Valve Makes More Money Per Employee Than Google Or Apple

http://techcrunch.com/2011/02/15/valve-makes-more-money-per-employee-than-google-or-apple/

by bjonathan • 15 years ago

66 54 15 years ago

bjonathan• 15 years ago

Forbes article on the subject: http://www.forbes.com/forbes/2011/0228/technology-gabe-newel...

sosuke• 15 years ago

That was strange indeed, this link to Techcrunch was a teaser for an article that was on Crunchgear that was a snippet of the actual full article on Forbes. It was a good read though.

bpeters• 15 years ago

I feel like Techcrunch does that a lot....

jamesjyu• 15 years ago

My friends and I have actually been noticing this. There's been a deluge of TC links to articles with barely any content, and/or content that simply links to another article.

This is not a good trend. People: please submit original sources.

saurik• 15 years ago

You actually missed a step, which to me is what really makes this situation amazing: the TechCrunch page is a teaser for an article on CrunchGear that was actually syndicated from "gamrfeed" (note the via link! ;P) which itself is a snippet of a full article on Forbes.

mambodog• 15 years ago

I was curious about the origin of the photo of gaben w/ minigun that turned up on Reddit a few days ago...

michaelbuckbee• 15 years ago

I've seen a couple videos of "behind the scenes" at the Valve offices and Gabe is a weapons nut: lots of framed knives and things used as decoration.

erikb• 15 years ago

Why didn't you post that link as the thread's link? Makes much more sense.

icey4• 15 years ago

Revenue per employee is one of my favorite metrics. I work on B2B software & services and when we ask our customers for testimonials we ask them to figure out what their revenue per employee was prior to using our system and then compare it with current numbers.

Since part of our value proposition is that we teach companies how to do more with less, it becomes a very powerful marketing tool. (We usually see an increase of 200% to 300% revenue per employee after 5 years; ordinary growth in our industry is 10% to 20% growth over 5 years.)

klbarry2• 15 years ago

Wow, may I ask what kind of software creates such an astounding change?

icey4• 15 years ago

Heh, it's a boring industry - Insurance sales. But other than a few small players that are focused on the wrong things, we mostly compete with home-grown systems and excel worksheets over email.

We made a choice to focus on this metric a few years ago and it's been a tremendous boon for us (and our customers). Now we consider every change with the lens of "Will this help our customers do their jobs better?"

yesimahuman2• 15 years ago

Don't forget engine licenses.

CrazedGeek• 15 years ago

Does Valve make much off of those? Looking at http://en.wikipedia.org/wiki/Template:Source_engine_games, there don't seem to be too many "other" games.

sid02• 15 years ago

Yeah, Epic probably gets a lot more money from engine licenses than Valve does. Valve definitely makes a large portion of its money through Steam.

andreaja2• 15 years ago

Valve don't release pricing information for the Source Engine, but they say it's competitive[1]. One of their competitors is id, who charge $250k plus 5% of wholesale[2] for id Tech 3. I'd say it's probably nice side income. Epic charge $350k plus 3% of wholesale[3].

For 18 games (if I counted that wikipedia list correctly), that should be a fair take, but it would seem like more of a side income when compared with Steam :)

[1] http://source.valvesoftware.com/SourceBrochure.pdf

[2] http://www.idsoftware.com/business/technology/printdoc.html

[3] http://udn.epicgames.com/Main/Licensing.html

Aaronontheweb• 15 years ago

I'm not surprised - Valve's business model with Steam is really smart and it's a great way to PC game publishers to sell older inventory (like my beloved Lucas Arts classics) without having to take any real risks. They're going to become the Amazon of PC games if they aren't already.

DevX1013• 15 years ago

Didn't know Newell was a Harvard dropout. What's it with Harvard C.S. students dropping out and making it rich?

kirubakaran• 15 years ago

Survivorship bias, selection bias etc

DevX1013• 15 years ago

I agree with the survivorship bias, maybe there are other dropouts who I never heard of.

But on the selection bias, I can't really think off the top of my head many other major founders from top C.S. schools that dropped out and were successful. Is Harvard even a "top" C.S. school?

endtime• 15 years ago

You mean, what's with people smart enough to get into Harvard, studying one of the fields most conducive to tech entrepreneurship, who then see a business opportunity with so much potential that they are willing to leave Harvard for it, being successful?

allwein• 15 years ago

Measuring any "Random Tech Company" versus Apple on the metric of Revenue Per Employee is always going to be skewed in Apple's disfavor. Everyone always forgets the thousands of retail employees at Apple Stores which are obviously going to generate much less revenue than say Johnny Ive or the programmer's writing the next version of OSX.

_delirium• 15 years ago

Valve is also really small compared to Apple (250 employees versus 50,000). If we're willing to compare among that level of size difference, then Mojang (of Minecraft fame) has better revenue per employee than Valve.

ZachPruckowski• 15 years ago

Does it? "High Hundreds of Millions"/250 could be greater than or equal to $10M-$15M/7 employees.

joh6nn• 15 years ago

that's a fun metric, but is it useful? i ask in seriousness. granted i'm no economist, but i'm not sure it's actually telling us much. Google and Apple, unless i'm mistaken, have way more product diversity in much larger markets; that Valve should have lower overhead per employee doesn't come as a surprise to me.

is there some non-obvious (or perhaps it is obvious, but not to the lay-person) reason why this is an impressive or telling metric?

Tiktaalik• 15 years ago

Even aside from their Steam distribution system I think Valve probably does better than most game companies at producing hit games while keeping their teams small. If you look at titles such as Left 4 Dead and Portal it's clear that there's not a whole lot of feature bullet points. These hit games are short, well crafted, tight experiences. In contrast many other AAA titles out there offer a massive array of features and options to the player. Grand Theft Auto, Mass Effect, Fallout, and Halo are all massive games that require massive teams to create.

MLR• 15 years ago

So their profit is somewhere north of $70 million if I did my maths right and Wikipedia is reliable.

Not at Activison level yet I think.

mjfern• 15 years ago

Aside from the Valve's revenues per employee, what I find interesting about Valve is their Steam platform.

Steam (and other platforms for downloading and streaming videogame content) are a disruptive threat to Gamestop and the videogame sales of other retailers, such as Wal-Mart.

Given that online distribution has now disrupted music, newspapers, books, movies/video, and now tv/broadcast, I'm surprised that investors think Gamestop is worth $3b.

georgemcbay• 15 years ago

One thing Gamestop still has going for it is used game buyback and resell, which IIRC is where they make the vast majority of their money. Considering this market is completely unserved by Steam and other online delivery platforms, I can see why Gamestop would still be valued pretty highly, for now.

Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon.

r00fus• 15 years ago

>Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon.

This is why Gamestop should be finding support (ie, EFF, ACLU, legislators) to safeguard First Sale doctrine for digital purchases: http://en.wikipedia.org/wiki/First-sale_doctrine

city412• 15 years ago

> Of course, over time I suspect console makers will move more and more towards digital distribution for all games, but that won't happen overnight or even any time soon.

Yes but they will do that without Steam. Sony, Nintendo and Microsoft already have infrastructure in place for it and already digitally distribute small games. They just need to make it scale to full releases.

city412• 15 years ago

Yes but thus far Steam has had no real impact on consoles. In fact Valve recently opened pre-orders for Portal 2, but only for the console versions leaving the PC/Steam version out. Until Valve can figure out what to do about consoles, Steam will remain valuable but stuck on the fringes. I have no hard data but I'm willing to bet console games outsell PC games by quite a bit.

sid02• 15 years ago

That's just completely untrue. PC gaming worldwide is much bigger than console gaming, and even in the US traditional PC games are bigger than any single console.

http://www.gamesetwatch.com/newzoo_2010spend.jpg

One reason is that AFAIK in Europe and most of the developing world, retail PC games are much cheaper than console games. (Here it's US $15 vs $55-60)

Also, Portal 2 is now up for preorder on Steam.

edit: of course, with digital distribution you also get a much larger cut [1] (so you don't need to sell as many copies as you do on a console to get the same amount of money).

For me, the biggest plus with digital distribution is that you get access to niche genres. I'd never imagine finding games like Reccetear or Super Meat Boy in a local store, but they're available on Steam. It's the same deal with music: outside of popular bands like Massive Attack and The Beatles, I've never been able to find any music I like in a local store. More generally, this is one of the reasons I fervently believe the Internet is the most important human invention since fire: if you take the time to explore your options, you need no longer be tied down to mainstream preferences.

[1] http://www.mcvuk.com/features/808/OPINION-Retail-vs-Steam

krakensden• 15 years ago

Interestingly, Steam was partly a reaction to the difficulty of getting PC games into b&m stores.

potatolicious• 15 years ago

IMHO it's more than just disruption - Valve has some of the most die-hard fans and supporters I've ever seen for any company in the game industry (myself included). They've done this by being relentlessly customer-focused.

Where EA will release a game, and then sell you unlock codes for content already on the disc as "downloadable content", Valve has ceaselessly offered perks for new and existing customers: years worth of updates to Team Fortress 2, all for free. Left 4 Dead too. Hell, when they introduced Steam Achievements they went back and added support for it in most of their back catalog! That's dedication to the customer.

And no small surprise, people flock to Valve, even when it comes to buying 3rd party games.

InclinedPlane• 15 years ago

Indeed. Valve seems to legitimately care about the quality of their games and about the enjoyment of players. They spend more time refining their games rather than just putting out what they think will make money for a few weeks. And then they continue updating them and adding new content. This shows through in their Steam platform as well.

They've built an enormous amount of customer trust and goodwill, and this has been paying off immensely as more and more people use steam as a go-to platform for game purchases.

masklinn• 15 years ago

And still no Episode 3.

iwwr• 15 years ago

Showing up is 90% of winning a battle. Other companies didn't bother with digital distribution and left the field wide open to Valve. All for the better, perhaps, it would be terrible if EA or Activision had the market all to themselves.

But even though they are not purely a game company, Valve are among the dwindling developers that actually embrace modders and giving players choice. In the console-centered world, the idea of free custom maps or player-run servers is fading from memory.

bugsy• 15 years ago

This is not a news story, it's a marketing story promoting the company. The reason is that the claims are not remarkable at all, but the story promotes them as if they were, which is misleading.

Per-employee profit and revenue is larger in general at small successful tech companies than big successful ones.

For example, I make far more per employee than Valve, Microsoft, Google or Apple and you don't see Forbes writing about me, nor should they.

Valve Makes More Money Per Employee Than Google Or Apple

Related Stories