The search for valuable insights into their player acquisition campaigns is an ongoing quest for online gaming and betting operators made challenging by large amounts of data. One approach that’s useful for determining the long-term performance of a campaign and the lifetime value of the players acquired is cohort analysis.
Applying this analysis method to player acquisition campaigns will significantly help operators make highly informed decisions regarding their advertising and promotional strategies quickly and efficiently.
How to Perform Cohort Analysis
Cohort analysis differs from traditional reporting because it looks at the performance of a group of people - a cohort - over time (or a sequence of actions).
Let’s use college students as an example. If you took a freshman class and then tracked how they performed over their academic career, measuring how many graduated, how many went to grad school, etc., you would be performing a cohort analysis.
For analyzing player acquisition campaigns, you would want to pick a shorter time frame, such as months or weeks (or maybe even days), based on your traffic volume. One metric that is key to campaign success, is deposit to cost pay back periods. If you have a 30 day target, then running cohort reports to see what traffic hits your goals is key.
Below is a sample six-month cohort analysis table that looks at how many players remained active in the months after they were acquired (modeled with a 10% monthly drop):
With actual data, you’d be able to use this table to determine your churn rate for each month and see if there’s a pattern or warning sign.
Similar tables would be built for other KPIs and player groups that are important to your business (acquisition channel, monthly revenue, etc.) as part of the analysis process to provide a big-picture view.
This analysis becomes more valuable over time as you get more data and the approach should be refined as your company grows - at a certain point, it may make sense to switch from months to weeks.
What Are the Benefits of Cohort Analysis?
Cohort analysis provides a valuable medium- to long-term view of player journeys, spend, and value that offers multiple benefits.
One is the ability to uncover trends that aren’t apparent in traditional monthly reporting because of the in-depth analysis. It also gives them the flexibility to format their reporting in a way that suits them best and enables actionable decisions.
A simple example of how monthly reporting can give an incomplete picture is when operators launch a campaign mid-month. Analyzing the data, especially if it has not performed as well as expected or compared with previous similar campaigns, can lead to decisions to scrap or modify the campaign, when it could in fact benefit from a longer-term perspective.
Another benefit of cohort analysis is that it helps growing businesses visualize their growth trends. This makes growth easier to sustain while the growth story can be more effectively communicated to stakeholders.
Considerations for the U.S. Gaming Operators
Regarding the booming but still nascent U.S. market, the vast majority of operators work on a cost per acquisition (CPA) basis with their affiliates. That type of traffic is somewhat risky as operators are paying up front for traffic they hope will return down the road.
Looking through the data at month-end might show that they are not getting a return on investment (ROI) or even losing money on that particular period. However, cohort analysis over a three or six-month period might show that player deposit levels and return play from that campaign are actually very strong.
The complexity and cost of player acquisition campaigns -- DraftKings spent nearly $500M on marketing in 2020, while FanDuel spent around $478M -- shows why it is so crucial for operators to accurately analyze their data and make decision look at how they analyze this data and optimize the value they can get from it.
A well-known example of this is assessing the value of sign-ups recorded during a major event like the Super Bowl or an international soccer tournament. The numbers may be high, but generally, those accounts will not generate much value compared with those made at other times of the season. The datasets generated by cohort methodology provide long-term, high-value analysis of these players and the ROI of campaigns that ran during these events.
This ability to provide long-term insights is why cohort analysis should be part of every online gaming operator's analytics and reporting stack. Without adequately taking into account long-term performance, you may inadvertently make business decisions that adversely affect growth or revenue -- or worse, you may not fix a problem before it gets out of hand.