Going Beyond Facebook: Cutthroat Competition and High User Acquisition Costs Compel Developers to Seek Alternative Distribution (Part 1 of 3)

This is a guest blog post Brian Balfour, Co-Founder and VP BD and Marketing, of Viximo who helps social applications and games get distribution on social networks beyond Facebook. With over 450 million worldwide users, it isn't news that Facebook is the biggest player at the social networking table. Viximo recently conducted a survey of 85 of the top app and game developers to learn about their development and distribution strategies, and 79% of respondents indicated that they currently develop social applications and games for Facebook. Developers also indicated that when assessing distribution platforms, their top priorities are: â€¢ Access to a large audience (62%) â€¢ Ability to monetize users (59%) â€¢ Low cost of user acquisition (42%) These are the factors that lead directly to profitability, and since Facebook offered all of these benefits, its rapid rise to ubiquity was not surprising. But the honeymoon period is slowly coming to an end. Our survey indicated that Facebook now presents some major challenges to game developers who are becoming increasingly frustrated with it and are starting to look for options beyond the stalwart site. The two key concerns with Facebook platform that rose to the surface were: â€¢ Competition with other games (54% of developers) Facebook is an attractive distribution channel for game devs because of its ability to deliver large, engaged audiences. But that also means that every developer is attempting to make its mark on the same territory. With big players like Zynga, EA/Playfish and Playdom dominating the developers' DAU leader board, the market is all but closed to smaller developers with new ideas. Facebook's user base growth rate has also begun to slow down, creating even more competitive conditions as developers strive to launch fresh, new games, that can break free from the clutter, and extend the longevity of active users who continue to experience game wear-out over time. â€¢ User acquisition costs (42% of developers) High competition also means higher overall costs for developers looking to break through the cluttered marketplace, and the costs are rising. Facebook removed its viral notification system, limiting the ability for game developers to acquire new users through viral channels. Facebook also adjusted its Facebook Ads model and has made it more expensive and less effective to buy CPM based ads. These increasing advertising costs, combined with Facebook's fees and 30% revenue share agreement from Facebook Credits, are making Facebook increasingly expensive to compete in, and developers are seeking new, more cost effective channels from which they can acquire more users and generate greater revenue. Interestingly, not only was this the feedback provided to us by Facebook developers, but 36% of respondents who do not develop for Facebook raised the exact same concerns, choosing Competition and High User Acquisition Costs as their top two reasons for staying away from Facebook. Another observation coming out of the survey was that game developers appear to be uneasy about Facebook Credits. When asked to characterize their overall attitude towards Credits, only 33% viewed Credits as Somewhat or Strongly Positive, and the 67% that did not have a positive opinion of Credits, said that their main concerns are Facebook's 30% revenue share model and a perceived "strong arming" of developers into complying with increasingly unfair policies. A few also referenced privacy issues in light of recent press coverage of Facebook's new privacy settings. Overall, the recurring theme expressed over and over again in the survey is the growing need for more viable distribution channels in the social games market where independent third-party developers have an opportunity, on and beyond Facebook, to access and monetize a large, engaged audience. There are a number of additional distribution opportunities for developers including Viximo's recently launched Social Game Platform. So are developers aggressively on boarding to these platforms? In addition, what is different when approaching platforms beyond Facebook? Where is Open Social in this equation? Those are all questions we will address in Part 2 of this series.

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Going Beyond Facebook: Cutthroat Competition and High User Acquisition Costs Compel Developers to Seek Alternative Distribution (Part 1 of 3)

Neil Vidyarthi

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Neil Vidyarthi