Is It Game Over For Facebook App Developers?

GameYesterday Facebook announced some significant changes for the Facebook Platform, especially games, which have become the primary type of application on the Platform. However over the past 24 hours, developers have been digesting the announcement and watching their metrics. We’ve spoken to a few and here’s what we’ve heard. (Hint: the game isn’t dead, it just changed)

There Was A Post-Event Traffic Surge

Developers have seen traffic jump upwards of 50 to 100 percent as a result of the new counter design. While some developers have told us that traffic has since returned to normal levels, the new counter is a significant improvement over the previous one, especially the addition of a counter next to the “More” link.

There Is Concern Over Virality

Zac Brandenberg, CEO of Meteor Games, told AllFacebook “Developers are concerned about the ability for existing players to introduce their friends to a game, and the effect of ‘discovery stories’ as the only option to do so remains to be seen.” Additionally, the inability for users to post app stories to non-app users’ walls has frustrated a number of developers who previously used this as a mechanism for growth (although as a user, I can’t express how much I hated this).

Many of these developers, including Zac, appear to have overlooked some of the key benefits introduced by Facebook’s simultaneous policy change. Since the company now has better monitoring capabilities, Facebook has removed some of the more frivolous restrictions placed on developers. For example, application requests/invites could now increase theoretically. While you cannot display invites immediately after a user registers for an application, you can display the invite request form on subsequent pages, and there no longer needs to be a massive “SKIP” button as long as it’s visible somewhere on the page.

Additionally, the volume of app-related stories from application users will most likely increase as developers can now prompt users to publish stories at any point, not just part of an explicit user flow process. These are extremely detailed points however.

User Retention Has Been Boosted

While some developers are concerned that the removal of stories from the feed will damage new user acquisition (there’s no doubt it will have an impact), the ability to reach out to existing users has been boosted. In addition to the improved counter system (which still appears to have a questionable algorithm as it surfaces apps I haven’t used in a while) app users will see many more stories from applications show up in their feeds if they use the games/apps actively.

Dorm Room Based Facebook App “Companies” Are Gone

For the most part, the days of dorm room (or basement) app companies are completely gone. While there is still some virality, the primary channel for user acquisition is Facebook ads. That means for the most part, it’s going to cost money to make money, and that cost is not only the cost of development. As one developer mentioned during a question at yesterday’s event, the cost of acquiring users through Facebook ads has jumped significantly.

Much of that growth is a result of the excessive amounts of VC funding floating around the social games space which is resulting in companies buying users at prices as high as $3 – $4 per user, and hoping eventually resell those users at Playdom-valuation levels ($15+ per user). There is most definitely a business model there, it’s just an expensive one. Even more significant is that the increased level of re-engagement will probably end up driving the cost of new users higher as the lifetime value of each user should also increase.

Better For Users, Better For A “Cleaner” Platform

Facebook has always been focused on the overall user experience and as Mark Zuckerberg effectively articulated yesterday, there are people who love apps and games and others who hate them. As such, they’ve been trying to “thread the needle” just right, and ultimately, most developers are optimistic yet cautious. The primary reason is that all previous changes have for the most part had a negative short-term impact. In fact the death of notifications back on March 1st killed most virality all together.

Despite the desire of many to pretend that the sky is falling, as has been the case with previous iterations, this is business as usual for most developers who have been in the space for the past 3 and a half years. Facebook is going to do whatever is necessary to retain their user base. If that requires killing some channels (feed stories to non-app users) in favor of new or improved channels (requests and counters), so be it. The social gaming industry isn’t going to disappear over night and the developers who are here to stay are here to play, and it’s the same game that Facebook has been running for more than 3 years.

As usual, we’ll be monitoring traffic and feedback from developers over the coming days and weeks. Let us know your thoughts about the changes in the comments!!