Tag: business

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Learnings From My First Conference Talk

This past Tuesday I gave my first conference talk at View Source in Amsterdam! It was an awesome experience at an amazing venue in a rainy city where people from all corners of the web came together to discuss many of the challenges, opportunities, and learnings for browsers, web development and the overall landscape of the internet.

I work on creating experiences to help people stay safe and have greater privacy online, so it was enlightening to hear from such a wide range of topics about the web. I’m always impressed by the depth of understanding and passion people have about their subjects of work, and the speakers and attendees at View Source carried an overwhelming amount of inspiration.

Just to name a few, gaming, entertainment, monetization, accessibility, connectivity, and rethinking digital utopianism were all covered. I love hearing about what people are working on. It shows how there is so much to think about and is a humbling reminder that my work is a small piece of a vibrant community.

I was fortunate to attend the conference with a group of us from the Microsoft Edge team. It was a great team bonding experience to get to know others from different parts of the team who I don’t normally work with. While it’s not always possible, I would highly recommend going to conferences with folks from your team. It’s great to have others with a similar frame of reference to talk about new ideas and to be more connected when you get back to work.

My colleague Lillian Kravitz and I spoke about the privacy principles we’ve developed for Edge. Melanie Richards gave a talk about the simple and actionable steps to help make your site accessible to everyone by considering of various contrast and theme settings, and others on the team held “conversation corner” discussions about web compatibility and more. The talks were recorded, and I’ll post a link here when it’s available. (Here it is! And me tweeting about the talk.)

A main theme of our privacy talk was listening, learning, and trying to gain a fresh perspective on a topic we thought we were familiar with. I know I am not at all familiar with giving talks on a big stage, but the aspect of learning something new and having a different perspective on presenting my work still felt as fitting to the process of giving the talk as it did to the contents of the talk itself.

I can come back to more about the talk when the recording is posted, but for now, while the experience is still fresh in my mind, I wanted to reflect on the things I learned, what went well, and what I could improve for next time. Because, yes, giving a talk is exhilarating and this one will not be my last.

IMG_9365

Preparing

Our talk was second to last on the last day of the conference. It’s tough having a time slot late in the day on a later day of a conference (this post and comments came to mind when I learned of our time). You almost need to leave something small to clean up and keep working on during the conference because if you show up on day 1 ready to go, you’ll have to keep your excitement and preparedness high for quite a while.

It would be great to be at peak preparation the night before the talk, but even then, we ended up waiting 8 hours the day of as our talk was at 5pm and the events started at 9am. At breakfast the morning of, excitement needs to be reserved because adrenaline could give out well before the talk. I likened the situation to an athlete or musician where a game or performance is late at night (worth looking more into how they manage energy). You need you energy and focus to be up at an hour different than your normal operating schedule.

Which leads to another interesting aspect of this conference. Traveling to a different time zone can be debilitating for the first few days. Especially when it’s many hours different than you’re used to (And seemingly more-so when going east around the globe?).

I am not one to take naps normally, but when your schedule is turned upside down, naps can be your friend.

Luckily the hotel was nearby the conference theater, so it was easy to go back to sleep. I was conflicted because I wanted to listen to all the talks, but I knew if I wanted to have the energy for my talk, I’d need sleep a bit before we were up.

My pre-talk routine (but maybe not a routine because I only did it once), was check the slides early in the morning before the first talk, listen to the first few talks, go for a nap, head back for lunch, listen to more talks (three hours before ours), regroup for a bit just before getting mic’ed up, the go on stage. Seemed fine. I think the whole process would have been easier in my normal time zone, but this helped manage energy and focus well enough.

The talk

It’s impossible to even scratch the surface of all you need to know going into something you’ve never done before. You have to put yourself out there and figure things out as you go.

There’s a lot of “tribal speaker knowledge” I learned from this first talk. Questions I hadn’t considered asking because they didn’t even come to mind before, and issues I could have mitigated had I known a bit more about the process. All good takeaways though. Makes me want to try again soon to test out my new perspective.

First, I think I was a little too reliant on my slide notes. I wanted to be sure to hit the speaking points we planned, but the talk felt less conversational as a result. The story we were going for lent itself to a more prescription presentation style, as we were sharing a process others might be able to apply, but I enjoyed the more casual and friendly sounding style of some other presenters that was more akin to giving a well thought out answer to a question rather than reading a speech.

Awareness of my over reliance on notes cropped up when, under some unforeseen circumstances, a few of my notes got cut off from the presenter screen. Without the expected cue, I stumbled a bit to keep with the flow I’d practiced when leading from an idea on one slide to the next. This was unfortunate because we checked the presenter screens before the talk, I just missed the few slides that had issues.

But when things don’t go according to plan, you’ve got to improvise! You can’t do a dance and walk off stage. You have to keep going!

Second was a simple problem of struggling with the clicker having issues advancing slides. At one point I thought I was ahead of where I was only to realize I missed a slide. (Sorry folks, that one image transition really made the talk 🙃).

After the talk when we went backstage to the “green room” talking about how it went, in an eye opening detail to me, another presenter mentioned that before his talk he asked the AV team where to point the clicker. I hadn’t even considered doing that. I figured the thing would just work (and I really think it just should), but for such a simple, yet crucial piece of presentation consistency, it was important to understand. This was some tribal knowledge that one who had given talks might know from variance of venues and presentation setups, but for me, it had not even crossed my mind.

Overall though, I think we did well. We connected ideas from other talks in the conference about privacy, collaboration, and the future of the web, and presented our customer focus as a way to reframe thinking about developing experiences. We realized there is always more to learn, and listening to feedback to spur continuous improvement was a common theme encompassing our time at the conference.

So yeah, that was the talk. Lots to think about for next time, but mostly minor tweaks to smooth out delivery. It was a great start to what I am look forward to as the beginning of many more to come. I definitely have areas to improve, and am anxiously awaiting the recordings to come out to kick myself over all the little things I didn’t get quite right. But I’m not going to hark on the mistakes. I’m going to learn from them to make my next talk even better. Can’t wait.

Touristing

Oh, and I mentioned the talk was in Amsterdam!? How about a quick travel update to round out the trip.

Side note, I think the concept of being a tourist and trying to avoid touristy things is funny. Why try so hard? Just go, enjoy the culture, and have a good time!

Side side note, a couple weeks ago at an organized bike ride in Seattle, which I would consider a very local thing to do, I met a couple who traveled from Missouri (I think it was Missouri, can’t remember exactly) who were visiting specifically to do the bike ride. No idea how they found out about it, but I was amazed at their ability to be local tourists. Pretty cool.

Anyway, I really like Amsterdam. The bikes, canals, frites, stroopwaffles, and tiny red cars all come together into a bustling culture. People are friendly, even if I often misunderstand what’s said under a Dutch accent (a taxi driver asked me how long I had to wait for the ride, and I answered I would be returning to the US. Thought he asked where I was heading… Sorry!).

Amsterdam is the first country outside of USA and Canada I’ve now been to twice, and I would definitely go again. Here are some photos from the rainier and sunnier parts of quickly playing tourist while on a trip for work.

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Facebook Privacy Report from The New York Times

As Facebook is upending the journalism industry, the New York Times is continues their campaign of exposing Facebook’s questionable data use.

Summary from The Download via the MIT Technology Review

https://www.technologyreview.com/the-download/612642/facebook-gave-more-than-150-companies-special-access-to-your-data/

Continue reading “Facebook Privacy Report from The New York Times”

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Rent-seeking

The Exponent podcast is back! And there’s a lot of news regarding pressure to change existing App Store pricing models.

it seems incredibly worrisome to me anytime any company predicates its growth story on rent-seeking: it’s not that the growth isn’t real, but rather that the pursuit is corrosive on whatever it was that made the company great in the first place. That is a particularly large concern for Apple: the company has always succeeded by being the best; how does the company maintain that edge when its executives are more concerned with harvesting profits from other companies’ innovations?

via Stratechery and Exponent

Plus, after shipping Fortnite outside of the Google Play Store, Epic Games is moving in on Steam with a new game store and taking a smaller cut of sales.

Developers receive 88% of revenue. There are no tiers or thresholds. Epic takes 12%. And if you’re using Unreal Engine, Epic will cover the 5% engine royalty for sales on the Epic Games store, out of Epic’s 12%.

via Unreal Engine Blog

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Ninja and Kylie Jenner, Who Owns the Future

Supertree Grove at Gardens by the Bay Singapore

In his book, Who Owns the Future, Jaron Lanier discusses the idea of real-time income and wealth generation. He presents the topics through the lens of sharing songs in the music industry, but the principle applies to today’s sharing economy.

Continue reading “Ninja and Kylie Jenner, Who Owns the Future”
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Thoughts

Economics of driving the Tesla Model 3

Long exposure photo of car lights on a highway at night

Long exposure photo of car lights on a highway at night

So I test drove a Model 3, and I have some thoughts.

Backstory

I feel like everyone has a story about when they got interested in Tesla. For me it was summer of 2012 just before the official release of the Model S. I was at Coit Tower in San Francisco and on the way back to the parking lot when I noticed a black Model S. I don’t remember how I’d heard about Tesla, but when I saw the car that day I remember doing a double take after realizing it was a Model S. Seeing it was so unexpected, but the thing was the coolest gadget: an all electric car with a giant touch screen. From that moment on, I wanted one. The only problem, the price tag was prohibitively expensive. (I settled for buying a few shares of stock in the company, yet not enough to afford a car now)

So six years later, the Model 3 is rolling out to the general public with the allure of a $35,000 Tesla. Still all electric with a giant touch screen, plus crazy features like autopilot no one would have imagined to be possible back in 2012.

Before the test drive, I had never been in a Tesla on the road let alone driven one. I was purposely avoiding the car knowing I would want one even more after I went for a test drive. But TL;DR, surprisingly that wasn’t the case. I’ve spent so many years thinking about the economics of owning a Tesla while listening to others talk about what the cars are like to drive and own. When I got to actually drive the Model 3, I already had my expectations and mind set on not buying one. I tend to be pretty frugal, and try to be rational about buying things that I really need instead of overspending on cool things that are just for fun (looking at you DJI Mavic…), so I knew going in that the car would be a blast, but an unnecessary purchase for me at this time. Maybe a few years down the road, when my current car starts to show its age and EV costs have been subsidized further by increased production, I’ll finally be ready to get a Tesla. For now, driving a Model 3 was just a fun thing do on one hazy Sunday morning.

Test Drive Experience

I signed up to test drive the $55,000 model with long range battery and dual motor. I specifically did not want to try the upgraded performance model because it was out of my price range (even more so than the mid tier model), and I didn’t want my first impression to be with the highest end model. The test drive started out with a warning that someone had backed the mid tier model into a wall, so we’d be driving the high end performance model. (Um, how does that happen? Aren’t all the cameras and sensors supposed to be able to prevent such a thing from happening? My question went unanswered and we hopped into the car.)

I immediately realized there would be a steep learning curve to understanding the controls. The first thing I usually do when setting out to drive a new car is adjust the mirrors (as I try to be a good driver), but there is no dial on the driver door panel. It turns out you have to tap the “car” button in the bottom left of the screen to bring up the controls menu, but without the sales associate to point me to the menu, this would have been a complicated task of searching through menu options.

Settings & controls

I could see myself sitting in the car for 30 minutes to an hour just figuring out what it can do and customizing it all to my liking. A Tesla feels like a gadget and tries to bring the simplicity of a smartphone design to a car. It works to an extent, and definitely would take time to get used to. When I found myself wondering if there was a setting to adjust the rearview mirror, or if I could just reach up and do it manually, I knew I was a bit overwhelmed by all the changes to the controls. Luckily, the controls for seat position adjustment are still on the side of the seat, so some of your muscle memory may still transfer over. It’s just hard to tell when that’s the case.

Steering

I drove the 3 out of the parking lot, the first thing I noticed was how heavy the car felt and the weight of the steering. The car feels strong, big, and solid. Turning the wheel takes effort, but not an absurd amount, just enough to give you firm sense of control. I wonder now if this is another setting Tesla programs into the car. Could there be a “light” steering mode that reduces the tension in the wheel? I don’t know why they would do such a thing, but it seems possible.

Turn signals are confusing.

Because the controls are reduced to a wheel, two stalks, and a screen, many of the controls act differently than a normal car. The turn signal for example always returns to the center, which is confusing because for all the car’s I’ve ever drive, a turn signal in the center position means its off. Pushing to the up or down position will turn right or left. I learned there is a short and a long press to the turn signal stalk, but I didn’t figure out exactly how it worked. All I know is that as long as you ignore the fact the stalk always returns to the middle position, you can signal for starting and completing turns by pushing up or down the same way you would on any other car. The 3 is even smart enough to recognize when you’ve completed a turn, but in some cases when I put the signal on too early, the car decided to turn the signal off before I even made it to the turn.

Blast off

The Model 3 goes 0 to 40 goes by in a flash and you don’t realize how fast you’re going because it happened so quickly. Just to reiterate, I was trying the Performance upgrade, so the pick up probably won’t be as powerful on lower models, but the immediate feedback and roller coaster feel, should be transferrable. There was a car ahead as I merged onto the highway, so instead rocketing by at the last minute, leaving the car in of in a cloud of dust, I decided to play it safe and drive like a normal person.

Enhanced Autopilot, lane keeping, and distance control

The vision system gives the Model 3 a super cruise control mode. In addition to maintaining speed, the car will help you stay in your lane if you start to drift, and keep the same distance between the car in front of you whether the car speeds up or slams on its brakes. Tesla notes, “Enhanced Autopilot includes additional driver assistance features. Every driver is responsible for remaining alert and active when using Autopilot, and must be prepared to take action at any time.”

Full Self-Driving Capability with hands nearby and automatic lane changing

This was just nutty. Pull down twice on the right stalk to engage full self driving mode, and you can take your hands off the wheel as the car drives itself. The same lane keeping and distance controls apply to the full self-driving mode as they do with auto pilot, but now they are the sole means of maneuvering the car down the freeway. I (eerily) quickly grew accustomed to the car driving me as we stayed in the same lane, but the craziest part is changing lanes. Simply pull down or push up the left stalk to let the car know you want to turn left or right. The car determines the lane is clear and moves on over. It’s wild. We’re not quite at the point of removing the steering wheel, but this still feels like the future. Again, Tesla includes a disclaimer, “This functionality is dependent upon extensive software validation and regulatory approval. It is not possible to know exactly when it will be available, as this is highly dependent on local regulatory approval, which may vary widely by jurisdiction.”

Other Tesla and EV specific things

Hold mode puts keeps the car in place when you push in the break all the way at a stop. Creep had to be programmed in because EVs do not inch forward in the same way a gas engine does while idling. Unlike a cell phone or laptop which has charge limiters for batteries, you have to set the max charge for a Tesla (~90% while city driving, and 100% for long road trips). Avoiding a full charge helps keeps the battery in good condition for longer.

Features & Pricing

The whole point of the test drive is to make a decision about buying the car, right? So what configuration do you want to get? Most of us bought into the allure of a $35,000 Tesla when the Model 3 was announced two years ago, but we still aren’t quite there yet.

Base configuration Model 3 available in 5 to 8 months

This is all brilliant marketing by Tesla to lure you in with the $35,000 option, anchoring your first impression of the car to a lower price, while only selling configurations that can cost upwards of double the base price for the next 5 to 8 months (as of late August 2018).

So the $35,000 (or $27,500 when considering the $7500 credit) you were expecting to pay immediately goes up by $14,000 for the Long Range model with rear wheel drive. Want Long range and Dual motor? That’s another $5000 or $19,000 over the price of the base model. You could buy one Model 3 or three cars for $54,000, and that doesn’t even include the “cool” Tesla features like Autopilot or Full Self-Driving mode add-ons (for an additional $8000). At the high end, the Performance model can cost up to $80,500. How is that affordable?

A formative view for my understanding of the value of the Model 3 came from Mr. Money Mustache. He thinks about buying a Model 3 while considering cost-per-use in relation to the base $35,000 model and upgrade options.

“I’m thinking of springing for the $9000 long-range battery in my upcoming Tesla Model 3 order” – this one strikes straight at my own heart, because I crave a long range Model 3 myself. But even for a serious roadtripper, this works out to $125 per hour of charging time that you manage to avoid. Aren’t you willing to take a few minutes occasionally to walk around and admire your beautiful car if you get paid $125 per hour after tax for it? If you are, standard range will do.

Calculations:

Tesla Battery Upgrade: The only time you use the longer range is on roadtrips over 230 miles. If you do a 600-mile trip once every month, you have to make two extra 30-minute charging stops per month. Figure the $9000 battery costs you about $1500 in extra capital cost and depreciation per year, or $125 per month. However, if you are a Tesla fan like me and you want the company to make more profit to continue their mission, you may still opt for the extra options since you have nothing better to do with that money anyway.

All wheel drive car: if the car costs $5000 more up-front plus an extra $200 per year in fuel and maintenance, you could estimate it as about $500 per year more expensive to own. Then, how many times do you truly get stuck in a front-wheel drive car with really good dedicated snow tires on winter rims? (because snow tires always come before buying AWD!)

via MMM The Twenty Dollar Swim

If you are trying to decide to buy now or wait, a commenter brings up a valid point: “Getting the larger battery gets you the full $7500 tax credit, getting the smaller battery likely doesn’t.” This is because Tesla’s US federal tax credit will expire at the end of 2018. The lucrative $7500 will only apply to vehicles delivered (not ordered) before December 31, 2018. Afterwards the credit will decrease by half and expire at the end of 2019.

Let’s consider how this pricing scheme came to be because it all seems a bit out of proportion.

Upgrade Perception

Before we get into Model 3 pricing, first think about what you get by upgrading from public transit to a car (of any kind), then move to what you get for the base line Model 3 and above.

Owning a car is a luxury allowing you to move around on your own time and optimize the routes you drive. You don’t have to adhere to bus schedules, try to find rides with people, or spend time going out of your way. A car takes a psychological load off your mind that gives you the freedom to engross yourself in your work without ever worrying about rushing to make a bus that leaves in the next 5 minutes. In many places a car is not a necessity, but it can be a quality of life improvement.

On the other hand, not owning a car has its upsides. For one, there is a significant cost savings when factoring paying for a car, insurance, gas, tolls, parking, and maintenance. It’s not unreasonable for owning a car to cost upwards of $10,000 a year (with a rough estimate of $400 a month for loan, $250 for parking and tolls, $150 for insurance, $150 for gas). Plus, you can get a lot done on the bus/train/taxi when you aren’t the one who must be engaged behind the wheel.

Ok, so for any car you decide to go with (or not) you’ll have to weigh these pros and cons. Driving a Tesla does not magically change the dynamics of owning a car any more than driving a Subaru does (yet. We’ll have to wait for advancements in autopilot and changes to regulations). If owning a car is a luxury, owning a Tesla is an opulence.

Let’s say you’ve decided against the advice of the Millionaire Next Door and are in the market for a new car under $50,000. What would persuade you to upgrade from a $35,000 Model 3 to a more premium package?

The Model 3 is a curious case of behavioral economics. It is more common for car brands to price multiple models across a $35,000 to $80,500 price range with visibly distinct prestige of owning a higher end car. Just look at the BMW line-up, they (logically) use a numbering scheme that increases with perceived prestige. For the Model 3, the body looks the same for all price configurations of the car, the only distinguishing factor is the tires (and this little badge on the back). Is it any wonder why the upgraded wheels cost an arm and a leg? It’s how you show you got the nicer car. Tesla is not the only company to do this. Apple is a constant offender, tweaking iPhone design to show make newer models easily recognizable, and adding a big red dot to their latest and greatest watch.

This makes business sense. For a company to make the most from its high end customers in order to subsidize lower end products is nothing new either. Apple also does this with the iPhone and Mac in regard to spec upgrades. The build quality, apps, OS, customer support, and general Apple ecosystem are all the same no matter of the type of iPhone or Mac you decide to purchase.

The majority of Apple’s margins come from upgrades that cost them a tens of dollars that they sell to you for hundreds (or thousands).

There’s nothing inherently wrong with this. It’s how Apple continues growing even with a trillion dollar valuation.

when you raise prices and a segment of your customer base will only buy the best, you can achieve higher average selling prices — over $100 higher year-over-year ($796 versus $694) — which means higher revenue.

Charging its best customers more for iPhones wasn’t the only reason Apple’s revenue was higher, though: remember that Apple is making more off of every customer over time via Services. And there is one more piece: Apple is selling its best customers more and more devices.

Apple’s Middle Age via Stratechery

And Tesla is doing the same thing. The baseline $35,000 Model 3 gets you the same build quality, software upgrades, autopilot hardware, customer service, brand prestige, and roller coaster acceleration. Higher margin cars will subsidize the more affordable models at larger scale, they even called it out as their master plan ten years ago:

  1. Build sports car
  2. Use that money to build an affordable car
  3. Use that money to build an even more affordable car
  4. While doing above, also provide zero emission electric power generation options

Tesla’s Master Plan

However, making business sense does not absolve companies of the psychological manipulation they employ with these pricing strategies. By singling out the one feature you get for a disproportionately large amount of money over the cost of the base product, companies frame upgrades to make you forget about all you get when you initially decide to opt for their product without the extra bells and whistles. Just look at the similarities across the iPad lineup. If Apple only pointed out the commonalities, people would question upgrading, so Apple makes the differentiators big, bold, and right at the top.

Whether you just have money to spend and only settle for the top of line, or have been saving for years only to wait a few months longer, consider the return on investment when spec’ing out a Model 3 (and anything else you buy). Maybe you ski every day and need all wheel drive, or live so far away from charging station that the larger battery is a must, but if that’s not the case for you, is the baseline good enough? After all, you’re still getting a Tesla.

So buy now or wait?

This totally depends on your budget. For me, I’ve had my current car for three years, and plan to keep it for at least 10. If you need a new car right now, and are looking at a Tesla, maybe this helps to think more rationally about the purchase. A used Chevy Volt is a decent alternative that checks many of the same boxes as a Tesla.

And if you’re set on a Tesla, just consider if driving down the highway knowing you’re safe with your hands off the wheel is worth $8,000, It is fun to be an early adopter, but why not let others subsidize your cost a bit? Are you going to buy one of these?

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The Genius of Fortnite’s Business Strategy

Fortnite is all the rage right now. It came out a little less than a year ago considered nothing more than a free PlayerUnknown’s Battlegrounds (PUBG) knockoff, but in that time, Fortnite has come to dominate the gaming industry. Some background for the non-gamer types, Fortnite is a free to play video game which means a majority of the game is available to play at no cost. There are many variations on free to play business model, but for Fortnite, the full gameplay functionality is available to everyone. There is one map and one game mode that all people play no matter what you’ve paid for the game. While you don’t need to pay money to play, costumes and skins for your character are available for purchase. These features aren’t too intriguing on their own, but when combined with a uniquely designed quarterly season pass, called the Battle Pass, the package becomes a multi–million dollar a day phenomenon.

BATTLE PASS

The Battle Pass is a $10 opt in quarterly subscription that is tied to “seasons” in the game. Every three-ish months Fortnite gets a huge update that comes with changes to the map, different character skins, and a new Battle Pass. While everyone is still playing the same underlying game, the pass unlocks new challenges and a leveling system with rewards that adds a reason to keep playing Fortnite. On top of that, everyone’s level resets at the start a new season, so it’s a chance to rank up again to collect all the new items, emotes and experience points. It’s amazing this setup makes any money at all because there is still no need to purchase anything to play the game the exact same way with everyone else. Everything you can purchase is purely for looks**.

Once players buy in to the Battle Pass they are more inclined to continue paying because the game loses some of its intrigue without the content unlocked from the pass. Fortnite reverts to a singular leveling system without much of a goal to the game other than to keep winning and just have fun. You can keep playing on the free tier, but for many (which is quite a lot of people judging by the sales figures) the point of the game is to unlock more content for your character. And what’s the way to do it? Keep playing the game. Keep buying the Battle Pass.

Aside from the joy of almost winning, there is not as much feeling of accomplishment in the free tier. Yet the paid tier continues to be fun because there are just more things to do, even if all sense of additional achievement is fake (not sure what that says about playing video games in general). But the irony is all players are still playing the same base game whether they are paying or not. The progression is purely superficial.

RARITY VS ACHIEVEMENT

And quantity vs quality

The Fortnite development studio, Epic Games, understands their position of reliance on in game purchases, and the Battle Pass for the new Season 4 doubles down on the business strategy. The same leveling and unlockable content system continues to exists from previous seasons, but now there are two skins (Carbide and Omega) than can be upgraded by playing the game more. With the introduction of these upgradeable skins, Epic has created two categories of unlockables based rarity and achievement. In reality however, both tie back to how much you play the game.

fortnite1.png

Because there is no visible ranking in game, to show prestige players can either purchase skins or spend time leveling up their character models. This balance of rarity and achievement serves a dual purpose for the individual player and the entire player base. For the player, upgrading your character visibly reinforces how they stack up against other players in the game. Because there is a time limit to each season, the sooner players have a new upgrade, the better they are assumed to be at the game (or they just played a lot).

fortnite2.png
The green cost line, for context, and not entirely to scale. For that matter, if we’re going to put disclaimers everywhere, this graph is purely a visual aid and has no scientific grounds.

For the rest of the community, this creates a “Stars Upon Thars” environment where those without skin feel inferior to those with the upgraded look. In the game, if you see someone coming at you a rare skin, you shudder at the thought of their skill, even though their character’s costume has nothing to do with how good they are at the game. Nevertheless, new players are naturally drawn to want better looking skins because it feels like once you have them, you will somehow play with improved performance. At that point, Epic only needs to convince new players that Battle Pass is the most economical way to get the skins, and they are swept up into the money machine that is Fortnite.

As an aside, it would be an interesting psychological experiment flip the dynamic by giving new players rarer skins and force experienced players to use the default skins just. Would the better players who were brought up with the skin prestige dynamic experience a role reversal? Maybe give new players a random rare skin for their first few games for a psychological boost against other players (and an advertising boost for Epic).

fortnite3.png

For Epic, building a leveling system into the paid version of the game is a genius idea. For players, it’s akin paying for your own soma holiday. The underlying game you’re playing does not change whether you decide to pay or not. What does change, however, is your perception of the game you are playing. The new layer of intrigue and achievement gives a reason to keep dropping in, playing game after game, and trying to win the base game does not afford. The Battle Royal genre of games has proven to be exhilarating, and Epic built a psychological goldmine on top of the core concept that reinforces itself and keeps people playing Fortnite instead of PUBG (and any other game for that matter). If you want to build a character, why not just play Sims?

BUSINESS MODEL

Many successful services in other industries employ business strategies where plans start with a free tier to get people on board and only pay as they scale. This benefits both those entering the market as they begin using the service with a few users and the service provider as successful clients are locked in and pay more overtime. There’s a similar funnel for Fortnite. Since the game is free, the sum total of people who know about the game is the mouth of the funnel. These people get to play the game but don’t see much additional benefit. Moving down the funnel, Epic needs to convert as many of these people into paying customers to profit on their investment. How does Epic do it? They increase the value for players as players decide they want to invest more time in the game. People want to pay more as they play more. It’s an amazing phenomenon.

In principle, Fortnite’s business model is simple: release a free to play game for everyone to try, include fun character outfits with no effect on the core gameplay, let players buy the outfits individually or through a leveling system. In practice, Epic executed the strategy to give all players from the most frugal to the most invested a way to play the game the way they want.

You don’t have to buy the Battle Pass. If you just want skins, you can pay for them individually. Although, the rarest can cost upwards of $20 and only a few are available per day, adding to the allure and impulsiveness. For the more frugal gamer, investing in a Battle Pass just feels like the better option. It includes many more items and gives players V-bucks, the in game currency, just for playing. If you are patient, you could purchase one Battle Pass and use all the V-bucks collected from playing the game to finance the next season’s pass. But with so many cool new things to purchase, how many players are really going to pass the marshmallow test?

Buying in to the Battle Pass unlocks an entirely new experience, reserved for those in the “elite” class who are truly invested in the game. While you can play without a Battle Pass alongside your friends, listening to them rank up and go for challenges can make you feel left out. For Epic, this desire to be “part of the club” is bolstered by the fact that Fortnite is the most popular game to watch on Twitch, and when people aren’t playing Fortnite, they are watching their favorite streamers use literally every new skin in the game. From a marketing perspective, Fortnite generates so much value that the free advertising from watching streams of the game is even a multi-million dollar enterprise. With this level of attention from such a captive audience, it’s crazy we haven’t seen Fortnite repeat Apple’s In App Purchase fiasco from years past (you can now refund Fortnite purchases).

COMPETITION

For many games, micro-transactions are unsuccessful and linked to abusive gambling techniques. Recently there has been a large backlash against micro-transactions in the gaming community. For these games, the additional transactions are added on top of a paid game, making it seems as though your initial purchase only unlocked a piece of the full game. Plus the core gameplay provides replay-ability that does not require additional enhancements to stay fun.

I mention this up because the old behemoth, Call of Duty, recently announced a battle royale mode, called Blackout, in its upcoming Black Ops game. CoD isn’t going to rip out its tried and true multiplayer prestige system and replace it with a free to play system like Fortnite’s. There is too much history of success riding in the existing $60+ a year model. Instead the game will remove it’s single player campaign opting instead to bundle Blackout with the purchase of the game.

Psychologically, spending $60 upfront more feels like a greater investment than spending $60 in $10 or $20 increments. So while Blackout could be popular, the initial investment narrows the funnel of possible players and limits the number of people who might be willing to pay less than the sticker price. For a direct comparison with the previous battle royale king, PUBG sells for $30 and is losing ground to Fortnite.

GAMING PSYCHOLOGY

Everyone is playing Fortnite because the core of the game is a blast, and Epic is making boatloads of money because the paid model adds a level of replay-ability that keeps the core gameplay fresh. This is why the Battle Pass is genius. The game is fun, and people want to keep playing, but on its own, the game gets repetitive over time. Epic developed a solution. Pay $10 to have fun, play more, get hooked and pay more in the future. Once bought in, players become invested in their progress and will continue paying to maintain their status. Plus going back to the free tier is boring, so why do that? The intrigue of the game is baked into the business model.

With all this said, I still can’t get over the fact that there are two versions of Fortnite. One that you pay for and one that’s free. The one you buy into feels more fun and engaging because you have a sense of purpose in addition to just trying to win games. But once you jump in and start playing, there is no underlying difference between the free and paid game. Truly a testament to the nuance of human psychology. Epic is playing us at an entirely different game than we think we’re playing.

 

*Disclaimer/skin in the game: I bought the Season 4 Battle Pass and wrote this while waiting for the Battle Bus.