This kind of capital that you deploy is actually difficult to get that kind of return. Over the period, we have also managed to get our marketing spend down 9 percentage points over net revenues. To go into a bit of detail, with that said, if you look at the cohort analysis, which is the slide here to the bottom left, that is basically looking at the return. When do we get the return on our marketing back? When we say the return on marketing, that is cash back. If we look at these, Q4 2018 and Q1 2019 has been some of our best-performing quarters for several years.
The Q4 cohort, we returned the money back within 3.8 months. The Q1 cohort, it was 3.9 months. In Q1 2019, we spent 108 million SEK, which basically means that we got the money back roughly to where we released our Q2 report. Those are very impressive numbers. You can see we consistently perform, not just in these extremely strong, but consistently return our money back within 180 days across the portfolio, across the games. This creates, obviously, capital efficiency. We also know when we talked about our predictive models, we have 600 players in our database. What that makes it also gives us a certainty that when we deploy marketing, we know we will get the money back. We constantly A/B test. We constantly grind this, as Phillip was describing.
This is a very strong engine that we can use for new games, for existing games, et cetera. That for me is sort of the marketing. The next part, Live-ops. We talked about Live-ops, and I think I got a lot of questions about Live-ops. For me, Live-ops is quite simple. It is about money. I think the slide up to the left actually demonstrate what that is. It is about financial performance of what we can see in Live-ops. This is the average revenue per monthly paying user. As you can see, it has gone up with 21% from 664 SEK to 800 SEK in the last quarter. This is exactly the sort of content, the grind, and finding new ways of getting your users to pay that Phillip described and also Clayton described. This is also something that is a very important tool here.
I think one of the things as well to keep in mind that in both of these, both with marketing but also with Live-ops, we are quite certain in the terms of our models. We will see fluctuations over quarters. We had a 37% in Q4. We went down to 31% in Q1 2019, and we will continue to see those fluctuations, both in terms of marketing spend but also in terms of Live-ops. Because the great things about Live-ops versus product development is that tends to be the same resources. It is a developer that can build content in Live-ops, but it can also build content for new games. If your Live-ops tends to be more allocated to your P&L.
We will see more fluctuations, which we've also seen in the past, but that's something we will see in the future as well because we have certainty that these models work. Last target, in terms of our leverage ratio. To be able to continue our acquisition strategy, which is a clear part of our DNA, leverage has been a good way of doing that. Our leverage targets are built on three key pillars. The first one is our operative cash flow. Our operative cash flow has increased with 64% to SEK 386 million. Yes, we do spend in new product development as well, as you can see, but we do actually have cash over. That is something that will help us both drive down our leverage, but also gives us a certainty that we operate in a sort of cash flow positive way.
The second one, the pillar here, is EBITDA growth. We do have a strong business. We have growth. When we acquire companies, we acquire healthy companies, profitable companies, and that of course helps with that, but we also have that organically in the group. That is a very key pillar when we look at M&A targets, but also in terms of having these profitability targets. It assists us in this matrix as well. The last one is actually our deal structures, and Marina talked about it, and Alexis, but we have obviously positive things about incentivizing entrepreneurs to join the family by being paid by shares and equity. That's one part. But from a financial risk perspective, it provides us also deleveraging capacity. We tend to pay with cash and equity, as I mentioned, and we tend to have earn-outs.
That gives us also a way of structuring our balance sheet and our financial risk and costs in a very efficient way. Therefore, we think the 1.8 is a total, but when we look at it, we look at the maturity profiles and the financial risk components. It's not just about the total amount. That's how we will steer this. Have steered it, and will steer it going forward as well. With that said, Stillfront has developed a, I would say, unique financial model. We talked a lot about the business model, but a financial model. High growth coupled with high profitability, that's very difficult to achieve, but also something that you can predict. That obviously makes my life a lot easier when we talk about the debt financing, et cetera. But we have also created a financing model, what I talked about at M&A.
That's something that we can execute, continue to build shareholder value. With those things said, we believe that we have really the engine to drive this growth in a profitable way going forward. I think that was mine.
Thank you. We need some help here, please, Jörgen. Fantastic. What a nice company we built.
Thank you. We just started.
You just started. Oh, that was it. I am a bit curious about these financial targets, exactly how you reach them. SEK 4 billion in 2022, 3x in five years. How did the discussion go?
Well, as I started this Capital Markets Day with, we think and believe that there is a unique opportunity now because of the changes and the dynamics of this great industry to create fantastic value. We think that part of that is to create a significant size, because we can draw many benefits from that. We have prepared ourselves not only this year, we have been running a project this year from February to prepare for this Stillfront 3.0, as we call the program, to get the bits and pieces in place, but we have prepared the models for since the company inception and refined them. I think that we are in a good shape, but it is basically coming back to our view on how we create substantial value that will stay there and develop over a long time, basically.
That is why we derived to this kind of 3x and SEK 4 billion by 2022 is our prime target, of course, with strong profitability, because we have that inbuilt in the way that we view our business and the way that we operate our business.
You actually said that before as well, that size will matter even more. Can you elaborate on why size is so important?
How long time do we have? How many hours do we have? I think that there are many reasons for that. But one, just taking it from how we operate our business, we have seen that we are able to scale our business positively, and then, of course, it will be a waste of value if we are not trying to scale it up and use the models that we have been built. If we do not use the platform that Stillfront is today, then we would not make the best out of what we have done so far. I think that is one of the drivers.
Then I think also when this industry at some point gets more and more consolidated, then I think you will have, for several semi-operational or tactical reasons, an advantage of having a certain size when it comes to buying, marketing, basically to conduct performance marketing and a lot of other things. It is for several reasons, but that captures, I think, the main of them.
I think if I can just add a complement to that as well, we have grown in terms of revenues in the past, but we also grown in terms of games. So continuing to grow with more games, we also actually create a less risky sort of revenue stream structure. So it actually helps de-risk or take down our financial risk in our model. We see that in the last quarter, we had the biggest game was 14%, and that, I think, was the lowest we ever had. That is actually a very critical component in terms of you build scale, you also build diversity.
As we allocate capital for both development, as Andreas pointed out, as well as marketing, of course, there is everything else the same. If we have a portfolio of 50 games or 100 games, if we allocate to the top 10%, those games will be better performing than if we only had 10 to choose from. The average will be like that. So if we have a wider portfolio, our very efficient capital allocation will yield a stronger total leverage, basically, financially wise.
Also since we have long life cycle games, the evergreen games, as Phillip described a lot about, since they are not declining so fast, if we will have games that were very short in life cycle, of course, if we only focus on the top 10 that we can scale the most efficiently, of course, we will have a faster decline in the part that we are not attending to so much. So I think that, again, this is a platform. This is a model. We have seen that through the refinements that were done, it works quite nicely, but we should take it to a completely new level.
When taking it to that new level, the last goal you had was linked to market growth. Now you are not saying anything about market growth. Is there an optimal balance between how much you would like to acquire and how much you want to grow organically?
It's not really, because as we are very disciplined and say that we should scale the game as long as we get the money back net in 180 days. In some way, you can say the more we can spend the UA, the better it is, and grow organically by that. But we also see that as Marina and Alexis elaborated on, we have a fantastic interesting pipeline. We think it would be to destroy potential value not to grasp those opportunities, especially as I would say all studios that come into the family have performed better in the family compared to what they did on their own. And we had only invested in companies that are healthy. We haven't gone into any distressed situation. So why choose if you can do both?
Are you willing to share your view on market growth, and will you grow more or less than the market?
Of course, just because we are emphasizing the total growth for the reason that I said, it's not suggesting, or we're not saying that we expect to grow slower than the market. Then, of course, growing at the pace that we have been able to do the last years between 15 up to 30% organically, which is equal to 3x the market, that, of course, is not likely we can do forever. So I think that it's more likely that we continue to grow organically like the market. Of course, when we compare to our own numbers, if we had a record quarter to compare it to, of course, that would differ. But the message is not that we don't foresee at least market organic growth, and we have been higher than that.
It's just that we would like to emphasize total size and total growth is the number one priority for us.
And if you look upon the market growth out there, do you see a healthy market that is growing as before, or do you see it slowing, or what does it look like for the others?
If you look at the ones that, Newzoo and others that look at the market in January, you can see it's expected to continue to grow at good numbers. Then, of course, how you slice the market will make it look a bit different. But I would expect that the games market for very fundamental reasons, and that is why we love this industry so much because as was in the initial big picture movie we have in the beginning of the capital markets day, there are so fundamental drivers to our growth. Digitalization, but also the fact that productivity goes up in most of the world, providing more spare time to our core audience, which is people that have work and so on. You will spend more time and money on entertainment, and we are very well-positioned.
I think that is some of the absolute core drivers, and they will be there for some time, and the last but not least, demographics as well. The average age is older than most expect, but still quite young, 34 years, and we become older and older. I think that there is a lot suggesting that the organic growth in this industry will be around for quite some time, so we're not so concerned about that.
Okay. So you have a growth target, and you have a profitability target. How will you prioritize, and which will be hardest to reach?
When we set up targets, we intend to reach both or all three of them. I think what is important to emphasize is that we will see the fluctuation that Andreas elaborated on, because that is mirroring our strengths in terms of EBIT. Because as we are very disciplined, we will deploy marketing money if we have two Nida Harb at the same time. Of course, the first and second quarter, that will be lowering our short-term margin. We play a long-term game and we will continue to play a long-term game. We will also, as also pointed out by Andreas, is that when we move resources between live ops and investing and building new games, that has a short-term effect on the P&L because we are not capitalizing live ops.
If you would call that a difficulty, yes, then it will fluctuate, at least in the short term. It could be on margins. If it does that, we think it is a good thing for the long term because it is creating value. Whether that is more difficult or not, I do not know how to translate that, but I think it is really important for us to achieve this certain size. We are comfortable that our model and the way that we operate our business can deliver, it has delivered, and it can continue to deliver high margins, and we expect that 35% on average than the next coming years is absolutely achievable.
You talked about this genre expansion or genre expansion. Are you raising the risk profile in Stillfront through going venturing out?
That is a completely relevant question, and that is why this is so important that we choose to elaborate on genre expansion. It is really important to understand that we are not leaving our core strategies, which is the long lifecycle game that is in our focus. We are always and will always be completely data-driven. So we will not venture into things where the data suggests that this game does not provide the longevity we are seeking. We will not venture into things where we do not understand how the dynamics in the games, and we do not see how to conduct live ops and how to scale up. On the contrary, I think that there are, if not a blue ocean, it is not at least a red ocean at all in this mashup of genres.
I think we have an excellent position to make something extraordinary in that between casual and the home turf of ours of strategy games. I don't foresee that we increase the operational risk.
Oskar has a question.
Thank you. Yeah, a few questions from me, if I may. First of all, about the absolute revenue target for me as well here. Is this primarily based on targets that you have already identified and that you expect to materialize in the coming years?
No, is the short answer. As I think was very clear from Marina, Alexis' session, and the great work that we conduct in the M&A processes, we have a tremendous strong pipeline. But if and when item 2, 5, or 9 actually happens, that's why we're not putting out timetables for acquisition. Then you tend to compromise with time, price, or quality, and we will never do that. But I'm sure we will, as we have done at every quarter, I would say, we find really strong companies that fits perfectly into what we search for that we really didn't know about earlier. I'm sure that we will meet companies that are either not on our top priority currently and/or that we don't even have on our long list. That is what I expect.
Great. Can you elaborate a bit on the margin improvement potential as well, where it is coming from? The gross margin has been quite stable at close to 75%, but it should perhaps decrease due to mobile games increasing and platform fees. Is it mainly from user acquisition costs getting lower and thus better live ops that is driving it?
I think that what we have seen, as Andreas clearly pointed out, is that we step by step have been able to improve our margins quite significantly. We have 30% full year, fiscal year 2018, and now we are up at rolling 12 months up to 34%. It will not be a walk in the park. There is no such thing as walks in the park. It will be hard work, as I also expressed with some color at the end of my presentation. It will be hard work. Of course it will be. I think we have the platform of how it scales positively with more products, how it scales positively with more studios, and the studios are there. We also have proven that our operational model, live ops, and user acquisition really contributes to improving margins.
Again, as Andreas said, 37, 31, 35, 34 is the last four quarters. Of course it will shift, but that is, again, mirroring how agile we are to consumer preferences and how our data show the performance of what we do. We will adjust at each and every time to optimize our long-term performance.
I just add to that as well, I think what the rest of the management, we are also in the beginning of some of our revenue synergies. Talk about the live ops for KIXEYE. We are constantly evolving this, so it is not. The shop did not just stop here. That would also add to that margin increase.
Great. One final question from me. About this going into adding more casual elements, what sort of KPIs are you focusing here to make sure you are not stepping away too much from your DNA? Is it monetization? Is it lifetime value? How do you think about that?
I think that will be a very long session. It is so many parameters we will look at, but it is basically not different. The parameters that are important, the KPIs that we will look at, does not differ so much. However, the values on these parameters could change with the dynamics of games that are slightly different. What has been extremely enlightening and encouraging for us is that we can see that on some of our core things like longevity, what you can see, for instance, if you have casual elements, again, it is a mash-up, but with casual elements, you can find traffic at a lower cost per unit, whereas the lifetime value could be on par with some of our good performing strategy games. That is, of course, fantastic if you can find that.
As always, there will be high-performing products that are mash-ups, or mixes of genres, and there will be other products not so great performing. That is why we are working hard on evaluating and analyzing. So same set of KPIs, but the values that are good could differ.
Thank you.
Hi.
Hi.
Could you elaborate a little bit more on the platform fees going forward? Is this something you see as staying stable with scale? Can you get any scale advantages to improve that, or are you always going to be a victim to the suppliers?
I think there's two dimensions to answering that question. One is we can do a lot of things as, for instance, Clayton described that KIXEYE does actually lower or increase their gross margin. So there are things we can do. We have done progressive web apps from Bytro that is actually making a game performing just as it was a native app, but it's actually in the browser. So there are ways of taking your products to the mobile or in different channels, browser games on KIXEYE or similar, and to thereby change and lower what you pay in platform fees. That's one part of it. So we have a quite good, it could be even better, tools for improving that operationally and organically. The other question is 30% a sustainable level of platform fees?
That one can discuss for a very long time, but I think that over a longer period, if you watch over a longer period, you can never take more for a service than the value actually is with some margin. Our view is that the value of the platform is under some pressure. So that would suggest that at some point it will be pressure on the 30%. You also can see that already in if you have subscription revenues over 12 months, it's only 15%. You can see on Android that several of the large games are offering their Android games through their own access, not through the Google Play Store. So I think in general, the trend is not going for higher platform fees. It go for lowers. But then again, we know that all these changes take some time.
It's not through we are calculating that will happen until 2022. That is not the business case to say that we should increase margins. But over time, I think it's in favor for us.
Hi. Thinking about seasonality and, I suppose, the potential for external market shocks, how does it feel to be the only games company with a net debt position? Your capital structure is different to everybody else.
I think it's great.
Yeah. Why are they all wrong?
No, but I think this is a very good question. I think very few gaming companies have had the opportunity to work with leverage because their cash flows have been too weak and/or their profit levels have been too volatile, and then you can't go for debt financing. So they haven't had the real opportunity to work with leverage. That is what I believe. So I think they're not wrong. I think many of them, I know several companies that would have had and even tried to raise debt financing but haven't been successful. So I think the good reason is basically because it's good for shareholder value, so that is obvious, but it's very few gaming companies, I agree on that, but I think that that is a key explanation.
Nice answer. Please.
Yeah, just to follow up on Oskar's questions about the EBITDA margin. Considering that gross margins are likely to go lower, if you split it, would it be from more efficient user acquisitions or would the larger effect be from scaling on OpEx? Also, do you see on the 35% margin that there is some headroom that you might acquire something with lower margin as well?
I think it's a quite extensive answer potentially to the first one. I think it's a combination of things. Our basic business scales positively. It means that the fixed cost in our structure for, Alexis pointed out, it's better to grow not only with people, growing with tools and other things. So I think we have in our platform already proven that we can scale up our revenues without scaling up personnel costs or other costs in the same pace. So of course, it should be some effect. How much? Andreas has a better view on that than I think. But then also continue to do what we do successful already. It's not that we're trying to take a completely different route. I'm not sure that the gross margin is becoming lower over time. But that was on the topic that we just discussed.
But yeah, that's my view. I don't know if you would like to add something from the cost structure.
No, I think as well, we talked about the fluctuation. I think with our predictive models, for each month cohort that goes, you have more certainty. I think that is why we would also see that when we actually deploy marketing, if we see something working, we might actually deploy more than we were confident enough to do two years ago. That could also help to actually drive that return or that margin up.
Also on the margin, do you see that Live Ops as a generator of revenue will increase its share if you take the portfolio as it is right now on a like-like basis?
I think that we are really good at this, but it surprised me, to be honest. Looking back one and a half, two years, I did not expect so much of what is Live Ops and what we heard examples here from both, to some extent from Alexis, but also from Phillip, that knowledge is as transferable and valuable for the other studios. I think that we have just scratched the surface on that. I hope and think that we step by step will increase how much Live Ops we share between the different studios, which, of course, is a very profitable-oriented way of growing our revenue. I hope and think that, but it is very hard to say more precisely how that kicks in. I am sure we definitely do not feel that we have come to some kind of peak at all.
A final question from me. Marketing revenue, 2% of the revenue right now?
Marketing, advertising.
In-app advertising revenue.
No.
Where do you see it in 2022? It is 2% now. Can it be 5%, 6% then?
I think it will take some time because we are doing this very diligently, and Phillip is leading the work that he just displayed. I think as most thing we do, we do it with a long-term perspective. We are not just rushing into it because we figured out some elements that works for some of the games. We take it step by step. I think that for sure we could be definitely better in the sense that having higher portion of in-game advertising related revenues.
I think just to complement to that one as well, what Phillip mentioned, the marketing revenues we get, that is actually a complement. It is not from currently paying users. We are monetizing on existing players that does not pay. So that is also a strength that will increase, that gives a positive impact as well.
High gross margin.
Yeah
Revenues as well.
I guess I just have a follow-up on one of those questions, because Marina talked about we look for profitable companies, and you have this target of 35%. So when you go out and look for companies, I guess there is some kind of level, and how much can you bring to the table when you buy something?
It strongly depends on the individual company. But what we do at each and every opportunity we have, we define what we call a growth agenda. Where should we put in our efforts? Where do we think is the most likely area of improving the performance of a potential target? That might be 100% correct based upon data analysis. Sometimes it is not.
But we care about that prior, pre-transaction. So I think that we have seen it very significantly, just as Clayton touched briefly upon, we see KIXEYE as a net contributor in Live Ops. Clayton and his team have shown that they are really, really good at this. So I see a great value coming from KIXEYE to the other studios, whereas as we have seen already and we are already deploying, is that marketing comes from other parts into supporting KIXEYE. So it differs from case to case.
That is a very good question, which also part of what you are asking, is that can we take on an acquisition that might have a strategic value but currently is running with a slightly lower margin? The answer is, yes, we can do that. Because just as in the Babil case, in some few occasions, in some few instances, our view, my view at least, maybe the board says no. I do not know. Birgitta is here, so she says no. But what I expect is that in some markets, in some instances or some parts of the market, it is very hard to do it organically. We touched upon that when it come to stronger broadening as well.
However, there we do not have to compromise potentially with the margins, but entering into the MENA region, that would have been a decision that were taken, even though AJ and his team would not have had the profitability you had. On average, since you source game, you are not potentially the highest margin in the group, but you develop a fantastic growth and provide synergy opportunities. Long answer to a short question, sorry for that, and it is late. The drinks are waiting, the beer are waiting. But I think that it depends on the different cases, but it is also, yes, if it is very good for Stillfront long term, we do not hesitate to take that, even though if it is not the highest margin of the potential targets.
Victor has the last question.
Okay. Thank you. The user acquisition cost looks impressive. Are there any risks? Could it hurt you going forward about the organic growth, the longevity of the games, the churn? Could you have to compensate in the high season now, or are there any risks?
There is no such thing as risk-free business building. So of course, there are risks, but I think that one angle of answering that is that it is much higher risk to organically build a new game compared to grow in an existing game that has the right KPIs, where we data-driven could grow it through user acquisitions, which we are very good at. So if it is marketable, that is the safest bet we have in combination with Live Ops. But I would say user acquisition, if you are super disciplined, and we will never, as long as I have anything to say, we will not compromise with that. So I think that is so built into our culture that we will not compromise. Then it is a very low-risk growth opportunity. So that I wouldn't put higher, but I will put higher to organically build new games.
That is, again, why it is so beautiful to acquire businesses, because by definition, the title risk is zero because it is live. By definition, you don't have to buy a loyal user base because it is already there. Okay, you can grow it, but you buy existing businesses with loyal users already enjoying entertainment, ready to stay for a decade. That is why we think M&A is so important and so value-creating.
Thank you very much. I know there are some more questions, but let's take them outside. Jörgen, just some closing remarks, please.
Yeah. Thank you, Charlotte.
If you want.
Well, yes. Thank you for staying with us here and also online, listening to our Capital Markets Day. Thank you, Sofia, for a great arrangement as well. The purpose with this was to describe our industry deeper. The purpose with this was to describe Stillfront broader, not only me talking, even if I talk now, but also to describe in-depth how we operate our games, how we work with M&A, how we work with our operational model, which we think is a super important thing. I hope we have been able to provide that to you. The day before yesterday, it might be three days ago, Sensor Tower had a market report. So interesting reading was, I think that we are amongst the 1%, we think the top half of the 1% even, of the largest mobile publisher already. We think we have just started.
We have established a platform through refining our operational model, through refining our business strategies, but this is only the platform, but at least we are in the top half percent, I think. So hope to see you next year, and then we are even higher up in that list, hopefully. Thank you very much for listening. Now it's beers and stuff outside, so I hope you stay. Thank you.