The Resurgence of Gaming On the Open Social Standard

[Editor’s note: In the post below, entrepreneur and consultant Sean Ryan explains why he believes the Open Social developer standard is due for big growth this year. Although we expect that not all of our readers will agree with his points, we think they are worth consideration.]

OpenSocial is a set of social networking interfaces (APIs) created by a group originally led by Google and MySpace, but supported by a coalition of large sites in response to the growing power of the Facebook platform standard (FBML). Launched with great fanfare in late 2007, but adopted primarily by MySpace (and Orkut in Brazil), the standard languished for the next 2 years, although the community continued to evolve it until the 1.0 version was recently released in Q1, 2010.

Why did it languish? Primarily because every developer in the world was focused solely on Facebook as the best publisher platform and because the other social networks (SNS) didn’t fully understand how lucrative online gaming was, and it too long for OpenSocial standard to evolve, at least until the last 6 months. I consult with various SNS about their gaming strategies, as well as with a variety of game developers, so I see it from both angles, and what we now see in the marketplace in 2010 is a growing focus on OpenSocial, with a massive surge in adoption of the OS platform coming this year.

Why? The first reason is that it has become abundantly clear to anyone not living in a cave that social gaming is the only truly profitable feature of a social network. And even better, it drives higher user engagement, not just revenue, since users return repeatedly to the site and often contact friends in order to get them to participate in games. Since the Facebook FBML set of APIs is fully owned by Facebook, the top player in social network services, it is a significant danger for Facebook competitors to adopt that standard, especially as Facebook becomes a tougher place to do business for everyone. Therefore, social networks with any IQ points are rapidly throwing away their home-built proprietary standards in order to adopt OpenSocial so they can roll out a compelling gaming solution.

The second reason is that to everyone’s apparent surprise, Facebook has finally become a much tougher place to do business for game developers – in fact it almost resembles a traditional retail environment these days. There is an oversupply of content, Facebook is levying a 30% “tax” with Facebook Credits, and with significantly reduced virality due to platform changes, most developers are spending at least another 30% of revenue on advertising on Facebook, all of which is significantly reducing margins. This is all obviously great news for Facebook, but it means the gravy train of “free traffic and great virality” is over, making the site a much more difficult place for mid-sized and small developers, even though the core site features and massive traffic are still the best on the planet. Therefore, smart developers are again looking for Facebook alternatives.

So what should Facebook competitors do? Given that gaming is immensely profitable and that Facebook is starting to be less hospitable to many developers, it’s becoming clear that all social networks should launch OpenSocial-compliant containers, striking deals with a select set of developers to feature their games in return for a relatively big revenue share. However, these smaller social sites must become an attractive destination for content developers, even though they have less traffic than Facebook. The key is that the OS container must be fully OpenSocial compliant so that developers can easily port their applications to a wide set of smaller sites with almost no work – if it takes a lot of work for each site, then the return on investment won’t be worth it to the developer, and the site will struggle to attract strong enough games. Now that there is an agreed upon 1.0 OS standard, all sites should move to adopt it in order to make the developer experience more consistent. I also don’t recommend that the SNS offer a big open platform since it’s really hard to manage thousands of games and their developers without a huge staff – instead, feature a smaller set of games which pay a revenue split in return for the promotion/placement, and then market the hell out of them – the success of Tagged and MyYearbook in following this more focused approach are great examples of this approach and they continue to expand their offerings.