Metacritic vs Sales

Tobold recently blogged a post about how videogame reviews are no longer relevant.   In it, he compares sales of the games themselves versus the aggregate Metacritic scores and how in some cases these two diverge.  His follow up post on McDonald’s popularity makes the point that a measure of quality isn’t really worthwhile because “consumers are quite rational, and that they make choices on a highly complicated multi-factor analysis.”

I think he’s right in that later statement.  But Metacritic is useful, not because it’s a measure of good fun, but because it is an entirely subjective measure of things reviewers found interesting.  It could be because of fun.  Or it might just be because it was something they’ve rarely seem before.  But before we get there, we need to understand why it diverges from sales figures.

Let’s go back to McDonalds.  That fast food franchise isn’t popular because it sets a minimum quality of food.  It’s popular because it sets an extremely low variance in its food quality.  If you bother looking up patents actually owing to McDonalds, they’re primarily focused on quickly batch-cooking large quantities of food with little to no operator involvement and little to no variation in outcome.

US 3397993 A Process for preparing frozen french fry potato segments – use of raw potatoes vary too widely during the seasons.  Frozen potatoes are a good substitute but they don’t match fries from raw potatoes.  The entire patent focuses on the preparation of raw to frozen segments such that the final outcome is consistent.

US 3255570 A Means for filling containers – manual filling of bags using tongs tends to crush or deform the food.  The patent outlines methods and means for rapidly, easily and controllably filling such containers.

US 3517605 A Bun toaster – a specially designed bun toaster that ensures consistent contact on buns of varying thicknesses.

US 3260419 A Dispenser with plunger and diffusor outlet - it is important and desirable that condiments to be provided on the food product are applied in uniform quantities, and preferably in predeterminable patterns which best distribute the condiment over the food product. That is important both in terms of uniformity of taste of the food product.

… and so on and so on.

When customers go to McDonalds, they for the most part get exactly what they wanted.  Matching their expectations equals satisfaction.  This is why franchises exist.  In video games and movies, the same could be said.  Players who already love a franchise, a director, or any specific aspect of ‘quality control’ will likely buy the next game in line; critics be damned.  As long as their expectation of what they’re going to receive matches what’s in the box, it’s all good.

With fans, where Metacritic only starts coming into play is at the lower range.  They might start looking at critic reviews to make sure the game wasn’t drastically altered.  That it’s not bug ridden.  But as long as those glaring flaws aren’t the reason why it was panned, as the saying goes a Michael Bay fan will continue watching Michael Bay movies.  Critic opinions based on tastes are easily mentally discarded.

Metacritic is immensely useful though for new player acquisition.  Players and movie goers aren’t immutable beings.  Eventually they will tire of the next Michael Bay movie and look for something different.  As a pre filter, anything below 80 metacritic is automatically discarded as something not worth their time.  Within that span of 20 metacritic points lies the realm of possibilities for the person interested in finding something new and interesting.  Because everyone’s taste varies, ranking within that is pretty much immaterial other than just being the order that its presented.  In effect, it’s the Oprah’s Book Club except on a universal scale and slightly less directed.

Not making such lists doesn’t mean a game or book wasn’t fun on any subjective scale.  But it just wasn’t interesting enough to be worth discussing.  The main consumer for ‘consumer critiques’ is the person looking for something new and interesting.  It isn’t the person looking for validation that their choice or tastes were correct.

An interesting corollary of all this is the franchise reboot.  What is the point of resurrecting a franchise that’s effectively dead?  In very basic terms, a known brand-name or IP showing up on the high metacritic range will garner clicks just out of simple curiosity, especially if the list itself is long.  Rebooted franchises aren’t directly targeting the older fans.  They’re targeting everyone else that only know it in passing.  That’s why they can vary so differently in expectations for the old crowd.

Mind you, this entire essay is predicated on most people being very brand and franchise driven.  They stay in their satisfaction comfort zones.  This idea isn’t without merit though.  Food, clothing, cosmetics, TV, film, and pretty much every single cultural product has had some psychology experiment listing the strong effects of this.  Constant cinephiles or ludophiles are an extremely rare breed.

Check your Privilege

I unfollowed someone (not a friend) on Twitter a few days ago for uttering the phrase Check Your Privilege.  The tweet wasn’t to me.  And in fact, the recipient wasn’t even engaged in a discourse with the person who issued it.  To me, this .@ tweet (intentionally broadcast to their followers) came out of the blue against the recipient as he went on about feminism.  It wasn’t even overtly hostile but more inline with the type of naive, clumsy, but honest self-questioning you’d encounter in an introductory gender studies class from both male AND female students.

And so I waited.  I waited for the person who issued the meme to follow up with some form of teaching or even a link to Finally Feminism 101.  And I waited.  Then I unfollowed.

The whole concept of Privilege arises out of McIntosh’s paper White Privilege: Unpacking the Invisible Knapsack.  In it, she recognizes that part of the difficulty for men in particular to instantly recognize feminism concepts does indeed stem from the system’s desire to instil a subconscious blindness to power differentials that it itself is imposing.

After I realized the extent to which men work from a base of unacknowledged privilege, I understood that much of their oppressiveness was unconscious. Then I remembered the frequent charges from women of color that white women whom they encounter are oppressive. I began to understand why we are just seen as oppressive, even when we don’t see ourselves that way. I began to count the ways in which I enjoy unearned skin privilege and have been conditioned into oblivion about its existence.

- Peggy McIntosh

Many have extended this concept of Privilege beyond race and gender to many other types of domination, most notably ability, class, religion, and sexual orientation. It’s even extendable to the geopolitical realm through such concepts as Western privilege.

Privilege is also very contextually dependent.  For instance, I am Asian Canadian which  puts me at varying levels of racial privilege/unprivileged status as I go from Engineering courses, through society in Canada, and then the Pan-pacific community.  The flips in my privilege status as I move between these realms does not mean one or the other does not exist.  That would be denial.

All of us are privileged to some degree or another.  Depending on where we work, where we live, how we were born.  And as shown that can easily change as well as we move from system to system.  To further complicate matters, the systems even change themselves through time.  Most gender studies courses along with diversity workshops recognize this and as an exercise have students perform some form of privilege inventory.  One of the better ones is the stand-up, sit-down exercise (a circular variation of the privilege walk).  In it, students gather in a circle as the instructor reads through different prompts and asks students to stand-up if it matches them.  Once standing, all students are asked to silently note who is standing and who is sitting.

I’ve listed the example prompts from the University of Colorodo’s Samuels paper Connecting with Oppression and Privilege: A Pedagogy for Social Justice.  There are countless other prompts herehere and here.

  • If people routinely mispronounce your name … please stand up
  • If you have ever been the only person of your gender in a class or place of employment …
  • If you have ever been asked to fill out a survey that asked for your “race” but did not include an option that accurately described your racial identity …
  • If you worry semester to semester about whether you’ll be able to afford your college tuition …
  • If you represent the first generation of your family to attend college …
  • If you ever felt pressured to alter your appearance, mannerisms, or language to avoid being judged based on your race …
  • If you have a physical, psychological, developmental, or learning disability …
  • If an educator, counselor, or other authority figure ever discouraged you from pursuing a particular field of study or profession …
  • If you are often expected to attend classes on your religious holidays …
  • If you have ever had a job where you received less pay than somebody for doing equal work …
  • If you have been sexually harassed in your workplace or elsewhere …
  • If you know someone who has been the survivor of sexual assault or attempted sexual assault (rape) …
  • If there is any dimension of your identity that you have to hide from most people in order to feel safe …

By the end of the exercise, most students feel some level of anger or guilt at not recognizing one form of privilege in their lives.  But at the same time, they see that others, even those to that belong in the population that is their main dominators suffer from the same systems of oppression, albeit along other axes.  It forms solidarity.  It forms the basis for those that are in a privilege class to listen to those that aren’t.  It also tries to instil in those that are oppressed that this isn’t a contest to see who’s more oppressed.  That energy that would have otherwise be directed at victimization and hatred (another method by which system itself reinforces things) is instead channelled into understanding and combating the systems of oppression.

The people who’ve never done the exercises in a mixed group or just snatched upon the idea of Privilege from a blog post will most likely utter that it’s not their responsibility to teach.  But by using an instrument designed to teach people, they have indeed taken on the onus to teach.  If they’re not ready, they’ve just hobbled the real attempts at teaching.

As educators, we need to understand our own connection to oppression and privilege, and how they play out in our own lives. Only by doing this heartfelt work on our own can we be prepared and successful in bringing these potentially volatile concepts into the classroom. Those of us who choose to do this work in the classroom are all on a path toward social justice. We must remember that along the way, we can not force students to see and acknowledge their privilege, we can only serve as facilitators in the process of their doing so. Students need an outlet to discuss this newfound knowledge, and we can give them one. This work is difficult enough to pursue in a group, but alone, it is nearly impossible.

- Dena R. Samuels

Also, as a key part of Privilege exercises, we never tell people that they have to apologize for their privilege.  Those that go the route of apologizing, do so of their own free will as a means of coming to terms with any guilt they built up from the exercises.  Some people internalize instead and rail against the system.  We also never use a phrase as a pithy as Check your Privilege because deep down we know that form of adversarial tossed-into-the-wind tweet is indeed asking for such.  At this point, it has become the 21st century equivalent of ‘Know Your Place’.

And the sad irony of it is, the person who uttered the Check your Privilege is actually a privileged person within the twitter-sphere, especially amongst the silicon tech group, to which these two people belong.  They are exercising their power differential by using the weaponized variant of “Check your Privilege”.  They know this shows up on the person’s public wall.  They know that most people have not done a privilege exercise.  They know that most people, upon reading a terse 140 character tweet would treat this as a Scarlet Letter assigned by one from a position of privileged authority.

Sadly, some people would like to treat this whole concept of privilege as some sort of scoring system.  Under such a system, privileges in a sub-community isn’t a real privilege at all.  That being under-privileged in the greater society trumps such fake privileges they might be experiencing and that by having a more negative Oppression Score one has achieved the moral high-ground.  Gosh golly, I guess White privilege isn’t real in North America since Asian privilege trumps it in the World by all measures.  Oppression Olympics misses the whole concept of Peggy McIntosh’s work by such a wide margin that I facepalm every time someone brings it up.  Don’t take my word for it, take hers.

So ya, I unfollowed someone not because of their beliefs, their skin, their sex, their handicaps,  nor their orientation.  I unfollowed someone because they were a poor example of a human being.

Why Every Gamer Should Be A Feminist

As a gamer, you should be pro-feminist for one very simple reason: better games.

No, I don’t even mean more diversity in game archetypes – although that would be nice personally – but I really just mean better games.  A better Call of Duty, a better League of Legends, a better Civilization, a better insert your favorite game.

Despite a constant stream of people wanting to get into the games industry, the biggest barrier to better games is retention.  Excellence in execution is driven by experience, and experience is only gained by being in the industry.  There is no substitute.  Wouldn’t it make sense to throw the best and brightest at this problem?

Let’s say we have twenty people.  Ten men, ten women.  Let’s also say retention is 50% (I’m being very generous here), so that only 5 from each group would stay, hone their skills and make awesome games.  In an ideal world, we’d be left with ten people making CoD better.

But sadly, that’s not the case in the real world.  Of those ten women, only 5 of them would even contemplate a career in gaming.  Why?  A multitude of reasons:

  • blatant sexism at gaming conferences and convention.
  • the Gamer culture at-large (or a very vocal minority).
  • cultural reinforcement that STEM (and by extension game development) ‘isn’t something that girls do‘.
  • lack of support or mentors.
  • a culture of benign dismissal from peers (e.g. ‘Hey, I’m all for you being here BUT…’).
  • a culture of malformed stereotyping (e.g. ‘We want to market to women.  Hey, you’re XX’)
  • poor pay.

Whatever the reason, we’ve lost two-plus people that would have otherwise made our games awesome.  7.5/10 awesome people is far worse then 10/10.  Heck, we don’t even get out of bed to play games that score below 80 on metacritic.  Why settle here?

Feminism isn’t just about equal rights.  It isn’t about affirmative action; that’s just a tool.  Feminism is about demolishing all the stupid reasons that keep your games from becoming great.

Network Partitions Ruined My Life

I came across Kyle Kingsbury’s talk on network partitions while doing some unrelated research into monitoring systems.  But first,

What are Network Partitions?

Say you have a globally distributed game.  One datacenter in the US, another in the EU.  To consolidate the user base, we have a single accounts database.  A simplistic approach would be to also throw in an inventory system into this database if we wanted to deal with in-game purchases.  

So, one day a ship drops an anchor and cuts several of the underwater fibers that make landfall on one side of the Atlantic.  The internet starts to route around this faulty network link.  Perhaps sending some packets across Asia instead as congestion hits the few remaining Atlantic lines.  All of this, takes only minutes, but a few minutes are enough to effectively split the EU cluster we have from the US cluster.

Why is it Important (or Why This Keeps Me Awake at Nights)?

What happens to people buying game items during this time?  What happens to people who pay for credits?  I’m spending way too much time thinking about this – but what’s the alternative?  You either catch it here, or create an auditing and logging system that customer support can use to manually resolve conflicts.  The industry tends to employ the later – but since I won’t have a CS department of any note, an ounce of prevention goes a long way.

Now, without further ado, here’s the talk.

Building a resilient distributed system is hard.  Building a resilient distributed system without data loss and just works is even harder.  I’ll end it here for now.  Step one is knowing there is a problem.  I’ll go into detail more later on solutions to this problem for specific cases.

Background Theory and Knowledge

There’s talk about CAP / AP but the talk assumes you know it.  For those without a computer science background, it stands for Consistency, Availability, and Partition tolerance.  The theorem basically says that you can have two, but never all three when dealing with a distributed system.

Each side of a partition will always think it’s the world.  One typical way to resolve that impasse is via a quorum.  The partition that has the majority of all nodes is considered the live master.  The partition that has the minority tends to lose Availability for all the clients on that side as it no longer accepts requests.

Interspersed between all this is the idea of Consistency – the idea that if you read right after you write, you expect the data to be there.  Because the speed of light is constant and network speeds between regions will always be limited, eventual consistency tends to be the norm instead of hard-consistency.  Writing to a record in the US, we only expect it to show up in the EU after some indeterminate time (say 1-2 mins?).   Ways to enforce hard-consitency would require a lot of gossip/transactional back-and-forth between each node which makes it brittle to network partitions.

PostgresSQL: One of the standard relational databases.  It’s not really distributed in the sense that all data is located on a single node.  The talk makes a good point that by virtue of the client being on a separate node, it will suffer from the CAP theorem.

Redis: Similar to a database (but not quite) in that its designed to externally store data used by an application.  The access semantics are different from your traditional database.  It’s main claim to fame comes from it being a convenient way for multiple processes to share data with one another.  It tends to be used a lot in monitoring systems as a temporary storage and buffer of high velocity flowing data.

MongoDB:  Another popular NoSQL database.  It doesn’t have a set schema (e.g. columns in a SQL database) and it comes with some built-in mechanisms on the client side to specify exactly how tolerant of CAP you want your data writes to be.

Riak: A different take on NoSQL based on the dynamo ring system.  Unlike MongoDB, it’s designed not to have a central point.  Where in the CAP triangle the system lives is also tuneable, although on a system-wide level.  It also employs a special system called a CRDT which lets the application resolve any conflicting writes.

New Years 2014 Reading List

Merry Christmas everyone!

Not to let one side feel left out, there’s also a set of game related presentations from Google IO 2013.  So without further ado, grab your cup of egg nog and a warm blanket for these presentations.

Intense Gaming

Chris Elliott, Alexis Hanicotte, Olivier Michon

Here Be BigQuery: Building Social Gaming Infrastructure on the Google Cloud Platform

Matt McNeill, Tom Newton

Looking back, Google’s cloud platform has changed a lot since I first looked at it about a year ago.  With the introduction of Cloud SQL, it’s stabilized enough that I’m seriously having to revisit its use.

Obviously, given it’s relative newness – and previous lack of bidirectional sockets – there’s not so much done on games in this space other than a few REST API driven ones (eg: social/Facebook games).  Realm of the Mad God being as outlier being more action driven.

Christmas 2013 Cloud Gaming Reading List

Here’s a whole bunch of presentations dug up from Amazon’s conference on their cloud service.

AWS re:Invent 2013 Firefall MMO Video Presentation

Building a World in the Clouds – MMO Architecture on AWS

Jeffrey Berube, Red 5 Studios, Inc.

Slides

AWS re:Invent 2013 Killzone Video Presentation

(re)Building Killzone’s Servers – How We Used AWS in Killzone

Tim Darby, Sony Europe

Slides

AWS re:Invent 2013 Parse Facebook Video Presentation

How Parse built a mobile backend as a service

Charity Majors

Slides

AWS re:Invent 2012 Ubisoft Video Presentation

Scaling Online Games with Ubisoft

Read Maloney, AWS & Tsvetan Petkov, Ubisoft

Slides

AWS re:Invent 2012 HAWKEN Video Presentation

Meteor Entertainment Lessons Learned

Sarah Novotny, Meteor Entertainment

Slides

AWS re:Invent 2012 Tiny Village / Tiny Pets Video Presentation

TinyCo’s Best Practices for Developing, Scaling, and Monetizing Games

Gabi Ghimis, TinyCo

Slides

For more sessions (not gaming related), you can check out the wonderful session lists provided Rodney Haywood and Andrew Spyker.

Contributing to the Heat Death of the Universe

Carina Nebula

Carina Nebula, Source: Hubblesite.org

When dealing with servers, there’s always one issue that crops up once in a while when you’re not looking.

Entropy
…or lack of it in particular.

You see, computers are things that don’t like to generate unknown values.  In fact, they’re purposely built to avoid that.  But here and there, we have on occasion required truly random and unguessable numbers.  We use it for SSL/TLS and a slew of other cryptographic algorithms.  Having something guessable there wouldn’t be a good thing.

How would you guess a ‘random’ number anyways?  Easy.  Most random number generators aren’t really random.  They take a seed value and permutate it to give you a new die roll.  Given enough sequential values, and a guess as to what that algorithm is, you can easily predict the next few numbers.  Casinos have been hit by these hacks.

But how does a computer generate a truly random number.  In linux, there is a device port called /dev/random that is tied to keyboard timings, mouse movements, and IDE timings.  In one word, chaos.  The universe itself is extremely random.  Your hand movements on a mouse are random, even if they trace more or less the same path.  Those minute differences can be captured by the computer.  But on a headless server, we don’t have an IT guy sitting there playing World of Warcraft so as expected, the /dev/random pool is extremely small.  So small in fact, that given enough SSL traffic, it can stall out the server

There are many ways around this of course, none of them universal.

Some people redirect programs to use /dev/urandom.  This pool also samples from /dev/random. But when the initial pool runs out, it generates more cryptographically using what it had. The ratio between real /dev/random values and those generated determine how weak urandom is. This works good enough for things like calculating keys for an ephemeral SSL socket. The possibility of someone doing something with it is extremely remote. Apache for instance has a SSLRandomSeed configuration parameter that lets you specify exactly that you’d rather use urandom.

Sun/Oracle Java has a securerandom.source config that can also do the switch. But that works on the entire JVM. Not something I’m extremely fond of in case something really needs to generate a more persistent key.

The alternative – or adjunct to the above – is to use another entropy generator to fill in /dev/random using other things it typically doesn’t.  Program timing is one.  Given a busy enough server, measuring the time it takes to run certain instructions can vary enough to add extra bits to the pool.  These programs, like timer_entropyd or haveged, can generate a pretty good series of random numbers.

In the game of cryptography though, nothing’s perfect – virtual machine hypervisors can theoretically enforce strict timing on CPU. But that will be extremely rare. I can generate the entropy that’s good enough, and have things use urandom when appropriate.  Hopefully by the time hacking has advanced to the point where this vulnerability can be taken advantage of, the universe would have long been a uniform heat mass.

Link of the Day: Beyond the Hot Brunette

Note: this was actually written back in March.  I just scheduled it for release on March 2113, which might have taken a while given its natural course.  You have the recent series of NBI posts to blame for this “I am alive” post :)

 

Hot on the heals of Anita Sarkeesian’s somewhat disappointing first episode of Tropes vs Women in Video Games, I managed to dig up a old link from 2010 about tropes – specifically tied to ARGs but which very well applies to video games too.

Listen to Andrea Phillips’ SXSW talk “ARGs and Women: Moving Beyond the Hot Brunette

leiaholo

Putting aside the overtly blatant sexist parts of the industry, even the few sparks of gender empowerment still seem to devolve into a hot brunette – who otherwise is very capable and smart – somehow always needing your help.  That’s the setup.  Arg indeed.

The takeaway?

“Writers and game developers are very lazy.  Building nuanced complex characters is really hard…  You want smart, funny, easy to relate to, and vulnerable.  Female conveys vulnerable.  Brown hair means smart, and bonus points if you put glasses on her.”

I admit, I’ve succumbed to that shorthand myself too.  Even if you have the best intention of drawing up a good female role, it’s too easy to fall into established stereotypes.  As silly as it sounds, hair color invokes familiarity with past characters.  Brunettes have Xena and Lara Croft.  Blondes have Buffy and Veronica Mars.  Redheads have … … …

Then we have the issue that the player has the agency, not the NPCs.  Because of that, the strong female role we thought we put in, just becomes another damsel in distress.  A hot brunette in distress most likely.

But the talk goes beyond that, and actually gives solutions (gasp).  Good solutions.  It turns out, you can have a NPC who happens to be brunette, needs your help, and have agency of her own.  It just takes a bit more work and time to flesh out.  At the end of which, not only do you have a strong female role, but you also end up with a strong and interesting character.  In reality, the tip applies just as well to male NPCs.

This talk is worth listening to for anyone wishing to do right.

At the end of the day though, it’s okay if you have a hot brunette – just make sure she’s not just a damsel in distress and has some agency of her own.  Simple to say now, but it has a way of sneaking up on you if you’re not alert.

Hackers Jolie

Oh look, someone who’s empowered and isn’t kidnapped!

Looking to Merge Charity and Gaming?

Games + Charity = Awesome

We’ve all heard of Humble Bundle and how they manage to raise over $10.7 million towards various charities.  I like to put that into the column of how gaming can actually improve the world.  Gaming is no longer a solitary hobby where people shut themselves off from the rest of the world.  It’s a form of identity.  A bond.  If only media would cover that more instead of giving soundbites to politicians’ inane rambling about how games induce violence with whatever new inane scapegoat they can find.

Like many others, I’ve got a lot of game ideas running through my head at any given time.  Most of them are pure folly, but I go on the premise that if left to percolate, something good might float to the top.  One of these game ideas revolves around the theme of charities.  As a sideline to the game itself, it would be nice to allow a portal for users to also donate to their charity of choice.  At the same time though, for this idea to bubble up, it needs to be sustainable from a business perspective.  This post will highlight some of the thoughts and research centered around it.

I think most people are familiar with charitable tax deductions, at least tangentially, if not in practice.  While it may vary a bit from place to place, it’s practically universal.  That is, for ever dollar you donate to a registered charitable entity, you get some percentage as a non-refundable tax deduction.

The first thing that pops to mind is…

Can I, as a game developer, or publisher, accept money – lets say $10 – and claim tax deductions on whatever percentage the user specifies?  Despite the loose morality of it, the answer is yes.

From a legal standpoint, you fall under the category of a commercial co-venturer.  This is slightly different from the more regulated and traditional commercial fundraising, where the charity itself pays a fee for the marketing help.  Commercial co-ventures go by others names as well: embedded giving or cause marketing.  We encounter it everywhere in our daily lives, from retailers and grocery checkout asiles, to yogurt products that offer to give 1% to healthy-living charities, all the way to pink-ribbon products that support breast cancer.  A co-venture primarily gives you some product – with the promise of charitable giving tacked on.

The important thing to note is that under a commercial co-venture, it’s the commercial entity that takes the tax deduction, not the customer.  This doesn’t seem fair, and personally I think it should be disclosed more readily.  So far, it’s more of a unwritten rule of don’t-say anything – for fear of being mis-quoted in media as being a moustache twirling evil-doer out to steal people’s tax credits.

That aside, it does put the cause at the forefront, making it more likely for people who are interested to donate.   After all, you’ve done the homework to check up on the charities and make sure they’re legit – that’s something I’d pay 30c on the dollar for – especially given that I’d likely forget by the time I was free to do so myself.  The lump-sum donations you provide also reduce the paperwork and overhead each charity has.

Now, for the numbers.  Let’s say you would normally take in $1,000,000 in total without the charity effect.  Next, we’ll use a donation factor to roughly approximate the amount of market this additional goodwill brings.  We’ll also assume, for the time being, that every new cent goes toward the charities and not the games you’re producing.  Other assumptions include cost of sales, taxes, and a standard software industry margin of 25%.

Donation Factor Analysis

Donation Factor Analysis

As we ramp up donation factor, we notice that the additional cost of processing payments and such starts to eat into your net profits before taxes (EBITDA).  When we throw the tax deductions in however, each cent donated actually increases net profits continually with a 20% donation factor being the most optimal.  This effect remains positive up until a donation factor 88%, where the additional cost of sales finally balances the tax deduction.  Only until we reach a factor of about 225% do we start to see a net business loss from this – even then a minor one.

Net Profit vs Donation Factor

Net Profit vs Donation Factor

How well does this map to reality?  I don’t think the assumption that every new cent goes towards charity is a good one.  It’s a pathological case - and reality probably falls somewhere in that green area.  As the market expands, people will still want to pay you.  Granted, as the campaign or offering is continually extended, I can envision the donation factor to skew towards a higher percentage as more and more people think you have enough money now.  It’s something to keep in mind.

A 48% increase in net profits is nothing to sneeze at.  Wall Street would sell their grandmother’s kidney for it.  Not to mention that goodwill is goodwill, and that’s bankable.  Yes, you can twirl that mustache now.  Go ahead.

Twirl it!

Twirl it good!

Final Notes

Despite my misgivings on how certain groups portray the charitable act, I can’t deny that this is one of those few scenarios where everybody wins.  The charity gets the money.  You get peace of mind.  The co-venture gets indirectly reimbursed for their time and effort.  However, before you go and decide to plaster the Breast Cancer Research Foundation, EFF or Child’s Play all over your product, remember that it’s called a commercial co-venture for a reason.  You need a written contract with the charity at hand before you are allowed to make any representation that the purchase of goods will benefit that organization.

Standard disclaimers apply: this is not legal counsel, go get one.  But one thing to note is that when you say 1%, 10%, or 100% goes towards charity, be precise.  1% of what?  Retail?  Net?  Revenue?  There’s enough case law to see that certain lawyers crawl out of the woodwork when there’s blood in the water – even if it is legit and for a good cause.  Practical advice is to use retail percentage as that’s what the customer sees.  If you calculated wrong and its putting you in the red, then just stop the campaign and explain it to your users.

Also, bear in mind that some places do impose a legal limit on the amount of deductions depending on your company structure and location.  It’s complicated – so get legal advice.