When to Sunset and When to Stay With Social Games on Facebook

The Facebook games ecosystem has evolved to the point where most social game developers put effort into planning the end of a game’s life cycle instead of just its beginning. Facebook’s Sean Ryan shares some insight with ISG on what developers are doing when a game reaches the end of the line.

“We’re hitting a phase right now where games are two, three, and four years old,” Ryan tells ISG. “So we’re seeing different philosophies on what you do. A full sequel that is a different game? An expansion pack like we’ve seen with Zynga and Pioneer Trail, or Army Attack with the Desert Area? Or just let it go and watch it decline?”

When to Let Go

Even with games consistently releasing new content and monthly updates, we’ve seen several long-running games reach the point of sunset in the last four months after 2+ years on the Facebook platform. This point comes when the game drops below a financial performance point or when the developer hits an opportunity cost of resources spent maintaining the game that could instead be spent on developing a new game. The financial performance point varies by developer, but the most common “evaluation equation” we’ve heard from developers is LTV > CPI. That is, when a game’s lifetime value of users is greater than the cost per install of a user, the game is healthy. If its performance drops to a point where LTV < CPI, the game is dying.

This was the case for several games developed by ZipZapPlay prior to its PopCap acquisition. Curt Bererton, former CEO of ZipZapPlay and now General Manager under PopCap, walked an audience through the equation during a session at Casual Connect in Seattle last month. In his talk, titled “Finding the Minimum Viable Game and When to Kill Your Baby,” he explained how the developer checked the LTV > CPI equation on the first day of launch, the seventh day post-launch, and then a final time a month after the game’s launch. In general, he says, if LTV > CPI after 30 days, you’re doing it right.

The point at which the equation seems to change dramatically for most developers is after the three- and four-month mark, where we see social games lose a lot of their early traffic. At this point, says Ryan, the game’s LTV is usually very high because only the dedicated paying users remain in the game while non-paying users have left. Depending on how a developer manages the CPI, the game will either thrive on its loyal users, or gradually decline over a period that ranges from six months to a year.

Case Study: ZipZapPlay’s Happy Habitat

The graph above shows the entire traffic life cycle of Happy Habitat as recorded by our traffic tracking service, AppData. At its peak in March 2010, the game had an all-time high of 501,918 monthly active users and 79,921 daily active users. At the point of the PopCap acquisition in April 2011, Happy Habitat got a slight lift in MAU and DAU as the new owner announced plans to sunset the title. The game officially ended June 30, 2011 at the age of 2.5 years.

When to Hang On

A game might have a LTV < CPI situation on its hands when retention drops below 10% and average revenue per daily active user is already low (say, less than 1 cent). That doesn’t always result in sunsetting, however, as we’ve seen developers turn a game around by simply changing the gameplay or adding new content.

When a game introduces a new expansion, two things happen: MAU and DAU spike as new users come into the game, and retention (DAU as a percentage of MAU) falls. This creates a second curve in the game’s overall life cycle similar to its first three months on the market. Like those first six months, the non-paying users will drop out and the dedicated paying users will stay — and hopefully there will be more of those dedicated users than prior to the expansion.

Case Study: RockYou Playdemic’s Gourmet Ranch