Games Startups! What You Need To Know To Succeed In The Competitive Social Games Market

Without question, the social gaming market is the newly hot space in the game industry.  Some of the leading developers have emerged as companies only in the last few years and in that time have managed to gather tens of millions of both dollars and users from these games.   With these outstanding numbers and increasing sociality of games not only on the web, but on mobile and console platforms as well, it seems like a very attractive market to enter.  However, for all its potential, it’s a place that many independent developers and traditional game publishers are having difficulty being successful in.  The reason for this is because these games are overwhelmingly financed by microtransactions of virtual goods, and knowing how to inspire users to pay you for virtual goods is something that’s not easy to master.

This article will attempt to shed light on these economics within the social games market, what kind of opportunity exists for new entrants, and provide strategies that independent developers with limited resources can use to make a successful entry into the market.  This article is one of a two part series that will focus on strategies independent developers can use to be successful.  The next will focus on strategies for publishers to enter the space.

The Social Games Market at a Glance

A large share of the news published on social gaming is information about the market strategies of the largest players and very little about independent developers.  The reason for this is because the top 10 game developers account for over 50% of the active users and revenue earned by all games & apps on Facebook.  These numbers can make developers looking at entering the market question what kind of positioning they can achieve against these market leaders (who have pre-existing game networks and multi-million dollar advertising budgets) and often discourage them from entering.

Well the good news is that there are indeed independent developers and publishers who have managed to launch successful million dollar games without mega-millions in capital.  We explain in detail below what kind of development, marketing, and operational strategies can be employed to independent developers who want to join these ranks.

The revenue equation

Social games earn most of their money off of Microtransactions, but only 0.5%-2.5% of any game’s active users actually pay.  Therefore for a game to earn any significant amount of money, it must have hundreds of thousands to millions of active users to earn well.   According to Lisa Marino, CEO of RockYou, games normally monetize at a daily rate of $10-$30 per 1000 daily active users.   This means that if you have a game that averages 100,000 daily active users throughout a year, your game’s earning potential ranges from $365,000 to over $1,000,000 in that year.  That isn’t the 100+ million yearly that Zynga is earning, but for an independent developer, it’s a decent chunk of change that will allow you to build a thriving social games company.

Looking at developer metrics on appdata.com, we see that there are many independent developers such as Broken Bulb Studios, Bitryhmes, and Tall Tree games (all of which who were founded less than 4 years go) each have audiences well over 100k daily active users.  If Lisa’s numbers hold any credit, we can assume that they’re probably earning several millions per year.  If your games can gain and maintain similar numbers of users, you have the potential to earn millions.

But how?  Gaining 100,000 daily active users sounds nice in theory, but how do you actually manage to get there?

Keys to making your games a success