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.

Where can you Expect to Place?
It depends on your will to enter the space with a smart strategy. If you take time to really understand what makes successful developers successful, try to create excellent games, create proper live operation & marketing strategies, experiment rigorously, and commit to a long-term stay in the social market, you could find yourself on the top earners. If you do anything else, you’ll likely find yourself in the lower end of the success scale or in the social deadpool entirely.

 

What are the key market players doing to be successful?

Six of the market leaders in social gaming

Key Trends Among the Top 80 Successful Facebook Developers
To understand what top companies are doing to be successful, it is helpful to look at their performance in the market and see if there are any common trends these companies follow. By looking at the MAU, DAU of the top companies, playing their games, and examining their financial history, we notice the following trends.

  1. DAU counts range from 100k DAU to 49 million DAU
  2. Many successful developers have more than one game.
  3. The total active userbase of most developers is gained from the combined userbases of the games they operate, but a majority of their active users come from only a few highly successful games.
  4. In most developer’s portfolios, there are several games which have mediocre performance or are complete failures.

  5. Figure 2 – A view of 6 of the 40 top developer’s list of games. In this we see points 2-4 illustrated.

  6. 5. Developers with multiple games cross-promote their other games. This allows these developers to pass users which have stopped playing one game to another, allowing them to retain that user.

  7. Wooga’s game bar, where all of their other games are shown.

  8. 6. New features & content are added to the successful games constantly (usually daily or weekly)

  9. Updated content in Nightclub City

  10. A large percentage of the top developers have had either heavy capital investment or pre-existing operating capital with which to develop & market with.

Keys to Success
From these above trends, we can draw a few general conclusions about what core steps these developers are taking to create their success.

  1. Creation of high quality social games that users want to play
  2. The financial resources to acquire millions of users with advertising
  3. Development of multiple game products.
  4. Heavy experimentation with different game concepts & gameplay mechanics that has led to both failures & successes.
  5. Consistent ongoing improvements to games to keep users engaged & playing

In short, it’s no big secret. They create good games tailored to what social networking users want to play, market them properly, and constantly improve them.

It’s these measures that new entrants should try to emulate. New entrants should be prepared to focus on making fun & appealing games, to support their games long-term, to experiment constantly with different game concepts and gameplay mechanics, and to create a smart strategy for user acquisition.

 

Cost

 

So, let’s assume you are ready to take on the challenge of entering the social gaming market. What kind of costs will you incur in doing so? This section provides an answer to that question.

In social game development cost boils down to three main areas: development, marketing, and live operation. The magnitude of these costs is explained below:

  • Development: According to Zynga, each game costs $100k to $300k to make & launch.
  • Marketing: To market on Facebook, Adparlor (a leading social game advertising company) states that ads cost anywhere from $.50 per install when a game is first launched and up to $3 per install at the later stages of a game’s lifecycle. Depending on how many ads are purchased, the cost for a launch could range from several tens to hundreds of thousands of dollars.
  • Live Operation: Ongoing maintenance & content updates will require a live team. Your game will thus have a burn rate that varies depending on the size of your live team and their salary. Assuming a minimal team of 1 developer, 2 artists, 1 half time tester, and 1 marketing & monetization specialist, your live operation team would require a payment of 4.5 man months each month. Depending on where your live team is, this could cost anywhere from $12.5k (assuming $2500 average man-month cost) monthly to over $20k (assuming a $5000 average man-month cost) monthly.
  • Totals:


Table 2 – An estimate of total social game development & launch costs

The Cost of a Product Line
As illustrated above, many companies launch multiple games within short time periods. This is generally done both to experiment with different designs and to establish a network of related games that users can migrate between. For first time entrants, launching multiple games in the first year can be a good strategy as it will let you test the waters with different gameplay mechanics and themes. An estimation of what such a strategy would cost is done below.

To do the estimation, we need to make some assumptions. In this example, we will make assumptions about how many games are developed, what each game costs, how many games are successful, what DAU count constitutes a “successful game”, and what rates the successful games monetize at. These assumptions are provided below:

  • Assumed number of games: 4
  • Average daily DAU for each successful game in a year: 100k – 800k/li>
  • Number of successful games: 1-2
  • Average development cost of each game: $180k
  • Average marketing costs of each game over 6 months: $130k
  • Live operation costs for each game over 6 months: $120k
  • Assumed monetization rates: $30/1000 DAU – $60/1000 DAU
  • Assumed revenue cut to Facebook: 30%


Table 3 – An estimate of the range of success possible

From these rough estimates, we see that if games are only mediocre successes, losses will likely be incurred. However, if a few games become very popular, it can be an outstanding new revenue source for a new entrant that will allow them to establish themselves even further into the social game market. Therefore naturally, a company will want to do everything in its power to make games that can be popular.

 

How do brands & existing IPs perform in the social space?

 

Developers successful in other gaming markets have several successful IP lines that are tried and true. Therefore, these IPs are their best bet for a success in the social space right?

Well, according to the numbers, maybe not.

Before launching brands into the social space, it’s good to look at how brands perform in this space. To answer this question, we performed an analysis of the performance of branded games in the top 500 apps on Facebook in March 2011. The results of this analysis are explained below.

We broke brands down into the following categories.

  • Casual skill game IP (Bejeweled, Bubble Pop, etc.)
  • Sports games (Soccer, American Football, Baseball, etc.)
  • Well known board or card games (Uno, Poker, Monopoly, Farkle, etc.)
  • Gameshows (Family Feud, The Price is Right, etc.)
  • Game IP ported from other platforms (console game IPs, hardcore games, TV shows/books, etc.)
  • Casual downloadable game IP (Hidden Object, Management, etc.)
  • MMO Games

The following table shows the performance of each of these genres


Table 4 – An analysis of brands on Facebook out of the top 500 apps on 3/21/2011

Doing the math on the number in this table, we see that out of all of the brands listed above, existing IPs ported from other gaming platforms such as PC downloadable, console, and MMO account for only 12% of the DAU in the top branded games.

Looking further outside the top 500 apps, we find several more Facebook versions of existing IPs created by large name publishers. Listed in the image below, we find 17 existing game IPs ported from other platforms to Facebook by several famous game publishers. Out of these 17 IPs has, only one has managed to get over 100k DAU. That’s a bad indication for the performance of brands & existing IPs in the social space.


Figure 3 – Over 17 ported game IPs, only 1 game with a DAU count over 100k

Why are the numbers like this? Why do gameshow, card/table, sports, and skill games do well in the social space, but IPs popular on other platforms fail? There are 3 reasons for this in our opinion.

  1. Social Gamers are not heavy gamersThe fact is that social network users are the general internet using population of the world. They’re your parents, your spouse, your busy friends who just had two kids, not avid gamers. A lot of them are either entirely new to gaming or have been only occasional gamers in the past so they probably haven’t heard of your brands before the thus majority of users have no incentive to play them.
    What they do have incentive to play are brands that everyone has played and knows is fun. Bejeweled, Uno, Monopoly, Family Fued, and soccer are brands that everyone knows which are fun & have lots of replay value. However, if it’s not something everyone knows and likes, your brand’s name is not too likely to bring you any great benefit.
  2. Mechanics that make the IP line popular don’t usually fit well into Facebook:The mechanics that make many IP lines so popular on other platforms don’t work well on Facebook.
  3. 3. Brands sometimes limit the ability for a game to be unique among other high quality games:Success in the social space is about making games users want to play. When making a branded game, its gameplay mechanics & theme are restricted to what the brand permits. These brand restrictions may limit the ability for you to make innovative design decisions that will make the games more appealing to users than competing games.


Nightclub city vs. Ubisoft’s Party Central. Nightclub city was a highly successful party management game. When Ubisoft brought its own party management game Party Central to Facebook, it stayed true to the mechanics of their Party Planner brand, but it failed to be more unique or compelling than Nightclub city. Therefore, Nightclub City succeeded and Party Central failed.

Should you make your Existing IPs into Social Games?
According to the numbers, existing IPs have historically performed terribly. Therefore, our professional recommendation would be not to unless they have immense worldwide name recognition and game mechanics that will very clearly be fun on a social network. If you have to struggle to think about how your IP will be fun for users and compete against other games of its type on Facebook, then it’s likely it won’t do either.

The exceptions are:

  • If your IP is extremely well known and/or has casual mechanics that have high replay value.
  • Your IP can fill some a niche on Facebook better than its competitors.

If you are intent on bringing a brand to the space, you must make the gameplay more unique and fun than other games competing for the demographics you’re targeting! IP recognition alone won’t cut it.

 

Part 2 – Strategies for Success

 

In the above section we painted a picture of the costs, potential returns, and success strategies being used by developers in the social gaming market. In this section we aim to explain what strategies and best practices that a publisher or established developer can use to succeed in the social gaming market.

Covered are the following areas

  1. The main risks of social game development
  2. How to create successful products
  3. Live operation, marketing, user acquisition, and monetization strategies
  4. Creating a good team and structuring a proper development process
  5. Strategies for reducing costs

 

Your Main Risks

 

When looking at strategies for establishing yourself in the social games market, it is helpful to first take a look at the risks developers commonly face.

A game fails because the concept or game design is not good
Sometimes users simply don’t like a game. Many games have been launched and marketed heavily, only to lose their entire userbase within a few months. Generally the causes of this include:

  • The game didn’t appeal to the targeted demographic
  • The game was not better or more unique than competing games
  • The game was fun for a short time, but had little replay value
  • The game was just not fun

A game fails because of excessive technical problems
A game is fun and users enjoy it, but heavy technical problems interrupt users’ gameplay experiences and end up causing a mass exodus of users.

Development cost goes over budget or over schedule
Development of a game takes several months more than expected, tying up resources, going over budget, and overall clogging your pipeline.

Losing a lot of money to marketing
A large marketing campaign is launched to promote a new game, but the game is not fun or has technical issues, and several tens or hundreds of thousands are lost on marketing.

The third party developer chosen to build a game doesn’t perform well
The developer selected is low-quality, or doesn’t meet the creative vision of your game and their mistakes are costly to reverse.

Your production process is slow and clunky
A social gamer’s interest is hard to capture and maintain and there are a lot of good games out there. When things go wrong in a game (users don’t like specific features, critical bugs appear) users will start leaving the game quickly. If your process isn’t setup to deliver fixes & new features fast to improve user experience, then it will be impossible to stop a mass exodus of users.

 

Creating a successful product line

 

Games live or die based upon their ability to interest a large amount of social networking users & inspire them to come back repeatedly. This section gives strategies for creating a line of games that can interest users and retain a large userbase over a long period of time.

Target a specific genre & demographic, and make a GOOD game for it
are a variety of game genres on Facebook that have successful games in them. They include management games, skill games, girl games, action games, RPGs and more. Each caters to a different target audience. Some will target women 25-65, while others will target men 18-40. If you intend to create successful games, then your biggest key to success will be to target a SPECIFIC GENRE and focus on making FUN and UNIQUE games for it!


Management, Action, Skill Games, Girl Games, and more! Which genre can you fill?

In general, when creating a social game, you want to ensure that it:

  • Targets a specific genre and user demographic (preferably an underserved one)
  • Provides a unique experience among other games in that genre
  • Is extremely fun!
  • Has core gameplay that will be addicting to the audience that plays that genre and provides STRONG incentives for them to return over & over again
  • Has social mechanics that are appropriate for the targeted audience
  • Ensure you design pipelines for user retention and engagement into the game

For instance, if you are targeting a genre that serves 18-45 year old men, the gameplay mechanics might be more action focused and social mechanics more competition or combat based. If you’re targeting a genre that serves 25-65 year old women, gameplay might be more light-hearted and have social mechanics based on cooperation & showing off.

In the current social game market, there are several niches that are currently underfilled and have room for growth such as arcade, RTS, and skill games. Our advice is to select niches you feel you can fill well, and do your best to create one or more great games for them.

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