When I started playing Counter Strike: Global Offensive (“CS:GO”) in 2014, ESEA was the undisputed leading 3rd party provider of high-quality pickup games (“pugs”). But just a year later, ESEA’s more than decade-long top spot was taken over by London-based startup FACEIT. But let’s start from the beginning…
If you know ESEA and FACEIT, you can skip this paragraph, but for everyone else, I’ll give a brief introduction to what these companies do. Imagine you regularly play soccer on a field in the park. The field is in bad condition, has many dangerous holes and the grass is not mowed. Also, you want to improve, but the people you play with don’t really care. The result is that it’s not really fun to play on the field and with the people. Therefore, you look for a solution to have a better experience. Many Counter Strike players face the same problem and FACEIT and ESEA provide the solution. They offer a better pitch (better servers than the ones provided by the game publishers) and more reliable teammates (fewer cheaters & more communication). To get access, you have to subscribe to them to get access to their servers.
This is a case study of how FACEIT managed to take the market leader position from a long-established leader using four strategies that are obvious in hindsight, while not differentiating themselves too much in the product.
Get the first traction to build on
In the beginning, FACEIT had to convince many players to play on its servers to satisfy users and get the network effects going. But building this user base was quite difficult for FACEIT because to start a game, ten players with similar skills and from the same region need to be looking for a game at roughly the same time. If any of these conditions are missing, the user experience suffers massively and there is a high probability that users will churn. Additionally, in the early days, FACEIT didn’t have much of an advantage over ESEA, so there was little reason to pay ~10 GBP per month for FaceIT instead of ESEA.
Therefore, FACEIT had to find another way to sign up users. And even though they weren’t really better than ESEA’s service, they were better than the free matchmaking offered by the game’s publisher. FACEIT, in fact, offered better servers, and the chances were high that teammates were better because they actively chose FACEIT. Thus, FACEIT was able to leverage its product to steal users away from a weaker product. However, these users were more likely to be casual players and would not pay a monthly fee. To solve this problem, FACEIT opted for a freemium model. This allowed everyone to try FACEIT and provided FACEIT with some signups and reduced waiting times for games. Players who didn’t want to subscribe to the premium version could play on the better servers but didn’t get access to the anti-cheat tool and the premium leagues.
This was a pretty smart move, because not only did it allow FACEIT to get the user base it needed, but it was also a bet on the natural development of more “serious” players. Most of them start out as casual players, but some of them become more serious players with ambitions to master the game. These people will also pay for a service like FACEIT and ESEA, and since they are already familiar with FACEIT and have gained a rank and probably a community of like-minded players, chances are high that they will subscribe to FACEIT instead of ESEA in the future. It’s safe to say that the freemium model laid the foundation for FACEIT’s subsequent success. While most users opted against FACEIT’s premium subscription for now, or would even pay the premium subscription for ESEA, it was certainly a key factor in getting early traction on their site and building a connection with later customers.
Destroy the market leaders USP
In the summer of 2015, when CS:GO was booming, FACEIT had already captured a significant market share through its freemium model. However, ESEA still had two massive advantages over FACEIT that secured their market-leading position over FACEIT. First, the classic way to become a professional gamer was to play in ESEA leagues with a real team for several seasons and steadily move up the leagues until you were noticed as an individual by other teams, or your team could compete with the pros and get sponsored. The second advantage was that all the professional gamers used their platform to play in their free time. This led to free marketing for ESEA as the pros streamed their matches and generated tons of views for the ESEA platform. They were also the best testimonials, because why would they play ESEA when FACEIT would have been a better choice?
FACEIT recognized what was holding back their growth and introduced the game-changing feature: FACEIT Pro League (“FPL”). This league offered pros a prize pool of USD 20,000 per month and an exclusive league where they initially played only against other pros. This was incentive enough to convert almost all pros from ESEA to FACEIT overnight, giving FACEIT the same benefits I previously highlighted for ESEA. But FACEIT also allowed a few players each month to qualify for the FPL, which motivated a lot of people to sign up for FACEIT to realize their dream of playing with the pros and maybe even getting selected for one of their teams. This smart move has completely changed the way of becoming a pro, as it is now much more common to climb the ranks on your own to end up in the FPL, where pros notice your skills and give you a chance in their team.
This move by FACEIT is a beautiful example of how to capture market share by adding value to users and redefining a common belief. But it’s also worth noting that this move probably only worked so well because FACEIT already had a decent active user base and brand awareness due to its freemium strategy. From then on, FACEIT’s user growth accelerated while ESEA’s slowed down until the network effects changed in FACEIT’s favor, causing ESEA to actively lose more and more users to FACEIT.
Allow others to build on your platform
Even though FACEIT was already the leading platform for pugs when they released Hubs, I’m convinced they’re still important to mention because Hubs helped cement FACEIT’s leading place. But what are hubs? Going back to our earlier soccer example, FACEIT originally provided the field and the community. To attract more people, they now rent out the field to different groups who can play their own independent leagues on FACEIT’s field. Getting back to the gaming world: Hubs are basically independent leagues on the FACEIT platform. These hubs can be set up by FACEIT partners and some of them require a monthly subscription. The revenue from this subscription is shared between the creator of the hub and FACEIT. This is a great incentive for creators or esports organizations to set up their own hubs to generate revenue. Some of these hubs offer the chance to qualify for the FPL or to play with the best regional players, thus giving players a good reason to subscribe to FACEIT and/or the Hub. Overall, FACEIT uses the Hubs to attract already existing communities to its platform. This further increases FACEIT’s visibility. In addition, FACEIT also benefits from free Hubs, as their members are more likely to pay for FACEIT in the future.
Be the good guys
Another important factor that allowed FACEIT to gain significant market share from ESEA was the fact that the majority of people did not like ESEA. There are several reasons for this. The most obvious one is probably that they had a big scandal in 2013 when they used their (paying!!) users’ GPUs to mine Bitcoins without their knowledge for a short period of time. But more importantly, around all their major and minor scandals, they never communicated with their user base on an equal footing.
As a result of all this mess around ESEA, most users wanted to leave the platform but didn’t know where to go. That’s why the whole scene cheered for FACEIT when they showed up. The community appreciated all the steps FACEIT took to build a competitor. But more importantly, FACEIT communicated with its customers and community on an equal footing. A big part of this was “Faceit_Mikey” on the CS:GO subreddit, who defused many complaints and became one of the most popular people in the scene. A positive association from which FACEIT benefited VERY much.
FACEIT didn’t perform any magic tricks or act as a charity, and there were also complaints about them in the subreddit. They won over a community that was starving for a sympathetic 3rd party provider simply by communicating properly and not being ESEA. ESEA on the other hand dug their own grave, blinded by their own arrogance. The rise of FACEIT was only made possible in large part because people wanted to leave ESEA and the community got behind FACEIT. However, the strategies explained earlier were also necessary to build a company that would become bigger than ESEA. In fact, many players over the years tried to knock ESEA off its throne, but in the end, they failed, even though the community was also behind them because their product was not good enough.
