The Future Looks Bright for Small Social Game Developers on Facebook

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.

Reconsidering 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: