Virtual goods have a bright future in the explosive social gaming segment. But does advertising? Not based on comments from several of the industry’s biggest players.
Advertising was hardly mentioned during the early sessions of the New York Games Conference today, as several analysts and industry leaders laid out their predictions for the gaming industry over the next few years. When the subject of monetization came up, virtual goods and other forms of microtransactions were mentioned as the primary business model for social games — at least in the near term.
Yet, there was little doubt among experts that social gaming — already a mass medium unto itself — would continue to grow exponentially.
According to Atul Bagga, director and senior analyst at ThinkEquity, a whopping 55 percent of Facebook users play games. In addition, a stunning 40 percent of page views on that social network are game related. “We are only just scratching the surface,” said Bagga.
Among his predictions were that Facebook would soon start seeing more immersive, hardcore-type games that appeal to niche audiences, as opposed to Zynga’s massively popular Farmville, which is played by 65 million people each month.
Another key trend: Social aspects of gaming are spreading beyond Facebook to multiplayer titles like World of Warcraft and console games, as more players connect their PlayStations, Xboxes and Wii’s to the Internet.
Currently, the business model for most Web-based social games is a play-for-free system that encourages users to purchase virtual goods that enhance play — or to charge for access to premium content. But for games that users pay for in advance (like console games), or subscription-based titles such as Warcraft, the current monetization models are being challenged as gamers play these games for increasingly longer durations, said Bagga.
“Users play the same game over and over again,” said Bagga. “You have people playing World of Warcraft for 150 hours….vendors need to monetize that [time]. A lot of people are leaving money on the table.” Perhaps tellingly, however, Bagga did not suggest advertising as a potential means of monetizing such prolonged play.
Nor did Steven Chiang, studios president at Zynga, during a keynote interview today. Chiang repeatedly emphasized the play-for-free/microtranscations model, adding that the majority of Farmville users do not pay to participate in the game.
Chiang said that Zynga was developing a slew of new titles, but he downplayed the idea that the firm would create immersive, console-like titles. “We are looking for ideas that people can understand in about five seconds,” he said.
When asked about the company’s relationship with Facebook — which has recently toned down the number of notifications users receive about their friends activities in Farmville, Mob Wars and the like — Chiang looked to dodge any controversy. “They want to create the best user experience for their customers,” he said. “We are all about the user experience.”