David (00:04)
Welcome to Growth Stage by FastSpring, where we discuss how digital product companies can increase the value of their businesses. I’m your host, David Vogelpohl. I support the digital product community as part of my role here at FastSpring. And I love to bring the best of the community to you here on Growth Stage. In this episode, we’re going to be talking about optimizing ecommerce for emerging markets, not the core markets in North America, Europe, and Asia, but emerging ones with their own unique challenges. And joining us for this conversation are two folks that know a lot about this. I’d like to welcome both from FastSpring, Sudipto Manna. Sudipto, welcome to Growth Stage. Welcome back to Growth Stage.

Sudipto (00:47)
Thanks for having me, DV.

David (00:49)
And Lauren Steyn. Lauren, welcome. Have you been on Growth Stage before, Lauren? I don’t recall.

Lauren (00:56)
No,

I have not. This is my first time. Thank you for having me.

David (00:59)
Excellent, excellent. We’re so excited to have both of you here. We’re going to double click and learn more about what your advice is for tackling e-commerce in emerging markets. And for those watching and listening for a little more context, Sudipto and Lauren are going to share their thoughts about how to approach payments in e-commerce in emerging markets and some of the requirements needed to get access to things like local payment methods and currencies.

It’s more than just a desire. There’s actually some steps to go through. And these folks are going to talk a little bit about that and particularly give us some more information on particulars in certain emerging markets. So I’m going to ask you both the same question I ask every guest here on Growth Stage. Lauren, maybe I’ll start with you. What was the first thing you bought online?

Lauren (01:51)
Wow, that is a great question and I genuinely struggled to remember it for so long ago, but I suspect it would have been something like a movie ticket. Buying that through online instead of going to the cinema and buying it from there. I believe that must have been my first online buying experience.

David (02:10)
Ooh, that’s a good one. Well, what about you, Sudipto? What was the first thing you think you bought online?

Sudipto (02:15)
Yeah, that’s like an old timer. So I don’t recall the first purchase that I ever made online, but I recall a memorable purchase that I did back in 2011. And I would like to piggyback on that side because that brings closer to what we are building here and what we are doing. So my first purchase was airline tickets for my entire family. So that was the first time we as a family traveled from Mumbai to Kolkata. And that was the pivotal moment where

things airline tickets were becoming more and more accessible to common people like us. So that was the first purchase online purchase that I did that I got to recall.

David (02:54)
So what was the occasion of traveling from Mumbai? Where did you travel to?

Sudipto (02:59)
We traveled to Kolkata. It was my cousin’s wedding. And that was the first time we, the entire family, traveled together. In India, back in India, we traveled during our holidays. So that was the first time we as a whole family traveled. Usually I travel alone, but that was the first time we as a whole family traveled. It was a pleasant experience for all of us.

David (03:21)
Cool and it’s kind of interesting that both of you bought tickets you think for the first time you bought something online. I’m trying to remember how you bought airline tickets before online. That’s actually maybe a topic for another another episode. All right. Well, let’s let’s take a little deeper here. You know, we’re talking about e-commerce and payments and emerging markets. And so I just want to kind of get an understanding for both of your backgrounds. I’ll start with you again, Lauren. Could you tell me about your role at FastSpring

And what FastSpring does, I mean, I people listen to the podcast, just like, what does FastSpring do and what do you do here?

Lauren (03:55)
Absolutely. really, FastSpring is a global commerce platform and it’s designed specifically for companies selling online goods across a range of industries. One of the things that makes FastSpring unique is that we act as a merchant of record, which basically means that we handle a lot of the complexity of selling globally, know, collecting payments, taking in taxes, know, calculating the taxes, VAT and GST, doing currency conversion.

making sure that you are compliant, doing fraud management. So really all of that complexity around selling online, we take on that responsibility so that our customers, can just focus on selling the goods that they want and making that product the best that it possibly can be. And really it flows through a FastSpring checkout experience. So we’ve got a range of checkout experiences. So our customers will…

plug in our, the FastSpring checkout into their website or app and ⁓ FastSpring takes care of the rest. So that is the FastSpring side of it. So my role at FastSpring ⁓ is really that checkout experience itself. I am a product manager working on UI UX. So I work on a different number of levels, but really on the UI, making sure that that user interface is very intuitive, but also ⁓ focusing on the

the developer experience and those developer facing components that companies use to integrate with the FastSpring checkout. So ⁓ my job really is about how all these complex systems show up on that buyer journey, that end customer journey that coming through that checkout. So if I, if I would say, you know, my focus is really around how the purchase experience feels to the buyer, making sure that the checkout is intuitive, localized and as frictionless as possible.

So the goal is that when somebody decides to buy, nothing about that interface slows them down or makes them lose confidence in any way so that they can just seamlessly go through that checkout experience.

David (06:03)
Okay, so you’re coming to this conversation through this kind lens of expertise around UI, UX, localization and developer experience. And I think when a lot of people think about localizing for any market, let alone emerging markets, that’s what they tend to focus on a lot are things like language translations and like use this color in this country because of these reasons, like those types of things.

There’s of course a lot more to it and you kind of alluded to that a little bit when you were talking about what FastSpring does as a merchant or record. Basically taking on all of that complexity and compliance like do I need a local entity? What do I need to get access to a local currency? And FastSpring’s customers are basically offloading all that to FastSpring. So we’re going to talk about that today, like what you need in order to get access and the strategies you need to deploy.

But kind of as you pointed out with that merchant of record model that FastSpring customers kind of inherit a lot of those things so they don’t necessarily have to jump through some of the hoops we’re going to talk about today. But we are going to talk about what’s necessary in order to achieve that. But you’re coming to it from like the UI UX and developer experience perspectives that sound about right, Lauren.

Lauren (07:12)
Absolutely, exactly.

David (07:14)
Excellent. Now, Sudipto we already heard what FastSpring does. I’m not going to ask you that part, but what do you do here? What expertise are you bringing to this conversation?

Sudipto (07:22)
Yeah, I’m a Senior Product Manager here for FastSpring and work in the high skilled payment infrastructure with the focus on converting transaction friction into revenue growth. And most recently, I’ve been working with our team to launch certain payment methods which help our customers acquire more subscription, recording, bidding space, optimize checkout flows, have shown incremental growth and we have grown 30 % year over year. So.

I tried to bridge the gap between complex local global compliance and seamless user experience, ensuring that invisible payments remain both secure and high converting. When a customer comes in, they should not feel like they are transacting in an alien software or alien land. They should feel more local. They should feel more ease to purchase and feel secure to pass on their payment information to us.

I’m looking to bring my expertise into modular payment stacks and retention focused FinTech for a team to scale and grow for the next 100 billion customers. That’s my goal for this whole approach.

David (08:28)
Excellent. You know, it’s funny when I joined FastSpring a little over three years ago, you were one of the first people I spoke with who gave me the lay of the land about how the company and platform worked and really much deeper understanding of payments and when I kind of came into the company. And so I’m really excited to have you here today to be one of the folks I’m asking questions around strategies for emerging markets. Now, we’ve talked about emerging markets a few times, obviously, this is like the context of the podcast.

But like what does that mean? Like Lauren, what does emerging markets mean to you?

Lauren (09:03)
Right. Well, I think when people talk about emerging markets in the context of digital commerce, they usually mean regions where online purchasing is growing rapidly, but maybe the payment ecosystem is still evolving. It’s becoming solidifying. In some regions, you’ve got it in really, really very stable place. But in these evolving markets, you’ve got local competitors continuously

creating new payment methods. So it’s a lot happening there. I think that is one of the things that for me, emerging markets mean. ⁓ So in practical terms, that could mean a few things. So maybe credit card penetration might be lower and local pevin.

local payment methods are more dominant. Yes, so I think from a product perspective, emerging markets aren’t just about geography, they’re about payment behavior. To give you an example, if you only support international cards, you may unintentionally be excluding a large percentage of those potential buyers in those emerging markets. And I think this is one of the real challenges that global merchants face when they are trying to go after those emerging markets.

David (10:18)
It is an interesting point that this idea of emerging markets is relative. And what we’re talking about is the ability, capability, and I guess the frequency of people buying online and how they do that and how you as a company are going after these customers and what you’re offering to them and considerations, like you said, around credit card penetration, local payment methods.

and other aspects of that commerce journey and payments journey that would be specific to that market, which is going to be different maybe than your core markets if you’re focusing on say North America, Europe, and certain parts of Asia. So I’m just curious, like Sudipto, and I’m particularly curious from your perspective, why is it important to localize commerce for emerging markets? Like if I’m trying to get into India or where you’re from or Brazil or another place that might not be one of my like…

primary markets I’ve already kind of been focusing on.

Sudipto (11:16)
Yeah, that’s a great question. And I can certainly put some color on both India and Brazil, both of the regions which where I have exclusively worked on. So both Brazil and India have a huge young population. So if you look at the

top markets or top growing population, both India and Brazil have a plethora of young population. A younger digitally savvy population, Gen Z and millennials seek convenience and personalization without the long term liabilities of ownership. So that’s where we see a tremendous growth or influx of customer base coming in from. Now this market existed to be sure, like they existed well before the pandemic. What happened?

post pandemic, see a ⁓ shift in the bio-to-purchase phenomena. Both these countries have built a local regulatory system which offers this regional payment method, which in terms like are well beyond the traditional payment rates like cards or pay balance and things. So when we look at Brazil and India, we are looking at a huge population which relies on a strategic payment method which is backed often by the government.

So those are the regions why we, FastSpring try to explore into those regions and try to offer a regional aspect to our checkout flow. Be sure this customer existed, they were not purchasing anything digitally. Take an example, I, as a consumer, when I purchased my first ticket, it was back in then. Prior to that, I still used to go to the airline counter and buy my tickets using cash. So things are changing.

the landscape is changing. There’s a rapid user growth and the customers are looking for a trusted partner. In this case, the partners are the government backed payment methods like UPI, like PIX which are very close to customers and customers can actually use those payment method and have a solid trust in the system. So that’s where when you talk about merging markets, people are looking for trust.

People are looking for growth. People are looking for reliability. And those regional payment methods backed by the government source actually do those things for the customers.

David (13:35)
So UPI is a government backed payment method in India. Is that correct? And then PIX is like the Brazil version of that. Is that sound fair?

Sudipto (13:40)
Yes, that’s absolutely correct.

Yeah, yeah.

And I’m glad you brought those things up and I’m responsible for launching those two payment methods ahead of FastSpring And I can safely say that those two payment methods have a tremendous impact in our customer base and how we see customer transactions act, be it the approval rate, be it conversion, be it new user acquisition. All those things have shown a huge shift in our traditional product launches. And I’m

I’m excited about the future and growth of this payment methods.

David (14:19)
You know, it’s funny when FastSpring first launched PIX, I was on a ski trip, I can think it was two years ago, around this time around spring break. And I got on the lift with someone from Brazil and I was like, Hey, we’re launching PIX in Brazil. And he’s like, yeah, you better because like everyone in Brazil uses PIX and not everyone necessarily has a credit card. And like that really hit home to me because to me that’s like maybe one of the reasons it’s so important.

It’s because my perspective as an American who’s lived here my whole life is everybody’s got credit cards, right? Some form or another or debit card. And the reality is that’s actually not true in every country and places like India and Brazil. The majority of people, the overwhelming majority of people are using these government backed digital payment methods, I guess, for lower fees and convenience and all kinds of reasons, but it’s just different than what I experience here in the US. Is that fair?

Sudipto (15:18)
Yeah, that’s absolutely fair. And I think there’s this psychological shift also. People are more keen on using, which is homegrown. When I look at, and give you an example, like when I go back to India, there’s this whole nationalism and pride going on. Hey, I want to use PIX or I want to use UPI. So that’s the narrative that is going around and making people comfortable in using certain payment methods, which are region, which are backed. And I think…

If I look at the amount of UPI is by far the most important payment method back in India. If you are offering anything in India, it has to be offered or you have to offer UPI. You cannot do business without offering UPI back in India. That’s the reality. And same goes with PIX also. You cannot, the person whom you met on the ski, he is definitely giving it a picture of how things are evolving and we…

sitting in the United States, we just think like, hey, why don’t the customer have access to credit card? Because it’s not the norm out there. Doesn’t mean that everybody should have a credit card. It’s totally fair for other people to have their preferred payment method. PIX and UPI seems to be one. And when we scale up and go to other emerging markets, that’s the case. That’s the scenario. That’s the lay of the land that we’re dealing with.

David (16:43)
Thanks a lot of sense and you know, I actually have done go to markets in India without picks and I would imagine they would have done a lot better had we included that. I don’t know if they were available at that time. That’s very like five years ago or so, but that seems like it’s an important part of it. So Lauren, I want to go back to you though for a minute and talk about like what are the elements that you need to localize for a specific country or region within your commerce engine? We talked about.

local payment methods, but what else do we need to worry about when we think about localizing for emerging markets?

Lauren (17:17)
Yes, absolutely. And you even mentioned, you know, the obvious one earlier, the language, you know, that is at the most basic. want to support the languages that those local users will be using the currency as well. Seeing a language that you understand and the currency that you are used to using just builds that trust. Really the elements should always follow the principle of, want to create trust and confidence in this checkout experience. You know, these layers, there are several layers. we’ve

got the language, the currency, and people want to see prices and instructions in a format that they immediately understand. Then there are slightly more subtle details. Once again, we’ve already gone through the payment methods displayed in that checkout. What they should really reflect, the payment methods that those people in that market are actually using. And even beyond that, show those logos of those payment methods very clearly so that they’re familiar logos. So it’s all these little…

visual trust signals that you need to build up, you know, and reduce that hesitation. And then some of the more subtle ones are the form design. When we come in from a more Western perspective, we have forms built in a very specific format, first name, last name first, and then billing address and so on and so forth. Not all markets follow that form design. So address formats, phone number fields, even name ordering differ across countries. You really should do your

your research on those local markets that you’re going after to make sure that your forms are flowing in a way that is natural to that market that you’re going after.

David (18:54)
Yeah, I know that’s such a great tip and I think that scenario people don’t think about is the form format. think a lot of people will pick up on like, you know, especially if you’re coming from like a US perspective, like the date format is going to be different than the rest of the world for whatever reason. And I really liked your tip around thinking about the default payment methods you’re showing. Shoppers and users when they’re kind of interacting with your checkouts and like if you have these local payment methods, making sure they’re visible and not like.

hidden down in some deep dark menu where it’s like hard to find. I think that’s another like less than intuitive thing that people think about with localization.

Lauren (19:33)
nailed

it 100%. I would say the last thing that people sometimes underestimate is and that is critical, absolutely critical, is how you present taxes and then the totals. They are different across different regions. In some regions, buyers expect the tax to be included in the price, while in others they expect them to appear separately. You’ve really got to cater to that. So giving full transparency

within the expectations of that market of the pricing. It’s going to build trust. If they say that they’re going to buy something and then at the last second they see a different price, it immediately breaks that trust. So really in a nutshell, know, localization is really about making sure that when someone opens that checkout in that market, it looks and behaves like something that is built for them, not something that is a bit jarring and imported from somewhere else.

David (20:28)
You’re giving me memories of travels to places where the tax was included in the price and how great that felt to not have to worry about the surprise extra total at the end. When it comes to localizing, I often talk about a crawl walk run and I like to think of like commerce as like the crawl even where like you can offer local payment methods. You can offer ⁓ you know, localized checkouts that are easy for local populations to use.

even before you localize your website by language or you localize your support by language, do you think that’s fair to think about it in that sequence where like localizing commerce could actually be like the first step to breaking into a new region?

Lauren (21:12)
I think you could definitely work from that way and then backwards. As a matter of fact, it’s probably simpler to do it that way.

David (21:20)
Yeah, that’s kind of the point I make. I mean, I’ve used this in the past when expanding globally at other companies is like localizing commerce first, then language, then platform and support, which are like the much more complicated pieces, I feel. But it’s good to hear your perspective on that.

Lauren (21:37)
I like that. Sorry to interrupt. just want to say I really like that and it’s flowing backwards. if you’re starting from that endpoint and flowing backwards, you also, and this is kind of another one of those UI UX tips is build for consistency. So start at the end point and then you can create the consistency into the platform at the back.

David (21:57)
Yeah, love that. All right, Sudipto, so I’m going to kind of come back to you. What are the unique challenges with getting access to local payment methods and currencies? Like we talked about how there’s these government backed methods like PIX and UPI. But what do I need to get access to that? Do I get like a bank account or like open a business? What do I have to do?

Sudipto (22:22)
Yeah, that’s a great question. you think of expanding your business globally, then you are met with multiple challenges. Getting access to a payment method in a developing country requires you to deal with multiple different financial and government institutions. It’s not one piece. You have to deal with financial regulators, the fintechs, the government authorities, and so on and so forth. And each and every one of them have their own model to complex rules and regulation. So when we think about opening a shop,

Now you’re dealing with, hey, which department do I need to go to seek for a license? Which department should I go to seek for the clearance on my shops? So same thing happens when you try to expand into a global market. You need to think about, hey, if I want to offer this payment by the way, that is the bread and butter for me to expand and grow in that market. What are the different things? Things can be like setup, onboarding. Are you doing the KYC and KYB for each NMD buyer?

David (23:18)
What does this mean? I’m sorry.

Sudipto (23:20)
Yeah, KYC would be know your customer, know your buyers. So are you doing the know your buyer, know your customers for each and every financial product that you’re trying to sell. So that will be the first piece. Every time we speak with a partner or an entity back in a developing country, that’s the first question that they are asking us. Hey, are you doing your KYB KYC or are you or do you have a local bank account where we can fund the settlements? Do you have all the rights and regulation to deal with it?

here at Foshpring, we take front load all these aspects for our customers and make sure that our sellers or our customers don’t have to go through all this regulatory process, don’t have to go through all this setup process to ensure that the FedEx or the partners with whom they are working globally, let’s say in India or in Brazil, they have to deal with it. It’s a complex product. If I may, I might give you some examples like

bigger Western companies, they have to close down their business back in India because they could not meet the specific requirements. So what we are trying to do is we are trying to tiptoe and work with the partners and institution to make sure that we follow all those rules and regulation and have all the rights instrument in place to ensure we acquire and we can process the payment for our customers. So if you go alone,

there might be lot of challenges on the way, but if you come with offspring, it will be a smooth sailing path forward for you. Sorry, I it, but that’s the reality.

David (24:53)
Yeah. And you’re on a fast-spring podcast. I don’t apologize too much for selling the benefits of fast-spring here, but it’s so like, if I’m doing it on my own though, right? I can build my own and manage my own payment orchestration layer. can run through my payment service providers and do credit card processing. can figure out the bank account legal requirements of local payment methods and, configure that into my orchestration layer and manage and maintain all of that on my own.

And I can also offload it or outsource it to providers like FastBringing and that reduces that complexity. But getting access to that local payment method comes with some extra hoops to jump through that you might not be familiar with. You’re going to have to get familiar with that country that you’re trying to break into. And then you’re going to have to bring all of that and figure out how to manage it if you are doing it yourself. But these are some of the requirements that you have to jump through some of the hoops you have to jump through to make that happen.

I think that’s helpful for people to understand like how that works in the grand scheme of things, even if they choose to offload or outsource to a provider like fast bring. So I really appreciate you kind of walking us through that. Lauren, I’m just curious from your perspective. What does bad look like when I do business in emerging markets like you talked about like what good looks like from like the UI, you actually inflation, all this stuff. What is bad?

Lauren (26:16)
really, it’s the same concept just in the reverse, right? It usually looks like the checkout that works technically works. It does everything that it’s supposed to, but it clearly wasn’t designed for that local user in mind. And we’ve gone through a number of examples where they may not support the currency or the language or the payment method. And I think in particular, the most…

The worst thing you could do is not support the main payment method because in some markets that instantly excludes a large portion of the potential buyers. So, ⁓ and I think that another, another one is what, what issue is interface friction. Things that slow the checkout pages down. So it might be confusing form fields or a heavy checkout with number of steps to go through. know, Siddipto alluded to this earlier where in some of these emerging markets,

You’ve got users mostly on their phones and they need a light touch and quick checkout that can, you know, just one, two, three clicks and they’re done. So, you know, especially in regions where the connectivity is not necessarily very good. So you want to, ⁓ you know, really reduce that friction as much as possible. Because any friction friction that you add to a checkout, any additional input fields that are not necessary, any clutter. That’s bad. You want to just get that, ⁓ buyer with that.

end customer focused on checking out as easily and as quickly as possible.

David (27:46)
Yeah, that’s really interesting that you bring up page load time in emerging markets. There is a gentleman I got to know who created one of the famous web page test tools out there. And he had created it at a time back in the AOL days when AOL engineers were testing page load times, but they were testing it from like inside the data center and they were like every web page loads great. And he was like, no, you got to test at the other end of a dial up line at that time.

And I know that we’ve gone through phases of that here at FastSpring where like we’ve optimized based on page load times in specific regions. And that’s actually one of our claims to fame is how well we do at page, flip my notebook up there, how well we do at page load times in these emerging markets. And I think that’s a thing a lot of people miss when they’re thinking about getting into PIX or India, like maybe they’re using a CDN, a content distribution network or.

Maybe they have localized hosting or something, but they haven’t really paid attention to their load time in that market. Is that something you’ve seen a lot of? You know, you brought it up there, Lauren, or don’t know, Sudipto, do if you have any thoughts on that on the infrastructure side, but is that a common miss that people do when they start focusing on emerging markets is like testing their speed in that market.

Lauren (29:03)
It’s definitely a common miss. you know, this is partly why we at FastSpring spent a lot of time and energy getting much more accurate measurements and then from there optimizing for those local markets. And we really did see the load times differ quite substantially across those emerging markets. And really, when you’re talking about load times, the

The golden number is almost two seconds. It’s not necessarily achievable, but that is you don’t really want to go much over two seconds. You just want that, you know, that seamless experience. As soon as it goes longer than two seconds, people start wondering, what’s going on here? And that’s where the conversion starts dropping. But it’s definitely something that you need to put some thought into how you can measure the load times in different markets. And you have to put a lot of energy and time into it. So I think that is a lot of companies then.

maybe to make shortcuts or maybe they don’t even realize they need to do that. So ⁓ we can definitely help on that side.

David (30:02)
Yeah, that makes sense. The other thing I’ve seen in the past is people say things like, oh, well, you know, in India, most people don’t have computers, so you need to optimize for mobile. And what I’ve also seen is people don’t necessarily pay attention to their own traffic in that emerging market. They take that little nugget of truth they learned and apply it. But then they sell like downloadable software for PCs. And it’s like, well, yeah, but.

all your customers or most of your customers are probably visiting from a PC. So like looking at your own analytics and determining like really what devices should I be doubling down on. There’s another myth I’ve seen people do when they take these little factoids about a country and then, you know, try to apply that to reality. All right, Sudipto, I’m going to ask you next, because I know this is like something you’ve been working on, if offspring launched UPI subscriptions recently.

Tell me about that and what special considerations one might have with subscriptions in emerging markets. Is there a special set of considerations for subscriptions when attacking emerging markets?

Sudipto (31:04)
Yeah, David, thanks for asking. Yes, we launched UPI AutoPay in India recently and we see a strong adoption there. And let’s take a step back and tell you more about subscription and how things are working in India. There’s a psychological shift in affordability amongst customers. So consumers are increasingly prioritizing access and flexibility over ownership. This is reflected in the own less experience more motto for the millennials and the

urban population. This is close to what I have experienced and I would like to give a small example. Subscription is not new to India. It has always been part of our culture. We have subscriptions for the regular milkman, we call it the doodhwalas, the newspapers and so on so forth. What has changed is we have moved all the subscription away from traditional offline channel to online channel.

and UPI being the most dominant payment method is basically shifting that entire offline traditional cash based payment to digital online payment. And no matter whether you’re selling a physical goods or a digital goods, UPI is bread and butter. If you think of any scenarios where you know that the customer will subscribe to this product and they would like to use this product, you have to offer UPI AutoBee. There is no other way around or else

you will rely on somebody who has already left the market 20 years back, like me, who has left that market, the inner market 15 years back when I moved here. So, U-Pay AutoPay is a great product and the psychological shift is basically driving all the customers in India to adopt to more, like adopting to own less and experience more and more too.

David (32:55)
You say that a consideration though, maybe India is a bad example for this, but are there other markets or even populations within places like India where they’re not ready for subscriptions yet and you should consider like a prepaid model instead? Is that another thing to think about when breaking into an emerging market?

Sudipto (33:14)
Yeah, absolutely. There are tons of market where subscription is not the way to go. So I’ve closely working with customers or partners in China and other South Asian countries. And those markets are again, huge market when we look at the customer base, but they’re not very keen on using the subscription model. They are very keen on, hey, if I want to use the product, I will pay for the product at that point of time. They are more savvy towards make it simpler.

the thing that Lauren brought up. Load it quickly, make the load times faster than possible. Also, they’re like, hey, I know what I want. I don’t want you to auto charge my payment method because I want to have more authority over the payments that I’m trying to approve. If you look at China, if you look at other Southeast Asian countries, they’re more reserved towards the subscription approach. They’re more inclined towards make it secure, make it faster for me.

Let me take a step back and think about my subscription auto recording purchase for a while.

David (34:18)
Yeah, and I know different countries have had different like surges of sentiment for and against subscriptions. I know that’s a challenging dance. Is there also like regulations and laws you got to pay attention to with stuff like that?

Sudipto (34:31)
Yeah,

that’s a great point, Devi. The regulation is also one thing that drives the payment partners like us to ensure that we are not tipping on some regulatory cleaves or some regulatory challenges. There are multiple countries and some of them are coming up in EU also where they are promoting more one-time purchase rather than subscription purchase where they want to give visibility to customers about how much money and who is going to collect from you. So they are more…

the inclining towards. If you do one-time purchase, we know that who is authorizing the payment and when the charge will be. But for recurring purchase, because that happens, it’s an invisible passive income, right? So that happens behind the scenes. So as a customer, I have less more clarity or less more visibility into when the charges will happen. So certain governments are taking this approach of only pursuing the purgatory product. The motto is, if you want it,

you pay for it at that particular point of time. You don’t have to set up and forget it.

David (35:33)
Yeah, that makes sense. Lauren, what about from your perspective? Are there any other considerations folks should think about when thinking about subscriptions in emerging markets?

Lauren (35:43)
think Sadipla raised a really good point about the regulations and the one thing that I keep seeing is that these regulations are evolving continuously, you know, and coming into law and you have to respond, you have to be quick and you have to keep up with that. And it’s absolutely, as Sadipla said, it’s all going towards that transparency of what exactly you are buying with the subscription, what are the charges going to be.

So you really just have to keep your pulse on all of the markets that you’re working within and make sure that you’re up to date on those regulations and adapt accordingly. That is one of the things that we do at FastSpring is we are constantly scanning what are happening in the different regions, in the different countries, and making sure that we update our regulatory, whatever it might be, but elements.

so that we keep our customers safe so that they can just continue to sell through us safely and within compliance.

David (36:47)
So if I have built and maintained my own payment orchestration layer, it’s more than just like seeking some product managers to research how to do it and be compliant initially. I have to then implement all that the right way and to keep up with it and modify it over time.

Lauren (37:06)
Absolutely. Yes, that maintenance is a large piece that is continuously ongoing.

David (37:14)
Yeah, and it’s interesting to think about it from the compliance perspective. And I know people get, you know, kind of freaked out about fines and stuff like that, which obviously is concerning. As a marketer, I think about conversion rates and like if I’m delivering an experience my customers aren’t expecting or aren’t used to, and obviously that’s going to have an impact. And I might walk away from going after emerging market thinking like, geez, it didn’t work. I guess that market’s not for us. But the reality could have just been I was bad at localizing that.

commerce experience, which I think is a really interesting perspective you guys have shared kind of throughout this interview. So now I’m going to ask you both the same question to wrap this up here. Lauren, I’ll stay with you. If people just remembered one thing from what we talked about today, what should that be?

Lauren (38:01)
It’s really what I’ve been saying all the way through the interview, which is don’t assume that you know the market that you’re going after or the customer within the market that you’re going after. What is tried and tested in a well-known market, you cannot shift and lift that to a new market. You have got to do your due diligence. know, a company might do everything right, have a great product, great marketing, global reach. But if the checkout experience feels unfamiliar or confusing, people simply won’t complete that purchase.

David (38:32)
That’s a great one. What about you, Sudipto? If people only remembered one thing today, what would that be? Should that be?

Sudipto (38:38)
Yeah, for me, it will be the psychological shift. It’s happening, which is opening up new opportunities. As long as the products are affordable and meet the customer demands and you make it affordable and easy to pay, you will find customers. When I say affordable and easy to pay, I’m leading towards offering local payment methods. Do not expect or do not wait for someone to tell you that the market is evolving. Look around, do your due diligence, and you will soon see the markets which are opening up and

where you should focus on. At Am, Africa are two big examples where I believe based on working on this whole portfolios, we see there are a lot of opportunities and we truly believe the customers are there. We need to just position ourselves in a way that it becomes easier for ourself and our customers to be enhanced. We are focusing on those regions more.

David (39:35)
Excellent. Well, thank you so much, Shadipta. Thank you for being here today.

Sudipto (39:39)
It’s always pleasure to be with you, DV and Lauren.

David (39:42)
Thank you, Lauren, as well.

Lauren (39:45)
Thank you so much for having me.

David (39:47)
If you’d like to learn more about what Sudipto and Lauren are up to, can visit fastspring.com. Again, thanks for joining us here for Growth Stage. I’ve been your host, David Vogelpohl. I support the digital product community here at FastSpring as part of my role. And I love to bring the best of the community to you here on Growth Stage.

Chip Thurston (00:04)
Hello everyone and welcome to the Growth Stage podcast by FastSpring, where we discuss digital product companies and how we can increase the value of a business with FastSpring. I’m your host today, Chip Thurston. I’m the head of gaming at FastSpring and I look forward to bringing you deeper insights on marketing and monetization in the gaming industry. And in that vein, today I am joined by the CEO of Game Data Pros, Bill Grosso.

Bill, how are doing today?

Bill Grosso (00:33)
Doing great. Thanks for having me.

Chip Thurston (00:35)
Yeah, yeah, course. Thrilled you were able to join me. ⁓ A peek behind the curtain for our listeners here. We’ve been a little star-crossed getting this on the calendar. We planned it for January, had to push it back, planned it for February, had to push it back. And here we are at the end of March, but we are talking. It is happening today.

Bill Grosso (00:53)
yeah, and you know in a very real sense, I mean it’s much better this way right? One of things we wanted to talk about was predictions for 2026 and we get to view the predictions not only through what was predicted but also through what has happened and sort of do a little bit of an update there. So you know I think this is actually fortuitous.

Chip Thurston (01:13)
Yeah. Yeah, that’s a good point. In fact, it would probably be even better if we did your predictions for 2026 in like December and then your predictions will be true. The year will be done. ⁓ No, no, I’m being glib but I do think, yeah, it’s great that we can record a few months into the year because you posted these predictions back in December of 2025 for what would happen in 2026. And now that we’re a few months in, we can really reflect on those and meditate on

and think, okay, what has already come true? Or maybe what would you repackage a little bit now knowing what you know with the beginning of 2026? So I’m excited to have this discussion for you today. So what we’re going to do is we’re going to go through your predictions for 2026 one by one. You made seven bold predictions, I would say, what will happen this year. Before we do, I would love for you to tell me a little bit and tell our listeners a little bit about Game Data Pros and what you do there.

Bill Grosso (02:07)
I’m happy to talk about Game Data Pros. What we are is we’re a small consulting company focused on optimization in digital entertainment. grew out of my work at Scientific Revenue, one of the very first dynamic pricing and machine learning startups in digital entertainment. And what we do is we essentially analyze data, propose solutions, help companies understand their performance with respect to industry best practices.

Sometimes we build prototypes, sometimes we don’t. But a lot of it is focused on if you capture the right data and then you look at it, what can you tell about your game performance? And what can you tell about your application performance? So a lot of it is actually focused around user acquisition or your user acquisition campaigns working correctly. A lot of it is focused around pricing and a lot of it is focused around retention.

The practice goes deep into experimentation, deep into multi-armed bandits, and deep into predictive analytics. as part of that, we look hard at industry trends because one of the things we try to do is understand if the industry is moving in this direction, how does that impact the data you should collect? How does that impact how you should structure your predictive analytics and your analysis?

Chip Thurston (03:24)
I love it. And that’s such a valuable service you provide, especially in the predictive side, being able to tell where these trends are going. And I’m especially excited to talk to you today because this will be such a broad topic. So much of what we talk about at FastSpring is the direct to consumer space and we will touch on that. And that’s one of your predictions. And that’s certainly what my expertise lies. But the other six that we talked about of your predictions will touch on all sorts of topics from PlayStation 6 launch to Grand Theft Auto 6 to

and many other topics that we’ll get into. So it’ll be a great far ranging conversation. And the other reason that I’m excited to talk to you today is because you make these bold predictions each year. I was looking through your 2025 ones and was pretty impressed. Can you tell us about the success rate you had on predictions last year?

Bill Grosso (04:10)
Well, I mean, there’s two different notes to thank you, first and foremost, both for reading it and for, you know, saying nice things. The interesting thing about predictions is you get to see which ones were correct, and that’s interesting. And it helps you correct your thinking as well, the ones that were wrong. But then the other part is you get to see the trends you totally missed. And that’s something that I think is perhaps the most interesting thing about predictions in gaming.

Every year, starting roughly November 15th, going through January 15th, about 100 people do this. some people are predicting just for their segment, some people are doing more general predictions. But then you can look at this and say, this is the consensus opinion among the people who are willing to make predictions of where we’re going. And then you can go, OK, ⁓ how did we do?

And I always think that the trends we miss are perhaps the most interesting thing. fast forwarding to this year a little bit, it totally wasn’t on my radar that Phil Spencer was going to retire and that Microsoft was going to be completely rethinking their Xbox strategy. And that’s like, ⁓ you know. And so I think, you know, the metric is like, if you look at the 2025 predictions, I think six of the seven came out correct.

And I did this thing where I, you know, everyone always believes their own predictions. ⁓ So I actually, I went out to Chat GPT and I think it was GPT four at the time. And I said, you know, assume the persona of an industry pundit and assume the persona of an industry CEO and, now grade this. ⁓ And that’s sort of an interesting change in the world as well. You can actually take somebody’s predictions and you can feed them into an LLM.

know, Chat GPT is now at five four and you can say, what is the evidence that they were right? What is the evidence that they were wrong? What is the systematic gaps in their thinking? or what are the systematic gaps in their thinking? And you can use that to not only know whether they have a track record of being correct, but to know where they have a track record of not paying enough attention. And that’s a fascinating thing. You know, candidly, I’ve been doing that.

Like, I made these predictions, this is what I think is gonna happen. But I do monitor my own predictions. Are they coming true? What have I missed? What are the changes? And that’s sort of the really interesting thing as you watch the evolution gaming industry.

Chip Thurston (06:41)
Yeah, yeah. And I especially appreciate the notion of the predictions that you don’t make are where we can really learn because there’s things that maybe we didn’t see coming going into the or we as an industry didn’t see coming. But then when we look back at the year, that can really inform where the next year will go. And I think that’s a really good place to start with where we go with your predictions of and I’ll quote here seven things that are absolutely going to happen in twenty twenty six. Love the title.

and the confidence there. ⁓ So we’re just gonna run through these in the order that you posted them on your site. Of course, gamedatapros.com. You wanna go through the full article. But number seven, we’ll go seven to one. Number seven is the new normal will continue and revenue will be up and headcount will be down. Can you take us through this one?

Bill Grosso (07:28)
Yeah, I mean, so basically this is sort of the safest prediction, right? If you look at the past five years, the peak years of COVID through today, you know, the gaming industry over expanded during COVID. A lot of people were, you know, under house arrest, essentially, record highs in video game playing record highs in a lot of different, you know, entertainment software categories.

And so there was always going to be a contraction from that. ⁓ The rise of AI as well. There’s a lot of efficiencies, horrible term, but there’s a lot of things you can do with fewer people now. And so that contraction exists and has existed for a while. And it’s still showing up. I think GBC this year announced that they had an attendance of about 20,000 people. So that’s Game Developer Conference.

It’s one of the top five conferences in the world and it’s the North American top gaming conference. And 20,000 people sounds like a lot, unless you realize that last year it was 30,000 and pre-COVID it was 70,000. And you look at that and you’re like, okay. And there’s a little bit of an industry blinder around that. The number of people posting on LinkedIn that the conversations were absolutely great and absolutely energizing. it’s like, yeah. ⁓

When you lose the 50,000 people who weren’t true believers, yes, the conversations are gonna be exciting and energized, but still, the fact is if you’re down by one third over a year, that’s not a good signal. And at the same time, know, Epic just recently announced a thousand-person layoff. It’s a 20-person layoff in a company that is one of the poster children of success. Fortnite was a monolith, right? Apparently it’s not doing as well, but…

It’s interesting that GDC is much smaller. There are alternative conferences springing up. like PocketGamer Connects are adding cities where they bring the conference to you as opposed to having you go to the conference. And that’s a great service to the community, but it’s also a sign that maybe budgets aren’t where they used to be and we can’t really afford to send people on a week long trip to San Francisco anymore.

And then just the ongoing layoffs. In North America over the past three years, it’s been a 40 % layoff. And it’s continuing. And it’s continuing on a weekly basis.

Chip Thurston (09:51)
There are a few interesting points you brought up there. One is we are seeing the unfortunate continuation of the layoff trend you mentioned Epic. I also saw the Eidos Montreal was just announced this week in terms of, it seems like each week or every other week we’re seeing these big headline studios announce other contractions, as you said, ⁓ which is unfortunate. I think that

the flip side of the coin there that you mentioned is the events and how we’re seeing those events shape up. And it is really interesting to me that we’re seeing these more targeted events come up. You have the giant events of a GDC and a Gamescom, which still have a place in the market and this really special way of extracting global decision makers and strategic conversations and having those take place at those events. ⁓ But I almost see it as an evolution of the events now that we have more targeted, maybe regional

events, where you have some maybe in Toronto, or you have some in London or the Nordics or in Spain, and we’re seeing them pop up and be a bit more targeted, and it will be a smaller audience, but still extremely relevant to that audience. And maybe that’s a function of ⁓ where we’re heading with the investments that these studios are making, as you said. But I think that will be really healthy evolution from the event standpoint and making those meaningful connections on a regional

of those events too.

Bill Grosso (11:12)
absolutely. ⁓ And then the other part of it is, ⁓ you know, with the rise of generative AI, and there’s all sorts of controversies about, you know, it’s proper role in gaming that I’ll just sort of skip over. ⁓ It’s possible to build a game company that is much smaller and yet successful. I know a number of people

who have said, I don’t need to be within the corporate studio umbrella, and I don’t need to have 200 people in order to produce a good game. The marketing apparatus, like last week or two weeks ago or something like that, Applovin sort of started pushing hard on, we can generate your creative for you and target it. Something that Meta started pushing on last year, right? They can evolve the creative and target it for you.

and you can target more and more smaller and more niche audiences. And so that’s interesting because the advertising portion, the user discovery portion used to be one of the primary functions of publishers. To some extent, the networks are taking that over. And you don’t need as many people building the game, you don’t need as many people doing the artistic part of the game.

creating the creative and the imagery and so on. And what that means is you can have a smaller, lean game company, but now if you’re a 20 person game company leveraging all of these things, do you really send people to San Francisco? No, you’re best served by a conference in your country that brings the things that you’re interested in to you. And so I think it sort of naturally dovetails.

As we go more towards single-A or double-A and indie style game companies, and as the fabric of the game studios changes, the monolithic conferences still have a role, but it’s a much smaller

Chip Thurston (13:04)
Yeah, yeah, absolutely. think we’ll see that role continue to play out. And I do want to make sure to advocate for the human value in those disciplines as well. Anything from art to engineering to production, like we do see the capability quickly evolving on the generative AI side. ⁓ But I think the incumbent experience and knowledge and just systems that we developed over time.

still have immense value. And so I think we’re in this interesting inflection point where I think it’ll take a little time for that to balance and settle. And we see what really the optimal path forward is. And really, there’s not a single optimal path forward for a given studio. think in some cases, it will be the hyper AI side of it, where it’s a truly AI-powered studio. But in others, it will be much more human-driven and human-powered. And I think both can be completely viable for good game production.

Bill Grosso (13:58)
Absolutely. AI actually makes people who have a vision much more effective. And then the other thing that it does that is underappreciated, at least in the public discourse, is it enables cheap experimentation. Right? If I want to just try an idea, that used to have a lot more barriers. Doing the creative for a wacky idea used to be hard. Right? And so, you know,

Not only are we enabling people who have specific visions of what they want their game to be, but we’re also enabling larger scale experimentation. The barrier to, well, let’s try it and see what it looks like, is much lower. And so I think we’re actually about to enter a year of massive innovation across gameplay. And that’s going to be powered by expertise.

Chip Thurston (14:46)
Agreed. Agreed. I’m excited for the innovation that will come. like Bill, I knew this would happen. We’re on track for I think like a two hour podcast here. So we got to pick up the pace a little bit. We’ll try to go a little faster through these next predictions so we can not keep people on the hook for too long. Number six, adjacent verticals will continue to staff marketing teams from mobile gaming. So I think this is a really interesting

contrast with your previous point of if there is this continued reduction in gaming, you’re saying that there’s this ⁓ other outlet that those gaming people can go to. Is that right?

Bill Grosso (15:24)
Yeah, absolutely. we saw a lot of fairly high profile moments in 2025 around this. ⁓ know, I personally, ⁓ know, Kimberly Corbett became the CMO at Underdog, which is a fantasy sport. So she moved from Fortis to Underdog. And Jeff Gurian became the VP of growth at PrizePicks. And those are both very clear examples of an adjacent vertical.

fantasy sports, valuing expertise that was primarily generated in the gaming sphere, around marketing, around user discovery, etc. etc. And I think we’re seeing that play out. And you know, the clearest evidence we have of that is we crossed a threshold in Q1 of this year, which is non-game revenue exceeded game revenue in mobile app stores. ⁓ And you might say, but it’s true, mobile gaming

was more than 50 % of the revenue in the app stores for a long time. Games are a very popular thing. And what we’re seeing is the world has moved to a point where phones are the way you interact with everything. I was first surprised and then utterly delighted by the fact that Claude Code now has this thing called Dispatch, where I have agents doing things for me and I can be out on a job.

and check in with my agents via the phone, right? Everybody got a phone and that’s a really interesting thing. And the revenue on the app stores is now more than half non-gaming. And that means all this expertise we developed in gaming around how to manage mobile apps, how to manage mobile experiences, how to queue things up, all valuable. And so we’re seeing this continued, okay, gaming is contracting a little bit. Non-gaming is increasing its revenue share.

and the skills we developed in gaining are bleeding over

Chip Thurston (17:19)
Yeah, yeah, that’s a great point. think it’s extremely transferable. And I think even in more disciplines than people might realize, because I think the first place people might go with this is something like marketing, right? If I’m trying to get installs for my game versus get installs for my non-gaming app, it’s very similar in terms of the strategies, the vehicles you may be using.

and all that, but even for something like product management, ⁓ like live operating, retaining users on a mobile app versus retaining users on a game. Sure, they’re not gamified maybe as much as a game literally is and you have that day-to-day gameplay, but things like live operations are still very critical for mobile apps and finding ways to engage the users of a mobile app. And so I think what is really interesting to watch for me is the ways that

those skills and that perception continues to evolve of how all those various disciplines can translate to ⁓ non-gaming apps.

Bill Grosso (18:19)
Absolutely. One of the consulting engagements we did last year was essentially explaining to a non-gaming company what a core loop is. it’s like, central to the idea of a mobile game is there’s a 10 to 20 minute core loop where you achieve a thing, and then a lot of times you’re dropped off in the metagame to collect some rewards. And then the core loop, you go through it again. And it’s very carefully designed for how long people are willing to…

How long do you wait in the Starbucks line? You know, I mean, because that is the unit of time in a mobile app. ⁓ And so you have to structure your activity that way. Gaming took 10 years to figure this out. The 2010s were all about figuring out how to architect core loops. And it’s a very valuable lesson in almost every other field of mobile application. And so that’s an interesting product management exercise.

Do we have a core loop that fits into the amount of time people are going to interact on their phone before they get distracted? And have we made it obvious what the next steps are? do we have, et cetera?

Chip Thurston (19:24)
Yeah, yeah, that’s a great example. And you reminded me one I will stack on top of yours, which is direct to consumer revenue. We’re seeing more mobile app stores make sure they have their own web stores. And they’re thinking about the user journey of how the user gets from the mobile app into the store. And especially because there’s often mobile apps are subscription based. And so thinking of having a good subscription manager on the web store, which is something we don’t see be as common on the gaming side.

and FastSpring is really well suited for both of those cases, but I think more broadly in the industry, it’s going to be interesting to see how those evolve.

Bill Grosso (20:00)
ties into some of the other things we’re talking about as well, because as we look at the evolution of the industry, mobile gaming talks a lot about discovery and how discovery has gotten much But a big part of that is the new players that are entering have businesses in other verticals. Mattel just bought Mattel 163.

So they had this joint venture that did mobile gaming and Mattel is a toy company. And they decided, no, we’re not really a toy company and we need to own our mobile gaming company. So they bought it or they need to own that. And so they bought it and they’re doing these other games, which are not all entirely mobile and they sell things that are not digital, right? And there’s an entire, we want to have a relationship with the consumer.

that goes past the mobile app store. And we want a unified ⁓ customer experience. We want a unified wallet. We want a unified idea of who this person is as they interact with us as a larger entity. And that plays into the whole web store idea, the whole D2C idea. That’s a place where think companies like FastSpring have an enormous advantage.

Chip Thurston (21:15)
Absolutely. Absolutely well said. So I’m going to keep us moving here. Let’s get to… Well, we’ll try to do some of these pretty quickly. I think we’ve already covered this one for the most part with some of your ideas about innovation and how AI will facilitate that. But number five is that mobile apps will continue to get weirder. Can you quickly explain this one?

Bill Grosso (21:36)
Yeah, mean, so a large part is ⁓ AI lowers the barrier to experimentation. You can try new things. A large part is that the capabilities that are being built out in the SRNs, the large scale ad networks that do analytics, meta, you know, et cetera, enable micro targeting. And a large part is that there’s just enormously increased competition for attention.

If you look at the Q4 statistics for 2025, the ⁓ rate of submissions to the app stores continues to just go up. Barriers to building it can go down, rate of submissions goes up. How do you rise above the noise? And so you put those back to back and you say, the ad networks have enormous micro-targeting capabilities and the ability to evolve your creative. And the marketplace is frothier and noisier than ever.

If you do your creative yourself, you have the ability to try new things at very low cost. And you put all of this together and you just see an explosion of, you know, and it’s not like, that’s completely unprecedented, but you sort of see that we’re sort of gradually drifting towards more and more interesting ads, which is fun. you also see a lot more scammy ads. The number of, you know, you need to update your game and it’s actually an ad for a different game sort of thing show up as well.

But the market is essentially trying whatever will work. And the tools enable the experimentation.

Chip Thurston (23:01)
Yeah, yeah, absolutely. The anecdote this one reminded me of is in my time in game development when I was overseeing user acquisition for a mobile game I was working on, the bottleneck for us was ad creation. And we were working on using playable ads. And the lead time to create a playable ad was several weeks. It took a long time just to get the creative direction aligned, then we get it created with an agency, and then we get the feedback.

or we provide feedback from that, have to iterate. Anyway, it became this long drawn out process to go from concept to launch was over a month. Well, now we have a partner that we co-host an event with called Playables.ai and they just can crank out playable concepts very quickly. And I think about that from a game development standpoint, wow, if I had had that tool when I was doing this, I could have easily found what would have been the most successful playable. Throwing several concepts out there.

learned from it, iterated from it. And I would say had much more successful UA, but at the same time, I have to recognize that my competitors are doing the same thing. And so it’s, yeah, yeah. And so it becomes, I think, more challenging in the user acquisition space and an already challenged space. But also the opportunities there, and it requires you to really invest in those tools to quickly iterate and to quickly think of different concepts. Otherwise you’ll

quickly fall behind.

Bill Grosso (24:25)
Well, and so this is also sort of, there’s another step to it, which is, I’m an advisor at an incubator ⁓ called Berkeley SKYDECK. It’s sort of a program that’s run in conjunction with UC Berkeley. And one of the companies I’m advising is a company called Vectorial, which basically builds synthetic users out of marketing data. So for example, if you have a game or you’re going to compete against the game,

you can create a synthetic population using the Reddit groups associated to your competitors and then try out your ads there. And that’s a really interesting idea because you can create ads faster. You can also, you don’t have to put it out on Meta pay tab at display to 10,000 people. You can sort of get quick feedback from synthetic focus groups. And that’s early days. It’s fascinating stuff and it works really well, but it’s

not widely adopted yet, but that’s also going to be a driver. So like if you go back to your UA days, it’s much cheaper to do the final creative. Absolutely. And that’s a revolution. But now you can also at the concept stage, even before you generate the creative and without having to go and buy the ads and wait a week, you can actually get a first pass evaluation from synthetic users.

Chip Thurston (25:44)
Yeah. Wow. That’s awesome to have feedback even before you’re launching the app ⁓ from a focus group of how they can perform a synthetic focus group. ⁓ Okay. So let’s keep it moving here. We got number four, GTA 6 will ship and the live ops backlash will end. Can you tell us about this?

Bill Grosso (26:01)
We

don’t have the evidence on this one yet. you know, ⁓ at GDC, I was talking to whole bunch of people and opinion is divided as to whether it’s October or November, or whether it is ⁓ next February. And the argument for next February was essentially because AI is consuming all the memory.

you know, the PS5 and the PS6 and the next generation Xbox are going to be delayed and more expensive. And therefore Rockstar is going to have to go back and make GTA 6 perform on current generation hardware. And that’s going to cause the schedule slip. But that was entirely, you know, late night drinks and hotel bars, you know? I mean, there’s no, there’s no public evidence yet of that. ⁓

Chip Thurston (26:50)
Yeah, so from what we know, still penciled in for ⁓ Q4 this year, but there is a chance that that doesn’t happen. you mentioned the LiveOps backlash will end, and I assume your meaning here is that Grand Theft Auto is such a well-monetized and well-respected game that players will be okay with the LiveOps monetization structure within Grand Theft Auto 6. Is that right?

Bill Grosso (27:14)
Yeah,

I mean, they’re okay with it in five, right? Five is sort of the poster child of effective line ops. so if you go back 20 years, there was this extraordinary backlash against the idea of in-app purchases and in-app transactions, right? And, you know, gradually people, got normalized, people got used to it, people understood that like, okay, you get the game for free. And then if you really like the game, you can enhance the experience.

And we developed a whole set of rules, you know, we can’t do gotcha except in limited cases, we shouldn’t put loot boxes in front of children, there’s now a societal framework for what constitutes acceptable IAP. And you know, there’s still a certain amount of, I really don’t like in-game events or I feel like they’re exploitative. And the point is,

that we’re now going to evolve the societal rules. And what we really need is a couple more large scale success stories to sort of outline the acceptable best practices.

Chip Thurston (28:13)
Okay, I love the prediction there. I feel like the backlash will always exist. That’s my prediction. Players will find any excuse to get out the pitchforks, but we’ll see. I take your point and I agree. I Grand Theft Auto will certainly help drive the case forward and really demonstrate effective live operation of the game.

So number three here is that Apple will drop the standard rate to 15 % and Google will be a fast follower. What is your reflection on this one?

Bill Grosso (28:52)
Yeah, I got that wrong. Google came first. ⁓ I’m a little surprised by that. But that’s part of the Google Epic settlement within the past month. Essentially, the point is, for a long time, there’s been this 30 % rate in the mobile stores, right? And actually also on the Xbox store and so on and so forth. And the question is, what does that really get you?

And it doesn’t get you enough. And that was Epic’s point writ large, right? I’m giving up 30 % of my revenue for the privilege of being listed in an app store that doesn’t really do much for me other than I get listed in that app store and it’s sort of the choke point onto the device. And so, know, Epic did ⁓ the high profile lawsuits. You know, you could argue that Epic lost billions in revenue as a result of that. But the walls are crumbling.

and they have been for a while. They’re alternative app stores. When you sort of look back to what I said earlier about Mattel 163 and wanting to own the relationship. mean, all of these things, you can do them and you can do them well and FastSpring does them well. And you can help people take payments. You can help people handle taxes. You can help people.

understand the overall fabric of how to do monetization and sales and purchases and processing payments well. And that’s not a thing that’s worth 30%. ⁓ And so it’s an interesting question. Why is Apple kept at 30 %? And the answer is because they can. ⁓ Would you give it up? No, I wouldn’t if I didn’t have to. ⁓ But it’s crumbling And then the Google cave, well, that’s probably too soon.

But that Google has negotiated with Epic and they’ve settled and Google fees are dropping is really interesting. ⁓

Chip Thurston (30:42)
Yeah, yeah, it is interesting. And also the fee amount. So the fee dropping to basically an all in of 25%. If you’re an install and you’re not involved in the level up program, which is the general

take from publishers. And so if we’re still 25 % there for like 20 % service fee plus 5 % billing, that makes me still very confident in the future case for direct to consumer. Why I feel this settlement is actually, as we’ve learned more about it, very ⁓ impactful for the future growth of direct to consumer. One part is that it legitimizes direct to consumer revenue.

But up until now, it’s been kind of this gray hat territory of like, how can I get my players out of my game into my web store, but without the platforms knowing too much about what I’ve got going on here. And this is saying, this is the policy that in this case, Google has defined and we expect Apple will be a fast follower to define similar policy. And so now we’re operating within that policy and driving revenue in an effective way. And there’s no constriction on messaging.

within this policy, which is another big change. Up until now, they’ve been very prescriptive, they being the platforms, have been very prescriptive about what I as a publisher could or could not say about my web store, talking about the percentage bonus or just that the store exists and having these draconian policies and this doesn’t have any restriction on the messaging. And beyond the messaging component, it’s global in scope. At least Google intends for it to be global in scope. Up until now, the main

case for steering has been inside the United States. And with this settlement, Google has said, no, this will be our new global policy. Now, I’ll caveat this saying that that doesn’t mean every country globally will accept this policy. Different countries will have different appetite for it. And we’ve seen this pop up in different regulations otherwise. So that’s something we’ll have to continue to watch. But the fact that Google is saying that they’re intending to roll this out globally is extremely significant. ⁓

And the last part is that, it’s cutting Google into these revenue streams, which I think is great in terms of that partnership, but also the fees that Google takes are limited in scope. They’re very specifically applied to when you link a player directly from your mobile game into your web store. If a player gets to your web store through other means, like an email campaign, a content creator, social media, even direct load, where they’re just coming back to make another purchase, you’re not paying that fee to…

the platform, you’re just paying it to your merchant record like FastSpring. And so it still becomes this extremely valuable revenue stream for you. And so those are, as I’ve thought more about this settlement, I’m like, wow, this is really going to accelerate not just adoption as people get more confidence in the state of D2C, but also just the growth and the potential for what we can achieve here.

Bill Grosso (33:32)
Yeah, I mean, and the nice thing there is exactly the last part you said. It’s like, okay, so now if the person comes to my, if they’re a fan of the game and they’re used to buying things or they’re thinking about making a purchase and they know about the web store and they go through there through an alternate means.

the platform doesn’t get anything, right? ⁓ And that’s interesting. And so now your incentive as a game company, when you’re small and you don’t have very many players, focus on the game, focus on growing the game. But as you start having a significant revenue stream, your focus shifts at least a little bit towards building a permanent direct relationship with the consumer. that’s actually a little bit of a change. didn’t, know, if you go back.

you know, five to 10 years when the only payment option you had was in the game, you know, why would you maintain that outside the game relationship? And we see lots of really interesting things, you know, so like the Supercell store is the Supercell store and it sells stuff for all the Supercell games. And that’s an interesting little change, right? I mean, it’s not a big deal, but it’s an interesting idea because it means, you know, we have a suite of games and you can see them as you interact.

one game you see the other games and you’re just sort of subtly made aware of the variety of different things, right? ⁓ And so you know now you start to say my goal as a game company is to establish a direct relationship with the consumer outside of the envelope of the platforms, outside of the Apple envelope, outside of the Google envelope and that’s a place where I think FastSpring plays well as well.

Chip Thurston (35:12)
Yeah, absolutely. The relationship will be critical and the data that comes along with that, that you get from facilitating those direct purchases, things like email addresses, will enable so much more just optimization and really understanding your player base in a way that just purchasing through the apps does not.

We’ll go ahead and go through the last two here. And I think this is a good time to insert the asterisk that the views and opinions here and the predictions are those of Bill Grosso and they are not reflective of myself or FastSpring I am going to abstain from commenting on this one, but I will tee it up for you. Your prediction was that Elon Musk will begin to talk extensively about the Neuralink as the ultimate gaming platform. Go ahead.

Bill Grosso (35:56)
Well, every set of predictions has to have something that’s a little bit forward thinking, right? And it’s an interesting thing, right? So, know, Elon does Tesla, does Starlink, etc., etc., etc. But one of the things he has is this company called Neuralink, which has early stage clinical trials where you’re essentially inserting electrodes into people’s brains. And that’s a really, really valuable technology.

If somebody is partially paralyzed, they get the ability to manipulate things by thinking about them as opposed to moving their hand over there and things like that. It’s an enormously powerful assistive technology. ⁓ But it almost immediately started having people thinking really, you

what if I didn’t have to move the mouse, right? What if I could just think and I could get more precise control, right? That impulse happened almost immediately. And we have a lot of really interesting precedents for things like this. So a friend of mine ⁓ ran a headphone company for a while. And the point of his headphone company was that it had sort of these very special speakers that went behind your ear.

and used subsonics and sending sound waves through the bones because they go faster than they go through air. And so these were incredibly expensive headphones that were positioned to send sound waves through bone because that way you got a tiny, tiny little advantage. You could react a little bit faster. And people would buy these and I’d be sitting there going, seriously? Seriously. That costs more than your console, you know that.

Chip Thurston (37:37)
You

Bill Grosso (37:40)
But nonetheless, people do that, right? ⁓ And we know that cheating is incredibly widespread throughout gaming, right? Anti-cheat systems are, you know, we don’t talk about them in public very much, but they’re endemic and they’re hard to build and players innovate constantly in performance enhancements. And so then you start to say, okay, so Elon Musk is an ardent gamer. He’s made various

public pronouncement of how important games are. He’s arguably lied about how proficient he is as a world-class player in several games. ⁓ I’m not gonna wade into that, but there’s evidence. And then you say, and he owns a Neuralink company. Okay, how long before those beams cross? And what we’re really waiting for is Tesla to have a bad quarter. ⁓ More than anything else, right? ⁓

because it’s a certain element of public distraction. And so Q1 of this year, there’s been a lot of really interesting clinical trials and clinical research. There hasn’t been a lot of focus on gaming, but as we move forward, I expect there will be. And that’s an interesting thing. I don’t know how mainstream that playing platform will ever be. We’ve seen that people don’t really want to have VR goggles. And so I think that bodes ill for the injecting, you

electrodes into your brain to play Grand Theft Auto better. But I don’t know. You know, that might actually be normal behavior in 10 years.

Chip Thurston (39:12)
Yeah, okay. Well, that is certainly a trend to watch and something we’ll be watching for in 2026. Like I said, I not be commenting on that. But we can go to your last prediction here, which is that the PlayStation 6 will be delayed until 2028. I think you touched on this earlier with some of the predictions that we had touched on at the top. But also, we’ve recently seen the PlayStation 5 price increase announced. And so I’m curious how you see that impacting a prediction here.

Bill Grosso (39:41)
Yeah, no, mean, the fundamental thing is I think this has been confirmed at this point, or at least it’s strongly on track. There have been announcements about DevKits not making it out for a while longer yet. And we also know that memory prices are through the roof right now. The AI boom has basically caused a spike in the price of all hardware. so you look at that and you say,

on any projection of what the PlayStation 6 is supposed to have in it as capabilities, it’s going to be a thousand dollar console, right? And you stare at that and you kind of go, okay, so it’s behind, we don’t have ship dates, we don’t have dev kits. And the recent spikes in equipment and component prices have indicated that when it ships, it’s going to be out of the reach of anybody. A thousand dollar game console is not

mass market device. And so that means that that cycle is going to elongate. And we talked about that a little bit because that goes back to the Grand Theft Auto VI question. If you’ve been building Grand Theft Auto VI on the theory that it’s really going to take advantage of the capabilities of the next generation of consoles and PCs and those elongate, do you now have to go back to the drawing board?

Do you have to rework fundamental systems to make them work on current hardware? And so it sort of has echoing going on.

Chip Thurston (41:10)
Yeah, that’s great point on how it can impact some of the bigger game launches that are coming up, certainly at Grand Theft Auto, but I’m sure other games could get caught up in that as well.

Bill Grosso (41:21)
And

then on the Xbox side, because this had sort of like, the Xbox will also be postponed, you know, we had Phil Spencer retiring. We had a whole set of leadership change on the Xbox side. you know, I don’t know what Microsoft is thinking. I have no connections there, but that certainly feels from the outside like a whole strategy rethink, which also feels like maybe it’s not full steam ahead on the Xbox.

Maybe we pause and think about what we want to be in there. And given that it’s 2026, that means 2028 for the Xbox as well.

Chip Thurston (41:55)
Got it. Okay. Well, in the interest of time, I think we’ll go ahead and wrap things up here. So we’ve covered your predictions, but one thing I do like to ask at the end is what is the number one thing people should remember about what you shared here today?

Bill Grosso (42:12)
that’s a great question. I think the number one thing I shared that I, it’s partially in this conversation, partially outside the conversation, I’m extraordinarily bullish on the future of video games. Owen Mahoney, who used to be the CEO of Nexon, wrote a blog called Size Matters. And what he basically said did some math. said, hey, you know what? If we assume that

people go from spending 45 minutes a day playing video games to 60 minutes, which seems like a reasonable assumption. And we assume that the world gamer population increases from 3 billion to 5 billion. Seems like reasonable assumption. Then you’ve essentially doubled the amount of video game playing that’s happening. That’s a really interesting thing to say out loud. You know, on the one hand, we have GDC shrinking, we have the layoffs, have, you know, the headcount reductions, et cetera.

On the other hand, the available markets increase, or is increasing dramatically. ⁓ And so those are interesting parallel trends. And then the third trend is what we were talking about earlier, where Applovin and Meta, et cetera, can do micro-targeting, and you can build a game with a much smaller team. You can build a high quality game with a much smaller team. And all of a sudden, it’s like the golden age of entrepreneurship in video games.

And that’s a really interesting, it’s not any of these predictions because like how do you measure it? But it’s a really interesting moment. We can build better games faster with smaller teams. We can target them more effectively. And we know that the addressable markets increasing in size dramatically. ⁓ That’s an opportunity that is mind-boggling. And so that’s sort of like the biggest takeaway of these predictions. That’s not actually in the predictions, but nonetheless, I think I believe.

Chip Thurston (43:59)
Yeah, no, but it ties together if you ⁓ put some wonderful bow on it. And I think it’s a great note for us to end on is the optimistic future of the gaming industry about the impact of all these. So I think we’ll wrap it up there. But thank you so much for sharing today, Bill. If you would love to learn more about what Bill is up to, please visit gamedatapros.com.

But thank you to you, dear listener, for your time and for joining us on the Growth Stage podcast. I’m your host, Chip Thurston. I love getting to dig deep on gaming topics like this with experts like Bill and share them with people like you. So thank you for listening and I will see you next time.

David (00:04.206)
Well, everyone, welcome to Growth Stage by FastSpring. I’m David Vogelpohl. I support the gaming and digital product community as part of my role at FastSpring, and I love to bring the best of the community to you here on Growth Stage. In this episode, we’re going to be talking about how to act global and pay local. In other words, what does it take to build global payments for your games? And joining us for that conversation is someone who’s done this tip to tail, if you will.

I’d like to welcome to Growth Stage Lindsay Walker of FastSpring. Lindsay, welcome to Growth Stage.

Thank you so much, hi.

I was going to say welcome back, but I think this is your first episode with us, is it not?

You can welcome me back next time.

David (00:47.882)
Okay, okay, good, good, good. I’m looking forward to that. And for those listening and watching, what we’re going to be talking about today, Lindsay is a veteran payment executive and leader. And what she’s going to be talking to us about are her thoughts on what good looks like in building global payment infrastructure. What really matters when it comes to local payment methods, and how you can think about your payment strategy.

even based on the kinds of games you’re making and publishing. So I’m really looking forward to this conversation with Lindsay. For those that don’t know her, again, a leader in the payment space. So if you’re trying to figure out payments for the first time, if you’re used to app stores and marketplaces and you don’t really know how that world works, Lindsay is a great ear to bend. Now, you won’t be able to ask your question today, but I will, and I’m really looking forward to that. So, Lindsay, I’m going to ask you the first question I ask every guest when we’re talking about gaming.

All right. Yeah, exactly. What was the first game you spent your own money on? Not a parent gift but like Lindsay money. Tell me the first

Yeah, it definitely would have been physical currency, right? So kind of dated myself, but I spent money on Street Fighter with an arcade game. And unfortunately, as a child, somebody came up to me and told me that I was too young. And I later figured out that they were actually just stealing the game because it’s that good.

my goodness, you got muscled out by a bully. Was this an adult or a kid that did this?

Lindsay (02:25.614)
I think it was a teenager and I was a very young child, but I just so badly wanted to go and smash those buttons. But I’ve had plenty of time since then to players to play Street Fighter.

Did you have or do you recall your favorite character on Street Fighter that you like to players to play? No. long time ago.

When I had no idea what I was doing then, honestly, I probably wouldn’t know what I was doing now. I’m more of kind of just a button smasher, right, to see what happens. But the tactile sensation, right? Gaming is fun in many different ways. And yeah, no, I loved everything about that.

Excellent, excellent. We’ll have to get you some free games to make up for that bully stealing your game.

Hit me up, please, yeah.

David (03:07.534)
And I mentioned when I first introduced you that you’re from FastSpring. Tell us a little bit about just high level what FastSpring does and what your role is.

Absolutely, yes. So I came to Fastspring as the Chief Customer Officer last year. So happy to be here, have learned so much from the amazing team that is in place. And one of the things that so interesting with what we were doing is really focusing on empowering the gaming space, right? And not just empowering the publishers and the studios, right? But really empowering the players at the end of the day. And so what we do is we empower players to players to play.

right? And we empower players to play where they want to make additional purchases for whatever that means for them, whether the purchase of game or

David (04:01.504)
Okay, I got you and this was like new for me when I joined FastSpring spring originally, but you’re the Chief Customer Officer and like FastSpring kind of has two kinds of customers in a way. Could you help us understand what what type of customers if you will because like there’s like the companies that use FastSpring and then the individuals and I guess other companies that use FastSpring bring to buy stuff. Help me understand how how that works.

Yeah, that’s a really interesting point. And I think it plays into why we’re very good at what we do. So there’s kind of two ways to look at this is that we are dedicated to the end player, just as much as we’re dedicated to our customers, which are the sellers, which are the studios, which are the publishers. And so we can’t do our jobs well unless we are constantly just maniacal about that player experience.

And so I think that is what sets us apart from a more, you know, from an app or from a traditional PSP is that we have to think of both because we are the merchant of record. Another kind of way to slice and dice is that we work with gaming, but we don’t only work with gaming. And I call that out here because it is really important and we’ll get into this a little bit later, but having that diversity with our seller portfolio,

actually plays in really well to our gaming community.

Excellent. Yeah, leveraging that economies of scale and like the lessons learned through multiple segments. So gaming is interesting because, you know, depending on what point of time and what kind of game you’re looking at, it’s very common, of course, for a publisher or studio to never have really had to mess with payments, know, leveraging app stores and maybe distribute games on Steam or Xbox or PlayStation or whatever.

David (05:54.402)
And while other industries might have figured this kind of direct monetization out long ago, a lot of game companies are kind of coming into this like I don’t even know what’s going on here. And one of the ways I find helpful to understand things is to understand like how would I build it from scratch? Like FastSpring is this like all in one solution that does it all for you. OK, great. But like if I built it on my own, what would that look like? So what does building your own payment infrastructure?

look like, like what would be the components and what would roughly go into that?

Yeah, let me kind of take one step back and even address the first part of the question. I think that with kind of moving into D2C, right, to your point, this hasn’t been an area where it’s been an operational need. And so what is really unique here that I love is that it’s just not about

connecting the dots, right? It’s not something that you have to do. It’s done because it’s something that you want to do, right? So there’s a broader strategy that exists behind this that’s different than, know, for example, you want to go and set up a web shop and you want to sell shirts, right? In order to make that happen, you have to do payments, right? But that’s sort of a standalone component and it’s table stakes, right? For you to do that. Whereas with gaming,

It’s just broader than that, right? It’s about connection. It’s about empowering. It’s about building that community, right? With your player base and all the different players within that player base. So it’s, it’s not just this very simplistic kind of like operational need. and that’s what makes it unique, right? In terms of how you’re thinking about it. Now thinking about how you want to go to market. So, you know, you’ve made the decision, you want to have a direct connection.

Lindsay (07:41.644)
with your players, you wanna build that community and part of building that community, right, is offering things within the in-game economy, right? And providing a web store or the ability for them to make purchases. But most games, right, are not focused on a particular geography. So it’s not as simple as, let’s even go back to the you selling shirts example.

If you were to sell that locally, it’s really simple, right? You just need to be able to accept the payments of the people who are physically able to walk into your store, right? To make that purchase. If you’re selling online, maybe you’re very narrowly focused and say, I’m only going to ship within a 50 mile radius, right? Or I’m only going to ship within the United States. Again, that really narrows the focus on what you need to do and kind all the components that go into building a payments infrastructure. With gaming,

You can’t contain your games into any one geography. In fact, the most vibrant communities that are out there, sure, maybe they have some concentrations in certain geos, but the idea is that this is something that people together globally. And then in order to support that global community, you then are required to provide the ability to meet all of those players where they are.

So if you think about how you would go to market, if you had to do it from scratch, right? If you had to go and choose individual tools, there’s a lot that goes into it. You need to consider all of the different entities, right? That you yourself need to have in order to support different payment methods. You need to think about the tax consequences, right? For each of those entities and each of the geographies where you have players paying.

you need to broadly understand not only kind of what your demographic is and who you’re marketing to and how you’re connecting, but how banked those customers are and what their preferred payment methods are. And then beyond that, you’re doing technical integrations to several, right? Several different payment service providers, acquirers, et cetera, in order to support that.

Lindsay (09:57.762)
with gaming on top of it. You also need to consider that there’s going to be some fraud and that you need to protect your good players from bad actors that are coming in, including the in-game economy. So there’s a lot of different components that go into it. And what it comes down to is that you need qualified personnel to support all of that. You need time to do all of that. And then you need ongoing resources to maintain all of that.

So what it comes down to is kind of time to market. I like to think of it, you know, if you’re gonna go into say Brazil, which is a really tricky market, if you are not already there to go local in Brazil, we’re talking about perhaps 18 months. If you are integrated with an MOR, I can get you there in 18 seconds, right? Let’s just turn it on. So let’s just turn it on, set it up. You’re able to go local. You’re able to tap into that market with the payment methods that that market prefers.

you’re able to be local, not push the FX right onto that player base. And this is just an option, right? Like I do think it’s the right move if you’re trying to move quick, if you’re dealing with a global basis, but you know, we are a, we’re an option for those that want to move fast We are an option for those that want to focus on their game, building the best experience and delegating, right? The payments component.

to someone like us where we really geek out on it and we do this all day every day. It’s what we like to do. It’s what all of our technology is focused on. It’s what all of our product is focused on. But it allows you to be you and us to be us, right? And what that equates to is meeting the players exactly where they are in terms of how they want to pay.

That’s a great rundown and I really like some of the analogies you were sharing there. Now you used a couple of acronyms or initialisms that think people might not know. let’s go down a gear here and ask you a couple of questions here related to this. And I think earlier I kind of alluded to like FastSpring all in one kind of thing. And I think you were kind of touching on some of this here, but help me understand in the audience understand.

David (12:16.3)
What is a PSP and what is an MOR?

Sure. Okay. So let’s start with PSP. Very broad term. And by the way, I do speak in initialisms all day, every day. appreciate the call out because I just, it’s just alphabet soup over here. So PSP is payment service provider, right? And this is a very broad term to generally an aggregated offering by a vendor, right? With multiple payment methods that can be card-based payment methods like Visa or MasterCard.

or they may be more local and geographic specific payment methods such as PICS in Brazil or UPI in India. And MOR is what FastSpring is. MOR is merchant of record. So it’s this hybrid model where we are effectively taking on all of the responsibility for the taxes. We are taking on the responsibility if you would like for subscriptions. We are taking on the responsibility for the payments.

and we function as the merchant, the official merchant. However, we do that working with our publishers and working with our studios as the seller. And so we’re taking input, right? And everything is customized, right? To the seller, meaning the studio or the publisher. But we hold all of the liability and all the responsibility.

So earlier as you kind of walked through like how to build your own payment stack, you talked about like, well, I might need corporate entities in certain countries to get access to certain local payment methods. You’re to have like tax requirements, filings, complexities. I’m going to have different payment methods that have all got to be routed when the player is about to buy something.

David (14:06.894)
I have technical work to stitch all that together and maintain it. I need to also do fraud management on top of all this. Yeah, and then as you pointed out, I need qualified people and like ongoing time and energy to maintain all of that. And so if I’m going with a payment service provider, sounds like in a lot of ways, most of that, if not all of it is on me. And then

So will we.

David (14:32.546)
Yeah, and then in a merchant of record, it kind of comes all in one and kind of just works. Is that a fair way to think about it?

Totally, it’s the easy button, right? And I think that where we see a lot of interest and a lot of success is, know, I spend, as Chief Customer Officer, I spend most of my day talking to our customers, right? And what I hear is, tell me what I need to know, right? Tell me what I need to do. But what they’re really saying is, do as much of this as you can, because I want my development team to be…

game developers. I do not want them to be payment infrastructure developers. Now that’s not universally true, right? Everybody has different takes on this. But I think broadly speaking as a vertical, as a market, right? The gaming space is really intent on that just maniacal player experience and the expertise and the interest, right? From the executive level all the way to the people who choose to work there and really dedicate their lives, right? With that gaming passion, that player passion.

their focus is on the game, right? And so it’s so useful for them to have a partner like FastSpring where they’re able to say, okay, you guys deal with this side of it, so I don’t have to, right? It can keep your teams lean if that’s what you’re looking for. But regardless of size, it keeps your teams focused on their core responsibilities, right? Which is building the best gaming experience for their players.

So it’s interesting because as I think about the type of offering that a merchant record has versus a PSP, I like to think of it in this way of like a managed offering versus a DIY self-managed offering. Sure. And in these types of build versus buy evaluations, often we’ll have, you know, miserly, abacus counters like saying like, if I do this internally and do this and do this and do this.

David (16:32.694)
I might be able to grind out a little bit better cost than if I went with a managed offering and you know managed offerings tend to say yeah but if you look at your total cost of ownership it’s actually more to go do all that and I think there’s some really compelling arguments why that’s true in payments in particular but is that really why people go with merchant of record because it’s a lower TCO like you kind of were alluding to this I felt like like it was like more about focusing on their game than trying to like

grind out a half a point margin or something like that. What are your thoughts? Is about TCO or is it about opportunity costs?

think it’s about opportunity cost. I think that it’s also about, you know, if you are, I am not a developer, right? But I assume that I am, right? I’m a game developer and I come into an organization and this is my passion. And I just want to build the best games and the most innovative games and the best player experience. And if my boss comes to me and says, hey, by the way, now you’re doing, you know, financial technology infrastructure building.

not where my energy, that’s not where I want to put my energy, right? So, and I can’t imagine what I hear from a lot of these, sellers, right, our gaming sellers is that that’s not where they want the focus or the energy or the expertise internally. Could they do it? Of course. These are incredibly talented people. But to your point, it’s just like,

Do you wanna grind out a basis point, right? Or do you wanna have a game that everybody is talking about, right? For five years, right? So it’s just, it’s the opportunity cost. The other component too, and I think that this is something that just cannot be understated, is time to market, right? So if you’re interested in saving $5,000, great, but that means that you’re getting $0 for 18 months, right? In this Brazil example.

Lindsay (18:29.646)
That’s fine. So, but you, got to kind of measure that. Do you want to be first to market or do you want to be 15th? Right. Do you want to meet the needs that your, you know, Indian players are expressing it very clearly in Discord servers and Reddit subreddits. Do you want to meet that now or do you want to kind of try to come back and meet that need three years later? Right. So that’s also how you have to think about it as well, regardless of where that energy and that focus is internally.

Yeah, it’s interesting. Particularly I think about the gaming space versus other spaces and you look at technology leaders and product leaders and the developers they lead like even just like you start thinking about executives, directors, C levels, VPs, like the types of problems they’re used to solving isn’t grinding out payment orchestration. It’s creativity, extreme innovation, and it’s just not what payment orchestration is.

it feels like the industry is particularly well-seated for leveraging the merchant of record model, which when you look at payment providers in the space, every single one of them is a merchant of record. Where in other industries, that’s much less common relative to gaming. in the title, we talked about thinking global and acting local. What is the difference to you as it relates to payments and…

the game industry.

I’m gonna start with an anecdote on that one because I think it really illustrates the point. So I’m sure that everybody that’s listening or watching today has purchased something online at some point. If you haven’t, not even sure why you’re watching this.

Lindsay (20:11.79)
So making this assumption confidently here. But if you have ever purchased something, whether it’s an airline ticket, right, if you’re flying, know, not, you know, internationally, things of that nature, you may have seen a situation where you are presented with a currency that is not your home currency and you’re doing the mental math. Maybe you’re going and you’re searching up kind of like, okay, what’s the conversion from, you know, 450 euro to USD, right? And you get a rough

idea and then you get your credit card statement and you might have a slightly different number on that. And then certain with certain credit cards, you may then see an additional charge closer to the end of the month, right? That shows that you have a foreign conversion rate. And that’s really frustrating for people, right? It’s really frustrating to see that, right? But that is that is exactly what happens when you are thinking global and not acting local.

because in order to present in a buyer or a player in this case, and a player’s home currency, and in order to have that currency be exactly the same on their statement, bank statement, credit card statement, as it is with what you show, you have to be processing locally. So it’s not just thinking locally, right? It’s processing locally. And that’s what we provide.

One thing that we have found, again, it’s just this absolute maniacal focus on the player experience and understanding too that these are at the end of the day, these are purchases that people do not have to make, right? And there is a degree of frustration and friction and expectation that exists right with this. so…

If you are showing your US players $5 and they get charged $5, right? But you are showing your European players, you know, five euro and they’re getting charged 505, 550, right? Whatever the case is, there’s a degree of frustration that you’re not meeting them where they are, that you don’t really care about them, that they’re sort of an afterthought. And this is not something that you…

Lindsay (22:24.834)
right, as a merchant yourself would know necessarily unless you’re coming from the payment space. these are kind of like, I think what we offer too is we’re able to peek around corners, right? We understand the implications of thinking global and acting local because this is what we do all day, every day. Like I really, really love what I do. And I love working with creative folks, but I also realize that we are very

operationally like down to the tax, right? And, you know, I leave the creativity to kind of, you know, the gaming side of things and everything else, but I’m here to protect the player experience just as much as they are there to protect the player experience, just in different ways.

Yeah, and so that player experience is such a good point to call out there. like, help me understand if I’m thinking about this right. So like I have a friend, believe it or not, based in Australia, and he was telling me that when they were selling their products through a PSP in the US, they had fairly low approval rates. And he felt that was because they were based in Australia processing in the US.

And from his perspective, that meant his business didn’t make enough money. But from his customer’s perspective, it meant why doesn’t my card work? Yeah. Right. And so it sounds like what you’re saying is like, yes, I can I can think global and say like, well, I want to sell in the US, so I’m going to accept credit cards, I’m going to sign up for a PSP. Right. But if I don’t act locally, I might not get the approval rates I as a business need.

or my customers expect when using the payment methods that they prefer and know and love. And it sounds like that might be a similar example to like how I might be thinking globally, but not acting locally. Is that fair?

Lindsay (24:22.286)
Absolutely fair. And I wouldn’t expect anybody to know this. There’s no college course. There’s no university course, right? There’s like, there are some good books. There’s better stuff out there than when I started, right? But that being said, you really, this is just stuff that you have the experience and what our team, right, inside FastSpring does, both the go-to-market team, right, which you’re on, our sales team, our PSI team, our customer success team, our job is really to educate.

more than anything else, right? About what this means. So yes, it’s everything from the end pricing being different, right? And why is it different? Why do you not care about me? Why is it this for the US customers and why is it this for me in Australia? It is maybe you’re having lower approval rates to your point with this example that you gave from your Australian friend.

could also be the reverse too, where you don’t understand the risk profile, right? And so that’s a little too open. And all of a sudden people find that, right? And they exploit, right? The lack of understanding, right? And not having the right controls in place. You can see things like simply not having the payment methods that make sense for the market, right? So imagine, I’m gonna give two examples.

Imagine you have somebody that is coming from outside the US and they go into the US market and they do not offer credit cards. They only offer wire and ACH. I don’t care what you’re selling, right? Unless you were doing property tax payments online, right? With your county, it’s just something where you’d be like, what are you doing? Like, I want to use my card for this. I want to get my points, right? Like how, how are you not offering this? This is, this is crazy. and on the flip side,

many Americans, US companies will go into other markets, right? So they’re acting locally just to themselves. They’re acting domestically, right? And they’re thinking globally and they go into markets like say the Netherlands and they don’t offer iDEAL right? And that is the majority of the market. The majority of purchases online are made using iDEAL, not using credit cards. unless you know that in advance, right? You are really not

Lindsay (26:44.45)
meeting and empowering your players, right? Based off of their unique geographies and the unique sort of payment infrastructure, right? That exists differently in different pockets of the world.

Okay, that makes a ton of sense and obviously geography plays a big role like you mentioned in Brazil, like everybody uses Pix device stuff. Like why would you go to market in Brazil without Pix from the gaming perspective? Are there nuances like if I’m a casual player versus a mid or hardcore player, does that influence how I might think about my payment strategy from other aspects of gaming?

It does, and not totally always in the way that you think, but one thing that is really important is to kind of understand the risk profile, right? So, you know, in-game economies are something that there are different shows on that, right? It is a fascinating, fascinating area. But kind of where you have people that are bad actors that are trying to go in and capitalize you, strolling cars, what have you, you you really need to understand the different risks

profiles of these different payment methods, depending on kind of where you’re seeing this risk profile. So I can’t tell you, right, that somebody can reach out to me on LinkedIn, right? And then I can give them just a perfectly customized answer. One of the things that we do is we really dig deep, right, with our gaming customers and understand their players and understand what’s been going on so that we can craft

the best setup for them and craft the best risk profile for them. There’s always a balance between keeping the bad actors out, right? And letting the good actors in. It’s never perfect. It is always a work of process. And that’s why I go back to, to kind of the cost of ownership. This is not a set it and forget it, right? Like this is something that you need to be constantly monitoring. And it’s something that you need to adapt and you need to pivot when necessary. And you need to understand how all the pieces fit together. So.

Lindsay (28:52.13)
that is sort of an element with the type of player that you have. The other piece to this too is, you know, there’s the casual players, but before we even kind of get to that side, I would say another area is age, right? So if you have younger players, you need to understand what payment methods they have access to. And so what we see is, you know, in gaming, we have a lot of very dedicated younger players that are out there and many of them are using gift cards.

right? Because that’s what they’re spending, Their Christmas, their Hanukkah money, like everything on. And so you need to understand kind of, how you turn the dials for the risk profile, make sure that you have everything set up so that you’re able to accept those. And then the final piece for your exact question is how do you make sure that you’re offering the right thing kind of depending on the type of player and the type of purchaser that you have? And the long, the short of it is

this is where it kind of goes beyond just like the what payment method are you offering to which payment are you offering per order and how do you understand how that could or should change based off of your understanding of is this a repeat player, right? Is this a casual player? Like how much data do you have and how for, you know, at its core, I would say for casual player.

you need to reduce the friction as much as possible. So maybe that means that I understand that you are coming in with an iPhone and you’re making a purchase on your iPhone. So I’m only gonna offer you Apple Pay. That is the simplest, least friction way for you to make that payment. I do not want to offer you a whole slew of different payment methods, because that might confuse you, that may give you analysis paralysis, right?

And so there is kind of an art form to, you know, how you structure things once you understand what payment methods you have access to. It’s not just give them every payment method. It’s give them the right payment methods at the right time for the right player.

David (31:02.316)
It makes a lot of sense and I think like from a personal level I’m probably both casual and hardcore of course depending on the kind of game I’m playing but like Disc Golf Valley is my favorite mobile game right now. I consider myself casual. It’s a subscription. I pay for it but I would not jump through a bunch of hoops to figure that out. I’m not changing payment methods or anything. Of course my age and that plays into that.

My son is like super into Roblox like surprise surprise of course. He’s very hardcore about it and like he has gift card money from grandma that we use for that sometimes sometimes he’ll come up to my desk with like a $20 bill like can I use this to buy some Robux and and like it’s interesting to me with this trend of D to C and web stores and I don’t think people really think about this a whole lot but like it actually provides an avenue to unlock payments that you weren’t going to get.

through the app store like a gift card grandma thing like that’s not tied to his Apple account. So having the Roblox store for me to go and use that on his behalf is has been very helpful. I think it’s an interesting part of it. Another thing that stood out to me was just the variety of payment methods, particularly VIPs use where I use a debit card once to credit card one. It’s like that kind of thing.

And so I think it’s important. It feels like it’s important for folks to really not just consider the geography, but also the kind of game and the kind of players they’re going to be serving when they think about like their payment strategy.

Yeah. One thing I’m giving you an answer to a question that you didn’t totally ask, but it kind of, you know, I thought about something that as you were saying that the other thing that’s really interesting too, is that when you are the one that is offering the payments, whether that’s through an MOR or elsewhere, you’re also responsible for the charge backs and you’re also responsible for the refunds. And both are good, not getting a charge back, but being responsible for it. That gives you information that gives you data, right? On how

Lindsay (33:07.278)
what that player means to you, right? What that player means to your game. And so what is different too is that if you don’t own that payments flow, you don’t own the ability to make a choice on the refund, right? So maybe this is a VIP player and maybe you’re like, I want to make an exception in your case and refund, right? You’re unhappy, maybe it’s a big Twitch streamer, et cetera. If that person is purchasing through an app, right?

It is not within the ability of that game to make the choice, right? That publisher, that gaming studio can’t make the choice on how they’re going to do that refund. That’s out of their hands. And then the same thing with chargebacks too. Like you want to understand, right? Like, do you think this person is a VIP? But actually, right? They’re calling their bank and saying, this is fraud, this is fraud, this is fraud. You want to cut that off, right? It pollutes in-game economy. It’s not a good actor. So it’s also just,

collection of data, right? That is important to have that 360 view that you don’t receive otherwise.

So speaking about fraud and bad actors, and this was one of the interesting things for me when I started to learn about payment fraud, like in the grand scheme of payments, there’s like two kinds of fraudsters to two expressions of fraud. I’m testing a card to see if it works and I’m trying to use the card somehow to convert that fraudulent activity into money. And it feels like the third piece that maybe is a little more gaming specific is

I might also be using a fraudulent card to influence my ability to make progress or gain advantages over other players in the game. Yeah. I’m just curious, you know, gaming, it feels like has this giant target on its back when it comes to fraud. Is that true? Like, is it very common that publishers in studios, whether they use virtual record or PSP, are they like, is this a big deal you have to deal with all the time and be really good at?

Lindsay (35:10.99)
It’s a massive deal. It’s such a big deal. And I will say that the more popular the game, the more popular it is for everyone, including bad actors. It is also something where you have to, it is an art and a science, right? There is no tool out there.

ours anyone right that you’re going to beat go and be like boom turn it on you are good everything is perfect every single bad actor is blocked and every single good actor is able to make the purchase like does not exist you are constantly monitoring and pivoting and adapting right to different fraud patterns that are going out there you have to

really clearly understand the purchase behavior. You have to understand the geographies. You have to understand the risk that is inherent with certain payment methods. Can you reverse them? Can you not reverse them? Do you get notifications? How long does it take to get that notification, right? Like how is that data pool coming in? You need to understand the age range. You need to understand so many different things. So there’s a lot of different data points and there are a lot of different tools out there, but no.

tool that exists is functional and effective without really intense monitoring. So we have an entire team internally that is day in, day out, 24-7, 365, watching what is going on and adapting to those changes. let me give you an example here. If everybody takes a credit card out of their wallet, the first eight digits used to be six, now it’s eight.

It’s called the BIN, it’s called the Bank Identification Number. That is generic. Everybody that has your exact card, let’s say it’s a Venture X from Capital One, that’s all gonna look the same, right? It’s issued by Capital One, it’s this type of card, et cetera, et cetera. Now, sometimes you will see fraudsters, right? Bad actors who are targeting a specific type of card, they found some sort of exploit, right?

Lindsay (37:16.334)
And so we can do things like we can shut down that BIN really quickly, temporarily, of course, until they get things under control. And again, it’s, you know, I want people to think it’s not just about the financial consequence. Of course it is, right? Like if these are chargebacks, you’re going to get debited. It’s just not a choice. That’s how it works. But importantly, your players.

Your responsibility to them is to protect them right from bad actor. Is it your they expect an un polluted environment to participate, right? So one thing to think about too is that if you’re not doing a good job with fraud and you’re letting too many bad actors in, you’re going to see the good players not want to play, right? It’s not fair. It’s not fun. You know, like they’re frustrated. Like why would I purchase anything if you know, the whole economy is off kilter?

And then the other side of that is if you’re blocking too many good players your whales, right? Your big spenders your dedicated player base even your casual your casuals are not gonna try again They’re gonna be frustrated and be like, all right, like whatever I’m gonna move on And your your big players your whales your dedicated folks, right? They’re gonna be really angry and frustrated and oftentimes that Moves to online forums, right where they’re expressing their frustration. So

It is a big deal, right? It’s not just about the dollar amount. It’s about the brand pollution that happens if you don’t get things right.

So this kind of gets back to the point you were making earlier like if you were going to build your own orchestration layer and like your own payment solution without like offloading to like a merchant of record You said you kind of need to qualify to people and ongoing resources So from a fraud perspective and I’ve I personally know that AI is part of the mix that FastSpring uses There’s not like a like a magic AI switch I can throw and then peace out and everything’s gonna work just fine

David (39:17.42)
seems like you still need that learned and experienced hand on the wheel. Yeah. Sorry. ahead.

No, I was gonna say, yeah, I think that’s true. I mean, look, if you have an amazing idea that’s gonna solve everything, let’s go into business, right? We’ll do a little side hustle, like I’m all about it. But the reality is, is that nothing exists now, right? And there’s still nuance, right? And decisions that are made in real time by real people, right? That do this all the time. You know, one thing that we see a lot, and we will probably get into this, we work with different types of business.

the fraud patterns that we see for gaming are really gaming specific, right? So something that we see often is telegrammering fraud, right? Where they’re selling stolen cards, right? They’re targeting certain BINS they’re targeting certain issuing countries. An issuing country is the country of the bank that issues your card, right? So for instance, you and I would have US issued cards, but there are certain targets that are going on, like you…

that doesn’t flow into AI, right? You have to react to that in real time and you have to have the ability to understand is this just noise, right? Or is this really happening in real time? So we use the best technology that is out there. We have machine learning, rules-based, AI, all of it, but that is not effective, right? Unless it’s harnessed by a person that knows what they’re doing or in our case, a team of people that know what they’re doing.

Makes sense. And I know that there’s like very sophisticated implications if you get it wrong. I mean, obviously your own costs can go up from fees and fines and stuff if you handle that improperly. If you’re a pay to win game, obviously that can create a lot of unfortunate outcomes for your players. it sounds like, know, you know, gaming companies spend so much time focusing on eliminating cheating.

David (41:12.802)
because it leads to frustrations for legitimate players. And cheating at payments also can do that. And I think that’s probably going to be an aha moment for a lot of people watching and listening.

There is no difference in my mind between the two aims, right? Cheating, you’re using a tool, right, you’re still polluting the in-game economy. If you are cheating by using a stolen card, right, and then selling those account takeovers, whatever, it’s the exact same thing. You’re still polluting the in-game economy.

Yeah, not good at all. Now you mentioned before, you know, FastSpring obviously is heavily focused on gaming, but there’s other industries as well. And we talked before about a little bit about like your reputation with the upstream payment service providers and how fraud can affect not just your game, but also like your relationships with payment processors. How we help people understand like, what does that mean? Like what is your

reputation mean in the context of payment providers and why is this important?

Yeah, this is another peeking around the corner type of thing. You don’t know what you don’t know. And, you know, I applaud anybody that wants to try to DIY, but there’s a lot of things, right, that you’re not going to find, you know, in a handout or, you know, a chat GPT prompt, right, when you’re talking about how to set up your own payment stack. So we, we work a lot with gaming and we love it. There’s a specialization, right? Like I could talk about it all day long, but

Lindsay (42:47.362)
We have a really large seller portfolio. So we manage many, many, many different customers and not all of them are gaming. Some of them are small, some of them are big. We have a very good mix. We do a lot with software. We do a lot with B2B. Now, why does this matter at all to somebody who is in gaming? You would think that it doesn’t, but it does actually a lot. Because gaming can be so prone to fraud attempts,

right, but we do a really good job with blocking it, right, but we still get a lot of attempts that are going in there. And that’s important to note. And what you were talking about is that, you know, the flow, the way that it works is, you know, you have your issuing bank. using this example, it’s a Capital One, Capital One, I have a Capital One Visa that connects into the Visa system. There’s an acquiring layer. There’s some other layers that are in there. And eventually it ties to something called a mid merchant identification.

That’s your account number, right? But if you think about it, the best way to describe this to non-payments people, it is your social security number. And it is something where depending on all of your history, right? You get a FICO score that’s around that. And that determines kind of like how credit worthy you are. And it’s not a perfect analogy here, but it’s pretty darn close. So because we have so much business that is not prone to fraud,

because there’s really not anything that they can do with stealing some B2B software with a stolen card. It’s just not worth their time. We have very clean, very low risk traffic. We also have 20 years of processing history, right? So that means that, you you want to talk about AI and algorithms, these issuing banks, whether it’s Capital One or your community credit union, right? That’s issuing, you know, a Visa card.

they all start to understand, they start to see FastSpring. They’re like, all right, FastSpring knows what they’re doing, right? We trust these guys. And so we come with a reputation that precedes you, right? So when you sign up with us, we’re able to bring that good reputation and that reputation with these issuing banks ultimately is what allows us to have higher approval rates.

Lindsay (45:02.68)
So think of it this way, if there is just a small tiny question, right? As to whether or not this transaction is safe to accept, yes or no, if it’s FastSpring they’re gonna lean more toward yes, because we have that reputation. If you are somebody who is brand new, maybe you’re Australian friend, right? Who’s like new, but also from a different country and also kind of has some maybe some weird setups, right? I’m gonna lean toward no. I don’t know anything about these guys.

And so that is where kind of you get the best of both worlds where we have this gaming experience, but because of the breadth and the scope of our seller portfolio base, right, we bring this healthy reputation and this lower risk profile so that we’re able to tweak the dials just right when it comes to fraud. But ultimately the reputation of our mid, right, is what is bringing these approval rates higher than where they are often lower for the gaming space.

my favorite sayings is if you want to go fast go alone. If you want to go far, go with others. it’s a blended approach is helpful to go far here along with the length of experience and reputation as well as just delivering low risk transactions to those upstream providers. My second to last question for you here. So, you you’ve talked a lot about

kind of how FastSpring approaches these things and FastSpring in a lot of ways is a specialist, right? And one of the key areas we specialize in is gaming payment service providers. It feels like tend to not be specialists. And we’ve talked about build versus buy TCO and opportunity costs. But help me understand like, why is it important? I mean, why is it important to choose a vendor in payments that gets gaming versus, you

may do it as part of a generalist and very broader mix.

Lindsay (47:02.866)
Yeah, I think it comes down to if you don’t have energy and focus and expertise on this particular vertical, you can just miss these important nuances, right? So, you know, if somebody is going to, you know, if you’re just going to a generic PSP, really qualified, great experts on payments, right? And broadly on what a particular geography needs.

But what gaming requires is something different. It requires sort of the understanding of the interconnectivity with the risk profile of both the players and the risk profile, the payment itself. What is also often missing is sort of like, what payment stack should you be offering, again, to the right player at the right time in the right geography? And so,

that you’re just you’re missing out on, know, like understanding the gift cards and sort of, the the cash app side of things. You’re missing out on understanding kind of like, oh, that makes sense. But it makes sense if you’re over 18. It doesn’t work for anyone under 18. And that’s all of our market, right? For this particular game. So there are different things that are out there. I would say just as important to kind of going to the PSP is also thinking about

generically, just using a risk tool, right? Like, do they really understand? They offer you a set of options. They offer you a lot of different dials, a lot of different switches. So they offer you the ability to do it yourself, but you have to know what to turn up, what to turn down, what to flip on, what to flip off. And again, going back to it, that is not a set it and forget it situation, right? That could be, that might be something that you tweak, you know,

multiple times a day, right? If you have a big season release, you might have to be monitoring in real time and kind of adjusting those dials. That is something that we do. That is something that we watch. But again, you’re given a set of tools, right? But you still have to build it yourself and you still have to have the instructions handed to you. And I think what we bring to it is that we’re gonna build it. We have the instructions.

Lindsay (49:22.254)
but we’re also a partner. we’re sharing the instructions with you and being like, Hey, like this is what we’re going to do. Like, do you have any, you know, do you have any feedback on this? Does this make sense? Are we reading this right? Do we understand your players? So again, it is, you know, we’re never going to give you a generic answer. I think one of the great things about our size and our interest in gaming is that we’re really approaching all of this. Like we have, we have an approach that is 90%, right? But like we take the time to really dig into the details to make it.

to make it 100 % for you and 100 % for your players.

So if I understand that right, if I’m choosing payment vendors that don’t really get gaming, it might put me in a bad spot for the player experience I deliver, might make my life more complicated having to jump through extra hoops and explain things. And then with that bad experience at the end of the day, I might want to flip them off.

Yeah.

Yes. Yep. I’ve been waiting 30 seconds to make that joke. All right. Last question. If people only remembered one thing you said today, what would it be? What should it be?

Lindsay (50:22.702)
You

Lindsay (50:32.952)
What should it be is we are the easy button, right? Let us do what we do best so we can let you do what you do best.

Nice, nice, deliver those awesome player experiences. Well, this has been really educational. I really appreciate you taking the time to explain this to folks. I know this is a new topic for a lot of people, especially as D2C is starting to really take hold and explode. But I really appreciate you taking the time to share today, Lindsay.

Thank you so much, DV.

Absolutely. If you’d like to learn more about what Lindsay is up to, you can visit fastspring.gg. Again, I’ve been your host, David Vogelpohl. I support the gaming and digital product communities as part of my role at FastSpring, and I love to bring the best of the community to you here on Growth Stage

Speaker 2 (00:03)
Right. Hello everyone. Good to see you all here. So glad to be here for GamesBeat NEXT. As Tyga pointed out, my name is David Vogelpohl and I’m going to be your host for this session. Joining us with Mike, ⁓ what we’re going to be talking about is real world examples of in-game steering that actually work. Now, a couple of caveats here.

We’re going to be showing some real world examples today. We have anonymized the games though, so you won’t know which games they are. But these are the experiences and we’ve done like a fake game overlay to show you what those experiences look like without necessarily revealing which game it is. Another important thing to point out as we walk through today is that I am not a lawyer and neither is Mike. So nothing we’re giving you is legal advice and I would advise you to follow the same

a path that our customers follow at FastSpring, which is to follow the terms and conditions of the app stores and to do what’s right by your players and to check with your council if you think you’re coloring outside the lines. But we’re going to talk about coloring inside the lines today and we’re going to give you some clear examples that you can work off of. For those that don’t know me, I’m the Chief Marketing Officer at FastSpring. We’re a direct-to-consumer platform.

What I bring to today’s discussion is 20 years of optimizing e-commerce at scale, including extensively in Mobile and direct to consumer. I’ve also dabbled in flash game development and Zoom cosplay, and I have a lot of fun with my family and my favorite games. And joining us for this conversation from the publisher side, I’d like to welcome of Aries Interactive, Mike DeLaet Mike, why don’t you tell everybody about you?

Speaker 1 (01:45)
Thanks David. currently the president Aries Interactive We’re a stealth mode gaming company that will come out sometime in probably q1 of 26 to announce what we’re up to We are Austin based company founded in mid 2024 by Niccolo DeMasi the old CEO and chairman of Glu Mobile We I have over 28 years of experience in tech and 20 years in gaming worked at Glu Kabam, Rogue Game Scopely and most recently Mattel

Originally from Kansas City and based in Los Angeles with my wife and three kids and two dogs. ⁓ currently playing Battlefield 6, Madden 26 and always Call of Duty. So great to meet everybody.

Speaker 2 (02:23)
I’ll have to squad up with you on COD one time, Mike. ⁓ But one of the interesting things about Mike is we were preparing for this. One of my coworkers, the head of gaming at Fast Spring, gentleman named Chip Thurston, ex-Scopely and SciPlay, we were talking about this panel and he goes, Mike DeLaet’s on your panel? And I was like, who’s Mike DeLaet? Wow, this is incredible. I didn’t know that much about him. And what was interesting in the way Chip had described it is at his time at Scopely, he was kind of following in Mike’s

footsteps who had come before in terms of leading a lot of their monetization and direct-to-consumer strategy. And so Chip had stumbled across Mike’s name and systems and insights. And so I thought that perspective would be valuable to add to this panel today. So the first question I want to understand from you though, Mike, in your years of 20 years of wisdom in the gaming industry, how has direct monetization changed over time? Like so much is changing today, but like let’s zoom out for a minute.

⁓ What is your view of how direct monetization has changed over the years in gaming?

Speaker 1 (03:26)
part of it is the rules have changed of what you can and can’t do as it relates to legal rules, platform limitations, ⁓ customers of what they’re willing to kind of accept and monetize. ⁓ That D to C relationship of like actually owning the customer has changed a lot and it’s something we’ve had to navigate on the developer publisher side for quite some time of how do we navigate that? How do we skirt the rules without breaking rules? How do we be respectful of our relationships with platforms like Apple and Google?

And also, how do you do games maybe not on the Mobile platforms? Do you do direct Android distribution? Do you do PC SKUs of games that have D2C relationships and monetization? So it’s something that we spent a lot of time on.

Speaker 2 (04:08)
So you think of that evolution from like a cross-platform perspective, meaning that you might have a different approach on how you approach direct monetization based on the platforms where you’re distributing your games?

Speaker 1 (04:18)
100 % for sure

Speaker 2 (04:20)
Okay, so it changes, and I heard you talk a little bit about PC gaming and think about direct monetization there, and then we talked about rule changes, which are happening as we speak, even this morning announcements in Epic versus Google, which we’ll talk about here in a minute. We’re not gonna go too deep on that. But overall, we see the industry is changing. So we see that as well, of course, in our work, and so we partnered with Omdia to go ask game publishers what their thoughts were in terms of direct monetization.

We asked a bunch of questions, but two of the ones that really stood out were, do you currently make use of a web store today? Of the 100 or so large publishers and executives we interviewed, 57 % said yes, no for 43. But then when we asked the no group, do you plan to make a web store within the next 12 months, 60 % said yes, and another 36 % said yes.

but they just don’t have the specific time frame of in the next 12 months. And then a tiny little sliver of 4 % said they weren’t really sure what they were going to do. So to me, this really indicates a trend that publishers are really starting to embrace this idea of direct monetization. What are your thoughts on that trend?

Speaker 1 (05:37)
I’d say in general if they’re not doing it, they should be doing it. Like margins are already very thin in the game business with time marketing, development cost, studio overhead, et cetera. Like if you can improve margins at all, it’s something you should really be thinking strongly about. And that’s part of the reason why we did it at Scopely and why I continue to do it to this day.

Speaker 2 (05:55)
Do you think that there’s like a size limit though? Like if I’m an indie studio and I have a handful of developers, like is now the time to think about a web store or do I want to get my game more established and start to think about that later in my journey?

Speaker 1 (06:08)
In general, think you want to focus on game first, make sure it’s a really fun, great experience. And if it’s engaging and monetizing your users, then it’s a good time to think about, we open up a D2C web shop?

Speaker 2 (06:17)
Okay, so a little bit of a critical mass there. And we know the rules are changing, and maybe this is changing the idea of the critical mass in Epic versus Apple. We saw that steering is now allowed in the US, and we’re gonna do a double click here in a little bit and see some examples of what that looks like. But in order to understand direct monetization, I wanna zoom out and think about it in the four types of funnels you might have. Now, for this conversation, again, I’m not a lawyer. Please consult with your lawyer for specific legal advice.

But we’re going to talk about the idea of things being allowed and what we generally mean is not in violation of the app stores terms and conditions. And generally when I reference allowed, I’ll also mean there’s not going to be an additional fee on top of that. So in some jurisdictions you might be able to steer, but maybe there’s a 27 % fee from steering. So in the sake of our lingo today, we’re going to consider that as quote, not allowed. I can’t steer without additional fees. And I also like to think like, well, if

there are no rules, what would that look like? And I think it’s helpful to understand the environment in which we’re operating. So the first type of direct-to-consumer funnel that we will lump in the not allowed bucket is embedding your in-app payments from third-party platforms like FastSpring, Exola, or whoever. And this is maybe the truest form of owning direct monetization. I don’t have to bounce outside my game. It’s just available in my game. This is, I think,

kind of the purest form of direct monetization, today is only allowed in side-loaded Android apps, which of course players aren’t very used to doing, and this is fairly rare. ⁓ And so as we think about embedded payments and steering and steering to web checkout experiences, it really asks this question, and I’d like to ask you, Mike, what your view is.

Do you think in the future we will even need web stores? What will we eventually get to where we can embed or just steer to checkouts? Does the web store have a role in the future?

Speaker 1 (08:15)
Yeah, I think you always want to have that, right? Because you want to own the direct-to-consumer relationship, and you want to give them the ability to pay however they want to pay. So if they want to go to your web shop and pay there, or if they want to do it in an app, then you should let them do it either way.

Speaker 2 (08:28)
So as the rules change in geographies, I might ⁓ steer to a web-based checkout. Maybe I can only market outside my game to drive people to my store. But it sounds like you’re thinking, no matter what, I would have a store for my players to have that option to buy, rather than just funneling them through a web checkout.

Speaker 1 (08:48)
Yeah, I think so, yeah.

Speaker 2 (08:49)
OK. So, will you need a web store in the future? It seems like it will be part of the mix. OK. So we’re exploring the four flavors of direct-to-consumer funnels. We’ve talked about the embedded in-app purchasing, which is largely in the not allowed bucket. So now let’s explore the second flavor, which should be fairly familiar to all of you, because it’s most of you who’ve been focusing on direct-to-consumer, because this has been the primary way you’ve driven direct monetization through your web stores to date.

And this is marketing outside of your game. This might be promotions in your Discord community, to your social media ⁓ communities, on your social media profiles, or of course maybe you have a creator program where the creator is promoting, you know, in this case store.randomconquest. This is a mock-up game and where you might get more gems or coins by visiting the store. And this is a very common technique for doing direct to consumer and kind of the allowed bucket, the most common way.

Mike, you’ve done a lot of this in your career. So what do you think are the best tactics for marketing your store outside your game?

Speaker 1 (09:57)
The things we’ve found that work really well are social media marketing. So you have these communities that will like your Facebook pages for the game, your Instagram, TikTok, also your Discord community, like really making it known to players that you should really explore the web shop. You could get discounts or better purchases or extra bonuses if you purchase there and really building that player.

know, behavior and habit to really go there as often as possible to see what’s available because you might get better deals if you buy directly from us versus through the Mobile kind of app, for example.

Speaker 2 (10:30)
Now if I have like a 90-10 or 80-20 rule where like 80 % of my revenue is maybe coming from 20 % of VIPs, do you think that makes it easier for marketing outside your game because those VIP players are more likely to be engaged with my social communities?

Speaker 1 (10:45)
Yeah, 100%. I mean, the games that are more mid-core, hardcore that have that kind ⁓ of split definitely will have players that are more likely to go to a webshop than more of a casual game, like a match three game. We found that those kind of games are less likely to go to a webshop because they do very small transactions anyway. But the VIPs that are spending, in some cases, hundreds of thousands of dollars, they’ll definitely go to get a better deal to the webshop.

Speaker 2 (11:08)
Okay, so that makes sense. And is that like a recommended strategy for certain types of games is to focus on VIPs when promoting your store rather than trying to focus on all players?

Speaker 1 (11:18)
If you have that kind of split, yeah, I think it’s important to really focus on VIPs, but again, you should open it to everybody.

Speaker 2 (11:24)
Yeah, makes sense. OK, so that’s the second type of direct-to-consumer funnels, where I have a web store and I’m promoting the web store outside of the game. So the third flavor of direct-to-consumer, also in the allowed bucket, is UA-based, or what we would call Web-to-App. Now, this is somewhat rare in gaming. And anyone doing this, I would love to talk to you after the event and see what you’re doing. But it’s very popular in Mobile apps.

And that is where we place an ad for user acquisition. We serve a web page that collects the user’s email address for a free trial. And then we ask the user to install, in this case, the game or in Mobile apps, the app. You’ve collected the player’s information. You’re able to communicate with them outside the app store, not violating any steering terms or conditions. You are the one that paid to bring the user to the game and acquire the customer.

So you’re the one delivering that value, and you have the ability to market outside the game. So this is another direct-to-consumer strategy that you have as an option. But again, I haven’t seen a lot of it. Mike, have you seen much of this at all?

Speaker 1 (12:31)
I have not, but it’s a very interesting tactic to like again get that customer profile, get those emails on file, have that direct to customer relationship. So I think this is something we should definitely be trying.

Speaker 2 (12:42)
Yeah, I think it’s worth exploring. There’s also funnels where you don’t have to collect the email, and you can still use strategies like retargeting to communicate with the player outside the game. But another kind of option that you have, again, this is fairly popular in the Mobile app world these days. And then finally, in-game steering. So earlier this year in Epic versus Apple in the US,

The court ruled that Apple had to allow steering and Apple updated their terms and conditions and then many games started to implement this idea of steering. We’re going to look at some variants of this later on, but I kind of want to walk you through what’s happening. load, the player loads the game, clicks on the button to load the Mobile checkout, uses Apple Pay to pay, the user player ID has been passed along, gets pushed to Unity Gaming Services in the back end and enables the player with their.

coins in this case. So what you’re seeing here is the game loads Safari as a separate app. And so in my view, this is one of the purest forms of steering. So it is completely separate from the game. It’s loading Safari separate and apart from this. ⁓ So I think.

As you look at this, you can see it’s very fluid. There’s no scrolling. This particular example was built with FastSpring, but you can build this kind of thing with Xsolla and the other direct-to-consumer payment providers. And so as you see, I’m not linking to a store. I’m linking to a Mobile checkout. Now, of course, you can also advertise your store. We see a lot of top publishers do this, where they say, to our store and shop in our store and see our special items and our special prices and our special deals. But when you steer, you don’t actually have to steer to a

category page or a page of products, you can steer directly to the checkout. And as you can see, it’s very fluid, very easy for the player to understand. So we have a decent number of people in this room. There’s always talks about direct to consumer at these conferences. It’s very clear that publishers are interested in having direct relationships with your players, owning and not renting your relationships with your customers. So it feels like publishers and studios are largely ready

for direct monetization, direct relationships. But are players ready, Mike? Are they ready to take this leap? is the trust there? Are they ready to trust game publishers with their financial information and their payment details? Are players ready for this?

Speaker 1 (15:14)
It definitely takes time and it’s something we’ve been working on for a number of years now in the gaming space. think if you come from PC or console, you’re used to this already. For Mobile, it’s a little different because players are used to transacting on Apple or Google. They’re not used to going to some other page to transact. if they see things like Google Pay, Apple Pay, PayPal, they trust those sources. So you just got to build that habit of them being able to do that. And then as you do that, then they get comfortable with it like, this works. I know it’s a legit source.

I get the items in the game that I paid for, I get a receipt from like a PayPal or whatnot, and therefore, yeah, this seems like legit to me and they’ll keep doing it.

Speaker 2 (15:52)
Yeah, and it’s interesting ⁓ being in the industry and experiencing these things when I’m playing my favorite games or whatever. And I have kids, and this past weekend, my son comes to me with a fresh $20 bill in hand and says, Dad, I need more Robux And he pulls out his phone and he shows me, and it had steered me from inside, or still steered him from inside the game to their web store. He barely noticed. We used Google Pay and I.

money in my wallet and he had the experience there but he barely had noticed and one of the things that’s really interesting to me and we see this from the payment platform side in terms of like the different types of payment methods that are used is that a web store and offering direct monetization can unlock money you might not have got otherwise because that particular payment method isn’t tied to their app store account. Do you think that’s an opportunity for direct-to-consumer that people don’t think a lot about?

Speaker 1 (16:48)
Yeah, for sure. I mean, I think you should consider all methods for people to engage and interact with your community and your ability to drive revenue and monetize the product. So I think from a game publisher developer side, it’s something that really makes sense for us.

Speaker 2 (17:02)
Okay. So we know that publishers and studios are largely ready for direct relationships with players. ⁓ We think largely players are ready for these types of relationships and have that level of trust. ⁓ I don’t know if the app stores are quite ready though. So how should publishers balance their direct monetization with their relationships with the app store providers? Like they’re providing this very valuable service. They’ve been this huge driver in the industry.

huge part of the success of these publishers. There’s the desire to have that direct relationship and direct monetization, but you still have these super valuable partners. So how do you think about that balance with direct monetization?

Speaker 1 (17:44)
You know, obviously you got to adhere to the store guidelines. So I always say like, you know, I’ve worked with Apple and Google since the beginning of these stores and we have really strong relationships with them. We want to be respectful of those relationships. But they also understand we have to make money. We have to be profitable. In order to do that, we can make more content and more future products for them. It’s good for their ecosystem as well. So it’s not like we’re telling people you can’t transact on Apple or Google directly.

But we’re just trying to give people alternative ways to pay and engage with our content and ultimately help make us make more money and profit too so we can operate as a business.

Speaker 2 (18:16)
So if I’m making decisions that are best for the player, supporting the App Store and keeping that as a kind of front and center option, do you think that’s a player first mentality and then thinking of my store as optionality for people that might want to get more value for money or use payment methods that aren’t tied to my App Store account? How do you think about that from?

Speaker 1 (18:38)
I think it’s pretty seamless nowadays, whether you do direct payments on the Apple App Store or you do Apple Pay, like it’s about the same to most people, right? So I think in terms of how they want to pay, you should give them different options.

Speaker 2 (18:50)
Okay, so there’s that fluidity there. ⁓ Okay, so we’ve explored the four flavors of direct to consumer. We’ve talked about embedded in-app payments, marketing outside the game, ⁓ using UA-based or web to app, and then in-game steering. So what I wanted to do next was to go a click or two deeper into in-game steering and understand a little bit about what your options are.

Now again, just to reiterate, we’re going to show some examples here. Some of these are Android examples. And ⁓ who here have been following the Google versus Epic shenanigans here? So what’s happened in the timing of this is really wonderful, actually. ⁓ Right before these slides were due, ⁓ Epic and Google, there was a ruling in the court that basically opened up steering. And since then, after the slides were due,

Epic and Google have come to a settlement agreement that they have communicated to the court. And even just this morning, the judge declares that they’re going to take some time. They’d like some more transparency around this settlement. And the judge is curious, and I’m not making this up, why there’s suddenly BFFs. And so there’s this ambiguity around Android.

So when we review the in-game steering options and we think about what’s allowed or not allowed, I think there’s a bit of wait and see for me personally with Epic versus ⁓ Google, obviously. So I want you to think of these examples in the lens of iOS ⁓ in the US, so where steering is allowed today. You will see some Android examples, but be aware that it’s still kind of playing out in that case. So the way I think about

examples. I’m not going to show you like an ad for a store that links to a shopping experience on a store. I think you can imagine those types of things, but I want to talk about the canvas and the paintbrush. How are we going to create these experiences within our games and how are we going to deliver a seamless funnel experience for the player, but still be clear about where they are and what they’re engaging with. And so the first example, this is ⁓

the GIF I showed you earlier in this presentation. And again, it’s pulling up, in this case, Safari external from the game. And there’s many examples of this with top game publishers in the game store. And in my mind, this is the most pure form of steering. I’m linking to a web-based experience. I’m going outside the game and loading the browser. Very pure, safe form of steering.

The second option you have is to invoke Safari in the iOS context inside the game. And you would use Safari view controller for this. I think this is also one of the cool things about steering and direct monetization is that as you can see, these are relatively fluid and fast experiences. And it’s even sort of hard to tell the difference in some of these. If you look at the top when it loads the browser, you can see the URL.

And the difference, that’s the key difference between this version versus what we saw before. The other key difference is that Safari is loading in the game and not external to the game. And again, all of these examples are going to show the web checkout view of the world. And then the final version is a WebView overlay. So this is mimicking a browser, but it’s actually using WebView in the game in order to facilitate that. You could also use WebView to quote embed payments in the game.

And this is where we start to get fuzzy lines and how we think about what is allowed and not allowed. I’m not going to go to that level of depth. Again, follow the app’s source terms and conditions. Ask your legal counsel if you think you’re coloring outside the lines. Get their guidance. This is what our customers do. This is what I’m guessing Exola’s customers and all these other customers and publishers do to make sure they’re doing the right things and make sure you do that as well. ⁓ So.

Now that we have an understanding of the technology and the canvas and paintbrush that we have to create these experiences, I want to kind of come back to you now, Mike, in our last few minutes here and ask you how you think about the balance between showing the player that they’re going back and forth between these two, I guess, systems of the game and the web checkout or web store.

while still delivering a seamless experience? Am I trying to fake it a lot, or do I want to be clear at certain points for the player’s benefit or otherwise?

Speaker 1 (23:30)
I mean, ultimately I think it would be great if we could just do it very seamless. You never actually leave the game. It all just happens right in the app. Now the overlay views are one way to kind of tackle that. Bouncing out to Safari or Chrome and then bouncing back into the game is another way to tackle it. The examples you showed make it look very seamless to the user, but it does, it’s pretty clear to me anyway that you’re switching back and forth on a couple of those examples. You just have to make it super easy for the player because if you make it complicated, they’re not going to do it.

That’s for us, that’s the main thing we think about is the user experience and just make it super easy for people.

Speaker 2 (24:04)
So I play games that our customers make and the games I enjoy. I’m not just testing, right? And I’ll buy things in the game sometimes. But I just buy from the app store because it’s easier. And my payment method’s already there. I just bounce right through it. I know I might get a little extra for the game. So do think that players will take that extra step if it’s a little more complicated, if they’re motivated, like VIPs or otherwise?

Speaker 1 (24:29)
Yeah, I think about motivation more just what type of player they are, but what are you giving them, right? If you get an extra 20 % more gems or something if you buy directly from me, then I’m motivated, right? ⁓ If it’s the same deal, then maybe I’m not as motivated. So I think you got to think about it from that sense or exclusive offers or you do get more currency or something if you buy it direct ⁓ and really make it clear to customers that’s what’s happening. And I think they’ll be willing to support the developer if they like your product.

Speaker 2 (24:57)
One of the questions we asked in our survey with Omdia was like, why do you go direct to consumer? And saving margin was actually like third on the list. And like one of the top answers was around really that direct relationship. And so it feels like in some cases, publishers, even if it was like all the fees were the same, they’d be like, well, I still want the direct relationship with my customer. And I think from the publisher’s perspective, that makes a ton of sense why they would feel that way.

Do think there’s a benefit to the player other than just like, I’m going to get more gems or an extra SpongeBob skin or something?

Speaker 1 (25:28)
I do. Like if it’s a game you’re really into that I want to be able to talk directly with the developer and the publisher of the game and understand like what they’re doing, what’s the content roadmap, what new features and functionality are coming to the game and really have that community. Yeah. Since the psych you do want to discord or something like that. Like our game has close to 250,000 members on our discord channel and we’re constantly communicating with them, sharing with our update, our future roadmap, even of here’s what’s coming in the next update and getting them excited about it. And I think having those emails or any kind of

information on the users on file, it really helps a lot with that D2C relationship, which I think is critical for any gaming company.

Speaker 2 (26:05)
Do you have any advice on building communities ⁓ relative to promoting your direct monetization approach? It sounds like you guys have already done a lot of that, and I don’t think you understand what stealth mode means.

Speaker 1 (26:17)
Well, to be fair, we acquired that company. But they just spent a lot of time engaging with the audience. And over time, they put links and the Discord into the game itself and allow people to easily link out to join our community. And then people just building that direct relationship with us, which has helped a lot with our game.

Speaker 2 (26:36)
Excellent, excellent. Well, we are at the end of our time. I would love to hear about what you’re doing with your direct-to-consumer funnels, if you’ve played around with App2Web or any other things we’ve shown today. Mike and I will be around here all day, answer any questions. But thanks, everybody, and really appreciate it.

Braden (00:04)
Thanks for joining us today on the latest episode of Growth Stage Gaming, our podcast where we help game publishers and studios learn more about all the ins and outs of going DTC. today we have a special guest, Rachel Harding, our senior director of tax here at FastSpring, who’s going to break down what every developer and publisher needs to know about taxes as they are related to gaming from digital purchases like your skins or

Currencies or battle passes to D T C web shops and beyond will cover why tax treatment differs from region to region The biggest compliance risks that publishers face and what happens when you move from a marketplace to selling direct? Rachel is also going to share where most publishers get tripped up and ways that you can avoid those common pitfalls So if you’ve ever wondered how taxes actually apply to your game and how to navigate those global tax rules without a tax degree

This conversation is going to help you learn a little bit more. So Rachel, tell us a little about yourself and ⁓ what you do here at FastSpring.

Rachel (01:09)
Yeah, thanks, Braden. I know I’m sure taxes is everybody’s favorite subject, but it is mine. So I’ve been at Faspring for about five years now. ⁓ I am the senior director of tax here and responsible for anything kind of in the tax umbrella. I have about 15 years of corporate tax experience, specifically this kind of excise tax, which we talk about VAT sales and use tax.

which is kind of the focus of what we’re talking about today.

Braden (01:42)
Awesome. ⁓ So before we dive into taxes, do something a little more fun. What games do you play? Do you play any games? What do you enjoy? What’s your favorite game to play? ⁓

Rachel (01:53)
⁓ Pretty much it’s like limited to really like family holidays, but I love like the team games. Like I think it’s co-ops, but Overcooked is a family affair. We get everybody in, the nieces and nephews, ⁓ grandpa sucks, you know, like it’s kind of our, ⁓ we get everybody together and at least play a few times over the holidays.

Braden (02:17)
Overcooked is a great game. It’s a very chaotic, it’s a blast. And it makes or breaks relationships, sure. Maybe it’s a good thing you only play at the holidays because then you can leave the chaos.

Rachel (02:31)
There are some people that can’t be on a team anymore. It’s better for the relationship.

Braden (02:36)
That’s hilarious. I love it. ⁓ speaking of, you know, this teamwork and this cooperative work, Taxes can be complicated. It can be hectic and it can be a headache for teams that are working. And so I want to ask to begin, you know, for someone who is building a game today or a publisher who has games out in the market that are maybe considering going direct to consumer, opening a web shop, ⁓ why should they even care about…

taxes in the first place, what’s important.

Rachel (03:08)
Yeah, so I mean, we get this question a lot. ⁓ And there’s kind of a couple of subsections of what could actually happen. There’s like the real business risk that could happen when you’re looking at fines and penalties, ⁓ financial burdens. ⁓ There are cases that you’re at officers, depending on what country it is, can actually be put in jail. I’ve used that to mess with some of our officers here at FastSpring ⁓

So there’s that business side, but then there’s also things that could fall under, like if you were going to sell your company or get a minority majority investment, they’re going to look at your tax operations and see what you did right, what you did wrong. And a lot of times there could be an adjustment for all the things you did wrong, meaning they’re going to pay you less based on all the mistakes that you made. There’s also kind of this concept.

statute of limitations that applies. If you’ve never filed or haven’t done anything, taxing authorities have full jurisdiction. There’s no limit on what they can kind of do or come after. If you’ve applied and you your intent is good, the statute of limitation will apply, which is anywhere from three to four years. And that means that the taxing jurisdiction has three to four years to come after you for that year.

for example, 2020, that is a closed year. So if you filed and you’re good, it’s all water under the bridge. But if you haven’t filed, things will come after you.

Braden (04:49)
And does that apply every year? that something or is it like a checkpoint that you say, I started filing in 2020 and then I forgot to file in 2021 and then it’s 2022. How does that work?

Rachel (05:01)
Yeah, so you have to look at each year. So if you didn’t file in 2021, it’s unlimited again. So, and once the year closes, the year’s done, they can always come after you for that. So it’s really something that it’s better to always do something rather than nothing. That’s kind of what I recommend.

Braden (05:25)
Okay. So it sounds like, you know, there’s a lot of different rules, regulations that are applicable to this. ⁓ Why are the rules so different from, you know, region to region or country to country, you know, for things like your digital goods, like your skins or currencies or battle passes.

Rachel (05:45)
Yeah, honestly, your guess is good as much ⁓ like the states in the here in the states, we like to keep things really complex and do we always like to do things different, like not be on the metric system internationally. It’s based kind of at the country, the federal level. So it’s a little bit easier to determine what’s taxable ⁓ kind of on the broader international spectrum. It looks.

at B2B, B2C. When you’re looking at kind of the comp within gaming, it’s really B2C. So publisher to player, those are really going to be taxable in almost every foreign jurisdiction. ⁓ It’s a little more nuanced when you step into the US because it’s a state level taxing regime. It’s not done at the federal. Each state wants to do it their own way. ⁓ It gets kind of into the details when you start to looking at

of how the game is played. Like you mentioned, digital goods, those are kind of like an item or a non-physical good, and those are going to get taxed by about 20 different states. The more you move into streaming or a live service game, more states are going to tax that. You have around 30, think 33, 35 states that are going to tax that.

As far as kind of in-app purchases like skins, currencies, battle passes, most cases those are just going to default to the taxability of your game. So in this instance, your live service game that is going to be taxable in 33 states as well.

Braden (07:31)
Okay, so what happens then if I’m a publisher and I decide, you know what, I’m gonna go do this on my own and I file incorrectly. say, I’m a digital good. I’m not a ⁓ streaming or live service game. What’s gonna happen or what could happen to me? ⁓

Rachel (07:50)
Yeah, what if you, mean, outside of just making the wrong determination for your product, you will technically then have exposure in all of those states. Cause you, let’s say you’re filing in only 20, those 13 states, then it’s going to go back to that statute of limitations. And since you didn’t tax them and you didn’t file, it’s, they’re going to have jurisdiction to come after you.

Braden (08:17)
Wow. Yeah, that’s pretty wild. ⁓ How quickly that can change things and how intertwined all of this is. ⁓ So then what actually is making the determination? We’ve talked a lot about these taxes and these different states, how you need to file, when you should file, but what actually determines where a publisher owes taxes? Is it at the player location or where the developer is located or who the payment provider is, or is there something else entirely?

Rachel (08:46)
Yeah, one thing we do is that the good thing about kind of excise like indirect tax, ⁓ which is not the case with income tax, because your tax on that is that it’s technically not the publisher’s tax. They shouldn’t be paying out of pocket. The only time that they’re going to pay out of pocket is if they do it incorrectly. But if it’s done correctly, ultimately, it’s a tax that the customer, the player is going to be paying

It’s only if it’s done wrong that it’s then going to fall onto the publisher. where you tax, ⁓ you’re going to look at the location ⁓ where the service is kind of consumed. And what that equates to is where a player is actually playing the game. ⁓ Operationally, it’s your IP address, your billing address.

Those are really the only two kind of the main data points that companies kind of integrate and tax based on. There are some other like weird things you can look at, but ultimately those are going to be the two most sure ways of finding where a gamer is playing.

Braden (10:00)
So then if I’m a publisher doing this, does that mean I need to be collecting what their IP address is, where they live, all of this data in order to stay compliant?

Rachel (10:12)
Yes, you technically don’t need as much information ⁓ internationally because it’s a country level. However, every jurisdiction really wants you to have its two pieces of corroborating evidence in order to prove the location of a player. ⁓ What that means is that if you’re capturing one item, technically they could go back

and prove otherwise that wouldn’t be substantiated if you were to ever get into any kind of issue with the authorities. To be on the safe side, you want two pieces that can corroborate the exact location.

Braden (10:52)
Okay. ⁓ And so I know that like a lot of marketplaces do this for you today. You know, your app store or your place store, like they’re taking care of a lot of this for you. But as publishers start to move to this direct to consumer model, they build their web shops and other things. There may be they’re moving away from marketplaces or maybe there’s a difference there, but maybe you can perhaps you could just help help us understand what is a marketplace in the tax world and how is that.

delineation important as you think about direct-to-consumer payments and some of this data and other things.

Rachel (11:28)
Yeah, and this is kind of like going to be the biggest, like more complex area. ⁓ You know, since the changes that have happened with the Google store ⁓ and, you know, they’re a monopoly, they can no longer force people to sell. We have seen a lot of people kind of go start selling direct. ⁓ One of the biggest pieces that’s going to change is the tax implications, and it’s more so how it’s going to be facilitated.

If you’re currently selling or you were previously selling it on Google or Apple, those are going to be considered kind of marketplace and they’re going to follow marketplace facilitator rules. And what that means is, it’s a shared liability. Google is responsible for the liability, but so is the publisher. ⁓ So a lot of times in the more complex places, Google is just actually

handling that for on be on your behalf. The reporting can get complex because depending on the country, the marketplace has to report and pay or the vendor has to report and pay. It’s best to kind of like, I assume most publishers aren’t even really aware what’s getting done on their behalf until they download a report. And it’s like, what is this tax? Where did this pay? Some in the US we pull up

we follow marketplace facilitator rules. So what’s gonna happen is Apple Google is going to pay on your behalf. There are states where you actually have to file, meaning you have to go claim that tax that was paid on your behalf. ⁓ A lot like I live in Colorado, Colorado is one of those states that you have to go do that. ⁓ So migrating off of Apple or Google and marketplace, you’re gonna have to

basically start doing that on your own if you sell direct. There’s another option obviously selling through merchant record like FastSpring where we operate as a reseller, meaning you don’t have any of that responsibility at all. It’s actually less responsibility than what you had through Google or Apple as a marketplace. ⁓ The most responsibility is gonna be if you’re selling direct. You’re gonna be responsible for looking at kind of all the

⁓ where you sell into and figuring out what’s taxable and where you need to file.

Braden (13:58)
Okay, so if you wanted to do maybe, you know, in because steering is only allowed in the United States, can you still work with Google and Apple and also do some of this direct things, direct to consumer stuff through a merchant of record? Can you do them in tandem?

Rachel (14:21)
Meaning like partly sell through a market like through a marketplace and then partly sell through a more.

Braden (14:27)
Yeah, yeah, sell the same things in both places.

Rachel (14:30)
Yeah, that definitely that I would say that that’s fun for me and like being in the tax room like, that sounds like kind of fun because you’re going to get a little bit of variety and it’s going to be different for non tax people that probably sounds miserable because not only do you have to know what your requirements are with within each of those models, the marketplace and then the merchant of record, you are going to then have

just all these different things you’re gonna have to comply with. Either don’t do it or do it. ⁓ It depends kind of on the different jurisdictions that you’re in.

Braden (15:13)
Right. That’s fascinating. That’s, mean, again, just adds these layers of complexity that I’m not a tax person. So that sounds terrifying to me.

Rachel (15:22)
Most people aren’t.

like, you know, it’s one of those things like, Hey, if you want to deal with it, great, love it. ⁓ but it can, it can get complex. And if you don’t like it, it’s probably the last thing you want to deal with in terms of being a publisher. I don’t think many people are into tax there. That’s why they kind of went into being, ⁓ a publisher within the gaming world. And they like kind of the graphics and the experience very different than

very dry tax, whatever is their preference, but it is much easier to comply when you are using a merchant of record.

Braden (16:02)
Okay. ⁓ So we also have seen, you you’re talking about these options, maybe some publishers you’ve talked about like going direct, you know, differentiating from direct to consumer, right? Which is just selling directly to your player, but direct meaning I’m going to take on a lot of the liability. I want to either be a payment service provider or I want to partner with one that doesn’t operate as a merchant of record. What does that look like? And what’s the

Is there benefit to doing that from a tax perspective or is there an additional challenge that comes from taking that road?

Rachel (16:37)
Yeah, so when you look at it’s kind of like within the selling direct model, ⁓ most of the time you are going to need the help of ⁓ a PSP payment service provider to help you facilitate those payments. It really depends on the services that PSP is providing, because if they are providing kind of the full suite and more robust set of services, they are going to fall into that marketplace facilitator.

and then it will be more along the lines of what Google and Apple were doing. If it’s more of just a standalone PSP, ⁓ it’s going to be the liability of the publisher. ⁓ You really have to, hopefully they walk you through the criteria that shows you what you’re responsible for because it really is, I mean, this is kind of a real time thing that’s been changing and we’re

especially now as we’re seeing kind of this abandonment ⁓ off these marketplaces. ⁓ So as things do change, these rules are not set in stone. And I expect them to change as the dynamics and the selling structure kind of within the digital space does change. So right now at a point in time, this is what the rules are like now. It can change and it probably will change very soon.

Braden (18:03)
That’s so, wow. I mean, again, just so much nuance to all of this. Yeah. The nuance and the details. Yeah. So then we’ve talked a lot about these different ways that you can go liability risk that you take on. What are the most common tax mistakes or pitfalls that you see publishers making when they decide to ⁓ do this on their own or ⁓ sell those things globally?

Rachel (18:08)
We like contacts.

Yeah, I mean, the biggest, I think, mistakes we see is just not understanding how it’s taxed, meaning the nuances between a digital good and gaming. ⁓ But the other thing I see a lot is this concept of like a filing threshold. ⁓ Publishers, different companies will come back and say, we haven’t met the threshold. ⁓ What the threshold refers to is

the volume of sales that you have in a given jurisdiction. That kind of concept is really, it does exist internationally, but it’s a lot smaller. It’s maybe thresholds internationally have been moving to zero, but they maybe are like $10,000 internationally if there is a threshold. Within the US, can be, they’re around 100,000.

But those are also changing as well. Some states have a two-part test where it’s 100,000 and 200 or 100 transactions. What we are seeing is that it’s just moving to a single test and the thresholds are starting to come down. So what was 500,000 is now 100,000. And we just kind of expect that trend to continue.

along with what’s been happening internationally where the thresholds have been moving to zero. So what was once thought of, I’m okay because I don’t have enough sales. We’re on over the threshold is no longer the case just because the rules have been changing.

Braden (20:14)
Right. Okay. That makes sense. So it sounds like, I mean, there’s a lot of things that you know that I wouldn’t know, right? If we were to go out and make a game, right? I would probably need somebody like you benefit of using a merchant of record like FastSpring, because you get that expertise out of the box. ⁓ but you know, I thought we’ve got Chat GPT, we’ve got AI tools and you can ask them just about any question. You get at least some kind of answer.

how reliable may be questioned, like, is it possible to just use an AI service of some kind to get the answers I need rather than paying someone like you or using a merchant of record to do this?

Rachel (20:56)
Yeah, mean, trust me, I’m poking and prodding Chat GPT all the time just to see what it’ll give me. What I actually have seen in the past like year and a half ⁓ is that it’s starting to provide less and less. It’s starting to have a more conservative approach and give you that language of, hey, taxes are complex. You need to consult your tax advisor. ⁓ It’s really good if you just, you know exactly the question that you want and you understand the context of it.

Meaning like, hey, I have ⁓ a downloadable game and my player is based in Missouri. Is this product taxable? Yes or no. That kind of stuff is fine. But that’s assuming you understand, ⁓ you know, location of the player and what the game is. If you give it, if you just dump all your operations into a Chat GPT and say, hey, what’s my tax liability?

it’s not going to give you anything concrete. It’s going to say, hey, taxes are complex. ⁓ And it’s, there’s just a lot of nuances in that. But it’s like anything, the more, you know, AI starts to learn us, it might get better. However, what I have seen is that it’s starting to be more conservative and not giving you anything. And like, you’re trying to poke it to like, give me, make a yes, no determination. It’s starting to back off of that. And that’s

probably due to like just they don’t want to be, they don’t want that liability to then come back to them if companies do start using that as their tax advisor.

Braden (22:38)
That makes sense. Yeah. Well, this has been extremely illuminating for me and hopefully it is our viewers as well. But before we sign off, what other last minute advice would you give to a publisher or studio who’s interested in selling DTC and avoiding these tax pitfalls?

Rachel (23:00)
Yeah, the one thing is just I always recommend to do something rather than nothing. I understand that’s probably a lot harder, easier said than done, mean. ⁓ But I also want to just like hear, I mean, hear from kind of our publishers. I would love to hear kind of real world questions that they have. ⁓ It is similar to digital goods, but it’s a little more nuanced as well. So.

I would love if we could take some questions even at some point. ⁓ And hopefully that would give me a better kind of like, I can speak to anything, but understanding what some of the questions on their mind is would be great too.

Braden (23:43)
Yeah, I love that. Maybe we’ll have to get you out to an event and we’ll get you to have this conversation live with some people and get some live questions from our publishers. Or maybe we can find some folks online. If you’re hearing this podcast and you want to chat with Rachel, you can reach out to us. You can reach out to us either by filling out our demo form and letting them know, Hey, I want to hear from Rachel, put her on the phone. She can give my demo or you can probably send it to our support team as well as support at fastspring.com

and they can get that message routed over to her as well. But we definitely would love to hear from you. ⁓ Well, Rachel, thank you so much for joining us today on Growth Stage for Gaming. It’s been an absolute pleasure and again, super valuable information you’ve shared today.

Rachel (24:28)
Of course, thanks for having me. See you guys. Bye.

Braden (24:30)
guys.

David Vogelpohl (00:04)
Hello everyone and welcome to Growth Stage by FastSpring where we talk about how digital product companies can increase the value of their business. I’m your host David Vogelpohl. I support the digital product community through my role at FastSpring and I love to bring the best of the community to you here on Growth Stage. In this episode, we’re going to be talking about how to scale playable and interactive ad strategies and joining us is someone who knows quite a bit about that topic.

welcoming the CEO of Quicksave Elina Arponen. Elina, welcome to Growth Stage.

Elina Arponen (00:39)
Thank you, David. Thank you. It’s great to be here.

David Vogelpohl (00:42)
I’m so excited to have you to talk about this topic. And I know you were just kind of nerding out about this a little bit there at PocketGamer Connect in Helsinki with someone else who’s joining us here, Chip Thurston. Chip, you want to say hi? Chip’s head of gaming here at FastSpring.

Chip Thurston (00:58)
Yeah, hey David. Thank you. Hi Elina Happy to be here chatting with you today. I’m the as David mentioned, I’m the head of gaming here at fast spring really focused on helping our customers market monetize directed consumer. But before past spring I was at scope Lee for a few years and there I worked pretty closely with playable and interactive ads myself. So I hope I have some interesting thoughts to share here too.

David Vogelpohl (01:21)
Well, it’s such a cool topic and I think such an opportunity. And I think there’s a lot of folks out there who are thinking, like, how can I leverage playable and interactive ads in a scalable and really an effective way? And that’s what I’m really looking forward to talking about with both of you today. So for those listening and watching, really what we’re going to cover here are Elina’s thoughts on why playable interactive ads are so compelling to begin with. What makes them hard to produce?

how creative teams can accelerate the production of those ads and other insights into why WebGL is ⁓ revolutionizing ad production, publisher websites, web stores, and beyond. So it’s a bunch of topics here, but really focused on the interactive playable ad strategy. So really excited to kind of dig in here. Now, Elina, I’ve asked this question of Chip, so I’m not going to ask it of him this time, but I’m going to ask it of you as I ask many of our guests.

What was the first game or in game item that you bought with your own money? Not like a, you know, holiday gift or birthday gift, but like you took money that you had and spent money on a game. What was that game?

Elina Arponen (02:31)
This is actually a great question, although I’m going to dodge it a little bit because I don’t remember my own first purchase, I remember very vividly when I was talking to a person who had made their first purchase, because that was the first purchase that I ever heard anyone do. I was at Digital Chocolate and one of our colleagues had made a purchase. I think it was Zynga’s Mafia Wars game in Facebook. She had bought this virtual sword there.

And it was a lunch break and she comes in like, hey, I bought this weapon in this game. And everyone’s like, what, like shocked or confused or excited? And it was because it was a new thing. It was like the very beginning, like the very first games that introduced the in-game purchases. And so it became like this big rumor, like, did you hear, she actually made a purchase already? And like, have you done it? And then I guess we all started from, you know, soon after did our own purchases. But somehow that, because we were already in the industry, we were game developers.

And then it was like a massive thing to happen that someone had made a purchase. So that I remember very vividly. I think my own game sometime after. Yeah. Yeah.

David Vogelpohl (03:35)
Oh, that’s an interesting moment. I hadn’t really thought about when the first time I was exposed to in-game purchases was, you know, you just kind of shifted from like this premium game model to now all of a sudden, you know, in-app purchases are available. But I hadn’t thought about like the moment I might’ve discovered that. That’s super interesting.

What about you Chip? I’m just curious, do you remember the first in app? Your answer was the you’d spent a bunch of quarters on like some sort of like X-Men game and the arcade or something. But what about in app purchases? Do you remember the first time that you were exposed to that?

Chip Thurston (04:10)
You know the first place my mind goes with that is when they debuted Horse Armor as an additional purchase option in one of the Elder Scrolls games and there was this uproar about like, what? doesn’t even do anything! Why would people buy this cosmetic item?

They’re just trying to get more money out of their players. this was before, know, purchases obviously became such a common feature of games as they are today. But it’s funny looking back on that now and how that’s just so in a dime compared to anything that we see in gaming today. But I think that was the first moment I was like, there can be purchases within the game in addition to purchasing the game itself.

David Vogelpohl (04:48)
Yeah, I do remember my kids back in the day coming like, I want to go buy this skin or whatever. And I’m like, why would you pay money for design? And this is in a point in my career where I was really involved with like e-commerce and web store themes. And I’m like, wait a minute, I’m charging for designs on this front and they want to go pay for designs on that front. I felt a little disingenuous, but it’s so interesting how the world has changed. Of course I’ve spent plenty of my money on in game items since then. All right. Well,

Elina, next question is for you. ⁓ I kind of teed up Quicksave a little bit before we got started, but could you tell me about Quicksave and what you do there and what your role is at Quicksave?

Elina Arponen (05:29)
Yeah, yeah. So I’m one of the founders. We have three founding members in the company who’ve all been ⁓ in the gaming industry for quite a long time, like 20 plus years now. But right now what we are focused on is the tool. So what we have is the QS app tool. It’s a tool to do interactive ads without coding. So it’s kind of like a Photoshop for interactive content, you could say. And now what we’ve done lately is also we brought AI into it. So you can also prompt

for the interactive content. If you are not fully satisfied with what the AI did, you can still open it up in the editor and you can still manually perfect what you building, whether it’s an interactive ad or whether it’s something else. But now we are fully focused on this technology on how to bring interactive ads to be more accessible.

David Vogelpohl (06:21)
Yeah, it’s such an interesting point. And prior to tools like QS app, how would people create interactive ads? Is this like a hand coded thing? Help me understand that.

Elina Arponen (06:32)
Yeah, I mean, it is often a hand-coded thing. mean, when we talk about interactive content, is HTML5 or WebGL. I mean, technically it’s WebGL, but some people talk about HTML5, so either way. ⁓ And that is a technology that is available everywhere, like in your mobile, in your TV, in your car, a desktop. I mean, it’s available for the end user, but the actual creation of the WebGL content is often coding.

For interactive ads specifically, there are some tools that also offer kind of template-based solutions. So if the template has the interactive part that you are looking for, then that might be enough. But usually it’s coding. And even the kind of AI tools like Claude or ChatGPT or maybe Lovable they don’t work as well because of the ⁓ kind of formats that are required for interactive ads. Like you need to be specific format, specific size. So if you don’t do some massive coding project,

Even if it’s automated, it may not work in the end result.

David Vogelpohl (07:34)
Yeah, it’s kind of interesting, right? Because with AI, with a few prompts, you can potentially make these interactive experiences. And I kind of like how you’re merging in the AI aspect of that with the ability to, it sounds like, edit it and manipulate it. Because like, just producing AI slop is, I’m guessing, not good enough. You still need that kind of informed human hand. Is that why you’re merging the two together?

Elina Arponen (08:01)
Yeah, well, that’s one reason, but also ⁓ how the tool for us works is that it’s actually producing data. ⁓ So it’s not even doing code, which is like a data format for the interactive ads. And so now what we’ve done is we’ve the AI to use the same, build the same data format so that it kind of keeps the structure, it uses the same validators for the content that we have. And it’s kind of more structured and it’s easy to…

to do iterations and variations of it as well. It doesn’t get out of hand with that because you can modify certain components of yeah, mean, actually working with the AI has been a really fun and actually really fast process because something that we discovered while working with the AI and the tool is like if the AI doesn’t do something correctly, like it’s using some features or filter or something, like a shader incorrectly,

what it boils down to is that probably the inline help in the tool was missing something, like it wasn’t clear. So actually training the AI is pretty much the same as improving your tools documentation now. So which is good for the human user as well, you have better help texts and then the AI, know, the humans don’t always read all that, but the AI does. And then the AI can use that information quite efficiently.

And I do think we’re going to get actually quite good results, especially if you have your game assets and you give that as a starting point. And so the AI can be a massive help, but it’s definitely coming strong. And I don’t think there will be any tools left soon that don’t have a solid AI kind of assistance as well.

David Vogelpohl (09:41)
That makes a lot of sense. Sure. There’s a lot of opportunity there for you and other other platforms like like Quicksave . So let me kind of zoom out for a minute here though, a little bit. And I’m just curious, like why bother with things like playable and interactive ads? Like why not just have a static ad that links to an interactive landing page for my sake of example?

Elina Arponen (10:05)
Yeah, well, I can start, but I think she probably has a lot of info on this as well. I mean, it is pretty well researched that playable ads or interactive ads, work like three times better than video. So it goes for ⁓ the conversion, the retention, how memorable the content is. And it’s quite intuitive because if you get the person kind of interacting with the ad, it helps. You’re actually clicking or tapping the content, not just watching it passively.

Chip Thurston (10:31)
Yeah,

I agree with that. That’s well said. And I would say also it’s a few things about basically meeting players where they are. You’re giving them a native experience to whatever platform it is that they’re on, where they’re doing something and then they encounter this playable ad. They don’t need to go to a third party, like a landing page, to go engage with whatever it is they’re doing.

⁓ You’re giving them obviously an engaging experience. That’s something that’s a bit more than a traditional ad, so the playable nature of it is appealing. And the third part that I always thought of from the game development side is like, so much in game development, we talk about removing friction, right? Whether it’s friction for a new player and getting them into the game easily and installing the game, whether it’s friction through the UA process and the clicks it takes to get from a UA ad to the install to playing the game.

whether it’s friction in the purchase funnel and how you serve and offer in the game and get players through checkout and then back into the game. there’s all these ways we look at friction. Of course, we look at it in the direct-to-consumer space and getting players from the game to a direct-to-consumer purchase platform and then back into the game. But I think it extends to these playable ads as well. It’s really saying, is, you’re doing whatever it is you’re doing and you will experience this playable ad and it is right there.

you’re removing any friction from that process to get players that experience. And then that extends into the install and then playing the game and everything else. So I think it has a really nice role in aligning so much with the strategy of game development too.

Elina Arponen (12:08)
It’s true that you kind of give a piece of the fun, the experience already there in the ad so that you can get the kind of taste of it. ⁓ And although you were kind of comparing it to like landing pages, so I would say like on the websites and web stores, there should be more engaging content as well. That’s kind of another talking point then as well.

David Vogelpohl (12:32)
Yeah, I like that idea of meet the player where they’re at, removing friction. ⁓ I also was interested to hear you, Elina, talk about giving the player kind of a taste. ⁓ Are you do you think most of the people, publishers leveraging Quicksave to make playable ads, are they making like the WebGL, the playable ad version of the game like easier or in some way more enticing than they might experience in the full game? Kind of like how

Some games will make kind of those introductory levels super easy to kind of get you like hooked on playing the game. Is that a common strategy? You see publishers when they make these playable ads with Quicksave Elina.

Elina Arponen (13:14)
Yeah, well, I’d say that you might want to make it easy in the sense that the player needs to, or the person needs to understand the kind of rules of the game on what’s happening here. So playable ad is only like 15, 30 seconds snippet. But in that time, you should still give them a sense of like, what this game is about, how does it function?

And ideally like a little bit of sense of progress, like some kind of a-ha moment that, I achieved something and that kind of is a hook. And it might be that in the game, that kind of a-ha comes a little bit later than in the first 30 seconds, but it might not. It depends on the game and how fast it comes. So sometimes in the ad you might speed it up a little bit, but it definitely needs to be truthful to the game. So you don’t kind of do things that are not in the game.

David Vogelpohl (14:08)
player spending like a good amount of time. Like I walked up to my daughter the other day and she’d been messing around on this iPad for a little bit. like, what are you doing? And she goes, I’m playing an ad. And I was like, okay. but if she had been playing it for a while, like her people are these playable ads. You want to like engage with them for like a long period of time.

Chip Thurston (14:24)
Yeah,

think ⁓ strategically it can be the case where it really depends on how you build your ad. You could build a really closed loop playable ad and say like you step one, step two, step three, and then that’s it. And there’s nothing further to do or you could make it. So it is just this kind of endlessly engaging experience. It depends on what the goal is and the strategy of the game using that playable ad. But I think you’re keying in on a really important point here, David, which is ⁓ what makes a good

playable ad is sometimes different from what makes a good game, right, in terms of the gameplay. And so you do need to think about how you represent that. Sometimes it does need to be made easier or something where you streamline the process a little bit such that you can engage players through that playable ad, which is a much more bite-sized form of content, and then get them into the game where it’s this much more long tail, much more…

engaging over a longer period of time and experience. But Elina, what are your thoughts on the endless experience versus having a more closed loop system there?

Elina Arponen (15:31)
Yeah, no, I think I agree. It depends on a little bit on the game. And ⁓ I would actually, ⁓ with your particular game, who doing the ads, like test it out, like do iterations. Like in a true kind of performance marketing manner, you should have multiple, ⁓ always like ⁓ creatives in the testing. So if you are producing like, I don’t know, hundreds of images, hundreds of videos, why not have…

similarly a lot of playable ads to test that. you could also, I would kind of try different lengths if the gameplay seems to be some such that it kind of lends itself to either option. It’s more often short than long that I’ve discovered, but yeah, there are the long options as well.

David Vogelpohl (16:17)
Yeah, and I like your point about testing and making sure you’re leveraging strategies that work best for you, your game and your players. So let’s get back to like producing these ads. I often describe WebGL as like it’s the new flash. Basically, maybe that’s a bad way to frame it. But I’m just curious, like if you could do a double click, Elina, unlike

Why are the ads so hard to produce? mean, maybe you could like vibe code something, but like in general producing a good ad, why is that so hard to do ⁓ currently?

Elina Arponen (16:52)
I guess it’s to do with the process. If you are coding it, if it’s quite manual to produce the ad, like make a game snippet in WebGL, ⁓ then your iteration speed is also ⁓ slower. We want to bring the most value, like increasing the iteration speed, which means that you can also create more of the variations. And then you can…

actually do this performance marketing where you have a lot of options to test out. If it takes many weeks to do the ad and if it’s very costly, then you’re less likely to have multiple copies and so forth.

David Vogelpohl (17:37)
If I’m a UA specialist and I’m trying to get new players into my game and I have an idea for a new ad unit and it’s playable and I have developers and designers that are helping me create these WebGL interactive playable ads and I kind of give the idea to them, they go off, take a week or so to make the ad and then I can deploy it. This sounds like

what you’re describing is like this process can even just a couple of weeks can be way too slow and you’re not able to iterate and test different variations quickly. You’re kind of sitting around and like waiting on the backlog to get resolved. So your idea can be made a reality. ⁓ it sounds like what you’re saying is like when you’re manually creating them, relying heavily on designers and developers, it can be slow to produce.

and reduce the number of variations that you can test. Does that sound about right?

Elina Arponen (18:39)
Yeah, yeah. So with ⁓ like a good tool and a faster process, even if the first ad, let’s say the first ad, takes hours or even like, let’s say days to make the first one. But then if you are able to kind of iterate and make variations quickly, that can be a huge, benefit as well. And the wipe coding has been mentioned a few times, but that is kind of difficult with the, you cannot have… ⁓

But obviously, needs to be very error-free. It needs to be quite small packets that you are delivering to the ad network. So there are all these kind of ⁓ restrictions on the output, technically how the output needs to be, especially if you are doing the interactive ad for these ad networks. All right.

David Vogelpohl (19:25)
It sounds like what you’re saying is that when I create these ads or when my team creates them, if it’s this manual process, of course it can slow me down. But you also kind of pointed out that maybe if I’m using templates or reusing and iterating on assets, this might be one way where I can speed up the process. I could also, of course, use a platform like QS app by Quicksave .

QS app usable by non-technical or least non-developers? Like as a marketer, can I go in and create these ads?

Elina Arponen (19:57)
Yeah, that’s the aim of it. So it’s being developed for artists and designers to be used by them. It’s actually ⁓ coming out from our ⁓ game development ⁓ editor originally and then we’ve repackaged it. So it’s an editor that’s been built over actually many years to be usable by non-technical people. And now with AI, ⁓ it is ⁓ obviously becoming even easier to use.

because you can get that AI help. ⁓ Right now though, we also can help a team to get started and maybe even make the first ad and so forth. So if you are not looking to use the tool, but you just for now want to get the ad and we can help with that too. ⁓ But yeah, mean, this is the goal on making it so fast that it’s anyone’s…

⁓ Anyone can do it and it’s really accessible. Right now it is the most effective ad format, but it’s still not used by everyone. It’s kind of out of reach for smaller companies, for the public. That’s how I’ve ⁓ kind of discovered.

David Vogelpohl (21:09)
that’s an interesting point. So it’s not just like I’m a UA or whatever marketer inside a publisher and I’m stuck waiting on developers. So I might use something like QS app to free myself from the developers backlog jail, but it’s also for smaller publishers who just don’t even have the resources to facilitate that. It sounds like by providing this type of service, it allows you to open up the possibility of interactive playable ads to more folks.

That sounds really helpful. then you said this is how kind of Quicksave helps achieve this with QS app. sounds like you’re also like working with them to create their first ads. Is that correct?

Elina Arponen (21:51)
Yeah, we can also work on the ads and help the team to kind of get started or even like, yeah, just be the users of the tool either way. Yeah.

David Vogelpohl (22:05)
Awesome. Now Chip, at your time at Scopely and before that, I guess at SciPlay or whatever, ⁓ when you created or had interactive playable ads that you were leveraging for the games you were working on, ⁓ were these hand coded? mean, were you waiting in line for the developers to make the ads for you?

Chip Thurston (22:26)
Yeah, it was cumbersome. I would say we used a third party agency. When we would do that, we would send them the brief and here’s what we’re looking for from the playable ad, get that back. Effective UA requires iteration, right? So then we would have back and forth. And I think if you ask why do playable ads take so long, I would have to say like, I’m part of the problem here because whenever I would get that ad, would…

really poke holes in it and say, okay, we need to change this part, let’s change that part. I was working on a game ⁓ with ⁓ IP-based, very famous characters. So that meant these characters had to be represented effectively in line with that IP. Not only that, after I would go through my rounds of feedback and iteration, which to your point would take weeks of back and forth, we then have to go to the licensor.

say, okay, licensor, do you approve this creative? And they might say, this character needs to be doing that instead of this, right? So then we take that back to the agency. And so you just have all these feedback loops. So yeah, it would take a long time. And it was really an uphill battle for us to leverage playable ads, as opposed to more traditional static or video ads, where just the cycle was so much quicker. And so that’s where I kind of wish I would have known about Quicksave back then, because that would have streamlined so much of our processes.

Elina Arponen (23:46)
This is pretty new. I don’t think this tool existed with us back then. ⁓ At least for us like this has ⁓ become available this year only. ⁓ Actually since August. So it’s a pretty new thing.

David Vogelpohl (24:05)
So the value then it sounds like for you Chip is like there’s always going to be this back and forth, right? You’re always going to poke holes and whatever the thing is, the licensors are always going to have their point of view. And so by reducing some of the technical complexity, it can help just draft, you just drastically across the board, shorten the cycles, but you’re still going to have the cycles, but by enabling your creative teams to produce more of this content.

versus having to have developers or outsource much of it seems like it could be incredibly valuable.

Chip Thurston (24:39)
Yeah, yeah, absolutely. I would say the extension of that is also giving me more shots on goal, right? Like I’m able to crank out a lot more volume of playable ads because we are lessening those feedback cycles, right? So we’ll still have the iterations, we’ll have the cycles, but as a result, therefore I can crank out more playable ads and then I can optimize better. And that was the part that always fell short for me trying to leverage playable ads was I had this very mature

a static and video ad section of my user acquisition strategy. Then I playable ads where I was confident in the theory behind it and everything we talked about about meeting players where they are and the engaging experience you give them. But it takes time. It takes time to find the right creative, what resonates with your potential players, what works in what forums.

That takes a lot of iteration and cycles of running different types of ads. And so I think just the volume is a critical piece, but at the end of the day, being able to get more volume is a function of being able to do that more quickly, like you can with a Quicksave platform.

David Vogelpohl (25:47)
Yeah, Elina pointed this out as well, like the idea of like number of iterations and variations and the ability to produce more of them. And I think it’s kind of interesting because I often think of like the world of advertising has shifted away from kind of like the madman era where ⁓ advertising people go in a room and drink a bunch of scotch and smoke cigarettes and come out with the perfect idea.

to where now we can iterate and test and understand, then I still feel like in gaming writ large, you kind of have this moment of like, I’m going to spend a lot of time somewhere and come back with like the perfect thing. And I have less ability to iterate, especially if I’m like doing a big release, like it’s out there and people are playing it and being exposed to it. And it’s affecting my reputation in the long run. But it sounds like with these ads, have more abilities to iterate and play around.

⁓ Is that a fair way to look at it?

Chip Thurston (26:44)
Yeah, I think so. Because you don’t… I shouldn’t say you. I was surprised a lot of the time with what UA would tend to break through. I would say, okay, I have this ad, I’m very confident in, I love this concept. And then we have this other one that maybe it’s a spin-off of that or it’s taking some weird feature in our game and really putting the spotlight on that. And we’ll try and add around it, why not? And then we try that and for whatever reason it outperforms the other creative.

So we’ll go lean into that, right? But that’s so much of what UA strategy is about is just throwing so many different things against the wall, seeing what sticks and then running with that and iterating on that. And that’s the way to finding a very impactful UA strategy.

David Vogelpohl (27:29)
Excellent. All right, Elina, the last question is for you. ⁓ So we’ve talked about WebGL a lot in the context of playable and interactive ads, but what else can WebGL be used for?

Elina Arponen (27:43)
Yeah, this is great question. mean, as I said, the, yeah, we’ve been doing like the playable ads, like since, since August, but we’ve actually done other WebGL content since, since earlier. So if you have like a, well, any website really, but you have a web shop, you have a web store, you probably want to have the visitors that come there to be engaged and stay on the site longer.

So now that lot of mobile game companies are also building their kind of site stores, ⁓ I would see that they should be a little bit more of a destination so that the players going to that store would find it engaging, exciting, to be more like a continuation of the game experience as well. So you can definitely have WebGL content. mean, normal website builders.

⁓ don’t use WebGL, they use HTML. You can do a lot of nice things. You can have videos and can have sparkly images, but to use WebGL content, ⁓ you can make it more engaging and you can have a continuation of the stories or the games even there. And ⁓ I think that would be quite beneficial in the end. So definitely I see that using WebGL content.

elsewhere as well. Of course, you can build whole web apps, just embedding ⁓ smaller things, of like in the sense that it’s a playable ad is embedded inside an app where it’s being advertised. You can embed WebGL content on a website.

David Vogelpohl (29:16)
I like this idea of like a playable web store. Maybe that’s a topic for another time. I had not thought about the implications of things like that, but it is really interesting. And you know, when we optimize web experiences in general, I like to think of it as like the balance between suffering and joy, the joy of new experiences and interactive content and the suffering of page load time.

And meaning that the more we add, the slower the page will load. But there’s such an opportunity here, I feel with such an engaged user base of players who are interested in playing and interacting and bringing that to life in unique and interesting ways on the web. Now my brain is like twisting with ideas around this. I’m going to have to go play this on WebVue.

Elina Arponen (30:05)
long times can really be kind of worked around with, it doesn’t have to become an issue. ⁓

David Vogelpohl (30:10)
Yeah, maybe we’ll do a different episode on page load time with WebGL and otherwise. But this was super interesting. Thank you so much for joining us today, Elina.

Elina Arponen (30:20)
Thank you. Thank you for having me. mean, it was a great topic, conversation. And yeah, good times. Yeah.

David Vogelpohl (30:28)
And Chip, thanks for joining again as well.

Chip Thurston (30:32)
Always a pleasure.

David Vogelpohl (30:33)
Awesome. And thanks everyone else for watching and listening today. If you’d like to learn more about what Elina is up to, you can visit quicksave.fi. Thanks for joining the Growth Stage podcast. Again, I’m your host, David Vogelpohl I support the digital product community as part of my role at FastSpring . And I love to bring the best of the community to you here on Growth Stage.

David Vogelpohl (00:04)
Hello, everyone. Welcome to Growth Stage by FastSpring, where we discuss how digital product companies can increase the value of their businesses. I’m your host, David Vogelpohl. I support the digital product community as part of my role here at FastSpring, and I love to bring the best of the community to you here on Growth Stage. In this episode, we’re going to be talking about the dramatic rise of the web in gaming and how top publishers and studios

are building innovative web teams. We’re gonna be having that conversation with someone who knows a decent amount about that. I’d like to welcome Caleb Brown from X-Team. Caleb, welcome to Growth Stage.

Caleb Brown (00:44)
Hey, thanks so much for having me, David. Happy to be here.

David Vogelpohl (00:47)
Awesome. Well, I know you all over at X-Team do quite a bit of work in this area, so I’m really curious to get your insights here. And for those listening and watching what we’re going to be talking about today, ⁓ X-Team and the company Caleb works with is a provider of technology talent as a service for top game publishers. But we’re going to be covering his thoughts around the drivers behind the rise of web experiences in gaming.

Caleb Brown (00:55)
Yeah.

David Vogelpohl (01:13)
the key challenges of building an innovative web team from scratch, which I know a lot of publishers are doing these days, and how top game publishers and studios are approaching building out their own teams. I think these are some topics that are really top of mind for a lot of folks, and I’m really interested to get Caleb’s perspective, and I hope you are too. Caleb, to kick us off, and I ask this question very often when we talk about gaming of guests.

But what was the first video game where you spent your own money on? Not like your parents’ know, holiday gift or anything like that, but like your money. What was the first game?

Caleb Brown (01:46)
Right.

It’s a really good question. ⁓ So my birthday is just a few weeks after Christmas. So was very common when I was young to kind of pull that money together, the Christmas money, the birthday money. ⁓ I do have a memory of buying, it was Donkey Kong Country one or two.

for the Super Nintendo, probably would have been eight or nine or somewhere around there. I recall holding it in the car, my mom driving us home, and just wanting to play it there, wishing it was a mobile game, because I was holding the package and so excited to get home and play it on Super Nintendo. So I’m pretty sure that was birthday and Christmas money. So I think that answers your question, unless you mean…

money from my first paycheck or something like that.

David Vogelpohl (02:46)
No, no, no.

Yeah, birthday and Christmas money makes a lot of sense. It’s funny, we were just talking about Donkey Kong Country over here. I can’t remember the context. But yeah, that’s such an iconic game. It was so cool, especially in the Super Nintendo era when you were getting more into these 3D games, which was really compelling at the time. But I can empathize with you there on that one.

Caleb Brown (02:53)
yeah?

So iconic, yeah.

Totally.

And lives on. It’s cool to see the franchise live on. It’s doing incredibly well on the Switch and things like that.

David Vogelpohl (03:13)
Yeah, exactly, exactly. Nice franchise and IP there. But let’s move on and talk about the topic at hand. But before we jump into that, I’m just curious. I said a little bit about X-Team when I did the intro. But can you help the people listening and watching understand what X-Team does and what you do there?

Caleb Brown (03:35)
100%, yeah. I mean, you did a great intro. do ⁓ staff augmentation essentially for software development. ⁓ So we connect top tier developers that are around the world, living everywhere, ⁓ with some pretty great companies that we’ve partnered with over the years. In fact, over the decades, ⁓ X seems about 20 years old somewhere around there. And some of those, partners we have,

Riot Games being a good example ⁓ are folks we’ve worked with for a decade plus. ⁓ And so we have a lot of X-teamers all over the world working with not just gaming companies, but we certainly have some in the portfolio. ⁓ the nice thing about how that works is ⁓ it’s staff augmentation. So developers come on for maybe a six-month-long project with one company.

And then there’s still X teamers the entire way through. So once that contract wraps up, they kind of come back to X team. ⁓ And then we begin that search for their next partner opportunity. So ⁓ like a lot of developers were already kind of independent contractors prior to being in X team and liked the, experience. ⁓ But getting clients can be hard. And like I said, we’ve, we’ve, we’ve partnered with, with ⁓ many great companies over the years. We have a good relationship with them and so we can kind of help them.

Keep that lifestyle they loved as an independent contractor and help bring them to great clients. In terms of my role, currently I am content and strategic initiatives manager, which is a bit of a mouthful, but I handle a lot of stuff. I am our podcast host on our end for the podcast, Keep Moving Forward, which you can find anywhere you get podcasts.

We also have an internal education program, something that looks like a Udemy or Coursera, know, with Swift and React and even AI courses, so I kind of ⁓ curate a lot of that content. We’re starting to do some of our own original content there. I do a little bit on our social media and the developer-focused stuff, and my background is actually technical, so ⁓ with the rise of Vibe coding, I’ve been…

helping us do lot of internal apps, stuff that we might have bought a small subscription for. We’re starting to roll that out on our own. So I’m a little bit all over the place, but just trying to ⁓ kind of really enrich the developer experience when you’re working at XT.

David Vogelpohl (06:08)
That’s excellent. And I personally know Nextteam for a good long time and happy to know Mitt, the CEO as well, and many developers that have worked there and all of them really super high caliber folks. I guess I’m talking nice also about some of my friends there. So like that with a grain of salt, I suppose. yeah, really, Yeah, yeah, yeah.

Caleb Brown (06:14)
Yes, yes.

True. Wait, you are right. I do agree. Good folks.

David Vogelpohl (06:33)
Some of the best folks I’ve worked with are known in that way. So I’ve been real pleased with my interactions with you all over the years. And you mentioned you have game publishers in your portfolio. And I know you can’t share like every name you do work for, but I know you’ve publicly talked about others. But give me some examples you can share.

Caleb Brown (06:42)
Happy to hear that.

Mm-hmm. Yeah.

Totally. So like I said, we have had a great relationship with Riot Games for quite some time. And that is the biggest, at least as far as my knowledge, the biggest game publisher that we work with. We also work with Epic Games. we’ve worked with small, I mean, massive, huge. Yeah, but we’ve worked with some smaller.

David Vogelpohl (07:11)
Those are two pretty big ones. ⁓

Caleb Brown (07:18)
⁓ kind of more indie studios and things like that in the past for for some small engagements but yeah the big ones ⁓ epic and riot

David Vogelpohl (07:26)
All right, good deal. So now let’s transition to the topic at hand, which is the rise of web experiences in gaming. From your perspective and your team’s perspective, what do you think is driving that?

Caleb Brown (07:32)
Sure.

Yeah, great question. ⁓ Because yeah, there certainly is a rise. ⁓ I I think a lot of it, and I don’t think all of it, I think we’ll certainly get into it, but I think a lot of it is the margin and the ownership of direct to consumer, The marketplace. Speaking of Epic Games, we all know about Epic Games versus Apple. There’s the whole ⁓ thing about… ⁓

using kind of other folks’ ⁓ platforms and taking a significant portion of that. ⁓ And so I do think a lot of it is on the financial side of wanting to rule your own ⁓ marketplace. ⁓ That being said, I don’t think it’s just about the financials. I think that there are major benefits to having that direct relationship ⁓ with the consumers.

for sure and like I said, we’re happy to get into that but you know, I do think probably a big thing that kicked it off was You know realizing that a lot of game publishers felt stuck within within some of these You know walled guards

David Vogelpohl (08:57)
Yeah, and it’s such an interesting observation because in almost every other industry, this idea that I’m going to have a direct relationship with my customer and own my commerce experience is a foregone conclusion. And the web is the engine and pathway for that for most brands, certainly digital brands. ⁓ And gaming was traditionally relying on marketplaces and ⁓

Caleb Brown (09:17)
Yeah.

David Vogelpohl (09:25)
app stores and things like that for distribution and monetization. And so it is interesting to think about the ⁓ ability to monetize direct as unlocking this idea that the web can be more than like a brochure site, if you will, to promote your game. Is that kind of where you’re going with this, it sounds like?

Caleb Brown (09:42)
Right. Yep.

That’s exactly it. like there is a like not even thinking at all about the financials. I think there’s a massive benefit to having ⁓ web platforms that kind of extend through. mean, you know, gaming is, know, folks are fanatical about it or they love it, right? And I think you can, you can have a better experience across the spectrum. You can have kind of frictionless, you know, platforms where

You’re doing your, you have a hub, you’re doing your loadouts. I think ⁓ EA Sports for their soccer game, I think you can manage your entire squad ⁓ from their web-based ⁓ app. So I think part of that is just the direct connection that you can have with consumers and you can experiment too. I think we’re seeing some potential. I don’t think we’re totally there yet, but there’s some ⁓ even tech.

⁓ expansion with like web GPU, where I’ve seen like 3D demos and mini games happening. And I think you could probably just have like a really good interactive experience on the web that then might even push you to ⁓ try the full game, know, things like that. So I think there’s just a world of experimentation where you can build these, ⁓ you know, extensions of the game.

David Vogelpohl (11:08)
It’s an interesting point. You I am kind of curious from your perspective as we talk about, you know, beyond just having a, you know, a store on your website, a web store, if you will, like, what does it mean to have web based gaming experiences? And I really liked the example you provide of like managing your soccer or football team on the web where you’re going to play it though on your phone or maybe a console or something like that. That’s a really

Caleb Brown (11:17)
Right.

David Vogelpohl (11:36)
interesting example because there are these really complex interactions where maybe a larger screen or a mouse and a keyboard might provide a better experience than maybe trying to mash it out on your phone. And obviously that’s not going to work for every kind of game, but a game like managing a soccer team maybe is more relevant. ⁓ You also talked about this idea that maybe I have extensions of the game or even ⁓

Caleb Brown (11:49)
Totally.

100%. Yeah.

David Vogelpohl (12:03)
playable elements of the game that are on the web that connect to the game, which I think is also really interesting. ⁓ What are some other examples? Like you talked about this idea of a hub, and I know a lot of folks talk about this in the gaming context, but what are some of the spokes on that hub ⁓ that stand out to you?

Caleb Brown (12:13)
Mm-hmm.

Yeah, yeah. Well, so it’s interesting because I think that Rockstar actually rolled it back. But I thought their Rockstar Social Club was really interesting. They had like an activity feed, ⁓ like a player profile that you could see. And I think some, you know, people obviously get really into Rockstar stuff. And I think they had some exclusive content videos and things like that. And they discontinued it, which is interesting.

But at the same time, I still think that’s a good example of what’s possible. I don’t know the reasons for pulling back on that. But I think the experimentation alone is really interesting. ⁓ And my guess would be, even if they rolled that back, I think it was a year or two ago. ⁓

that they’re probably not done in that space. They’ll probably expand into it. ⁓ But yeah, like I said, the inventory management, you made a really good point that some stuff works really good with a keyboard and mouse or even on the console, but then doing some of your kind of management of what’s in your inventory and things like that actually might work better as a mobile app or a web app.

David Vogelpohl (13:29)
Yeah, it’s interesting to think about the interaction between the game and the web and how you combine them together, or maybe not even just the web, but like PC versus phone versus console. And, you know, it’s, I don’t, I’m not familiar with Rockstar Social Club, but obviously we also have third party platforms like Discord, where some of those interactions happen, but it sounds like the wheels of the hub, if you will, or the hub in general.

Caleb Brown (13:35)
Totally.

David Vogelpohl (13:57)
It sounds like the the sentiment you’re getting across is this idea of your website is not just a brochure or not just a commerce engine, but a destination for your players where they can interact with their account, with the game and perhaps the community. But it’s this idea of it being a destination and not just a sales page. Is that fair? OK.

Caleb Brown (14:18)
That’s right. That’s

100%. Yeah, yeah. You need to look at these things like they’re real products.

David Vogelpohl (14:25)
Okay, products. And my website is more than just an advertisement. It’s part of my product. I think that’s a really distinct way of looking at this. And I think a lot of people haven’t thought that way before.

Caleb Brown (14:34)
Totally.

Yeah, I agree with you. And perhaps we will get more into it, but I think you’re right that it would be really easy to make what I would call a mistake of saying that you’re getting into this world of extending out into web, and it’s really just marketing, not a product.

David Vogelpohl (14:54)
Yeah, that makes

a lot of sense and definitely resonates with me. if I wind the clock back even like three to five years ago, and I kind of imagine gaming sites at the time, it would have some good imagery, some videos, a little link in the navigation to our games, maybe a hiring page and things like this. It was really basic. It was the kind of thing you could probably outsource to an agency down the street. ⁓

Caleb Brown (15:05)
Yeah.

Yeah.

David Vogelpohl (15:22)
They’d build it within a month and it’d be live and that’d be a thing. And now when you’re talking about like, wait a minute, now I’m going to have this commerce engine with D2C. I’m going to have a destination that’s going to be part of my product. And I do want to get into that more later. ⁓ But now we’re having to like think like, well, wait a minute, this is more than just like offloading, making a website. This is now a very important and much more important thing. ⁓ So help me understand what are some, help everyone really understand.

Caleb Brown (15:30)
Yep.

Totally.

Mm-hmm.

David Vogelpohl (15:51)
What are some of the key challenges in building a quality web team from scratch? Like lot of these publishers have just never done this before. Give me the lay of the land. Like what are they up against?

Caleb Brown (16:00)
Yeah.

Yeah, yeah. I mean, you know, playing off what we just said, like, you know, you do have to look at it or the right way to look at it, in my opinion, is a true product. And that’s what we’re saying, you know, authentication so that it is ⁓ working with your existing ecosystem with the existing game. So when you do stuff like, you know, you already have a soccer game going and then you log into this web portal, you you want to be able to have all of that sync up.

and work and just to see your team there within the web app. So there’s obviously like the, the technical side of things. ⁓ But you you’re also looking at, ⁓ like you said, you’re looking at it as a marketplace now. So you’re looking at, can even have microtransactions within that. So you’re looking at, you know, fraud and policy and chargebacks on virtual goods, you know, a whole thing. So having folks that understand that world, that ecosystem.

⁓ certainly valuable, certainly important to have the right tools there to build these things up properly and securely.

David Vogelpohl (17:12)
So when I’m building this team from scratch, though, ⁓ and I’ve got to go find people, and recruiting can be a challenge. And of course, the gaming industry has had rounds of layoffs recently. And so maybe hiring for game developers isn’t super duper challenging. Maybe web developers are also relatively easy to find. But the first thing I think about when I think about hiring is hiring for what? ⁓

Caleb Brown (17:30)
Right.

Mm-hmm. Mm-hmm.

David Vogelpohl (17:40)
And so

as I put myself in the shoes of a publisher that’s kind of ramping up a web team for the very first time, the first question is really, what is my web stack? You talked about interactions with the game and the back end system, and those are things, obviously, that are already there. But what are some of the key considerations for choosing which web stack to go with? ⁓ Help folks understand that.

Caleb Brown (17:51)
Right, right.

Totally, yeah. And I do think that’ll vary to some degree based on what they’re building. But trusted, modern, real-time frameworks are typically a good way to go. Next.js will give you a lot out of the box. You’re streaming out of the box, server components out of the box, which is pretty nice. Like I said, like an authentication standard that works with your existing ecosystem. And that’s where it’s important to, I think, have experts, folks that

know OAuth and know that world and ideally have built something similar to this before. ⁓ If we’re talking about the micro ⁓ transactions, we’re in the payments world, we’re looking at compliance and regional conditions, ⁓ you want folks or a platform that understands that really well. And specialization I think is huge here. I we see it at Xseme for sure. I was just talking about the web GPU.

stuff that I was seeing recently, which I haven’t seen built totally. Yeah. Yeah. Yeah. I haven’t seen it built totally into one of the examples we’re talking about, but I’ve seen demos that are wildly impressive through the browser. And that’s like relatively recently unlocked with some of the, some of the web GPU stuff. you know, you’re, you’re right. Maybe it’s a little easy at the moment to find game developers, but

David Vogelpohl (19:07)
If you are right.

Caleb Brown (19:33)
even within any niche is a sub niche. So looking for folks that have worked with something like a web GPU is really valuable. And ⁓ like I said, we do see that at X team where folks are putting this thing together and they have an amazing existing in-house team, but they need folks that have really worked with XYZ tech to build that out. ⁓ And so that helps on the hiring side if you want to kind of…

jump right into it.

David Vogelpohl (20:04)
OK, so that makes sense. So ⁓ if I kind of play back some of what you talked about there, I’m going to pick a kind of core technology for my site build. And one example you gave was Next.js. I’m going to leverage and integrate in things I already have, like say maybe my player authentication system, ⁓ and integrate that into my web experiences.

⁓ Next.js is often used with decoupled JavaScript web architecture, headless, if you will. And maybe folks in the game industry aren’t as familiar with this, but this is the new way of building a web experience is where most developers coming out of code school and learning are learning in this way. Is that a fair assessment, Caleb? Okay, okay. So…

Caleb Brown (20:37)
Yep.

Totally.

I believe so,

David Vogelpohl (20:59)
This might be a path that if I’m building out a web team from scratch and I’m picking this web stack, but I might very well ⁓ land in this approach. Now, I want to talk in the game world, there’s a lot of web store or web shop providers. And so what these will typically look like is there’s some kind of store in a box and the provider

does all the work for you or most of the work for you and launches it and hosts it and maintains it. And when you see Next.js and headless builds and things like that, yes, you’re right. It’s like a framework and you inherit things that you don’t have to build from scratch. But it’s building a site from scratch but with a framework versus a guardrail of a store and a box. So help me understand the balance between those two approaches. Obviously, we like

Each approach is probably valid for different reasons and different situations, but help us understand like the benefits of both sides.

Caleb Brown (22:01)
Yeah, absolutely, absolutely. ⁓ You know, and you’re right. I don’t think there is a universal right or wrong. That’s certainly for sure. ⁓ But when you have a little bit more freedom, especially if you are a larger team, a larger organization, I think that has resources, you want the freedom to A-B test and test with pricing and do stuff that might.

be something that you alone want to try and therefore it might not be baked into an off-the-shelf solution. ⁓ At the same time, guardrails is amazing to have in terms of, you don’t need to be A-B testing security. You don’t need to be experimenting with compliance. ⁓ And so it’s nice to have cookie cutter solutions for the stuff that

you know, needs to be sort of hammered down. ⁓ But every team is going to be entirely different. know, I wasn’t a game developer, but when I was an individual developer building e-commerce solutions, I was just one person, and I was happy to have options that covered more than I could handle in terms of that. ⁓ At the same time, you know, like I said, if you’re a bigger team doing a bigger project,

and have resources, having freedom to build exactly what you want and make that. Like I said, if you’re looking at this as a product, which you should, you should be developing it the way that the team feels it should be built. And so having that freedom is necessary. But ⁓ yeah, you’re certainly right in that I don’t think there’s any right or wrong ⁓ kind of across the board.

David Vogelpohl (23:54)
Yeah. So the balance it sounds like is when I go the kind of quote custom coded route and I am quoting that because like frameworks obviously come with a lot of stuff baked in. have the freedom to kind of drive the direction of innovation and experiences. And if I’m using something off the shelf with more rails on it, I can go faster and I have to mess with maintaining it to your example. I don’t have to experiment with security or compliance.

Caleb Brown (24:05)
Great.

Totally.

David Vogelpohl (24:24)
but I might be trading off that freedom. so these are some of the balances that play there. If I’m taking the custom route though, what are your thoughts on using off-the-shelf components to address that? ⁓ So like in the FastSpring universe, people like offload payments to us. So like that’s one example. But do think that’s a way to bridge some of those gaps on the custom side? Not necessarily the payment side.

but just like in general using off the shelf components for certain parts, but still preserving that freedom you have with a custom coded site.

Caleb Brown (25:02)
Yeah, absolutely. mean, and payments is a really good example. Like I said, that’s what I was referring to when I was working as kind of an independent developer. ⁓ Like I was so happy that in fact, I actually did use fast spring for this project. ⁓ is back in truly back in 2011, I started taking payments for a it was an educational bookmarking site. ⁓ And it was the first dollar I had ever made on the internet. And, you know, because of the security and compliance stuff we were talking about, I was so happy.

⁓ that someone else, Fast Spring in this case, was able to handle all that stuff and I didn’t have to think about, ⁓ my gosh, I have customer credit cards and stuff like that. And obviously there’s parallels there to other ⁓ off the shelf components. I’m sure there’s times when that makes just a ton of sense for folks and they don’t need to customize absolutely every single thing. ⁓ But yeah, totally depends on what you’re building, but absolutely.

pulling in ⁓ outside resources like that can be ⁓ really helpful.

David Vogelpohl (26:06)
What a happy surprise for me. actually didn’t know this. feel like it sounded like I teed you up for that, but that’s really ironic. ⁓

Caleb Brown (26:08)
I

assure you did not, but no, it’s true,

David Vogelpohl (26:17)
That’s funny. That’s cool.

So, you know, in my background, I’ve ran an agency before and we would go to customers and we talk about, you know, custom coded versus off the shelf systems. And these were some of the tugs and pools and we almost always landed on something custom coded. And it was because the client usually had some zany idea on how to make money or go to market in a very specific way.

Caleb Brown (26:47)
Yep.

David Vogelpohl (26:47)
but they

liked the advantages of offloading complexity, especially in areas that they weren’t going to experiment with or that presented a lot of risk. And so I think a lot of people think that custom coded means you’re responsible for everything, but you actually can componentize and offload key parts of it in that way. But then at the same time, if you’re up against the deadline or you don’t have the team to support something custom,

Caleb Brown (26:54)
Totally.

Absolutely.

David Vogelpohl (27:13)
Maybe you’re too small or you just haven’t got there yet in a larger organization. Off the shelf is a great path and option. ⁓ And it’s good people have those choices. But I appreciate you kind of walking through the puts and the takes on that one. So you’ve mentioned a few times that you feel like the web should really be treated like, the web experiences should be really treated like a product instead of just like an ad, if you will.

Caleb Brown (27:30)
Absolutely.

Yeah.

David Vogelpohl (27:43)
So this

really brings up the question, you know, again, a lot of publishers are for the very first time starting to scale a web team. Where should they report? I feel like in the old days they would go to marketing, but should they go to product or engineering? And I guess it obviously differs per organization, but what are your thoughts on that?

Caleb Brown (27:54)
Totally.

Yeah, yeah, it may differ per organization. the same time, I’m pretty opinionated that it probably makes the most sense to have the core web team under product, ⁓ but with a strong sort of dotted line connection to marketing. ⁓

You know, obviously, ⁓ marketing is a very important thing, of course. At the same time, I think it would probably be a mistake to have your web product entirely focused on marketing, because as we said, ⁓ what you don’t want it to be is a marketing landing page, and you don’t want it to feel like that. ⁓

So I think having a strong connection with product and looking at it like a product, like an extension of your existing ⁓ game in this case, is the best way to do it. But you partner with marketing for campaigns and maybe some kind of like life cycle strategy. ⁓ You can sort of partner a little bit on some of the content, but I don’t think marketing should define all of that content. But I think you should work together to figure that out.

I’m pretty strong in feeling that, you because you don’t want to make that mistake of letting this fall into just being a landing page, ⁓ you know, for marketing and feeling that way, that it probably does make the most sense to at least have that core team underpriced.

David Vogelpohl (29:34)
Yeah, that makes sense. As a marketer though, I’m going to push back a little bit here. And yeah, like to me as a marketer, when I hear things like this, I’m like, wait a minute, I’m to have to wait on product and engineering to like do stuff on the website. So like to me, like a more ideal approach would be to have, say the main website or the, the dub dub dub sub domain, if you would not that people do that anymore.

Caleb Brown (29:38)
Okay, please do, yes.

Yeah.

Yep.

David Vogelpohl (30:02)
be different than the product side of my web experiences? And in the web, of course, this might just mean different sites or domains with the marketing side and the product side of the hub or whatever. What are your thoughts on that? Like giving marketing the freedom to be able to market ⁓ without making them wait on engineering, but then giving engineering and product their own realm where they can treat the web like a product.

Caleb Brown (30:28)
Yeah, I mean, yeah, I absolutely think that marketing should be marketing for this, ⁓ for the existing game as well as ⁓ the new one. And right, I understand timelines can… ⁓ Yeah, you don’t want to be just waiting around for another department to kind of wrap things up, wrap their sprint up and things like that. yeah, I I do think that they should be in harmony. I think that there should be that dotted line connection. I think they should work closely. ⁓

I just feel that the core app itself should be product focused.

David Vogelpohl (31:04)
Yeah, it’s such an interesting dynamic. And I think it depends on the company in this situation. I worked for a CMO in the past where it was one of those tech companies from her past where the homepage was the product and it wasn’t marketing. was just, it’s kind of like Google is like homepage is the product. But as a marketer, if she needed to go out and like spread the word about this thing and be able to have

Caleb Brown (31:20)
Yeah. Yeah.

David Vogelpohl (31:31)
web pages that people came to and learned about it and then interacted with the brand in different ways. And so there was this tension in that org between the two. And when that tension is handled in a bad way, that can be really problematic. So if I’m out there marketing games and in-game purchases on the marketing side and the product side of my website is vastly different and disconnected,

Caleb Brown (31:41)
Right.

David Vogelpohl (31:56)
then that sounds like a really bad experience for players and you’re not getting the benefit of the product and the marketing side working together. Now, this is definitely not an easy thing to solve for, but I’m definitely in your camp where that player web experience is a product-led experience. And as a marketer though, I’m like, well, let’s keep the door open on the other side to give those marketers some of that freedom, but…

Caleb Brown (32:20)
Yeah.

David Vogelpohl (32:23)
I think, of course,

it just depends on the company and the publisher or studio or whatever focused on this. This is all super duper interesting. I would love to talk about this all day and often do. But for those watching and listening, if they remembered one thing we talked about today, what should it be?

Caleb Brown (32:29)
1000%, yeah.

Yeah, great question. ⁓

I really think what we, the marketing product discussion I think is really interesting. I would definitely want folks to be thinking about how that should work in their organization. Even if they’re not in gaming, but they’re in a similar situation here. Think about that because, mean, you’re right, it can be a little bit of a complicated dance, but when it works,

you know, that synergy, if you will, with product and marketing is beautiful. And you you build a great product and then you actually get it out there. ⁓ On a personal level, I build a lot of products and then just don’t market it. Like on a personal, you know, I don’t market it at all. I’m more product and engineering than I am marketing personally. ⁓ And so I, and I wish that I had more of that marketing DNA. ⁓

And so I absolutely see the benefits of it. So yeah, think just understanding what your product is, making sure that, it’s no disrespect to marketing, but making sure that your side app is not a landing page for marketing and is an app if that’s what it’s going to be. But then utilizing, working very closely with marketing to make sure that actually gets out there and people understand it. That’s what sometimes on the technical side we’re bad at.

explaining why users want to use this and that’s why marketers are amazing because they’re good at communication on that. I think thinking about your own organization and that balance between product and marketing is probably the most important thing to remember.

David Vogelpohl (34:26)
Such an interesting point to focus on because, historically in gaming, we would make a game and then mark it over here on the product side and then market it on the website side. And now what we’re seeing is like, well, these web experiences should be a part of the product, if you would, which now means that product and marketing need to have a much stronger bond than they have in the past. It’s such a kind of higher level

Caleb Brown (34:39)
Yeah.

Both,

100 %

David Vogelpohl (34:55)
challenge or way of thinking that I think is great to end on and kind of underpin some of the more tactical strategic things we were talking about. This was super interesting. Thank you so much for sharing all this today, Caleb.

Caleb Brown (35:09)
Thank you for having me. I really enjoyed this.

David Vogelpohl (35:12)
Awesome. If you’d like to learn more about what Caleb is up to, you can check out x-team.com. Thanks everyone for joining this episode of Growth Stage. Again, I’m your host, David Vogelpohl. I support the digital product community as part of my role at FastSpring, and I love to bring the best of the community to you here on Growth Stage. Thanks everybody.

Caleb Brown (35:35)
Thank you.

David Vogelpohl (00:04)
Hello everyone and welcome to Growth Stage by FastSpring where we explore how digital product companies can increase the value of their business. I’m your host David Vogelpohl supporting the digital product community as part of my role here at FastSpring and I love to bring the best of the community to you here on Growth Stage. In this episode, we’re going to be talking about pricing and packaging for gaming web shops and joining us for that conversation is someone that knows quite a bit about that.

like to welcome Chip Thurston. Chip, welcome to Growth Stage.

Chip Thurston (00:36)
Thanks for having me. Happy to be here.

David Vogelpohl (00:39)
Awesome. Well, glad to have you here. And I know this is a topic that a lot of folks are curious about, especially with the rise of direct-to-consumer and web stores following the recent Apple and Google rulings. So really interested in unpacking this one a little bit on the pricing and packaging front. And for those that are watching and listening, what we’re going to be talking about today are Chip’s thoughts around how pricing and packaging strategies differ between game and web store.

What are the top considerations when forming your pricing and packaging strategy, the role of creators in driving web store value, and how to strike the right balance in rewarding players while increasing your profitability? It’s pretty deep topics, but I think we can get through them here today. Really excited to learn more about this from your perspective, Chip. But before we get started, I wanted to ask you a question that’s similar to a question I ask other guests on the show.

But what was the first mobile game you remember spending money on?

Chip Thurston (01:44)
That’s actually a tough question for me to answer because I am notoriously frugal when it comes to purchasing on mobile games. And I realized the irony of that, given that I used to manage monetization strategy and offer strategy on mobile games. ⁓ I think it was Pokemon Go, but it was only after years of playing the game and only after my kid got into it. And that was really like pushing me to get this one like limited time ticket to this little…

event that we were doing. So yeah, I’m tough to monetize, I will say.

David Vogelpohl (02:18)
that’s interesting. I remember in the early days of mobile, I just went nuts on buying, but they were premium games, not really in game items, but I would easily spend seven, 10 bucks or whatever on a game.

Chip Thurston (02:29)
you know, that’s a great point. I do remember buying ⁓ Mega Man X on mobile as a premium time. You just drop a few dollars and get Mega Man X. It’s one of my favorite games. So when they put it on mobile, I had to get it.

David Vogelpohl (02:35)
Yeah.

Now I have all kinds of questions about Mega Man X, but that’s not why we’re here today. So we’ll pause that conversation for later. But I was wondering if you could tell me a little bit about FastBring, what you do there and what your background is in pricing and packaging games and in-game items for mobile games.

Chip Thurston (03:01)
Yeah, absolutely. And I would say let’s make sure we put in the calendar a separate podcast about Mega Man X. We can do a full deep dive on that one. Yeah, so FastBring is a direct-to-consumer payment platform. We facilitate the checkout on a global scale to enable publishers to sell globally. And so in the case of gaming, this often means web stores. And so it’s really enabling them to sell outside.

David Vogelpohl (03:07)
Yes, definitely.

Chip Thurston (03:27)
of the common platforms like Apple and Google and sell directly to their players. And for me personally, my experience is coming from the game development side. So I’ve joined FastSpring as the head of gaming to help our sellers market and monetize direct to consumer. And that means everything from understanding what’s going on with the latest regulations to understanding the FastSpring product, to making sure they have the scalability and the tools that they need to succeed.

⁓ And where I come from in game development is most recently leaving Scopely where I was for a few years. And before that, I worked at SciPlay for a few years. And over that time, ⁓ more than a decade in the industry, I wore a number of different hats. I oversaw LiveOps and monetization strategy. So basically responsible for day-to-day revenue of the game and event strategy. I was also a marketing lead.

for mobile games, and so overseeing our community engagement strategy, user acquisition strategy, managing the teams that would help facilitate all of that, and everything done with the configuration management of how are we actually setting these up in the game and getting them executed on a day-to-day standpoint. And what that culminated in at Scopely was the opportunity to take on the web store strategy.

for a mobile game and being responsible for its growth and its goals and what we expected from our web store and how we were going to make it succeed, ⁓ even knowing that there were these Intel-steering policies in place from platforms like Apple and Google. so taking a lot of time to iterate and understand that landscape and drive it to success was what then led me to join FastSpring and say, OK, I want to drive this conversation more broadly in the industry.

David Vogelpohl (05:12)
That’s a cool perspective. And it sounds like your scope at Scopely was quite broad. But do you feel like that gave you like a holistic picture of the player’s journey and experience and how that fed into pricing and packaging?

Chip Thurston (05:27)
Yeah, absolutely. Because ⁓ one question I got a lot throughout my career there was the common thread between the marketing lead role and the monetization lead role, because they’re under two different disciplines, right? There’s the marketing vertical and the product vertical, and those are typically pretty bifurcated. There’s not a lot of ⁓ overlap between those two. But for me, the common thread was player empathy. For me, it always started with

What is the player thinking? How will they perceive this? What are they doing when we reach them, whether it’s with a user acquisition ad or a starter pack offer in the game? At the end of the day, it’s rooted in the player. And so, yeah, guess, circling back to your question, it really did, I think, give me that holistic perspective where now I’m thinking of the player.

before they reach the game, when they install the game. When they first install the game, what do they see? Or if they’ve been playing the game for five years, what is their experience in the game? And how do we do that? And then what’s that player journey outside of the game as we drive them to something like a web store?

David Vogelpohl (06:29)
Yeah, that holistic view. I often, when I talk to folks, particularly in marketing context, I always say, what was the person doing right before they experienced what you’re building? And I feel like coming from that perspective allows you to build better messages, more compelling information and experiences. ⁓ so it’s interesting to hear your perspective there. Now, when I asked you about fast spring though, and what fast spring enables, said something interesting that I just wanted to kind of dig in a little bit.

You said that often means web stores with direct-to-consumer. What’s an alternative path to direct-to-consumer than a web store?

Chip Thurston (07:09)
interesting. Well, this is something that’s really emerged this year, which is the option to surpass the web store entirely and go directly to a checkout page. So this is something in line with recent regulations, which we can get more into later. But the short version is for Apple, or for iOS in the United States today, publishers have the option to steer players directly into a checkout page, meaning there’s no store needed. It’s the most frictionless path available.

We’ve actually recently launched a solution with Asprin called Steer Safe, which is a great visual example of how publishers can do this. But it’s an interesting option where, OK, maybe we don’t need to build out this entire web store and have our players go from game to store to checkout page. We can remove that intermediary and say, just go from the mobile game to a web-hosted checkout page and then go right back into the game. So pretty seamless experience.

David Vogelpohl (08:07)
Yeah, it seemed like that was a big eye-opening moment for folks as steering became available. It was like, well, wait a minute. Why do I even bother to go to the shopping experience in this other place when I can just present the option to buy the item or whatever in the game and then link directly to a place where someone can do a direct checkout? I think a lot of people hadn’t really thought about that paradigm prior to steering becoming available. And I think it was this like light bulb moment for a lot of folks. So thanks for picking that apart.

But let’s get back to the store for a minute here. ⁓ And we have this kind of divergence of experiences for the player a little bit. And of course, there’s a financial incentive for the publisher to drive the player to do the transaction on the store to make higher profits and have a more direct relationship with those players. So earlier when I was asking you about your experience with pricing and packaging, you rooted it in player empathy.

understanding what their experience is like, where they’re at in the journey of the game. But help me understand more about that process. What does it look like to set pricing and packaging strategy between a game and a web store based on your prior experience or even the experience you’re having these days?

Chip Thurston (09:24)
Yeah, I think the first thing I think of and really the umbrella for me that that would all sit under when it comes to pricing and packaging for a new web store initiative, say for a mobile game, is really game economy. It really boils down to that and managing the economy effectively because most commonly what we see is ⁓ the purchases made on the web store give more value to the player than the purchases made on the mobile store.

you need to be able as a game to accommodate that in the game’s economy. And what I found was the most ⁓ layman’s way of looking at this was basically looking at your source versus your sink and saying, source is what we’re giving out to our players, whether it’s they can play this game mode and win this currency in that mode and win these prizes. And this is what basically the output is from the game to the player, what we’re giving to the player. And that includes purchasing too.

What are we sourcing from the store? What are we giving to the players for the dollars that they’re spending versus the sink, which is where players are sinking that currency. What is the input that we’re getting from those players? And that’s constant balance that has to be regulated. And the best games out there have very flexible ⁓ sink options so that they can be more flexible on the sourcing side. And so when I think about a web store, it’s saying, OK.

we’re going to launch this web store and therefore we’re going to incentivize players to go there, which means we’re increasing our sourcing. And that could be through lower pricing, it could be through more value per store, it could be through other ways that we can talk more about. ⁓ But if we’re increasing our sourcing through having this direct-to-consumer program, we also need to increase our syncing. So how are we going to do that? What modes in our game are we going to tweak?

or what incentives are we going to put for our players inside the game to sink those currencies such that things continue to stay in regulation.

David Vogelpohl (11:28)
Are those, is that the totality of key differences when pricing and packaging between in-game and app stores? mean, what about profitability? You kind of alluded to more value. that like discounts for more in-game currency? Help me understand what the variables are that are going, do go through your mind when you think about pricing and packaging between stores and web stores and in-game.

Chip Thurston (11:55)
Yeah, more tactically, I would say I would look for what our players want. Again, going back to player empathy and say which method will be most compelling to them. So typically it would be maybe more per purchase is where I would start more gems per dollar. If gems are your currency, more hard currency per dollar when spent on the web store versus on the mobile store. So say I spend a $10 purchase on mobile and get a hundred gems.

Well, maybe if I go to the web store, that becomes a $10 purchase for 110 gems or 120 gems, whatever that right percentage could be, again, depending on your game’s economy and flexibility there. Or instead of more per dollar, it could be a discount. It could say, OK, that $10 purchase on mobile that gets me 100 gems is now $9 or $8 on the web store for the same 100 gems.

either discounting it or giving them more. And you could even A-B test or run some side by side to see which one is more compelling to your players. And it’s not just compelling to your players, but also which one is better for your game’s economy. Maybe you find that ⁓ the 120-gems or 110-gem option is a little difficult to accommodate from a game economy standpoint, so you opt for more of the discount route. There’s several different variables to evaluate as you try to run those. But beyond the core…

I think those are the base two options that most people jump to. But there’s more you could do, too. You could have exclusive items or exclusive bundles when you think about pricing for your web store as ways to incentivize players to go there. So you could put some cosmetics if your game has cosmetics, just visual items that have no impact or consequence or actual ⁓ utility in the game.

but you put those where players can only get them if they purchase on the web store. So you buy that $10 for 100 gems on mobile, or you can buy the $10 for 100 gems on the web store. But if you buy it on the web store, you get this little Hawaiian shirt that you can put on your avatar. And so players say, well, I might as well go purchase there because I get this cosmetic. Or it could be non-cosmetic. It could be a power item if you want to be even more aggressive and say, OK, this is a boost that you only get.

by purchasing on the web store. You could bundle it with other things. You could put it as a standalone item. And your players would understand if they really want to get that edge, that competitive benefit, they need to go purchase on the web store to get it through this exclusive item. And so there’s ⁓ all these different options. Basically, all the tools in the game economy and monetization toolbox are available. And it’s thinking about how you allocate those between the mobile game and the web store.

David Vogelpohl (14:44)
With player empathy though, like how do you balance that without like, you know, obviously players will often get agitated if there’s like play to win options in multiplayer and things like that. But how do you balance that with people that can’t or just don’t want to purchase outside the app store, just like live with it or like, how do you balance that with player empathy in mind?

Chip Thurston (15:09)
I think it’s just giving players choices, ⁓ empowering them to make the decision they want to make. so if a player, as long as you’re transparent with a player and they know that they have this option to get this other item elsewhere, and they’re choosing to purchase on the mobile store where you’re not forcing them to do that, you’re not putting them into the competitive disadvantage, they’re choosing to put themselves in that place in that case. ⁓ So I think it’s more just…

making sure that you’re communicating actively and not having someone say, I purchased this on mobile, not knowing that had I purchased it over there, I would have gotten more for it. It’s just ⁓ making sure that they’re aware and making the right choice that suits how they want.

David Vogelpohl (15:54)
Yeah, I see. So give them the choice and the opportunity to take advantage of it if it’s a good fit for them. ⁓ One of the interesting things that happens to me at every holiday and birthday for my kids is they come in with like a giant stack of like Visa gift cards and cash from relatives and things like that, but this really like sophisticated plan to use some of this money in their favorite games.

And then they asked me to help facilitate it. And many times the answer is I need to do the transaction through their web store because in app doesn’t support this, that, or the other and how they might’ve gotten that money from a relative. And so it makes me just think about like an additional benefit to a web store is taking advantage of payment methods, different card numbers and things like that that might not be able to be used.

through the app store for whatever reason for an individual player. I’m just curious, are there other advantages for players or publishers for transacting in web stores other than just like more money or better value for the player?

Chip Thurston (17:01)
Yeah, yeah, absolutely. Well, first I want to reflect on your kids getting a giant stack of gift cards. I want to make sure to send my kid to your Christmases.

David Vogelpohl (17:11)
Maybe not giant giant, but enough to be complicated, yeah.

Chip Thurston (17:12)
⁓

Yeah, think the benefits are numerous. Everyone tends to reflect on the profit, right, which is very significant. You pay 30 % of your purchases on Apple and Google ⁓ to Apple and Google for the usage of their platform. And there is a lot of value in that. And so ⁓ that continues to be a critical part. I would certainly not suggest forgoing that entirely.

But when you drive through a web store, it might be closer to 5%. So you just get a lot more profit per dollar spent from your player for all the revenue you’re getting. And that is important. But there are benefits otherwise too. There’s the ⁓ control that you have over the pricing and the flexibility you have. These ⁓ platforms like Apple and Google have a lot of guardrails on what you can do, how you can operate within them, how frequently you can update things, or even

to some extent the price points you can offer your players. When you’re on a web store, there’s no guardrails for better or worse, right? You have as much control and as much flexibility as you want in how you’re communicating to your players and what you’re pricing things at, what your strategy is. And so we’ve seen publishers find some value in that and taking advantage of the freedom that they have on a web store, even a website versus what they have on the mobile platforms. And another big one is the data.

that’s available to them. ⁓ When we’ve seen in recent years that Apple has really cracked down on privacy and the amount of data that they’re sharing with publishers. And that’s been detrimental to user acquisition efforts and how laser targeted game publishers can be in acquiring valuable new players. Well, on a website, you’re getting that data. It’s not as protected. And so you have a lot more

information at your disposal that then you can use to target more players and grow your games. And so there’s this really nice flywheel where you’re getting more profit from it, you’re getting more margin, which then you can use to put into your UA and your UA is now better informed because you have this great data. And so it can be this really healthy growth cycle for games.

David Vogelpohl (19:27)
Assuming people are being compliant with their data on their website, of course. Yeah. What about for the player? Like what’s in it for them? Like the example I gave was like, well, I can use more payment methods more easily. ⁓ what, what else is in it for the player to transact other than money or value?

Chip Thurston (19:32)
Of of course.

Yeah, I ⁓ think it does boil down to one, the transact how you want with the methods at your disposal, whether it’s a credit card or Apple Pay or ⁓ gift cards or whatever you have and being able to do that. I think there’s a nice global scale to it where being able to reach maybe different regions and different things with those local currencies.

in a way that certain merchants will be able to provide. And so if I’m someone that might be in one of those more remote ⁓ places, maybe that’s more appealing to me and a bit more accessible than it would be otherwise. ⁓ But the main benefit for the player really is the incentive that the publisher is putting on there. It’s saying, I get more out of my purchases by purchasing on a web store. And so…

⁓ That’s really nice for me as a player because I have maybe those extra power items. So we’re just getting a little bit more hard currency than I would be getting otherwise that then I can use in the game and engage with.

David Vogelpohl (20:52)
I’m a publisher and I hear someone say, know, ⁓ well, direct to consumer is a way to have a more direct relationship with your players instead of always going through the intermediary of ⁓ app stores or marketplaces. ⁓ That makes sense, right? Like every business wants to have a direct relationship with their customers. What’s the player’s benefit from a direct relationship with the publishers and studios that make the games they love?

Chip Thurston (21:21)
Yeah, I think it’s having a more personalized experience. You can ⁓ get served offers that are more relevant to you and something that may be more appealing to you or maybe even more valuable. ⁓ The publisher can better grow those games and develop the games that you love. And so ultimately it should be good for the industry when games inherently become more profitable through direct to consumer, just becoming more more commonplace. That can mean more ⁓ development.

for the games that you have. And ultimately, think more creative concepts getting greenlit because the threshold for success is lowered a little bit because games are more profitable. And so I’m getting a bit beyond the direct relationship piece, but I think there’s so much more benefit to gaming as a whole that players writ large will benefit from ⁓ just by virtue of direct-to-consumer on this upward trajectory and

increasing the profitability of the entire industry.

David Vogelpohl (22:23)
Yeah, it feels like on a personal level, the strongest relationships I have with brands in my life, or when I have that direct relationship and my experience transcends the devices that I’m having that relationship or an experience on. And so for games, for me, it personally means things like Fortnite and Rocket League in that, in the Epic universe in particular, and having that connected experience through my Epic account and all these different

places. And then non-gaming, it’s things like Netflix, where I’m really transcending between devices. But my relationship is with Netflix, and that’s a very fluid experience as I flow through there. So these kind of things are on my mind when I think of player value ⁓ outside of the monetary piece of it. ⁓ So let me switch gears a little bit here. ⁓

Before steering, you talked about how with steering now we can just link to a checkout instead of like a whole store. But before that, outside the US, the only way to bring players there without additional fees is to market outside of your game. And I know ⁓ creators play a really big role there, but I’m just curious what you view the role of creators and influencers are.

with web stores and are they important or secondary or like how do think of their connection?

Chip Thurston (23:53)
Yeah, I want to underscore one point you made there, which is that steering is still somewhat limited in just geographically where it can be implemented and even by platform. mean, it’s really iOS in the United States is where I’ve seen the most readily available opportunity unlocked for steering.

And that’s what’s driven so much of the recent conversation in the industry. And even the presentations I’ve been giving and the talks I’ve been having have been really focused on steering because that is the hot topic of the day. But when I look at a global scale, there are still these anti-steering policies in place to say, we can’t directly steer players outside of the US to these stores. so the question there is, OK, well, then how do we grow the web store? What are the methods available to us?

And I think that that strategy still needs to be considered and really optimized as well. And circling back to your question, yes, that’s where creators can come in. I would start by saying we need to identify what are the growth vectors available for our web store? We know we can’t take players directly from the game into the web store steering. We know we cannot do that under certain regions outside the US. And so if we can’t do that,

David Vogelpohl (25:07)
Outside the US.

Chip Thurston (25:11)
What can we do? What are the ways we can get players into our web store? And this is the exercise I did when I was at Scupl.ly of really trying to understand how we could grow. And so depending on the game, that could mean content creators, it could mean social media channels, which again, since you’re not inside the game, you can talk more openly about your web store there, regardless of what country you’re in. It could mean an email.

program where you’re reaching your players directly via email. It could mean community like a subreddit or a Discord channel. There are all these different places that you can talk about it. And why I think content creators are such a critical channel, critical growth vector to identify there ⁓ is one, they’re great about developing a meaningful relationship with your players. Your players will trust them and understand what they’re saying. Two, you’re giving your…

content creators a pretty compelling reason to talk about it because they have a clear case to make to their players of whatever that incentive is that you’ve built into your web store. So they’re advocating for, hey, players, make sure you purchase on that web store because you get 10 % more there. the players are happy because they’re learning about this and they’re getting to go this other platform where they’re going to earn more.

And the content creators are happy because they’re giving value to their audience in that case and developing a more meaningful relationship there. So I think it is mutually beneficial. And I think at the end of the day, it becomes a really effective way to grow your web story. And the best part is that it’s rolling agnostic because the anti-steering policies are really specific to what you can say inside of your game and how you can route players inside of your game. But for content creators, there’s not really ⁓ a firm regulation of what you

they can and cannot say about the existence of a web store and the value of a web store. And so it’s something that can drive growth regardless of where these regulations go.

David Vogelpohl (27:09)
You know, this reminds me of a conversation that you and I had with Justin Sacks of Nexus, nexus.gg for those watching and listening, which operates a creator program platform for game companies. And one of the things I remember Justin talking about, he’s actually a guest on this show before too, ⁓ was how publishers are thinking about creator attribution.

Are creators actually driving players to spend more? ⁓ Are the creators getting credit for purchases that were going to happen anyways? And I thought one of the really interesting things Justin had pointed out about all that was that with web stores, you often can have a great degree of confidence that that was a unique purchase. And of course you get the additional profit from that, from going around the marketplace, if you will.

But it was a very strong attribution signal when players were using creator codes in the web store. I don’t know if you remember that conversation very much or have any thoughts, but in general, what do you think about the role of attribution web stories and creators?

Chip Thurston (28:19)
Yeah, I think it’s a very compelling business case because I think the concern there is cannibalization. It’s saying, if I’m going to pay a percentage of the revenue to these content creators for the purchases that they drive, well, who’s to say they wouldn’t have already made that purchase without me paying that percentage of revenue? And so that’s the number one concern I’ve heard when it comes to considering content creator strategy. And for anyone with that concern.

I would encourage you to go to Nexus because they have some really compelling data that illustrates that those purchases are incremental, that they are either someone who was purchasing, but now they’re purchasing more, more frequently or at a higher price point, or it’s taking someone who’s never purchased before and is now purchasing because of that advocacy. There’s the word I was looking for, because of that advocacy that’s coming from that content creator that they trust.

So yeah, I’m a firm believer in the value that they add. And frankly, that’s true beyond the scope of direct to consumer and web stores. It’s just the value of content creators overall and their ability to drive growth for a game.

David Vogelpohl (29:27)
Yeah, anecdotally, getting back to my kids here, because that’s the most important topic we’re talking about today is I definitely my 13 year old will come in and say, I saw this creator and they were talking about this and Roblox and we need some Robux to go achieve this strategy. So you can like see it directly, but there is that question. And I think the web store plays an interesting role there. ⁓ So, well, I wish we had time to like.

talk this out to the nth degree, but I’m just curious out of everything we talked about today, Chip, what is the one thing people should remember about their pricing and packaging strategy for their web store?

Chip Thurston (30:04)
⁓ everything, every word I said. ⁓ I think I touched on a lot of different tactics about how to grow a web store, whether it’s on the monetization side and how you incentivize your players, whether it’s on how to grow what channels, what growth vectors you identify and leverage to drive more traffic into your store. I think it can be

a bit overwhelming for someone who’s new to direct to consumer to say, all right, I want to build this web store, but man, I don’t know where to start. There’s all these different ways I should consider to grow it. How do I even incentivize that? How can my economy handle it? Where am I going to sink this extra currency? You can start asking all these questions. so the one thing I would say to take away from this conversation is to not let the perfect be the enemy of the good.

Don’t feel the need to get it perfect right out of the gate. I didn’t really touch on this earlier, but web shops don’t just launch and have 50 % of revenue of your game coming through the store. They grow over time. And so I shared a lot of strategies, but I would say pick one, try it, move forward, iterate on it. The important part here is just to get started and move forward.

David Vogelpohl (31:24)
Affection is the enemy of progress. And I think the number one thing I’m going to take from you today is the focus on player empathy. I think that was such a great place to root on. But I really love your idea of launch quick, iterate, and learn. Such an important piece. Well, this was awesome. Thank you so much for joining us today, Chip.

Chip Thurston (31:45)
Yeah, thanks, David. It was a pleasure.

David Vogelpohl (31:47)
If you’d like to learn more about what Chip is up to, you can find him on LinkedIn, Chip Thurston of FastSpring. And you can also visit fastspring.gg. Thanks everyone for joining us for Grow Stage. Again, I’ve been your host, David Vogelpohl. I support the digital product community here at FastSpring. And I love to bring the best of the community to you here on Grow Stage. Thanks everybody.

Jesse Paliotto (00:04)

Hello, everyone. Welcome to Growth Stage podcast by FastSpring, where we discuss how digital product companies grow revenue, build meaningful products, increase the value of their business. I’m your host, Jesse Paliotto. I love being part of the community, and I love bringing the best of the community to you here on the podcast. Today we have with us Hank Hoffmeier from Kickbox. I’m so pumped to have him here. Email marketing is often hailed as the highest ROI channel for marketing, especially in SaaS and digital businesses.

But what happens when your emails don’t even make it to the inbox? So in this episode, we’re going to talk with Hank. He’s Director of Operations, but the email deliverability evangelist, more importantly, at Kickbox, about how authentication, verification, deliverability impacts your bottom line. So we’re going to learn why deliverability is no longer a set it and forget it process and how to fix common mistakes that could be silently killing your campaigns and communications. Hank, thanks so much for being here today, man. I really appreciate it.

Hank Hoffmeier (00:59)

Yeah, thanks for the invite. It’s exciting to be here and talk about email marketing and how it’s a crucial role for any type of company.

Jesse Paliotto (01:06)

Absolutely. I know we were joking for a second before we hit record that it can sometimes feel like the dark art off in the corner of like, how does that all happen? So today we’re gonna reveal the dark arts or whatever. I don’t know. Something like that. ⁓ Can you just to get us kind of into it, can you talk a little bit, why is email still such a high R— ROI channel? If I can spit that out, especially for SaaS companies or digital companies.

Hank Hoffmeier (01:31)

Interestingly enough, I like to do videos almost every day on various social media platforms, short form, and I did one this morning and it was a, did you know, and it was, did you know that email marketing, the first marketing email was sent in 1978 and made $13 million. And I was encouraging people, it’s Monday, but you might not make $13 million, but send an email. Yes, it is the marketing channel of choice by people that know what they’re looking at when it comes to numbers. Just the most affordable, provides the highest ROI,

and most importantly, and this is coming out more and more, I’ve heard it over the last few years, but more importantly, I’ve heard it in the last few months at conferences is it’s an owned audience. You own your audience. Of course you have to upload it to a platform to send emails, but you can take— it’s portable. If you’re on social media and you do something wrong or don’t do something wrong, but you get reported, you can have your account suspended, banned, or killed. You just lost that audience. It’s called rented land. A lot of people do marketing on rented land. On Facebook,

you know, if you’re running ads and then doing posts and boosting your posts and you get your account suspended, you just lost that audience. With email marketing, Like I said, you own that audience. You could stay in touch with them. You can make it feel like a personalized one-on-one conversation through the use of personalization and merge data. And it just, to me, it’s a no brainer to either just get started or go back and revisit what you’re doing. If you feel like that has fell off of a cliff or something.

more more I have these conversations and get people excited about bringing email back into their platforms and their marketing efforts again.

Jesse Paliotto (03:06)

Yeah, I’m curious like, has there been any changes over the last few years? Has anything kind of modified or is it still the same game as it was from 10 years ago? And is there anything that like founders or marketers should be thinking about like, hey, this is how.

Hank Hoffmeier (03:23)

there’s been changes and then there’s a lot of fundamentals that people don’t even know about. mentioned like dark arts and people don’t know. And oftentimes I go to conferences and I talk about the basics and getting things set up and doing it right so that you are successful right away. And it amazes me how many people in the audience are new to email marketing or have been doing it for a while, but just don’t know some of the things that I end up talking about. And when I started at,

Eye Contact, which is a sister company to Kickbox, both owned by Ziff Davis. You know, I went into account management. said, I know how email works, right? You get a list of subscribers, you create an email, you send it you make money. It’s not that easy. You mentioned it. First, your email needs to get to the inbox. It needs to be viewed. And first and foremost, you need to have a valid email address to send to. And that’s where Kickbox comes in is we validate email addresses.

Now lot of times people say, OK, I’ll upload a list where I’ll connect it to my HubSpot and validate my email addresses or HubSpot said, hey, my list is old, may have a lot of email addresses that are no longer valid, and they’re going to recommend that I go to kickbox to clean my list. And that happens. And sure, by all means, do that. But the missing link, as I call it, is verifying it when it first comes in. Let’s say you have a sign up form.

A lot of your audience probably have has a website. Maybe you have a sign up form or you’re looking to add one. You should be doing that on the fly. If I fill out my the form on your website and I put hank at g nail dot com and I spell it with an N by mistake. I finger it right. The form, if set up correctly with an API, can say, did you mean Gmail and automatically allow them to correct it? Or if I type in Hank FG.

At gmail.com and I didn’t mean to put the FG and it’s an invalid email address. It’ll say this is an invalid email. Just please try again. Custom like Citibank Major League Baseball and Reddit use us in that manner. Not saying only big companies can do that. We also have some partners that work with us to work with WordPress forms with gravity forms, small companies, and they’re able to do that. You can use the API. Anybody can use the API, but first and foremost.

Validate your email addresses, then decide if you want to use what’s called risky email addresses like disposable email addresses. Those are on the rise. That’s one thing that’s changing. Then there’s role email addresses like admin at and marketing at now. Why is that dangerous? If somebody signed up for marketing at whatever company.com, maybe I signed up for your email using that email address. And then three months later I leave the organization and then you, Jesse, you’re checking the emails because you got that new.

responsibility and you say I didn’t sign up for this email. I don’t remember it. You market a spam or you know unsubscribe from it. It’s up to you and the type of business you’re in whether or not that’s important and it also depends on other things as far as your engagement rates. But those are things to look for. Disposables, the role addresses and then there’s the free like do you want to accept Gmail, Yahoo, Microsoft or do you not? Do you only want B2B domains? You might see that you may fill out a form and will say please provide a business email because you tried using a Gmail.

That’s another thing that providers like kickbox and other ones that do validation offer is the ability to filter those out on the fly if you want to, or in a report. Next is email authentication. And a lot of people forget this and years ago, maybe it wasn’t as important and you didn’t really have to do that. What is email authentication? It is basically showing these email providers or the recipient servers that you are safe, secure and trustable.

Jesse Paliotto (07:05)

Mm-hmm.

Hank Hoffmeier (07:06)

And I’m to go into detail here because the first one is SPF and it’s not something you put on your skin to protect you from sun damage, right? It’s called sender policy framework. Yeah.

Jesse Paliotto (07:10)

Yeah, bring it.

I wanted to ask you about this because I feel like these terms

get thrown around and I’m not sure people always know truly what they are. So yeah, do this. This is great.

Hank Hoffmeier (07:21)

Let’s go through this and try to make it understandable. SPF is sender policy framework. This means let’s say I’m sending emails from hankhoffmeyer.com, but I’m using MailChimp. The recipient server is going to say, this email is being sent by Hank, but MailChimp’s actually sending it. Does MailChimp have permission to send us emails? What it’s asking for. Now MailChimp and other providers, they’re automatically going to do this SPF set up for you. And I contact our sister company who I worked for for 13 years.

Jesse Paliotto (07:43)

Mm-hmm.

Hank Hoffmeier (07:51)

They do this automatically. Now you may have another provider or you have your own server. Just make sure you have SPF set up and that would be in say your hosting provider like GoDaddy. I always mention X it’s well known. You go into GoDaddy and you go into your DNS. If you’re technical, you know what I’m talking about. If not use chat GPT, right? Or ask your email provider. How do I set this up?

And then you’re to go in and put a text record in and it’s going to be the SPF record. It’s going to identify, say MailChimp as a sender for me is what it’s doing to dumb it down. Then there’s DKIM, Domain Keys Identified Mail. Simply said, this means that the email has not been altered or changed during transmission. It hasn’t been hacked. It hasn’t been injected with malware. There’s end-to-end encryption. This is something that your provider, email provider, or you need to set up. Most times your provider will send you this information or it’ll be in your control panel.

Go to GoDaddy, whatever hosting provider you have, enter these DNS records and validate it and you can check it and make sure it’s valid. And then the last one is called DMARC, Domain Based Message Authentication Reporting and Conformance. That’s a mouthful. Really, even though it’s the longest acronym, it basically says, do you have SPF and DMARC set up? mean, DKIM set up. And if you don’t, what do we do with this email? What I always recommend is setting it up and then there is pass, fail, and ignore, right? Kind of.

And I would recommend just doing ⁓ doing no, none ⁓ fail and quarantine is what it would be right. None, rejecting quarantine is the correct terms set up as none. What this does is allow you to see if anybody is actually spoofing your emails. Maybe some company from a foreign country is sending emails on your behalf, trying to steal information from people. You can actually see this.

Jesse Paliotto (09:20)

Yes, ⁓

Hank Hoffmeier (09:35)

And a fun thing is you’ll actually see, Oh, it looks like the dev team is actually sending out a newsletter. We didn’t even know about it. And, know, cause you could see that they’re doing that and what email address they’re using and what domain they’re using, but then you can send it to quarantine or reject. And this is going to be something that’s required. The reason why I mentioned these three is these are required right now from Yahoo, Microsoft, and Gmail. If you don’t have this pretty much your emails are going to going to go to spam.

Now you might have a listener that’ll say, well, Hank, some of my recipients are still getting the email and they’re replying to it. I know they’re getting my email. What do you mean? Sure. If somebody is highly engaged and they’re opening, clicking your emails, they’ll continue to get the email. Now somebody going and going to your website and filling out a form and you’re using authentication for a kickbox. Then what happens is they don’t get that welcome email. They don’t get subsequent emails because it’s going to spam.

Another item you can add, and this is not required, optional, it’s called BIMI, brand indicators for message identification. Now, if you look and say Gmail is the perfect way to describe this, you may see either a logo or like a K for kickbox in a circle, like a red circle. The reason why it would be a logo is because BIMI is set up. Again, you have to have SPFD, Kim, and DMARC. You do have to have a verified domain.

There’s a couple options and it does cost some money anywhere from $800 to $1,500. You may need to have a what’s called a VMC certificate and then to go through this process of verifying you own the domain, right? Which is critical for this. And really what that does is it provides a way for users to trust you in the inbox that your domain showing up. OK, this is Best Buy. This is their subject line. I probably can trust them. I’ll open it. Whereas if it’s just Hank Hoffmeier and Assistant H, can you trust that? Maybe, maybe not.

But those are the authentication methods and things that you need to worry about when it comes to sending emails. Right. And I mentioned Microsoft, Yahoo and Gmail. like to call them “Yahooglesoft,” but we can also say MAGY, which would be Microsoft, Apple, Google, and Yahoo, because Apple and I can mean my phones right here. And let’s say I put it face down. I’m not even looking at it, Jesse, and you send me an email and I’m using the built in email

Jesse Paliotto (11:41)

Mm. Yeah.

Hank Hoffmeier (11:54)

app from Apple, right? And I can use that with Gmail, Yahoo, et cetera. It’s going to count as an open whether or not even looked at my email or not. I mean, never look at your email, but it’s going to count as an open. lot of people like to look at opens as a metric of success. In other words, at 20, 30, 40 % open rate where that’s kind of a almost a dead metric. It’s still OK to look at it. Realistically, you want to look at clicks and make sure that people are clicking your email

Jesse Paliotto (12:19)

Well, let me let me let me go back a paragraph. I just want to make sure that I grabbed that, because that was a lot of sort of dense definitions. But I this is my simplistic way that I heard you. So a ⁓ the SPF is a text file. In your. Domain settings the. Or. It’s the host and then.

Hank Hoffmeier (12:39)

or host that mostly most times is the host. But it could be

on the domain. It just depends on how your website set up nine times out of 10. It’s the host.

Jesse Paliotto (12:48)

And the DKIM is an encryption that’s running in order to make sure that contents are not altered during send, right? Okay, DMARC is essentially a policy that runs sort of if-thens, that if it sees these signals, do this with the email, either let it go through, possibly quarantine it, possibly put it into the spam folder. And then BIMI, in my weird brain, it’s the blue check mark on Twitter.

Hank Hoffmeier (12:54)

It’s making sure there’s encryption, yes.

Yes.

Jesse Paliotto (13:15)

You’re paying in order to get a brand trust signal that shows up right next to your message in the inbox. Is that Jesse’s dummy dumbing it down? is that where? The clip notes version. OK, so this is ⁓ before the Apple thing on the 30 % is a really interesting thing. Let me ask you really quick on a sidetrack before we come back to that. What do you see companies messing up? That’s that’s too negative. What’s the biggest opportunity you see that companies have when it comes to?

Hank Hoffmeier (13:16)

Yes.

Yes. Yeah, I like it. What do we call those Cliff Notes? Yeah.

Jesse Paliotto (13:45)

getting what you just said with all those settings.

Hank Hoffmeier (13:49)

When it comes to getting the settings right is they’re not actually implementing it. They don’t have it. They don’t know that they need to implement it and then making sure it’s correct.

Jesse Paliotto (14:01)

Yeah. So just straight up awareness, just knowing that there’s these pieces that need to be put into place. Is the obstacle. Yeah.

Hank Hoffmeier (14:08)

Yep. And there’s a tool. Let me, this is important about my dot email.

If you go there and you recently set up or you want to check your authentication, that’s a good tool about my.email. It will tell you if you have SPF, DMARC and DKIM and even BIMI set up and set up correctly.

Jesse Paliotto (14:27)

that’s a great tip. ⁓ if you’re, you know, shout out to anybody that’s new to the marketing team on the operations team, trying to get a quick read on things, you could go to there and get an immediate readout on your own or potentially even competitors or somebody.

Hank Hoffmeier (14:41)

Yeah, somebody could start in a marketing team and they’re head of marketing and they were told, yeah, we set up authentication years ago or last month. You may want to verify that.

Jesse Paliotto (14:50)

Yeah, does it change over time? Is there anything that would alter ⁓ those settings or once they’re set up they’re permanent?

Hank Hoffmeier (14:57)

Maybe you change the, ⁓ the domain you’re sending from or something like that, usually they’re kind of permanent or maybe you moved from MailChimp to Constant Contact and you never updated your records, right? ⁓ that could be a huge red flag and cause it to fail. And then a lot of people tend to use Microsoft email still.

A lot of times sometimes it’s hard to set up something with what’s called IP lookups because every domain has one or more IPs and I believe that the SPF record holds only about 10. So in other words, if you use it in Microsoft, I think it automatically uses like six to eight, I think. And then if you’re adding five more, it’s going to put you over that limit and it will fail. And there’s workarounds for that. We won’t get into that because it’s like highly technical.

Jesse Paliotto (15:42)

Yeah, interesting. And I know from my experience in SaaS companies, the entire company is often not using the same email platform. So you may have marketing team using MailChimp. You may be having the product team using Railgun or something to shoot out ⁓ system messages. You could be having sales team using other outreach techniques for outbound. So I would say that’s the thing that also strikes me with that is

It’s not just validating one system. It should be across the company, I would guess.

Hank Hoffmeier (16:14)

Yeah, and if you’re using many platforms, make sure you’re synchronizing your unsubscribes because you don’t want to get in trouble there.

Jesse Paliotto (16:20)

Yeah, that’s ⁓ interesting. Yeah. Okay, let’s go back then. Thanks for letting me kind of like circle around for a second there. ⁓ Can you get us back into, so Apple with ⁓ open rates, you’re, and this is going, I’ve seen this in a number of articles, people will talk about this, that your open rate as a metric is no longer as meaningful as it was because your phone is auto opening anything it gets. ⁓ So what do we do with open rate?

Do people still quote benchmarks and say, oh, know, if you’re in this type of business, you should be having a 40 % open rate? Or do you even think about that, or do just throw the whole thing out?

Hank Hoffmeier (16:56)

You can eyeball it and it’s a good way. You know, if your list isn’t holistically changing a lot as a, you know, an informal metric, you know, if you’re steadily in the twenties or going up, then you’re doing well. But if all of a sudden there’s a big drop or a big spike, you might want to look into why that happened. Um, you know, if you added a bunch of, uh, people that may be using Apple, then you obviously know there be some jumps, but most people don’t usually steady grow over time because you should be.

using permission based email marketing. In other words, never buying a list and adding your million email addresses that you purchased because there’s a lot of issues there because not only does Yahoo Google soft require that you have this authentication, they’re also looking at your spam complaint levels. If they’re over 0.3 % or 3 % per thousand of each of these domains, not overall, you will be dinged again. And also

cause what’s called IP or domain reputation damage. The same thing with your bounces, right? And that’s why kickbox is important and validating emails. If you send too many emails to too many emails that are invalid and they bounce again, that hurts your ⁓ reputation as well. And what I’m talking about here is every time you send an email, let’s say I’m using hankhofmeyer.com and I send to a hundred Gmail subscribers. I like to use Gmail cause they’re the most strict with their algorithms, et cetera.

And then over time, 50 % or 50 of them are either bouncing, mark me a spam or worse unsubscribing and even ignoring my emails. That is a bad signal and people don’t realize that. That’s why list hygiene is important. If that starts happening and my credit score is 50, again, I’m going to run into trouble and Gmail, Yahoo, whatever server is going to say, Hank’s not a really reputable sender. Let’s send more and more of your emails.

his emails to the spam folder and that’s what happens. And you mentioned like, what is the biggest thing that marketers either have an opportunity for with authentication, but the biggest overall opportunity is value, right? Making sure that you’re sending emails that your subscribers want that they opted into that’s. Educative, informative or helpful in some way, not what you as a marketer saying, I have the best email in the world and I love it. Everybody else should love it too.

Jesse Paliotto (18:56)

Yeah.

Hank Hoffmeier (19:16)

Make sure you’re sending relevant emails and testing, know, split testing. A lot of these platforms have ways of taking a portion of your list and testing it to see if it’s going to do well because yeah, authentication is important. Verification is important and your IP and your domain reputation is important. I don’t mention IP a lot because usually smaller senders are going to be on what’s called a shared IP like MailChimp constant contact. They have a bunch of IPs that all their customers share.

Jesse Paliotto (19:38)

Mm-hmm.

Hank Hoffmeier (19:43)

But if you’re a huge center and you’re sending millions of emails a day, it might be worth looking into what’s called a dedicated IP, having your own IP address, then you’re holistically responsible for the reputation of that IP address. And how I meant like to mention this is years and years and years ago when spammers would sign up for a service, they would send out spam and it would be the IP reputation that made it an issue, right? Okay. They’re on this IP address. They’re sending spam. Any emails coming from this IP leads block.

Jesse Paliotto (19:51)

Mm-hmm.

Hank Hoffmeier (20:12)

Then they would just say, okay, well I’m leaving this ESP and I’m gonna go over here to this one now and burn their IPs. Then they burn those IPs and they go somewhere else. What happened is there’s been a change. Number one, these providers start blocking people. And then two is the powers that be said, well, let’s start looking at the domain. Okay, if they use this provider and they’re sending crappy emails, that domain reputation is gonna follow you over to this other provider. And that’s what’s happened over time.

Jesse Paliotto (20:40)

Oh, interesting. Thank you. That was a helpful summary because I know I’ve looked at that in the past and tried to track like, why did this reputation, you know, why did it persist? Can you talk a little bit about list hygiene? Because I feel like this kind of gets us into like, if I’ve got 10,000 member list or 100,000 or million, it doesn’t really matter. And I want to make sure that what you’re describing isn’t happening, that people aren’t ignoring, spamming, just throwing in junk.

then know my I’ve heard that you know well you want to clean your list and take away people that are actively not engaged but I’m getting false signals now from my phone or from their phone rather that are auto opening that how do I approach ⁓ hygiene on my list in light of all of that.

Hank Hoffmeier (21:25)

And the advice can be generic and it could also depend on what industry you’re in and how many times you’re sending an email. If you send an email once a quarter versus once a month versus once a week, your timeframes can be different. let’s say average, you want to look at six months. If somebody hasn’t opened and clicked an email in six months, it might be good to put them into a sequence and asking people if they still want to receive your emails.

Now I’ve seen this done well on people that are in our space because we all know marketers know what’s happening. And there’s a newsletter I belong to that every now and then they’ll say, Hey, we all know that Microsoft Yahoo and all these other providers want to see engagement. Please click this link if you want to still receive our emails. I actually got one from a well-known brand doing something similar saying, we noticed that you may not have engaged with our emails in a while.

If you still want to receive our emails, please click this link to let us know to keep sending you emails. Now that was great. Wonderful. The thing I think the mistake they made is I clicked on the link and I went to their homepage. That’s it. Like just dropped on their homepage. You should have a, think in my opinion, have a specific landing page. That’s simple. That just says, thank you for clicking on the link in the email or thank you for letting us know you still want to receive emails from us. Now, if you want to put an offer on that page or put something else, picture of a clown, whatever you want.

Jesse Paliotto (22:31)

Yeah, missed opportunity.

Hank Hoffmeier (22:48)

Just make it so that, like I said, it’s valuable, right? Don’t just drop somebody to homepage and maybe they’re gonna buy something or you were just lazy to set something up. Maybe you do something where you sell something that people don’t buy too often. Like you sell, I used to work with a client that sold reading glasses and also regular glasses. I don’t know if you wear glasses at all or not, but I do. How often would I buy glasses? Maybe the most once a year. Why should I be sending somebody an email once a week, which is what this client was doing?

Jesse Paliotto (23:13)

Mm-hmm.

Hank Hoffmeier (23:17)

We moved to once a month, but then we also started limiting how much promotion was in there. Started providing information like blog posts about organic health for your eyes, how to clean your glasses, repair them, gave them more value to stay in touch with them. So basically my, guess I want to give some advice. Like if you don’t send the emails too often because you say we only send once a quarter because that’s the industry we’re in.

find ways to keep in touch with them and send them an email a little bit more often so that you do have that data and those metrics. And then you use that sequence of emails, send them one email asking if they still want to receive it, waiting a week, two weeks. If they didn’t open that first email, send them a second one. It’s kind of like, are we breaking up question mark, the first one, right? Then they don’t open that. The next one’s like, here’s the divorce papers, right? And then you have some information in there. And then the last one, if they didn’t open the previous two is,

Sign sealed and delivered. We will remove you from now. Hey, maybe email is not your thing. Follow us on Facebook. Follow us on LinkedIn. You know, whatever you want to do. Try to promote that as well, because maybe they’re getting them or they got that last one and they opened it, but they still don’t want to engage with your emails. Maybe social media is their thing. Then follow through and then you can use automation to automatically remove them or manually remove them. The beauty is folks, you can add them back at any time. That’s the thing is they can come back at any time. Some companies just

Jesse Paliotto (24:37)

Yeah.

Hank Hoffmeier (24:41)

Some marketers want to hold onto those email and say, they’re going to open up at some time and we need to be in their inbox even if they don’t open. Because now we also have the AI summaries where Apple is automatically summarizing these emails for you as well. You have to fight that battle too.

Jesse Paliotto (24:56)

Can you talk about that for a second? What does that look like for people that may not have experienced that?

Hank Hoffmeier (25:01)

Right. And there’s no telltale way as to exactly how it’s going to look for each individual person. I can look at my phone right now and any emails that I’ve gotten while we’ve been talking, it would summarize it for me. And it can even summarize that one specific email if I open it at the top. Play around with your copy. Your copy is more important than ever, making sure it’s concise and valuable. This way the summary is going to reflect what you have in your content.

If you’re using a lot of fluff words and you’re not really getting to the point, keep in mind that that could be pulled into the AI summary. And, you know, there’s a lot of jokes going around because some of it’s kind of funny or, know, there’s always there’s been like two I’ve heard where somebody had a death in a family and the summary was just hilarious. And it’s still a work in progress and they’re not going to be perfect, but that is something that we’re all going to have to learn together because it’s kind of newer.

Gmail starting to summarize emails now. If I gave you my work email address and you’re sending me emails, it’s going to summary at the top. Make sure that you’re optimizing for that. It’s almost like SEO and almost.

Jesse Paliotto (26:08)

Yeah, the AI summary with the death of the family, which is very, I mean, it was probably tragic for the person experiencing that. It reminds me of the story from years ago of, I think it was Target’s auto coupons, where I think it was the woman was pregnant and that coupon or something showed up, said, looks like you’re pregnant. Do you need these products? And the husband or somebody didn’t know and that’s how they found out. And it was just like the system is trying to be so smart.

you’ve got to, it can follow you up, you’ve to be smarter than the system.

Hank Hoffmeier (26:42)

Exactly.

Jesse Paliotto (26:44)

The ⁓ with sending. I’m curious because I’ve read recently around long form being making a bit of a comeback and a lot of different channels. Have you seen that with email? know kickbox probably has access to a lot of data. I’m not sure how much of that you can share, but do you have any insights on like in terms of getting engagement so that you do have a list that stays good and people are excited to or at least accepting of receiving your emails?

Is long form back for email marketing or is that largely other content forms?

Hank Hoffmeier (27:18)

It depends. It depends on what industry you’re in, your audience. I do a monthly newsletter and it’s tools I found that made me productive. If I’m going to be speaking somewhere or takeaways from conferences I’ve been to another blog posts I’ve read, that’s a little bit more long form. And I find that people tend to like that. But if it’s something where you’re selling a product and service and it’s you only sell one or two products and service and not like Macy’s where you can put a bunch of products.

Jesse Paliotto (27:48)

Yeah. Yeah.

Hank Hoffmeier (27:48)

It’s not worth having long form. It’s not worth

putting a full product review in an email, maybe put the first two sentences and getting the click to get them to read more. I still think that FOMO wins out, especially with email because we have to get that click through to show engagement, right? Whereas we’re not looking at opens much anymore. ⁓ You could say, Hey, we recently wrote a blog post with the top three ways to whatever.

Right. you can say number one, number two, and then say to read number three, head over to our blog and get them to go over to the blog. Right. You’re giving them the summary, not AI summary, your summary, and then click here to get the third one, which helps with that engagement. I think that people are willing to do that. But to specifically answer the question, it really depends. And also make sure you’re testing and finding out if that’s what and I’m always a fan of polling your audience. Do a survey once a year and ask people.

Jesse Paliotto (28:32)

Yeah.

Hank Hoffmeier (28:39)

Hey, do you generally like longer form content or shorter form content and let them decide. And people tend to say, Oh, well, we know what our subscribers want. No, you don’t. And a lot of times you might get mixed. Then what you can do is say, okay, 50 % of our audience or 49 % of our audience wants long form and 51 want short form. Then you split that audience into two and you put them on two different lists and you react accordingly.

Jesse Paliotto (29:03)

Yeah, testing is always the answer. Like asking and testing. Yes, 100 percent. ⁓ I wanted to ask for a second about regulation or changes or anything you may see coming up in the market around this. I GDPR has been with us for a long time. For those who may not be aware of it, that’s the Europe started ⁓ legal process or not legal process, legal requirement.

For people to opt in and not get spammed to their CCPA, which is the California one which has been more recent I’m curious if you see any other kind of changes standards or whatever else coming down the pike for the world of email

Hank Hoffmeier (29:40)

I think it’s all going to move towards like what GDPR is. And I would just ⁓ plan for that. And the best advice I’ve ever heard from somebody on a legal team was always follow the most strict there is, even if it’s not in your country. In other words, follow GDPR because then you’re covered for CCPA. You’re covered for, you know, Castle Now and, ⁓ and all the other ones that are out there and every state can come up with theirs because the thing is

I can market to someone in the European Union without knowing it. And then I’m on the hook for that same thing with California is if you’re emailing somebody that resides in California and you didn’t follow the CCPA, you can get in trouble. And the punishment’s pretty serious. I would say just make sure you’re doing the right things and make sure that you’re getting those options. I mentioned in beginning, don’t ever buy a list. And more importantly to not more importantly, but also important if you go to say a conference.

and you sponsored the conference and they say, we’ll give you a list for $2,000 of everybody who’s attended. Now, how many of those are going to actually come to your table if you have a table? Not all of them, right? But then you do have the ability to email all of them. But did they specifically opt in to get your emails? Probably not, unless the conference is doing it right. Then you run into the they don’t know who you are. They don’t remember your brand.

They may mark that message as spam, ignore it, or, you know, and all those things and it may bounce. It may have provided a bad email address. That’s why it’s always good to make sure that you have the best possible quality list you can. And with those folks that you meet at conferences too, most times what I recommend is emailing them one off or reaching out through LinkedIn and asking if you can add them to your email newsletter. Not every marketer wants to hear that if they’ve been going to shows and collecting lists of hundreds and hundreds of people.

Jesse Paliotto (31:22)

Mm.

Hank Hoffmeier (31:28)

⁓ I did a talk in Birmingham, UK, and I got the list of people who opted in. I sent them a personalized email video and I personalized each one, 120 people that I got the opt in from. And I just said who I was, gave them the key takeaways and a copy of the deck and a recording of the session afterwards. And I asked them, I have a newsletter. Would you want to sign up for that? I asked them to stay in touch. It was a one and done. And I asked them to stay in touch.

I’m not saying everybody wants to do that, but that is a good tech.

Jesse Paliotto (32:00)

So those were folks that they, because you were a speaker, the event had probably had something that said, you know, if you tick this box, maybe we pre tick this box, you’re giving permission for our sponsors to email market you. But you said, I want more permission than that. And so I’m to do this video tag.

Hank Hoffmeier (32:16)

Yes.

Cause I mean, if I just said, thank you for coming to the IREX conference, the name of the conference, wanted to follow up and tell you more about what kickbox does. They might not remember all that. They may have came to my session, sat in the back and been on their phone the whole time. And they probably might not have remembered me, but majority of them may have. they, and I got a lot of replies, you know, saying it was great and all this, and he appreciated the followup, but there will be those handful that.

Don’t remember who you are. Don’t care who you are. And they’re going to market a spam, unsubscribe, ⁓ ignore it, which hurts your domain reputation, which is what we mentioned. That’s what you’re looking out for most first and foremost, staying legal price. You don’t get fined and then making sure that you are keeping your domain health in check so that your emails get to the inbox.

Jesse Paliotto (33:03)

I love that in the sense that or in multiple sense one is just that it’s true permission marketing because once somebody says actively yes no I want to hear from you I’m going to be more likely now to open your emails because I kind of made this mental decision that I want to hear from you. Also I feel like SaaS companies digital product companies are so many venues where you get that you know when you somebody registers for ⁓ filling out a review they fill out a trial they fill out they attend a trade show they do something where they’re kind of.

kind of giving third party sponsors permission to market to them, but they don’t really want it. And so there’s so many scenarios that, you know, a company may find itself where they technically have GDPR opt in, but do they really have the actual buy in to not get burned in the relationship? And so I really respect, you know, kind of going out and doing the hard work to confirm the relationship.

Hank Hoffmeier (33:54)

Yeah, I like to always say, know, if you’re using a purchase list or using these conference lists, of course you’re to get the flash in a pan moment, right? You may get some sales, you may get some opens, but you’re hurting yourself for the future. Your domain and your IP reputation and your brand reputation is going to start to sink in. Your email marketing efforts will slope downwards and you might even start wondering why, unless you’re listening to this episode, you know why, but if you didn’t, you’ll

Jesse Paliotto (34:01)

Mm-hmm.

Hank Hoffmeier (34:20)

It will start saying, why are open rates so low? Why is nobody clicking our emails? It’s because they’re not getting them.

Jesse Paliotto (34:25)

Yeah. OK, this is a big question. So you can answer to the extent you want. If you could wave a magic wand ⁓ and fix kind of one thing with how most SaaS software, digital companies, do their email, what would that one thing be?

Hank Hoffmeier (34:41)

It’s going to be looking at the program and making sure you’re providing value while sending authenticated emails. That’s simply what it is. And it’s not one simple thing, but yes, just making sure you’re looking at your program and you’re set up correctly as far as setting yourself up for success. First thing is authentication. know, I’m not, mean, sure. Verification is important, but authentication is the king. And then your content and the value you offer is going to be the queen. And after that,

Hopefully everything just goes smoothly after.

Jesse Paliotto (35:14)

Yeah, I love that. ⁓ I think you can we talk for a second. I think you’ve got an offer for the growth stage audience today. We were just chatting for a second before we hopped onto the call. Do you want to talk about that for a second?

Hank Hoffmeier (35:27)

Right. People that come to kickbox and they sign up, they get a hundred free test credits. What I’d like to offer is using growthstage as a coupon code. When you go to purchase credits, maybe after you use the a hundred, if you want to up to you, I want to offer 1000 free credits. In other words, especially if you’re a small company, it would take you a while to get through a thousand free credits. You can test out our integrations, our API upload list. There’s a way to do one. We call it single verification. You can go in and just do one at a time.

Test it out, but yeah, use the code growthstage and get 1000 free credits. I have that set through the end of the year, which is the end of December of 2025.

Jesse Paliotto (36:05)

Awesome. Thank you, man. So much for doing that for the audience. And just to kind of poke at a little bit, because I haven’t used Kickbox yet, although now I’m going to have a thousand free credits to do. The credit is the API validation of the email. So somebody is filling out my free trial form and it double checks. This is a legit email and all of that. that’s actually especially for some for a company that may be either smaller or on the B2B side where there tends to be less volume of lead generation. Yeah, that’s a that could be a substantial runway to get somebody

testing this whole methodology, right?

Hank Hoffmeier (36:36)

Yeah. And we don’t charge for unknown results. There are some servers that may be temporary issues, servers down, or they just flat out refuse to talk to us. It’s called unknown. We don’t charge for those. We also do email deliverability consulting. And if you feel like you have a domain reputation issue or you you think your authentication is not set up correctly and you feel like majority of your, or you know, a majority of your emails are going to spam. We can provide a success plan and strategy to get you back on track.

Jesse Paliotto (37:06)

Man, that is so valuable and I’m not just buttering you up because you’re on the podcast. I’ve just been in numerous scenarios where ⁓ like email deliverability for the marketing operations or sales team can be, you never think about it till it’s wrong. And then all of a sudden it’s a fire and you’re trying to figure out how do I put this out? And so that’s a great shout out for folks that may run into that in the future.

Hank Hoffmeier (37:32)

Yeah, think of it like the credit score, right? You tank your credit score. It takes a long time to come back, right? It takes a while to get down to a low level and it takes a long time to climb back up that mountain. Same thing with email deliverability. Once you know there’s a problem, it’s hard to get back on track again.

Jesse Paliotto (37:37)

Mm-hmm.

That’s so good. Where can people catch up with you, Hank, if they want to ⁓ try and catch you somewhere online after this?

Hank Hoffmeier (37:56)

I always like to say if you search Hank Hoffmeier on Google, I have really good SEO. I show up probably for like the first two pages of results with everything that has to do with me, all my social media channels. The only thing I ask if you’re going to connect on LinkedIn, just make sure you personalize the invite. I have this rule where I don’t accept blind invites, but I’m a marketer, so I will reply and ask you if we’ve met before because I have a bad memory or I’ll offer to have a call with you.

And what’s funny is I keep track of that and I think the metrics still around. I only get a 40% response to that. In other words, it’s just a lot of salespeople trying to pitch me. I even get responses to my reply saying, thank you for accepting my invite. Here’s my sales pitch when I didn’t even accept it. But if you reach out and you say, I met you on the show, I still may actually want to have a call with you because I really covet having a valuable network where I can help you. You can help me and we can have a wonderful LinkedIn relationship together. Otherwise follow me on TikTok, Instagram, all the social channels. I’m always putting stuff out. It’s not all related to email. I do a lot of tips around digital marketing. I’m still trying to get my podcast going again. Hank’s Marketing and Business Tips. There’s probably about almost 300 episodes that are there historically. I hope to definitely get that back up and running and Jesse I’ll have you on too as well.

Jesse Paliotto (39:15)

Oh, I would love that, man. Well, thanks for being here today. I really appreciate it. Thanks everybody else for joining us, for being with us here on Growth Stage. Again, Hank Hoffmeier from Kickbox. Really glad to have him here. I’m Jesse Paliotto. I’m your host. I get to be a part of the digital product community by doing this today, and I’m so pumped about that. And I hope you all have a good week, and we will catch you next time on the Growth Stage.

David Vogelpohl (00:04)
Hello everyone and welcome to Growth Stage by FastSpring, where we explore how digital product companies can increase the value of their businesses. I’m your host, David Vogelpohl. I support the digital product community as part of my role at FastSpring and I love to bring the best of the community to you here on Growth Stage. In today’s episode, we’re going to talk about payment horror stories.

the how and why behind the most vicious attacks on your payment stack. And joining us for that conversation is someone who knows quite a bit about vicious attacks on payment stacks. I’d to welcome to Growth stage, Mr. Jeremy Waxman. Jeremy, welcome.

Jeremy Waxman (00:50)
Thanks, thanks David for having me.

David Vogelpohl (00:52)
I’m really looking forward to hearing your tales from the world of payments and risk and fraud and what these common attacks are, why these bad actors choose these particular types of attacks and what you can do to make your payment stack more secure. And I know that you work for FastSpring and you’ll tell us a little bit about what we do there in a second. ⁓

but I know that a lot of people will think about managing their own payment stacks, outsourcing or offloading to a partner like FastSpring. And so think it’s good, even if they’re not familiar with payment orchestration and risk and management, to understand a little bit about what that world is like. So really excited to have you here today and really excited to hear these horror stories. So.

Tell me a little bit about FastSpring for those unfamiliar and then what you do there

Jeremy Waxman (01:53)
Absolutely. So FastSpring is the leading merchant of record ⁓ in e-commerce. Basically, we can take your digital goods or digital commerce global ⁓ or cross-border outside of your existing country into ⁓ a new country. So it can expand your ⁓ target market, customer reach, ⁓ and overall revenue. ⁓

At FastSpring, I lead payments, ⁓ risk, compliance, operations, ⁓ and ⁓ ultimately, I am a customer advocate or a seller advocate, as we would call it internally, ⁓ where I work collaboratively with our, excuse me, sellers to help optimize, ⁓ improve their ⁓ growth potential.

and also understand where their next steps are and where they want to go next so that we can be ahead of the overall e-commerce curve and be ready for those growth markets.

David Vogelpohl (03:05)
And your teams are working with our upstream payment providers, local payment methods, our risk models, our engineering team to make sure that our payments and our payment systems are optimized, monitored and orchestrated in a way that results in the best outcome for FastSpring and our customers.

And so as I think about my interactions with you and your team and looking at all the things you do for FastSpring as a platform, but then also for very specific customers that are having very specific issues, it got me thinking that it’d be really interesting to talk to you about that here today. And I know you have kind of a background in this as well, but before we get into that, I want to ask you the question I ask everyone actually who joins the show. ⁓

What was the first thing you bought online?

Jeremy Waxman (04:02)
⁓ jeez. ⁓ You know, being in the payment space, I have a long history of purchases. ⁓ I would say it was probably a subscription. I’m going to really show my age here. it was using my parents’ credit card. And it was probably a subscription to AOL ⁓ or NetSuite. It was probably AOL. Remember those old CDs you used to get in the mail?

and it was a free trial, well then I convinced my parents to let me sign up for the internet through AOL and actually paid for it. So that was probably my first purchase, which probably throws people for a loop because they immediately go to physical goods that they can use. I went to access to get to the internet.

David Vogelpohl (04:51)
because

the AOL CDs allowed your computer to get access to the internet. Then you use the card to sign up for the service over the internet. And that’s, that’s really interesting. First purchase. I hadn’t thought you could buy access to the internet on the internet without access to the internet, but at the AOL CD thing I had never really thought of before.

Jeremy Waxman (05:17)
Yeah, they gave you a free trial, if I remember correctly, and it was free seven, 15, 30 days, whatever, and then they charge you. I guess I convinced my parents that the future was in the internet and they allowed me to pay or they allowed me to purchase. But the downside is that I didn’t think to convince my parents to invest in any internet stock. So that’s probably where I failed.

with internet purchasing, to be honest with you.

David Vogelpohl (05:49)
That’s funny. You

just, you just gave them internet companies money. You didn’t invest and get anything out of it.

Jeremy Waxman (05:53)
I supported

all investors in the internet companies.

David Vogelpohl (05:58)
Well,

I feel like you guys somebody out of it later, like later in your career, didn’t you work for Comcast? Why don’t you tell us a little bit about your background and payments to give folks a little bit of context more than just your role here. Like what were some of the other places you’ve worked before or the bankers like there?

Jeremy Waxman (06:16)
Absolutely. So, so, you know, I hate giving the number now, uh, you know, and I’d like to say that I had a lot of hair when I started in payments and software back in the day. Um, and, uh, you know, so 25. Ish years around a down, uh, in, the payments and software space, uh, primarily in payments, software product management.

financial services. ⁓ The role prior to ⁓ to Fastspring, ⁓ I worked for the company that either you love to hate or hate to love ⁓ Comcast, ⁓ where I ran payment operations for their largest division. ⁓ And prior to that, I worked at ⁓ different part ⁓ payment partners like Fiserv, ⁓ Verify.

I also ran a payment strategy for ⁓ the original merchant of record, Digital River, ⁓ which has now since ceased to exist, but it was a part of that, which is great. ⁓ And then all the way back to one of the first e-commerce companies ⁓ or dot-com companies called Princeton E-com, which was then since acquired two or three times over the years and is now a part of ACI.

David Vogelpohl (07:40)
Has managing payment stack attacks by bad actors been a part of these rules that entire time? Part of the time? Like how significant ⁓ role did that play in your career today?

Jeremy Waxman (07:55)
Well, I’m going to age myself a bit because back in the day, when I started in the space, really attacks didn’t exist because e-commerce wasn’t where it was. We’re still in the dot com boom. And, ⁓ you know, would say fraudsters. Learn to transition from as they saw the growth in e-commerce from, you know, stealing from stores to virtually stealing. Right. ⁓ and that’s something that

has evolved over the years. And I always like to say that the fraudsters will always be one step ahead of any fraud provider or partner or merchant that’s out there. That’s just the nature of the beast. ⁓ But ⁓ I would say they’ve always been there. Their attack strategy has changed over the years. ultimately, the one thing that has stayed common

for the entire time is they will find the weakest point and they will exploit it. And they will continue to exploit it until you close that weakest point or fix that weakest point. Then they’ll move on to the other company that has that same weakest point. And they’ll come around until they come around back again and then they find the new weakest point in your organization. So it’s very cyclical. We saw that many companies I worked. ⁓

They look for the weakest link and exploit it and then you close it because fraudsters don’t like to do work. They work a nine to five job just like the rest of us, believe it or not, ⁓ in the most cases. And they like to just make money where they can easily do it. They don’t want to redo code. They don’t want to redo their strategy. You use it, abuse it until you have to change it.

David Vogelpohl (09:44)
So before we get into the horror story side where you tell us about some of the unique and maybe terrifying attacks, ⁓ help me understand like what is the, what is it? What are the basic attacks on a payment stack look like? Like what are they doing and why are they doing it? Like what’s the most common type of attacks basic?

Jeremy Waxman (10:07)
I would say the most common attack is, you know, carding attacks, right? Where they are at end account takeovers, right? So you have two forms of attacks. One, I’m going to test a whole lot of credit cards that I might have purchased off the dark web or stolen myself, not me personally, but if I’m the fraudster ⁓ and testing to see if those cards are valid. And if they’re valid,

then they resell them or raise, go use them someplace else and buy a whole bunch of stuff. And, you know, it’s, it’s, it’s lost cause. And then on the other side of it, there is account takeover, right? And we see that a little more prevalent in some of the spaces that we work in, where somebody steals it’s, it’s, you know, kind of identity fraud. I’m stealing your e-commerce identity with this particular customer.

your credentials, so to speak. And I am logging in as you and I am buying stuff as you with your stored credit card or maybe with some of the other credit cards that I’ve stolen from you and purchasing stuff. you know, that’s why, you know, things like two factor authentication or setting up a notification that, hey, your password has changed is, is very relevant in everything you have.

David Vogelpohl (11:30)
Okay, so the most common type of attack is a carding attack where a bad actor is flooding your checkout with requests to test credit cards. When they find a credit card, is there a certain type of product that they favor when they do a carding attack, like in terms of the average order value or like product type, anything like that?

Jeremy Waxman (11:52)
Absolutely. So digital goods and very low dollar amounts. ⁓ because, you know, as everyone knows, a credit or debit card has a balance. And if you try to buy something for a thousand dollars and they only have ten dollars on their account, it’s going to get declined. Right. And industry standard is you don’t tell a fraudster why it’s declining.

So you don’t know if it was an invalid card. You don’t know if it’s insufficient funds. You just know it didn’t work. So you start with the very lowest dollar amount that you can do. And then you could build up from there because then you know, yes, it’s valid. Yes, I got the information right. Then I can go buy more stuff.

David Vogelpohl (12:38)
I remember back in the day, seeing a charge from Starbucks that I didn’t make and calling my credit card company, cause I got an alert pretty quickly and they caught the person. were going into the grocery store to buy like $200 worth of liquor and beer or something like that. And they had tested it at the Starbucks outside. basically a carding attack is doing that at scale. And when they buy the goods later is, that.

part of an account takeover or is that different? Because that feels like an attack too, right? You’re coming in with a stolen card to buy something from me. How do we understand that piece of

Jeremy Waxman (13:18)
Absolutely. an ⁓ account takeover is essentially I’m taking over your account and using the things you have stored on your account, a card on file, so to speak. ⁓ But then a stolen card just using fraudulent payment method ⁓ is you’re just ⁓ basically committing fraud just for that single transaction. ⁓

⁓ infiltrated somebody’s username and password, you have created a whole new path using that new card or the stolen card.

David Vogelpohl (13:59)
Is there a common type of good that fraudsters will use with fraudulent cards? Like obviously they’re trying to turn it into cash or crypto or something at some point. Again, is there like a commonality of like low AOV and digital is the best as a fraudster for a card attack when it’s time to use the card? What are the best types of products from their perspective?

Jeremy Waxman (14:24)
Honestly, it’s resellable, right? It has to have a market for it. ⁓ And it has to, you know, it has to be something that is commonly used, right? Typically not B2B software, right? Because a business doesn’t necessarily want to buy something from a third party that isn’t necessarily the, you know, selling entity. ⁓ But

you know, a customer may be looking for a discount and going to a fraudulent shop or finding a telegram channel that says, hey, buy this for a 20 % discount. And they’re like, okay, well, I’ll do it, right? Not knowing that those were stolen goods. They can make it very easily looking like, you know, the selling entity is a subsidiary or an affiliate of, you know, the company that they stole them from. ⁓

And from a goods perspective, if you go into holistic e-commerce, it’s goods and services that you then can go resell out of the back of a truck, so to speak. But in the e-commerce digital goods market, it’s things like gaming passes, even gift cards.

right? Which, know, gift card fraud is a whole different type of fraud, because it’s, you know, basically stealing cash, and then turning it into ⁓ real cash.

David Vogelpohl (16:02)
Okay, so the bad actors are looking for something essentially with resale value on some way. And so that’s part of the way that they target it. ⁓ as we think, as you start, I want you to give us some real juicy horror stories here in a minute, Jeremy, but I really, wanna, before we get to the horror part, I feel like we have to understand why this matters. Like, ⁓

It’s interesting to hear about these attacks and their motivations and some of the things that drive them. But if you get it wrong, if you let the attackers win, what is the ramification for businesses?

Jeremy Waxman (16:43)
There are a lot of ramifications and they span from business to operational to partner risk, right? To even buyer risk. One, if you continue to get attacked, your reputation with buyers just goes down. that, you

If you get account takeover or carding attacks and you’ve had your card used at a site you’ve never bought before, you may never go to that site. So there’s the buyer impact. Then you’ve got the seller impact, the merchant impact. It’s brand reputation. is, you are…

with the brand, the networks and with your issuing banks and with your processors, you are not doing, you know, industry standard or best practices to protect the payments ecosystem. And, you know, the networks of Visa and MasterCards and the payment providers out there, they take a lot of pride in the protection of the network. And you can have, you know, negative risk.

⁓ or negative fines coming your way if you reach certain thresholds within Visa and MasterCard, you know, so there can be financial downside to your business. But then if you look downstream into your payment processing, if you continue to get hit with a whole bunch of transactions and there’s a lot of declines in carding attacks, there’s a lot more declines than successes. ⁓ You can damage your approval rates with your issuing bank.

There are also fines associated with enumeration and carding attacks, ⁓ as well as you are just processing payments with never going to have the level of success that you’d want. So you’re just throwing money away by allowing those to happen because you get charged a certain amount every time that payment transaction goes through to the issuing bank, whether it’s declined or accepted, you get charged a fee.

those fees end up adding up over time if you don’t protect yourself on the front.

David Vogelpohl (18:56)
And so if I’m, if I have my own payment service providers, PSPs and my own relationships, perhaps with local payment methods, I’m doing my own self orchestration. ⁓ then the ramifications of getting it wrong are potentially fines. you, said negative fines and you mean like really big, massive fines, right? These, these are no joke fines that you risk here. and, ⁓

So if I, if I’m doing all of this, have these risks. If I’m outsourcing or offloading that to a merchant record like FastSpring or others in this space, I’m kind of relying on them to make sure that’s taken care of for me. And so I probably doing some good diligence there to make sure that solid, but getting it wrong in general, ⁓ effectively can affect your approval rates, your access to payment methods, and then result in effectively millions of dollars in fines. Basically, is that accurate?

Jeremy Waxman (19:56)
Absolutely. it can be, ⁓ it all adds up. You ⁓ don’t necessarily get fines for the, or massive fines for the declines or the actual process of ⁓ carding attacks.

But what you will is you’ll get a whole bunch of chargebacks because like you experienced with Starbucks, you’ll have a thousand people that experienced that problem with Starbucks because they tested a, you know, and got through on a thousand cards. Now you have a thousand disputes, a thousand chargebacks, which that comes with larger fees associated with it from your payment processor, from Visa, from MasterCard, but also that comes with fines when your ratios.

start to get out of whack. And that’s when, ⁓ the networks and your acquirers start really putting eyes on you. And, with the new programs that are coming out, which are putting more emphasis on the acquirer or your payment partner to manage the seller or the merchant, so to speak underneath, them, there could be a better chance that there’s a less, less, much less of a threshold before they say, Hey,

We don’t want you on our platform anymore. And then that puts the merchant in a very tough situation.

David Vogelpohl (21:17)
Yeah. So big, big stakes on the table here. ⁓ you also touched a little bit on the operational impact and it’s funny, ⁓ had, ⁓ someone I know refer, ⁓ the CEO of a company who is being overwhelmed with chargebacks and fraud. And it wasn’t so much the fines that was the problem for them.

It was the operational impact. Like half their support team was like spending like a good chunk of their time just, you know, processing these over and over and over again. think they were like yielding on them or whatever they were doing. So they were just being, I don’t know. It was just like taking over their business. Is that common? Is that pretty rare? Like tell me about that.

Jeremy Waxman (22:03)
Well, yeah, absolutely. I mean, and you can either decide to fight or represent a chargeback or just accept it, right? And when typically when a merchant gets an increase in chargebacks, you’re going to do whatever you can do to mitigate them from impacting your business. So you’ll start representing a whole bunch of them, which is a lot of work.

to be able to do for a merchant on their own. There are services that are out there that, know, they, if they represent and you win, they keep a portion of it, but it’s very expensive. It’s not a small percentage that they keep. So either it’s internal resources or you’re spending money to do it, it’s expensive, you know. And then on the other side of it, even if you’re accepting them and you’re not, let’s say fully integrated into your system,

or you have a dispute resolution tool like a Verify or an Ethica you’re using that is manual. Well, now you’re using multiple systems to try and limit your exposure. And it just starts to snowball and it just gets bigger and bigger and bigger. And that makes it tough for organizations to handle from an operational perspective. And unfortunately, my career, I’ve seen it and it’s not fun.

but you take it, you put your stuff in place to mitigate it, and then you ensure the next company you’re at isn’t in that situation again.

David Vogelpohl (23:31)
Well, I’m very grateful to have you here to take care of all this stuff. So I don’t have to get to this level at this complexity on this. This is a really interesting to hear. Now in my Starbucks example, I explained how they had, you know, tested it at Starbucks and then went into the grocery store in the same parking lot. And when I, when I called, I saw the charge almost immediately and I called and

⁓ it was talking to the rep on the phone and she was like, yeah, I can reverse the charge for the Starbucks and the grocery store charge hadn’t taken place yet. It took place when we were on the call and she was able to stop it at the register. And I just imagined the scammer, ⁓ with this cart load of groceries that they had gone shopping for and like hitting like.

Jeremy Waxman (24:05)
So

David Vogelpohl (24:23)
fail right at the moment of truth. And I just thought that was so funny that they had wasted all that time. Maybe they just changed to a different card and the old deal. But that was maybe

my weird horror story or interesting story from the world of payments and scammers. So let’s let’s get into yours. ⁓ What is you can leave out the names of the companies, obviously, and the people involved. But tell me a horror story. Tell me something like really weird or crazy that happened.

Jeremy Waxman (24:51)
Well, you know, I’ve been in a lot of organizations and a lot of organizations we’ve sold different divisions, different products, you know, and I’ll stick to the merchant type. ⁓

area. And I won’t tell you if I was at this merchant or I was a partner of this merchant, right? Because we don’t want to give any of our secrets away, right? ⁓ But I will tell you that carding attacks have grown over the years, right? Because of automation, software, the ease of software to create, right? And heck, even I’m sure chat GPT and AI

has a large part in automating some of this stuff, right. In one way or another. but what you see is they’ll target a certain thing, right. And if you’re not the biggest horror story that I have was the organization was not aware or not tracking. The clients, they were looking at approval rates at a high level, right.

But they weren’t looking at it at specifically down to what’s called the bin level. And fraudsters who typically are carding attack fraudsters typically buy stolen cards in a bin. And a bin for those out there that don’t know is the first six to eight digits of a credit card, right? ⁓ You know, an Amex starts with a three, Visa starts with a four, a MasterCard starts with a five, right, of that. And the bin represents the issuing

institution, right? So, you know, Chase Payment Tech or Chase City Bank, they all have bins associated with them, even your local credit union does. And if you look at it at a high level, and you’re looking at your payments approval rate globally, you know, you could see, well, heck, my approval rate goes up or down, you know, a couple of bips.

couple percentage points, right? It’s the ebbs and flows of normal activity, et cetera. But what we weren’t doing, or this organization wasn’t doing, was looking at it down to the level of a bin, and therefore weren’t able to identify the exact area of them getting attacked by carding. So by having millions and millions of transactions that flow through their system,

There was no way to see that you just got hit with 10,000 carding attacks on a bin in, you know, we’ll say Mongolia, right? I’m throwing out a country that I like to use as an example, because it typically never comes up in conversation. ⁓ So, you know, ⁓ so think about it, you’ve got this carding attack happening in this small little area, which therefore, on the whole scheme of things didn’t change the dynamic at all. So what

you know, we partner the way this organization mitigated it. They started looking at anomalies in specific bin volume, right? Because you typically, if you have a small credit union in the middle of Nebraska that, um, you know, does 10 transactions, 12 transactions a month, maybe peaks to 50 during some sale and all of a sudden does a thousand. That’s a red flag. Now granted,

They could be doing some massive sale or they launched a new product. So it’s not always fraud, but those are the types of alerts that you want to start monitoring and researching. And that is the value that payment operations brings to either a merchant or payment operations of your partner ⁓ or even a merchant of record. That’s what they bring to the table so that the actual sellers, right? The actual people who are building the products, ⁓ you know,

making your organization, providing solutions to make your organization grow from a revenue perspective. They don’t have to worry about that. But that was a horror story that when you came in the door, they never looked at it. Then you started looking at it and all you had to do was apply the decline fees to the attempts for these, what we’ll call low performing bins. And it quickly made people realize the value.

of protecting yourself from carding attacks.

David Vogelpohl (29:18)
So their fees were basically they weren’t catching them and they kept happening and they weren’t filtering them out and that resulted in fees or fines that were exorbitant basically.

Jeremy Waxman (29:29)
Well, actually, this organization, they were either bad cards or bad fraudsters, but there was not a very high approval rate of those cards. So what they experienced was these massive amounts of increases in decline fees. But because the fees of declines are very small comparatively to interchange rates, et cetera, and if you never look at it,

broken down into that level, you never actually realized that it’s impacting your business. And there was hundreds of thousands of dollars just waiting. Because remember, scale, it’s huge, right? ⁓ You know, and, ⁓ you know, the bin level stuff is what really brings it down. Because, you know, that let’s just use that credit card and credit union in central Nebraska, right? ⁓ Let’s say they do 50 transactions a month. Well,

If you keep that credit, credit union keeps getting hit by carding attacks, that approval rates going to go down because the issuing bank is going to see who you are at the issuing credit union. And they’re going to say, this is a lot of bad activity. I’m going to lower the threshold of what I’m comfortable in improving. So it’s not just impact in the moment. It’s got a long tail impact that ⁓ can be affect the organization and that.

is what makes me lose my hair or made me lose my hair.

David Vogelpohl (30:59)
So I’m imagining like the highway bank robbers of the 20s, like the Bonnie and Clyde’s melting into the fabric of the world and like taking advantage of these like chinks in the armor on a local level and kind of hiding amongst, ⁓ you know, the chaos. And so that’s how it might.

Jeremy Waxman (31:08)
Hahaha!

David Vogelpohl (31:21)
play out for bank robbers robbing in smaller towns and geographies and thinking about your central Nebraska or Mongolia example where, ⁓ you know, there’s these kind of standout data points and thinking about that observability and catching that. can, I can see why this would be a horror story. ⁓ finding these bad actors like lurking in the shadows of these smaller, Ben’s. So, ⁓

What else? Tell me another one. What was something else that made you lose sleep? ⁓ What else you got, Jeremy?

Jeremy Waxman (31:52)
⁓

Well, you know, there’s another organization ⁓ that ⁓ believed that there was a, well, twofold. One believed in a silver bullet from a risk and fraud prevention perspective, right? Where it’s, hey, this one thing is going to protect me against everything.

Right. And there are providers out there that say they’re, they, you know, they’re all encompassing. Right. but, know, in reality, if you’re using one single point solution, ⁓ it’s very tough to protect yourself. Right. ⁓ and then on the other side of it, this organization, ⁓ actually didn’t care about fraud. ⁓ the, what they cared about was customer satisfaction.

⁓ and, you know, overall count of customers, right. And there’s many reasons that people could care about customers versus, you know, net revenue. It could be, you know, stock price. could be valuation. could be, you know, growth, you know, growth potential, right. ⁓ you know, active daily users, et cetera, right. There’s all these different factors in play, but what was interesting is the horror story was you combine these two together.

And it’s very hard to convince an organization to help protect yourself on the front end, right? Because it’s not necessarily their primary directive, right? ⁓ And are willing to write off the losses, right? So it was a very ⁓ scary thing, but over several years, the business case was able to be made to say, look,

Here’s, you know, if you think about, here’s where we would have been if we did X, Y or Z. And, you know, we’re able to prove out that, you know, by stopping, you know, you always want a ratio on the front end. So by stopping a small percentage of what I’ll say, false positives or good customers, we were then going to stop 40 % of the fraud. And I’m making numbers up, but that getting to that point and the reason this is a horror story.

was getting it to that point took so long to convince the organization that it was benefit for them. It was just scary about how much money we were just, and customer experience, we were just kind of throwing away.

David Vogelpohl (34:32)
because they were so concerned about the effect of approval rates that they were willing to accept the loss from the fraud basically. And you’re saying that it wasn’t worth it at all ⁓ to lose just a tiny little bit of new customer accounts.

Jeremy Waxman (34:50)
There are some industries that, you know, there’s a greater threshold of what I would say, you know, flips the needle from good to bad. But in this industry, was tremendously out of whack. you know, it was, they were really worried about the one, two, three, four, five, whatever good customers that couldn’t pay. So it was, or couldn’t.

couldn’t purchase or enroll. ⁓ But where the switch came was proving out that your customers, in certain places, you don’t have options. If I want to buy Nike sneakers, I can buy Nike sneakers from 50 different places on the internet. There are certain things and certain industries where you only have a couple of options.

And if you really want to buy and you can’t buy, you’re going to pick up the phone. And that that’s where, you know, it sort of shifted the dynamic of the thought process of, look, we can show you if we start to close the door a little bit or close the dam and let a little less water through. ⁓ You’re still going to get the good customers coming through because they want to buy. So.

David Vogelpohl (36:16)
That motivation will help hopefully push them over the edge. But to your point, there’s a tipping point where it’s not worth it anymore. Obviously, if you’re getting millions of dollars of fines and acquiring a ⁓ thousand customers, that doesn’t really pay for itself, depending on the kind of customers they are, guess. But obviously, those kind of payoffs aren’t good. So I could see that being a horror story.

Any funny examples like anything stand out to you like did Mickey Mouse buy like a million dollar weird judge somewhere so

Jeremy Waxman (36:48)
I mean, in general, on a daily basis, we see tremendously funny names coming through our fraud and risk platform from Mickey Mouse to ⁓ AABB. And obviously, our organization does the best it can to protect our sellers from it. And you’ll always see those come through. ⁓

There are some creative names, ⁓ know, Super, Super, Super Space Man, ⁓ Batman. There’s a lot of superheroes, a lot of

David Vogelpohl (37:25)
Is it common

to filter risk rules and fraud rules on names? does that have too many false positives? Like there are a lot of real Mickey Mouse’s out there that you’re really just blocking out for buying things.

Jeremy Waxman (37:37)
Yeah.

Well, a lot of the partners and providers out there have what they call gibberish rules, ⁓ which are very good when you’re in English. When you start getting into different characters, ⁓ in language characters, right? ⁓ It starts to get a little out of whack. ⁓ So the really good providers out there have, you know, multiple language.

gibberish rules that allow you to react differently based on what’s there. ⁓ You know, and it doesn’t necessarily try and translate everything back to English, right? Because that’s where it can be kind of messy. And the lower end gibberish rules, they look at things like, three consonants in a row, four consonants in a row, right? But then if you’re looking at it that way, then there can be names with three to four to five consonants in a row, right? ⁓

you as you go into different geographies, you know, and how you’d spell things into English can change drastically as well. yeah, so there’s a lot of funny things that go on. know, there’s always the presidents that are signing up and, you know, world leaders and yeah, stuff like that.

David Vogelpohl (38:54)
Yeah.

Well, you’ve thoroughly terrified me, that’s for sure. And I’ve had my own share of hair loss, although it’s back here now and gray hairs though, from dealing with fraudsters and making sure sites are secure and funnels are humming nicely. So I hope you terrified those ⁓ watching and listening.

Is there anything you would like people to remember though as they think about, you know, keeping their customers and themselves safe and secure from vicious attacks on their payment stack? Like some like sage advice to leave people with.

Jeremy Waxman (39:35)
Yeah, there’s two areas, right? ⁓ From a personal perspective, ⁓ using the word password, using the same password across multiple places, that’s just going to allow people to…

attack one account and then just go find your other accounts, right? So, you know, there’s password tools out there that are very valuable. I’m not going to recommend one or the other. Everybody has their favorite. ⁓ But that’s good. You know, and it’s funny because people joke how they used to have a list of passwords in their drawer of their desk, right? And, you know, they kept them written there and then it became very insecure.

home to do that, which, which, you know, no company does, you don’t do that at companies, but now people are starting to do it again because they have so many different passwords. You can’t keep track of it. And that’s where I encourage people to move those passwords to a password tool. that’s out there. ⁓ and then from a, business perspective, there’s a couple of things I’d like to say, and this is not about me. It’s about we, right? It’s.

you need to have payments expertise somewhere in your ecosystem, whether that be within the four walls of your organization, whether that be through your merchant of record or that be through your payments orchestration platform. I would say you do not want to be dependent on your payments expertise through your payment partners, right? ⁓ Because you’re going to have multiple payment partners and you’re not getting that consolidated

⁓ translated feedback back into your organization. you know, I’m not touting payments experts out there, but I’m touting payments experts out there because it’s not look, it’s not rocket science, but it’s also not, you know, second grade math, right? So, and those are the two extremes, obviously. ⁓ You know, and the other thing is, is even though you think the smallest little thing

is so simplistic to put in to help put a speed bump on your, from fraudsters It really is a speed bump. And if you don’t have the one little thing that everybody else has, they’re going to find you and exploit you for that one little thing. Even if you think it wouldn’t stop the more complex fraudsters.

you’re not even stopping the simple fraudster.

David Vogelpohl (42:11)
That was really spooky. Thanks, Jeremy. I really enjoyed having you here today. Thank you so much for joining.

Jeremy Waxman (42:12)
Hahaha!

Thanks for having me, David. This was great.

David Vogelpohl (42:23)
Awesome. If you’d like to learn more about what Jeremy is up to, you can visit fastspring.com. Thanks for everyone for watching or listening. I’ve been your host, David Vogelpohl. I love to support the digital product community as part of my role at Fastspring. And thank you very much and enjoy the rest of your day.