Breaking Into Social Gaming — A Must-Read Guide To Entering the Facebook Game Space

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. Read more about Bitfold after the article.

The social gaming market is without doubt the new buzz in the world of gaming. The top companies in the social market have launched games which have millions of users and million in monthly revenue. However, most of the successful companies in the space are either totally new companies like Zynga or casual gaming companies like Popcap games or King.com. Only a small handful of developers & publishers established on other gaming platforms (consoles, MMO, etc.) have had any success in the social market.
Why is this?

In our opinion it’s because these casual gaming companies & new upstarts have gone into the space with the exclusive intention to take risks & experiment within the space. Through extensive experimentation, these companies have learned how to make good games that social networking users want to play. Developers established in other platforms such as consoles or MMOs do not possess similar experience. They therefore have had a much harder figuring out how to make games users want to play their games and have experienced many failures in the space.

In our view however, this doesn’t have to be the case. We believe that if any new entrant is able to create games that social networking users love to play and learn how to incentivize these users to keep playing & spend money, they can be successful.

This article attempts to explain the keys to creating a successful long-term presence in the social gaming market. It is targeted at any developer or publisher who has had success in other markets and wants to get into social gaming.

 

Part 1 – The social gaming market for large game companies

 

Before entering a new space, it’s first important to determine what return is likely in the market and decide whether this return is enough to justify the risk and cost of entering it. This section tries to provide the information required to make that decision by providing the following information:

  1. Definition of the social gaming market
  2. Performance of successful social game developers and where new entrants can realistically hope to place among them
  3. The key trends among successful social game developers that make them successful The cost of entering the social market
  4. The performance of brands in social games

 

How do you define the social gaming market?

 

Social games sometimes mean different things to different people. Most often though, it is used to describe games that are played primarily on social networking sites or games that can be played with a person’s real world social graph. The primary platforms on which these games are played are described below.

Facebook
With nearly 700 million registrations and 350-400 million active users monthly, it is undoubtedly the most popular social networking platform in the world. According to ALLFacebook.com, 53% of these users play Facebook games. Because of this highly active userbase and a high percentage of users in “rich” countries, it presents a great platform for gaining lots of high-monetizing users. However, in the last year, the cost of acquiring users on Facebook has risen sharply. Adparlor estimates that purchasing installs can cost anywhere from $.50 – $3 per install. Thus launching a game on Facebook often requires heavy marketing investment to gain a large number of users.


Facebook – The 400 million pound gorilla in the social gaming space

Other Social Networks
There are many other social networks outside of Facebook. These networks fall into several categories.

  1. Regionally popular general social networks such as Orkut (Brazil), StudiVZ (Germany), Vkontakte (Russia), and more.
  2. Secondary English speaking networks (Bebo, Blackplanet, Tagged, etc.)
  3. Specialty networks focused around specialized themes such as gaming (IMVU) or Journaling (Livejournal).

Individually, each network only has around 2 million (IMVU) to 50+ million (Orkut) monthly active users a piece. Added together however, the combined active userbases add up to hundreds of millions of active users. Therefore, games that target a large number of social networks at once have the possibility to gain several tens of thousands or millions of extra active users. Among those who have ported their games to outside social networks are leading Facebook developers LOLapps, Wooga, OMGPOP, and Kixeye.


Some of the popular regional social networks

Mobile Social Games
A growing number of mobile games are including social functionality. This social functionality varies wildly at the moment, ranging from simple leaderboards, to interaction with strangers who also have the game installed, to interaction your Facebook friends. The latter option (playing with your Facebook friends) is enabled by integrating Facebook Connect into the app. This option enables full social games of the type that would be seen on Facebook to be played on mobile. A great example of this is Smurf’s Village by Capcom. Mobile social games are still a very young market in Western countries, and at the moment there are not huge volumes of data to gauge its potential. However, as adoption of internet capable smartphone devices is currently increasing, it is a market with potential for high growth.


Playfish’s “Who has the biggest brain” on the iOS

 

Market Performance of the Top 80 Developers (and where you might place)

 

Let’s imagine that you have several hundred thousand to a few million dollars to invest in entering the social gaming market. What can you realistically expect out of your investment? To answer this, it’s helpful to know how much money other developers are making so that you have a reference for what your earning potential is. To establish this reference, we provide an estimate of gross revenue of the top 80 developers below.

Methodology for Revenue Estimation
In our last article published in Socialtimes, we quoted a very basic method for calculating revenue based upon the amount of daily active users (or DAU for short) that a developer has. This method is borrowed from Lisa Marino, CEO of RockYou in her presentation titled “Monetization of Social Games”. Her method of revenue approximation states that most games monetize between $10 and $30 for every 1000 DAU, and that well monetized games can earn upwards of $100 per 1000 DAU.

To use this method, we first take the total DAU count of each of the top 80 game developers from Appdata.com. From this we establish 5 ranges of DAU counts, pictured in Figure 1. Next, we apply Lisa’s approximation and provide revenue estimates for two developers within each range (shown in Table 1). This provides us with a general range of what social game developers are earning.

Please note that this revenue estimation method is very basic and only intended to provide a basic idea of social game revenues. Estimating social game revenues rigorously would require more sophisticated statistical methods and a more complete dataset than is used in our estimation.


Figure 1 – Number of developers that fall within various ranges of Daily Active User counts on 5/29/11 Source Data: Appdata.com


Table 1- Revenue estimates based on the number of daily active users each developer has Source Data: Appdata.com, Revenue Estimation Method: “Monetizing Social Games”, p.11, by Lisa Marino

Looking at the top 80 app developers, we see DAU ranging from over 49 million at the top (Zynga) to under 150k at the bottom. Excluding Zynga, this rough approximation predicts daily earnings of $4k to $154k assuming $30/1000 DAU and daily earnings of $8k to $309k assuming $60/1000 DAU.

Analysis & Interpretation of the Numbers
Looking at these numbers we can identify the following trends

  • Zynga is the undisputed leader, they have more DAU than their 9 top competitors combined
  • Only 16 developers had DAU above 1 million. This will of course fluctuate throughout a year, but the data indicates that only a handful of developers have managed to achieve top earnings in the social market. Those that do make enough good games to place into this bracket however will earn handsomely.
  • 63 developers have achieved DAU counts over 100,000, which our approximation predicted would earn 1 million a year or more in revenue. Thus even if you only end up with 1 game that averages 100k DAU in a year, you’ll at least have several hundreds of thousands of dollars in return.
  • By looking at the differences between $30/1000 DAU and $60/1000 DAU, we see that if games are well monetized, game revenues can be very high.

Overall, we see that a lot of developers are achieving moderate success, and the few that have immensely popular games are achieving earnings in the tens of millions.

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