Why Humble Bundle Sold Out Itself and Over 100 Million Customers
Zach Turnbull
Friday’s a venerated day in our workaholic culture. Friday is traditionally when many of us check out during the afternoon and our weekend begins. Goodbye work, hello fun! Friday afternoon is also highly regarded in the press and public relations industry, because that coveted time slot is when bad or potentially controversial news gets tossed out into the void, with few people paying attention. The cycle starts back over on Monday and the trash news is hopefully forgotten.
The Friday the 13th announcement that beloved indie darling and charity powerhouse Humble Bundle had been acquired by soulless gaming media titan IGN was not an accident. It was the best time to announce a development that many gamers would perceive as a dumpster fire of a development.
This particular Friday news dump provided a way for publications in the industry to report the news and save face and avoid doing the work (and hard feelings in an industry that is already way too chummy) of considering why the deal went down or what the implications might be.
Polygon,
Rock Paper Shotgun,
Destructoid and other major publications essentially reprinted a short, uncritical announcement from
Gamastura which read more like a friendly press release than a news article. An interesting sentence from the Gamasutra article states: “In a conversation today with Gamasutra, Humble cofounder John Graham and IGN executive VP Mitch Galbraith reiterated that IGN does not intend to change the way Humble does business.”
So how does Humble Bundle conduct their business? And more importantly, how does that align with IGN’s business strategy, a strategy overseen and developed by Vivek Shah, the CEO and architect of Ziff Davis’s growth. Shah is also poised to become the CEO of J2 Capital on January 1st, 2018. J2 Capital is the parent company of Ziff Davis. IGN is a subsidiary of Ziff Davis’s digital media empire.
How Humble Bundle Does Business
From its first bundle in 2010, Humble Bundle’s core offering consisted of a bundle of “indie” games offered at very low cost when compared to the retail bundle of the individual games. Another initial positive point was that all games included a DRM-free version of the game, alongside activation keys for DRM platforms, such as Steam. Another factor was that users had the option of donating some of the proceeds to charity as well as determining what percentage of their purchase went to charities, developers, and Humble Bundle.
The combination of great value to the consumer, support for small developers, the freedom to determine how the money was allocated by the purchaser and the charitable aspect helped make Humble Bundle one of the “good guys” in the minds of many gamers.
Over time, Humble Bundle spread out. Bundles started to include major developers, as well as mobile bundles, console bundles, magazine bundles, comic bundles, book bundles and software bundles. In 2013 the Humble Store debuted, with Humble Bundle selling titles directly outside of bundle deals. In 2015 Humble Bundle started offering the Humble Monthly subscription service. Subscribers pay 12 dollars a month to get a jumble of mystery titles as well as access to Humble Trove, a small catalog of “Humble Original” games and other DRM titles. In 2017 Humble Bundle started its own game publishing service.
On the surface, everything looks great. But a more cynical examination reveals cracks in the Humble facade. The anti-DRM stance is far from universal. For example, none of the core games in the October 2017 Monthly Bundle offer DRM-free versions.
The not-so-Humble Bundle offices in San Francisco. One of the priciest places to rent office space in the U.S.
The charity aspect also has some less than selfless implications when examined. Humble Bundle does let purchasers donate to a charity of their choice and essentially all purchases do see a percentage of the proceeds go to the charity…all of which Humble Bundle is able to write-off as a tax deduction at the end of the year.
This option is not available to the individual purchasers, however. [Ed. note:
There’s no denial from Humble Bundle that they do write off these charitable deductions, so while I can’t say with certitude that’s the case, I do believe that they are using them for a tax break.]
There’s also the benefit to the developers. Some report that inclusion in bundles helps their sales on outside platforms, but there’s also the fact that developers split proceeds from the bundle with other developers who also have included games…this comes after Humble takes its cuts for itself and for its probable charitable tax write-off. So developers might get a very small portion of an overall bundle’s total earnings through sales.
But the DRM bullet point, the charity, the total sales of indie games, these aspects also factor greatly into the image Humble Bundle has carefully crafted for itself, which is a major part of their marketing. And marketing is a large part of Humble Bundle’s success.
In the fall of 2016, Humble Bundle started its
Humble Partner program. This is an affiliate marketing program that allows members to provide links to Humble Bundle products and receive a cut of the profit if someone clicks through their link and makes a purchase. Some readers may have noticed a marked increase in gaming sites and networks reporting on Humble Bundle offers, such as on
Rock Paper Shotgun,
Gizmodo network, and others. It’s a win-win for both sides. Humble Bundle gets free promotion that would cost them an exorbitant amount of advertising dollars and the sites in question get a portion of every purchase the readers make through their links.
So what’s the big deal here? Humble Bundle isn’t perfect, but there are worse business models out there, obviously. It’s highly likely they get a tax write-off for donating to charities, but at least the money goes to worthwhile causes. They offer great deals to consumers. Developers, if they are lucky, get a decent chunk of money and exposure and even if the proceeds are small, at least their games have gotten a substantial boost in ownership, and hopefully, word-of-mouth benefits allow their titles to see increased sales elsewhere.
Humble Bundle does offer great deals for consumers, but there’s a hidden cost for those cheap bundle deals many people haven’t considered and it’s likely the major reason IGN/Ziff Davis/J2 Capital/Vivek Shah bought out Humble Bundle.
How Vivek Shah Does Business
When Vivek Shah left Time Inc. as CEO, he walked away from a former print behemoth struggling to stay relevant and profitable in the wake of a digital revolution that left traditional print revenue models at the brink of destruction. At Ziff Davis, he took on a formerly rich and powerful print empire that was also floundering during a digital zeitgeist the company was ill-prepared to embrace.
Vivek’s strategy was simple: Make ad revenue work, not by selling ads the traditional way, based on practices of the time, but to take it one step further: to build an in-house ad exchange to offer contextual and relevant placement to advertisers:
“‘We tried to open up layers of moneymaking,’”
said Vivek Shah, Ziff Davis’ CEO. “‘Yes, we make money on display ads. But we go well beyond that.’”
Shah accomplished this in several ways. The first was to build the ad exchange,
BuyerBase. By running an in-house ad exchange, Shah was able to make the sort of ad placements that were traditionally handled by third-party ad networks, who would buy ad space on a site and sell it to advertisers.
Everytime you visit Speedtest or Ookla, Mr. Vivek Shah gives you a cookie!
The second thing Shah did to develop the user base needed for BuyerBase to succeed was to expand Ziff Davis’s acquisition of digital properties, focusing on topics and segments that were complementary to each other and that provided advertiser value. PC Magazine was already the flagship property, but under Shah, properties such as Ookla.com, Speedtest.com, Geek.com, and Offers.com added not only those users but all their contextual data, the fuel that powers BuyerBase and makes it attractive to advertisers.
Browsing history, age, income, address, research—what products or topics users took an interest in while using their browser or apps—all this contextual data, against the backdrop the millions of the users on those sites, gives Shah a coveted platform of targeted data to offer to advertisers. Look at the synergy among the above-referenced sites. It’s a large swath of subjects and needs matched up to people interested in hardware, software, and related interests.
Which is why IGN fit right into the portfolio when Shah purchased it in 2013. And it’s also why Humble Bundle was acquired yesterday.
How IGN and Humble Bundle Will Do Business
On September 14th, 2017 Humble Bundle quietly revised its privacy policy for users. At this point in time, it’s not exactly clear what changed between the prior version of the privacy policy.
However, sometime between
October 16th, 2016 and
November 7th, 2016 the privacy policy had some major revisions. This timeline of nearly a year ago for the privacy policy changes fits right into the timeline of when acquisition talks started between Humble Bundle and IGN, as reported by Gamasutra: “[IGN VP Mitch Galbraith] explained that IGN started
looking to make a deal like this nearly a year ago.”
The pertinent language added was this:
If Humble Bundle or substantially all of its assets are acquired, or in the unlikely event that Humble Bundle goes out of business or enters bankruptcy,
user information would be one of the assets that is
transferred or acquired by a third party. You acknowledge that such transfers may occur, and that any acquirer of Humble Bundle may continue to use your Personal Information as set forth in this policy.
Humble Bundle is a business, not a noble cause. It’s not two altruistic guys burning the midnight oil in their garage to support indie devs and throw money at charities while giving the finger to DRM. It’s a sophisticated business with 60 employees in a very expensive San Francisco office—some of the most expensive commercial real estate in the world—who just sold the collective user history of over 100 million users to one of the internet’s biggest digital media empires.
Make no mistake, that’s exactly what this deal was about. Sure, it’s a solid investment for multiple reasons: it has a good income stream, a huge user base of repeat customers, the model is sound, but the real value was in the collected user data.
And if you look closely at the Humble Bundle privacy policy, the extent of the reach is clear. Not only did they sell browsing history, purchase history, demographic data—they also sold some very niche data that dovetails neatly into how ads work on IGN. If a user attached their Steam account, Humble Bundle just sold all the data collected in relation to their Steam holdings and usage. The same holds true for Battle.net and other linked third-party services.
There’s another interesting statement in the Gamasutra article. Humble Bundle co-founder John Graham says: “Because of the shared vision and overlap of our customer bases, there’s going to be a lot of opportunities.”
The shared customer base is IGN’s advertisers getting access to the contextual data of over 100 million users. And of course, there are opportunities for IGN to be enriched by Humble Bundle customers outside of leveraging their data.
Who gets prominent pricing in bold red letters? IGN affiliate links to Amazon. Coincidence? Not really.
Now IGN/Ziff Davis/J2 Capital gets the cut from purchases. The affiliate marketing program Humble Bundle started at the same time they made the privacy policy changes last year? That’s free promotion for IGN and just another way to ramp up collecting user data, by getting a multitude of large sites and networks to bring users into their data collection.
Let’s not forget that IGN already participates in its own affiliate efforts, such as
IGN Daily Deals. Expect to see Humble Bundle promotions and products featured prominently, including games developed by Humble Bundle…another facet of the company that was announced after the acquisition talks were already in motion. If you look at IGN’s review page, you will see many of the reviews feature links to buy games from Amazon. That’s because Amazon (but not Steam, which is why you don’t see Steam links) has an affiliate program. Every game bought through those links earns IGN revenue. Now IGN can cut out the middleman and link directly to their own store at Humble Bundle.
As Leo pointed out yesterday, this also looks like a huge conflict of interest on IGN’s part. Will this compromise their ability to provide objective coverage? I think the question itself is loaded because it isn’t as if IGN was out there indiscriminately providing reviews and news for all games. They do the same thing other large sites do, and that’s focus primarily on games and coverage that will give them the largest amount of readers/viewers with the least amount of effort. They care about money. Balanced coverage, looking out for the small titles as well as the big ones and gaming culture and everything that comes with it comes far behind making cash.
IGN doesn’t need to change their current approach. With their affiliate program in place, they can safely let other sites promote games and provide reviews for titles that might be considered a conflict of interest, and they will reap the rewards of the coverage and all of the user data they will harvest from those links. And they can still cover their ass with a tidy disclaimer under any conflicted title or deal, promote their own content on their site, and claim they are giving full disclosure, full well knowing the majority of their users won’t notice or care.
If you want to opt out of
Humble Bundle or
Ziff Davis’s data collection, good luck. The terms of their privacy policy make it much more difficult to opt-out than it is for them to collect and sell your data. Humble Bundle’s policy states they do not honor third-party Do Not Track services. You can contact Humble Bundle or Ziff Davis directly and request that they remove your data, but they may make you jump through major hurdles proving your identity.
If you are angry because you feel like Humble Bundle just sold out to the man, don’t be. Humble Bundle has been the man for a long time. Everyone looks bad here: Humble Bundle, J2 Capital/Ziff Davis/IGN, Gamastura and every other major gaming site that helped bury the real story on a Friday news dump: that Humble Bundle sold the personal information of over 100 million customers and that business would continue as usual because that’s the way the major players like it.
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