So you pretty much hated Apple.
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Can someone explain Valve's business model to me?
- Thread starter Mama Robotnik
- Start date
marjo
Member
While I agree that a lot of what Valve does is simply smart business sense, I do believe that they often go above and beyond what they need too (i.e. making all L4D 1 campaigns available as free DLC in L4D 2), because unlike publicly traded companies, they have the ability of not always needing to maximize profits. They can simply decide to do something because they think it's a cool idea. And Grabe strikes me as a pretty altruistic fellow.
Sorry but Apple and Valve are nothing alike. Apple only makes people happy with good marketing and brand appeal while Valve focussed on the customer and value (outside of hats lol).
I'm pretty sure back in 2003 when Steam launched, no one else was willing to do it ... didn't Valve ask publishers if they would create a Steam-like system to make PC gaming easier?
Apparently everyone rejected the idea so Valve went and took the chance to try it. By 2007 or just a bit earlier we have Steam in it's current reincarnation, give or take a few things. Now other publishers want to jump on the Steam-like bandwagon and they are (for the most part) catching vitriol from other gamers why?
Apparently everyone rejected the idea so Valve went and took the chance to try it. By 2007 or just a bit earlier we have Steam in it's current reincarnation, give or take a few things. Now other publishers want to jump on the Steam-like bandwagon and they are (for the most part) catching vitriol from other gamers why?
"So we'll hunt him because he can take it. Because he's not our hero. He's a silent guardian, a watchful protector. A dark knight. "
The Technomancer
card-carrying scientician
Everyone who makes this argument then fails to explain how Apple then became a good consumer product brand in the first place. By...leveraging the brand they didn't have?
And then someone goes and makes a whole thread about how he hates the new Sony tablet, and one of the main complaints he has is an unintuitive and awkward interface and people still somehow wonder why Apple's strategy of devoting enormous amounts of R&D to interface produces products customers enjoy using.
Apple succeeded for the same reason Valve did: they saw an area that could be made easier for consumers to navigate in, and they devoted resources to creating products and services that filled that niche.
It's amusing to me that people think Valve is successful because they sell other people's games and make money off of it. Do you think it's fucking easy to do that?
There is so much more to Steam and Valve, and like I said earlier, it's all about customer loyalty and taking risks on innovative ideas.
I mean, for fuck's sake, who here would have ever thought just two years ago that we'd have a massive treasure hunt spread across countless games on Steam where you unlock objectives in games to win Steam stuff out of game? Or an alternate reality game that brilliantly tied into tons of different games? Or a way you could win more games and coupons just by playing the games you already own?
Anyone can go and sell 3rd party games. Stardock tried it. Direct2Drive tried it. EA is trying it. But they all suck at doing it, and they've all either failed or are pretty much failing right now. They're all wondering why they're failing, and they just don't get it.
It's not just good prices, or crazy sales, or whatever. It's everything else around the service that builds incredible customer loyalty that keeps people coming back and recommending it to other people, so much so that many would happily pay more to have it on Steam than less to not have it on Steam.
There is so much more to Steam and Valve, and like I said earlier, it's all about customer loyalty and taking risks on innovative ideas.
I mean, for fuck's sake, who here would have ever thought just two years ago that we'd have a massive treasure hunt spread across countless games on Steam where you unlock objectives in games to win Steam stuff out of game? Or an alternate reality game that brilliantly tied into tons of different games? Or a way you could win more games and coupons just by playing the games you already own?
Anyone can go and sell 3rd party games. Stardock tried it. Direct2Drive tried it. EA is trying it. But they all suck at doing it, and they've all either failed or are pretty much failing right now. They're all wondering why they're failing, and they just don't get it.
It's not just good prices, or crazy sales, or whatever. It's everything else around the service that builds incredible customer loyalty that keeps people coming back and recommending it to other people, so much so that many would happily pay more to have it on Steam than less to not have it on Steam.
This is what I meant by 'Hm.'
Raitosaito
Member
Pretty sure my grandma doesn't care about "brand" and what is hip. Customer service from Apple has saved her so much headache, and I don't really see old people showing off their iPads to each other to prove how much cooler they are compare to each other.
To them it's basically a magical device that let's them do everything with ease.
The product makes the brand, just like Valve.
Valve and Apple are very similar and very different in many different ways.
Same:
-Cares about customer loyalty more than anything
-Creates very high-quality, industry-leading products
-Created risky digital distribution platforms that massively overhauled entire industries in the end making things better for consumers
Different:
-Apple makes huge margins on hardware, because they've mastered their supply chain to get low prices for themselves
-Valve doesn't sell any hardware whatsoever
-Apple doesn't make much money on software at all, not even from the app store
-Valve makes all their money from software, and makes boatloads of money selling millions of copies of their own software and also software from other companies
-Apple keeps prices consistent, and on the high-end, because they need to do so with their hardware to keep making a profit, and because people will buy their products since they're high-quality
-Valve's entire business model practically relies on low prices, undercutting the competition, and literally giving away software at times to continue building customer loyalty
-Apple has pretty much the best and most influential marketing of any company out there
-Valve barely advertises at all, and when they do, they're relatively average TV commercials.
Same:
-Cares about customer loyalty more than anything
-Creates very high-quality, industry-leading products
-Created risky digital distribution platforms that massively overhauled entire industries in the end making things better for consumers
Different:
-Apple makes huge margins on hardware, because they've mastered their supply chain to get low prices for themselves
-Valve doesn't sell any hardware whatsoever
-Apple doesn't make much money on software at all, not even from the app store
-Valve makes all their money from software, and makes boatloads of money selling millions of copies of their own software and also software from other companies
-Apple keeps prices consistent, and on the high-end, because they need to do so with their hardware to keep making a profit, and because people will buy their products since they're high-quality
-Valve's entire business model practically relies on low prices, undercutting the competition, and literally giving away software at times to continue building customer loyalty
-Apple has pretty much the best and most influential marketing of any company out there
-Valve barely advertises at all, and when they do, they're relatively average TV commercials.
Ambition and irrationality often go hand in hand.
Valve wants 100% of PC gaming to go through Steam. That means they'd get a good cut of every dollar spent on PC gaming.
All their marketing and free stuff is just to get folks to use Steam more and more. It works.
Privately owned companies like Valve can take a short-term loss to get a long-term profit. Public companies often have to listen to short-sighted shareholders who want to make a quick buck in a turnaround.
All their marketing and free stuff is just to get folks to use Steam more and more. It works.
Privately owned companies like Valve can take a short-term loss to get a long-term profit. Public companies often have to listen to short-sighted shareholders who want to make a quick buck in a turnaround.
Yep. Just look at how open they are with Steamworks activation. They don't give a crap if they get $0 from a sale of a Modern Warfare 3 key on Amazon, and then that customer leeches bandwidth from Steam for it. That short-term loss will in the end probably yield yet another loyal Steam customer in the long run.
-The developer paid nothing to integrate Steamworks into the game
-The developer gets ridiculous benefits from Steamworks - leaderboards, matchmaking, incredibly in-depth and instant sales tracking, all for free, saving on R&D
-The customer gets to re-download their games as many times as they want for free
-The customer gets to buy wherever they want to, whether Steam, Amazon, or otherwise
-Valve still gets no money from it unless buying it through Steam
It's not even "risks", per se. They just don't have shareholders to answer to when they come up with these plans that will have obvious long-term benefits but no short-term revenue.
When Steamworks was first announced, I thought it was fucking brilliant and no one seemed to care. Valve obviously knew where they were going and they were very smart to do all this. It was a plan practically guaranteed not to fail, but just because it would eventually take years to manifest, a public company could never be caught doing the same thing. Now they're reaping the benefits with so many Steam-enabled games, they can do crazy stuff like treasure hunts.
Damn its almost as if it was a for profit business!
HP_Wuvcraft
Banned
Didn't know that, makes a lot of sense.
I came in here expecting another "why can't every company be like Valve" thread and was pleased it was not one.
Now that I think of it, the company that reminds me most of Valve in this case is Amazon. Look how many losses they take with Prime, the free app a day Android store, free cloud storage for music, and more. They slowly introduced all these seemingly-separate features and no one could understand how they made money off of all of it.
Then they come out with the Kindle Fire and tie all these services together brilliantly - and even the Kindle Fire is losing money right now!
But they're a public company. Their stock is getting hammered for all of this over the last few months, Even though it's so blatantly obvious that their long-term plans will eventually pay off huge.
Then they come out with the Kindle Fire and tie all these services together brilliantly - and even the Kindle Fire is losing money right now!
But they're a public company. Their stock is getting hammered for all of this over the last few months, Even though it's so blatantly obvious that their long-term plans will eventually pay off huge.
demosthenes
Member
He worked at Microsoft for a while, made a lot of money there.
HP_Wuvcraft
Banned
I think it's very ironic that you're trying to champion for devs when Valve is a privately-owned company.
I guess the fact that they make money is too much, right?
The Technomancer
card-carrying scientician
Yeah, he was one of the original Microsoft crew. After it exploded he took his millions and founded Valve.
I think its the bit where everyone on the internet uses Steam, and Steam prints money. Then after Gabe's daily moneybath, he tosses out some bread keys to random peasants users.
Also; hats. When people can make $10,000 off selling your virtual products, you're probably on to something.
Also; hats. When people can make $10,000 off selling your virtual products, you're probably on to something.
It's amazing how often this is seen as an inherently bad thing on this forum.
HP_Wuvcraft
Banned
You mean everywhere.
It's quite amazing how some people don't see paying rent or your employees as a priority.
MS exploded? News to me
True, but given how deeply Sales Age permeates this place, you'd imagine it would be less common on GAF. But, oh well.
Those employees should work on computers in public libraries and subsist on nothing but love for their medium.
HP_Wuvcraft
Banned
I've actually read people write this exact stuff. My friends company once got a letter from one of their ex-employees raging against how they used to be four guys in a basement.
You would. You really, really would.
My whole theory is that a company needs to be as specific as possible when talking to its fanbase. If you can turn a hater into a consumer, that's a good thing. Of course, you always need to know when to just back off, when someone just won't turn away from their preconceived notions.
charlequin
Banned
You don't think universally decrying any and all business built on facilitation and distribution as pimping is irrational? It's one thing to take issue with the flaws of Steam (because it, like all things, is flawed) and another to engage in a jeremiad against the very concept of businesses that profit by offering services to other businesses.
SouthernDragon
Member
Well, that kinda ended that.
EatChildren
Currently polling second in Australia's federal election (first in the Gold Coast), this feral may one day be your Bogan King.
Soon as I saw this thread I crossed my fingers this would be the first post. I knew you'd deliver.
NinjaBoiX
Member
*adds to insult repertoire*
So the Apple you DO like is the one that nearly went bankrupt due to terrible pricing (even compared to modern Apple pricing), aimless direction, and convoluted product lines?
I mean, I get Apple hate, sure, but this statement is still something of a head scratcher to me.
Pureauthor
Member
The gist of the OP is that we have somehow reached a point where Mama Robotnik finding it difficult to comprehend how a company that treats its consumers well is able to be as profitable as it is.
Then something about how a hypothetical service should do the exact same thing as Steam but with less of a cut from games.
Mama Robotnik
Member
Thanks for the responses. I think they helped illustrate the "people" aspect of their business strategy that I wasn't considering - that loyal and happy customers fuel their success. It seems like such an obvious notion too, perhaps my mistake was to try and take in the madness that is Valve and Steam as a whole, rather than think about all the little strategies that contribute to the success of their model.
water_wendi, you are clearly adamant in your viewpoint, but despite reading through the thread (twice) I'm still at a loss as to how your model would work.
Is there any chance you could break it down, into an easy-to-digest ordered strategy of how your presented alternative would succeed? For example:
(1) Water_wendi's model does this.
(2) Then, Water_wendi's model does that.
(x) more stages listed in chronological order
(10) Successful non-profit digital distribution business model is established in which all developers get 100% if their profits and becomes the most successful digital distribution model in the industry.
I'd be genuinely interested in a detailed breakdown of what you are proposing, if you can present one.
water_wendi, you are clearly adamant in your viewpoint, but despite reading through the thread (twice) I'm still at a loss as to how your model would work.
Is there any chance you could break it down, into an easy-to-digest ordered strategy of how your presented alternative would succeed? For example:
(1) Water_wendi's model does this.
(2) Then, Water_wendi's model does that.
(x) more stages listed in chronological order
(10) Successful non-profit digital distribution business model is established in which all developers get 100% if their profits and becomes the most successful digital distribution model in the industry.
I'd be genuinely interested in a detailed breakdown of what you are proposing, if you can present one.
This.
It's hardly a great mystery. Give customers free stuff, engage with them and treat them well. Sell games online and take some cash from devs to sell their games too.
throwawayname
Member
I always lol IRL when I see that HATS/HATS graph.
Guerrillas in the Mist
Member
(1)Privately owned, mostly by one individual (initially two, both of whom bankrolled it). Makes decisions that benefit the customers, not the shareholders.
(2)Unlike most other's business models, they don't attempt to monetise everything (ie. free updates for their games) which leads to goodwill from their customers, who respect and support them more readily for doing so.
(2)Unlike most other's business models, they don't attempt to monetise everything (ie. free updates for their games) which leads to goodwill from their customers, who respect and support them more readily for doing so.
tassletine
Member
Valve are a relatively small company given their profits. Most company's work on the basis that when you earn more money you expand so you can ease the workflow. Valve don;t work like this.
It's a massive misconception that becoming a boss makes your life easier and it's what a lot of people aim for. It does if you want it to but then your company will suffer and eventually die. Everybody at Valve works hard at what they do and keep everything friendly and fun so people want to work there, allowing employees 'play time't to be creative and come up with their own ideas. Although there is a hierarchy it isn't rigidly adhered too. Take your work seriously but don't take yourself seriously -- that sort of thing.
They also treat their customers almost like they are a subsection of the company and welcome criticism and openly engage in discourse with them. They are also very quick to adapt to market forces because they retain this flexible approach at all times.
It's a massive misconception that becoming a boss makes your life easier and it's what a lot of people aim for. It does if you want it to but then your company will suffer and eventually die. Everybody at Valve works hard at what they do and keep everything friendly and fun so people want to work there, allowing employees 'play time't to be creative and come up with their own ideas. Although there is a hierarchy it isn't rigidly adhered too. Take your work seriously but don't take yourself seriously -- that sort of thing.
They also treat their customers almost like they are a subsection of the company and welcome criticism and openly engage in discourse with them. They are also very quick to adapt to market forces because they retain this flexible approach at all times.
Valve isn't in the stock market.
GotEmRunnin
Member
Probably due in part to the fact that they are a private company and if I'm not mistaken Gabe is the biggest shareholder (no pun intended). I'd have to assume when your biggest shareholder also runs said company he can experiment with different pricing models and business models most CEO's couldn't even get off the ground.
GotEmRunnin
Member
that just means they don't offer or trade shares publicly.
Valve is owned by Valve employees. In what way do Valve's decisions not benefit them is what I asked.
It seems to me that Valve has a lot of power among indie developers who are out to make money on their games. If your game ends up on Steam, that's awesome... if it doesn't, earning money on your game is more of a challenge. Would be interesting to see Valve's process of choosing the games allowed to be released on Steam.
SouthernDragon
Member
To clarify;
When people say that Valve isn't beholden to stockholders, they mean the stock market. When a company is off of the stock market, they have much greater flexibility in how they go about their business. They can take decisions that most stockholders would gnash their teeth about but would benefit the business in the long-term.
Valve's playing the long game. They want to ensure that it's virtually impossible for consumers to *not* want Valve to be in the industry. I think they understand better than anyone that it's better for customers to feel good about giving you money than to do so begrudgingly.
He didn't say 'beholden to stockholders', he said "Makes decisions that benefit the customers, not the shareholders." Which to me indicates he was referring to the Valve staff who are shareholders, and in which case I disagree that's true. They make decisions that benefit both, but they still put the priority on making money. Some people seem to think Valve are like a charity guardian force of PC gaming and they're not, they're still in it to make a lot of money, and their decisions are all with that in mind. If they wanted to they could very easily release every game they make for free. They choose not to because they make decisions that benefit their shareholders above their customers. I remember all the embarrasing gushing over them taking on Dota 2, like they were doing some great service to the user base, some selfless gesture. In truth what they did was take on an IP worth potentially billions over the next ten years for virtually nothing.