LDG's Business Model

Thursday, October 29, 2009

The difference between a normal business and a non-profit seems, at first glance, to be a no-brainer. A normal business turns a profit by selling products or services for more than they cost it to produce. A non-profit uses donated time and money to serve its community. They're as different as day and night.

Under the surface, the distinction is much more subtle. You see, a non-profit also produces goods and services, and if they cost more to produce than it makes in donations, it's every bit as doomed as a normal business. The fact that they receive donations instead of selling what they produce doesn't change the fundamental economics of the situation.

The most important difference is that when a non-profit makes money, there's no owner or shareholders to siphon some off. All of the money that comes in the door gets used by the non-profit. This is what makes people willing to support them. Any money you donate is used to support the non-profit's mission.

The downside is that there's a lot of work involved to convince people (especially the IRS) that nobody is siphoning money off. And, as a result, there are a lot of restrictions on the kinds of things you can do.

Aside from those (admittedly important) differences, there's not a lot to separate the two. In particular, running a non-profit takes every bit as much planning as running a normal business. If you don't know where your money is going to come from, odds are good the answer is "It isn't."

LDG is using what I call the "refined NPR model". If you're not familiar with it, NPR is short for National Public Radio, a US-based public radio network. It produces some of the best and most-listened-to radio programs in the USA. Like LDG, NPR is a non-profit, largely supported by donations. Periodically, they run a pledge drive, essentially a period of time where they actively solicit donations on air. Like many non-profits, they give out labeled items like t-shirts or coffee mugs for specific levels of donations.

It works. The combination of repeated reminders and incentives gets people to donate. The problem is that it's also annoying. Even if you donate, they keep interrupting what you're listening to to ask for money, and it doesn't stop until the pledge drive runs its course. It's still an improvement over commercials, but that's not exactly a difficult achievement, now is it?

In software, the NPR model is known as "nagware", and people don't like it. I understand completely. It interrupts or delays what you're doing, and that sucks. At the same time, it's a necessary evil, and one that should be mitigated as much as possible.

The "improved" part of the improved NPR model refers to a feature that's all but universal in nagware: If you pay the toll, it stops nagging you. NPR, by its nature, can't do that. They can't put out a second radio signal without the donation drive, or everybody would just switch over to that one.

On the other hand, NPR has one thing figured out that most nagware doesn't. Frequency. If you solicit donations frequently (the "nag" part of nagware), all you accomplish is annoying people. It's a delicate balance. If you don't ask frequently enough, people forget that you need support. If you ask too frequently, they don't want to support you at all!

Right now, our plans call for a two-factor approach to frequency. The first is absolute time: we won't bug you more than once a day. We don't want to nag anyone, just remind them every now and again. The second factor is play time. If you haven't played the game for at least four hours since the last reminder, we won't remind you again.

Both of those timers start at 0. If you don't play for several hours or on more than one day, we haven't earned your attention yet.

There are other issues to consider, too. Seeing the same notice over and over is boring, so we'll put several versions in. They will be skippable, but we'll try to make them amusing and tied into the game's content, so that you want to read them. And if the notices show up during gameplay, we'll do our best not to interrupt you at a critical moment; it'd be counter-productive. In short, we're doing our best to take the "nag" out of nagware, because the best way to get donations is to make people happy.

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