Games Startups! What You Need To Know To Succeed In The Competitive Social Games Market

Without question, the social gaming market is the newly hot space in the game industry.  Some of the leading developers have emerged as companies only in the last few years and in that time have managed to gather tens of millions of both dollars and users from these games.   With these outstanding numbers and increasing sociality of games not only on the web, but on mobile and console platforms as well, it seems like a very attractive market to enter.  However, for all its potential, it’s a place that many independent developers and traditional game publishers are having difficulty being successful in.  The reason for this is because these games are overwhelmingly financed by microtransactions of virtual goods, and knowing how to inspire users to pay you for virtual goods is something that’s not easy to master.

This article will attempt to shed light on these economics within the social games market, what kind of opportunity exists for new entrants, and provide strategies that independent developers with limited resources can use to make a successful entry into the market.  This article is one of a two part series that will focus on strategies independent developers can use to be successful.  The next will focus on strategies for publishers to enter the space.

The Social Games Market at a Glance

A large share of the news published on social gaming is information about the market strategies of the largest players and very little about independent developers.  The reason for this is because the top 10 game developers account for over 50% of the active users and revenue earned by all games & apps on Facebook.  These numbers can make developers looking at entering the market question what kind of positioning they can achieve against these market leaders (who have pre-existing game networks and multi-million dollar advertising budgets) and often discourage them from entering.

Well the good news is that there are indeed independent developers and publishers who have managed to launch successful million dollar games without mega-millions in capital.  We explain in detail below what kind of development, marketing, and operational strategies can be employed to independent developers who want to join these ranks.

The revenue equation

Social games earn most of their money off of Microtransactions, but only 0.5%-2.5% of any game’s active users actually pay.  Therefore for a game to earn any significant amount of money, it must have hundreds of thousands to millions of active users to earn well.   According to Lisa Marino, CEO of RockYou, games normally monetize at a daily rate of $10-$30 per 1000 daily active users.   This means that if you have a game that averages 100,000 daily active users throughout a year, your game’s earning potential ranges from $365,000 to over $1,000,000 in that year.  That isn’t the 100+ million yearly that Zynga is earning, but for an independent developer, it’s a decent chunk of change that will allow you to build a thriving social games company.

Looking at developer metrics on appdata.com, we see that there are many independent developers such as Broken Bulb Studios, Bitryhmes, and Tall Tree games (all of which who were founded less than 4 years go) each have audiences well over 100k daily active users.  If Lisa’s numbers hold any credit, we can assume that they’re probably earning several millions per year.  If your games can gain and maintain similar numbers of users, you have the potential to earn millions.

But how?  Gaining 100,000 daily active users sounds nice in theory, but how do you actually manage to get there?

Keys to making your games a success

Designing games to do well

Why do some games manage to retain and monetize users, and others fail completely?  The answer to this is complex, but often boils down to the game’s design.  Many publishers and developers who have entered the space have failed on account of bad game designs, so it pays to study this subject a bit.

Some of the key components to a social game design are:

–        Niche Focus: Targeting a niche and being unique in that niche

–        Fun/Engagement: How engaging the core gameplay is to users

–        Incentives to Return: What incentives the game gives users to return (i.e. to check crops, when energy is recharged, etc.)

–        Social Interaction/Identity: What kind of *meaningful* ways people can interact with friends (competition, sharing, cooperation, etc.) or other Facebook users and how can players establish themselves as unique among these other players.

–        Advancement: A proper speed of advancement through the game

–        Monetization Incentives: How well the game incentivizes users to buy things to advance their gameplay.

–        Content Refreshes: How well the developer is able to keep fresh content to keep users engaged

The golden ticket however in our opinion, is to really focus on a niche that has room for innovation and to create gameplay within that niche that is fun and engaging for users.  If you can do this, your chances of success are greatly increased.

Costs of Development

Okay, well that’s nice, maybe you’ll make a hit, but you can never be sure that your first game will really succeed.  What kind of financial risk are you looking at?

Development: Zynga states that social games take roughly $100k-$300k and 1-3 months to develop.   Independent developers can often build a social game for less than this depending on their team makeup.  Some teams get investment and hire full staff, and some teams consist of only founders or founders + a few paid employees.  In our experience, companies with investment and full teams tend to spend over $100k on games by virtue of supporting a full staff.  Companies with small teams or founders only can build good games for under $50k.

Marketing: The question of launching presents a further challenge.  If your game needs to gain hundreds of thousands of players to be profitable, you’ll need to some way of reaching out hundreds of thousands of Facebook users.  There are several ways of doing this including purchasing Facebook ads, purchasing ads in other social games, and some cool free options explained later in this article.

If money is no concern, one of the most effective ways to market a Facebook game is to buy Facebook ads which range from $.50-$3 per application install.  To gain 100,000 users, this can quite expensive (ranging from $50k to over $100k) and it is in this area that the top game developers have the greatest advantage as they can buy lots of ads and market their new titles via their already popular titles.

Independent developers on the other hand are often coming to the market with relatively little capital, and have trouble affording $50,000 marketing budgets, especially if they’re not sure their first games will succeed.  Fortunately, there are other solutions which we discuss below.

Operation: In operation of your game, you’ll generally be focusing two things: properly handling load as the game scales and creating a constant stream of fresh content and features to keep your players engaged.

Hosting on a cloud solution such as Amazon EC2 or Rackspace is what a lot of independent developers choose as developers only pay for bandwith actually used.  Pricing is posted on these provider’s websites, but we know from personal experience that 50,000 daily active users can rack up about $3,000 in charges monthly, however compared to the cost of development, this is generally neglible.

The larger cost often comes in supporting the burn rate of your live team, which for us consists of 4-5 people per game (1 server developer, 1 flash developer, 2 artists, and 1 tester) depending on how much you pay your people, this could amount to under $10k monthly, or it could be over $30k.  This cost all depends on how much new content you deliver, and what you pay your people (if anything).

Overall Costs: The summary of estimated cost for each portion of the game lifecycle looks a bit like this:

DevelopmentMarketingTotal Launch CostMaintenance
Under $50k to $300k$0 to over $100kUnder $50k to over $400kUnder $10k to over $20k monthly

 

The optimal situation for any developer looking to publish a game is to get these costs as low as possible without reducing any opportunity costs.  Strategies for doing this are discussed in the following sections.

Design & Development Strategies

Go Niche: Niche games are generally a better bet than doing games that imitate the market leaders.  The reason being is that if your game fails to be as engaging as the leaders, there are already many more well established choices for your players to migrate to.  If you cater to a niche and the demographic within that niche, you’re much more likely to succeed.  You see this strategy working well for games like Backyard Monsters (one of the few RTS games), Wild Ones (Realtime combat), or Car Town (car & racing game).

 

Stay Simple, Release Early, let metrics guide later progress: Since social games live on the web, updates can be made painlessly.  Once you have implemented the core gameplay, economic features and ensured the game is bugfree, it’s good to release so that you can get early validation for your game and earn some initial money to fund its further development.

 

Find Partners: Several highly successful independent developers have started as groups of partners with the necessary skills to build a game and have developed their games for close to free.  If you find partners with appropriate skills, it can be good way to develop without investment.

Marketing your game & acquiring users:

The goal of any developer is to get the maximum amount of users for the least amount of money.  With the cost of acquisition of a significant number of users being in the tens of thousands, it is advantageous for developers to find cheaper ways to acquire lots of users.  The following are methods of gaining these users without spending large quantities.

Join free ad networks to spread your game:

There are several free advertising networks such as Applifier,  Appstream, or VIP games network that allow you to spread your game via ad banners on the top of other social games.  These networks are free and post their banners on popular games such as nightclub city, so if you are able to get into their programs, you can gain a great source of free advertising.

Other free advertising alternatives include Coinwhale which sells credits for games at discounted rates for packages of social games.  By joining their network (free of charge), you can be included on their lists of games for which they sell credits for, driving more free promotion.

 

Publish to social networks outside of Facebook & take advantage of free promotion:

Facebook is not the only social network to publish on.  There are millions of users on networks outside of Facebook that play games and many monetize as well as Facebook users.  Many of these networks are hungry for content, and provide free promotion to new games to allow social game developers to gain an initial userbase.  By publishing to these networks, developers can get a large initial boost in traffic and extra users. 

Many developers consider this too much work to be worth it due to the work required to utilize each network’s social, viral, and payment features.  If developers were to do this themselves, they would be correct.  For this however, social game developer Maygem is coming out with a solution for developers called APPwalk which allows them to port social games to multiple social networks with a single API and use all viral, social, and payment features on those networks.   Their tool allows developers to use a Facebook style API to publish to about 11 networks at once (such as Orkut, Hi5, & Netlog), and get free promotion and advertising on those networks.

 

Localize:

Games targeted towards other players often grow at impressive rates.  If you’re able to localize, you might be able to gain a significantly larger audience than you thought.

Run a small paid marketing campaign:

One of the keys to know whether to invest more resources into your game or not is to do an early test to see how it performs.  If the above methods have not managed to gain a satisfactory userbase, running a small campaign to acquire 10k-20k users can let you gauge this.  If you retain a decent portion of those monthly users and your ratio of Daily Users to Monthly users after several weeks is 10% or higher, that is an indication that your game is engaging to users and you can consider purchasing a bigger marketing campaign.

Publish with a publisher: One of the most straightforward ways to spread a game is to sign up with a social publisher like 6waves.  This option eliminates your marketing and hosting costs, but has a SIGNIFICANT opportunity cost.  Generally publishers take 50% of your revenue, take rights to your IP, control your game’s expansion schedule, and don’t start paying you until they recoup their expenses.  So although this option negates upfront marketing and operations expenses, you often stand to lose rights to your IP, and may have a significant period of delayed payments before your game realizes return.   And if your publisher decides not to promote or expand your game, there’s not much you can do about it.

Engagement & Monetization:

Assuming your game can gain and maintain a critical mass of users, it will start earning money and your players will be enjoying themselves.  However, it might not be earning at its full potential and after a while without any fresh updates, your players will get bored and your app will shrink.  To prevent this, you need an ongoing strategy to retain users and improve monetization.

Optimize monetization & retention with metrics:

Metrics tell you how your game is performing and what users are doing in game.  This allows to gauge what is engaging users, what is making them leave, and where your best points of sale in game are.  From this information, you can gauge what further content & feature updates will help increase retention and monetization of users.  Implementing a home-cooked metrics platform will be fairly straightforward for developers with proper technical skills, but there are also metrics tools such as Kontagent that can be used as well.

Content updates:

To keep your users engaged, it’s wise to keep the flow of new virtual items and cool features constantly moving.  Sometimes these will be small updates to balance the game, but it’s often fun for your users if you roll out major new features every now and then.

Offer lots of payment options for your users:

Most games earn from microtransactions, so it’s a really good idea to offer as many options as possible for players to make these purchases.   Some of these include:

 

  • Using Strong Offer Networks: Companies like Trialpay offer extremely targeted offers to your users based on their demographics which convert in revenue for you if they buy.  A great summary of existing offer companies can be found here: http://www.adweek.com/socialtimes/the-20-top-social-game-monetization-tools-that-we-reviewed-so-you-dont-have-to_b25657
  • Use Facebook Credits and Credit Promotions: Facebook is coming out with lots of promotions for developers who use Facebook credits.  These include frictionless payments which enables immediate payments without a prompt, and the two credits program which allows users to post discounts to friends on buying credits for your game, make use of these.
  • Make lots of points of sale in your games: Users should have the option to buy credits at all relevant points.  There should be options everywhere that a user might want to purchase.

Build a network of targeted games: Many of the top developers earn so well because they have multiple games in which they can cross promote their games.  If you are able to get one successful game, you should consider releasing more so that you can use your games to cross-promote each other.

Port to other social networks: Porting to other social networks via tools like Appwalk can gain your extra users and who monetize at rates the same as Facebook.

The table below summarizes the above statements.

 

Conclusion

So in short, do developers have opportunity to gain traction without a gazillion dollars?  The answer is yes, but it takes good games, and pro-active use of the lower-cost methods of gaining users and monetizing them.  Happy entertaining!

Mike Turner is a managing partner for Bitfold Online Games, an independent social game developer that focuses on original social game IP for Facebook, international social networks, and mobile devices. In the increasingly competitive social games market, Bitfold has been vigorously experimenting with their games to discover the best methods to acquire, engage, retain, and monetize users within a reasonable budget.  As the head of business development, Mike focuses on making Bitfold’s games successful internationally and helps independent developers & publishers create their own successful social games.