In the social gaming world, whether at a conference or a more informal gathering, it’s not uncommon to hear that small developers are in for trouble. Leading companies like Zynga and Electronic Arts, the common wisdom goes, have too much power and money for independents to be able to put up a fight.
When this theory comes up, the evidence that’s usually offered is that social games are already undergoing a squeeze. Growth was highest near the end of 2009, and has fallen since it peaked in the spring of 2010.
Declining traffic means more intense competition for the existing pool of players, and more cutthroat tactics for viral distribution of the games. A company like Zynga, with over half a billion dollars raised, huge daily revenue and (some say) a close relationship to Facebook, is too much of a threat to small companies.
Earlier this year, we began to wonder how accurate this “common wisdom” take on the social game industry truly is. The source of the worries was clear. Zynga’s own traffic is often used as a barometer; its hit FarmVille is down from 84 million monthly active users and 32 million daily active users, to a its current 62 million MAU and 16 million DAU. Smaller Zynga titles like Roller Coaster Kingdom have been closed altogether.
Worse than FarmVille’s decline from its peak is the fact that no other company has stepped in with a comparable hit. Several of the biggest games released in 2009 easily topped 30 million MAU. In 2010, two Zynga releases — FrontierVille and Treasure Isle — have gone over 20 million MAU, but no other game has come close, while Treasure Isle quickly declined. The highest point reached by any other company was Playdom with Social City, which maxed out at 12.6 million MAU and 3.1 million DAU. The title is now under six million MAU and has only 663,823 DAU.
These sort of data points have led many to worry about the potential of social gaming. Zynga, Electronic Arts, CrowdStar and Playdom are already profitable, and have the advantage of circulating their existing playerbase between their games; even without growth, they will survive. But other companies clearly need new growth.
As the title of this post implies, the pessimistic take on the social gaming market is belied by a higher-level view. Since we rolled out AppData Pro a few months ago, we’ve been building in tools that allow us to more easily detect broad market trends. One of our newest tools is the ability to look at the historical leaderboard for any given day, going back to AppData’s inception in 2008. Using this tool, we’ve found clear evidence that the common wisdom that social gaming is in a holding pattern is simply wrong.
That’s not immediately obvious, even from the high level. Starting on September 10th, we recorded the top 250 games for the same day of every month, going back a full year. We looked at daily active user counts rather than MAU, because developers find DAUs more valuable.
Here’s what growth looked like for all 250 games (note that we’ve removed the Y-axis labels of these graphs):
The above view seems to confirm the thesis that social game traffic is declining. From a February high point traffic has declined about 18 percent in just seven months to 113 million DAU — not a good sign, for what’s supposed to be a growing market.
The growth lies elsewhere. For a different view, we removed all games from the five developers with the largest audiences — in order of their current size, those are Zynga, Electronic Arts, CrowdStar, Playdom and RockYou. Once we were done, we were down to a set of 175 games for each month. The next chart shows traffic growth for both small and mid-sized developers like Digital Chocolate and Wooga:
As you can see above, a December peak was followed by a dip into May, then a recovery. September will be the best month ever for social games by developers other than the top five.
It’s worth acknowledging here that 175 games by dozens of developers share just 63 percent of the DAU enjoyed by five companies led by Zynga. But many of these smaller games are potentially able to be sustainable themselves. The smallest value for any game in our September measurements was 38K DAU, and the median was almost three times as large.
Some of this growth is certainly driven by a set of games that is winning through a combination of good timing and execution. Some of the largest titles pull in over a million DAU by themselves. We’ve talked about many of these successful, independently-produced games throughout the year, like Kingdoms of Camelot, Family Feud, Baking Life, Millionaire City and Mall World.
Each of these growing games tends to be offset by a declining older game — Farm Town, the precursor to FarmVille, being an example that many would recognize. But there are, at this point, more growing games than shrinking.
The last question we had was what the numbers would look like if we removed surprise hits like Baking Life and Millionaire City from the rankings. How are smaller games by independent developers, which rarely get any attention, doing?
As it turns out, this group of smaller games (by smaller developers) is the healthiest of all. We removed the top 50 games from our sample of 175, which left us with a sample of 125 games, each of which had no more than 200,000 DAU:
Our extended look at the games on the list suggests that these scrappy smaller games are the real trend on Facebook. Back in October 2009, the first month of the sample, the games in these leaderboard rankings were not only much smaller — many of them were also rudimentary, or direct copies of other, far more successful games.
Facebook is clearly not an easy platform to become successful on — but few are. The period from late 2009 to spring of 2010 saw unrealistically high growth across the Facebook platform, often driven by out-of-control virality and questionable marketing tactics. Normal growth processes were short-circuited, and a handful of young startups grew at a rate almost without precedent.
The unsustainable components of that growth have now somewhat faded away. But their presence through spring obscured the undercurrent of gains we show above. Many small developers have told us that they have done well since Facebook tuned down notifications this spring, while some of the larger companies have declined or remained flat. Those same small developers are largely confident in their ability to create compelling new games.
However, fears about the platform will never completely abate. The latest example is the recent change to the feed, which caused fresh concerns that Facebook has again hampered organic growth for small developers, leaving the field to larger competitors who can pour millions into advertising.
We are seeing a broader trend of players moving to more niche offerings, ranging from Nightclub City to Monster World. The larger companies are still picking their areas of emphasis, leaving some openings for creative small developers.
We’ll continue to examine these trends in coming weeks, as well as in our Inside Virtual Goods reports on the future of social gaming.
The data used in this post is sourced from AppData Pro, our membership service that includes in-depth categorization, historical reports, trend analysis, and more. If you’re an AppData Pro subscriber, you will receive an email followup with full data and research notes today.