The Future of Social Games: How Facebook is Connecting Players, Developers, & Dollars

Social games have grown so quickly over the past two years, even Facebook is surprised. Although many of the most widely adopted early apps on the Facebook Platform were games, few could have expected the industry to be where it is today. Thousands of games have been built. Hundreds of millions of dollars will flow to Facebook and MySpace game developers this year. The biggest social game developer, Zynga, now has nearly half as many staff as Facebook itself. As online, mobile, and console games rediscover their social roots, Facebook is in the middle of it all. We caught up with Gareth Davis, Facebook's platform manager for games, to talk more about the future of social game design, social game monetization, and Facebook's vision for the gaming industry. Justin Smith: When I talked to Mark Zuckerberg earlier this summer, he said that Facebook never really thought about games before launching the platform. Why do you think that was the case? Gareth Davis: When the platform was created, I think there were a couple motivations. The company knew there would be some great applications that we couldn't imagine ourselves that would be built on the social graph, and even if we could imagine them we wouldn't have the resources to build them. Games as a category is a leading type of application on a variety of platforms around the world. In the early platform days, there were pseudo games that reflected how developers were trying to figure out the platform, but in the last year we've seen a big increase in the quality and quantity of games. Now, we are a game platform where tens of millions of people come to play games every day. Now, we're trying to figure out how to make the platform most suitable for developers. And what we find is the needs are pretty common across the platform actually, rather than just focusing on the needs of game developers in particular. One of the things we did do in order to encourage synchronous play was the release of chat invitations. It's now in games Pet Society and Lexulous. The chat interface is really moving the site to feature synchronous activity. What's surprising to you right now about the way people are playing games on Facebook? The companies that were created to build social games are now coming out with more compelling games - Crazy Planets, for example, stands on its own. We're seeing a whole new category of games designed for the "social gamer" who would never describe themselves as a gamer. For example, Typing Maniac is like Missile Command meets Typing Teacher. We're also seeing interesting core games like Paradise Paintball - you feel like you're playing a console game. And the other trend we're seeing is the large traditional game companies getting involved. EA has been involved for a while. PopCap's Bejeweled Blitz has been taking off, and now has 5.5 million monthly users. Zuma is now launched on Popcap.com with Facebook Connect, which is driving more content sharing. Over the course of the last couple of years, we've seen the rapid growth in the free to play virtual goods model for many top Facebook games. Do you think this is a healthy and sustainable trend? We're an open platform, and we allow developers to build whatever apps they like, as long as they follow our policies. The three primary monetization models we see are advertising, offers, and transactions. We've seen a mix of those across the board, and we think the right move for developers is to tailor the monetization mix according to their audience. We don't really believe there should be one way. Given that, there is a trend toward in-game transactions. This is clearly a model that's proven itself in other genres and regions, particularly Korea and China. Not only is it doing well today, I think it will continue to grow. The top developers on Facebook today all say they're seeing a shift toward in-game transactions. Facebook has launched alpha tests of a payment system and ad network for developers. Is Facebook likely to get more involved with the game monetization ecosystem with time? We're very interested in developers successfully monetizing our platform. There are a number of third party solutions tht have evolved that are generally pretty good. Wherever we can, we are interested in helping developers monetize. That could be through ads or transactions. The test to which you refer is taking Facebook credits and extending them to be used by developers for in-game transactions. We don't have a lot more to share on that today. The interesting thing here is the leading social game developers are all doing very well. All the top social game developers say they've been profitable from day one. They've been very successful in a very short space of time. The focus should be on creating great games, building a great audience, and keeping them engaged. That's the best long run approach. One of the major problems experienced by many payment systems today is fraud. Do you think Facebook will be able to help with that? That's not really my area, but identity is a useful asset to have when thinking about transactions. I'd rather have it than not have it. Several of the larger Facebook game developers have had success importing popular games from China and Korea, but some large Asian developers (like Five Minutes, developers of Happy Farm) are starting to launch games directly on Facebook. Have you had a lot of contact with Asian game developers? Very little. However, there are a number of game developers from Asia who I interact with who are very interested in moving their titles to Facebook due to the restrictions and constraints of other social platforms in China - they're not open platforms. With the rise of the Facebook Platform, we've become a very open option for them. The Chinese developers are very talented and know great games, and I expect to see a lot of great games coming out of China. For example, I think Playfish's Geo Challenge and Country Story came out of their Chinese studio. CMUNE (developers of Paradise Paintball) are based in China as well. We have seen significant audience growth in farming games over the last six months. There are a few interesting mechanics - a nurturing aspect, you design something, it grows over time. It's almost like a virtual pet Tamagotchi-esque experience. Gifting is a big part of it, as is helping out on each other's farms, and trading and gifting items. There are many examples of successful management games across a variety of platforms - RollerCoaster Tycoon was huge for many years on the PC. What has Facebook learned from Asian services like Tencent's Qzone, which has been monetizing social games for years in China? The main learning from Asia in the games space has been the predominance of free to play and virtual goods. We often talk about the Nexon model and developers getting as many players to play for free and then getting them to pay inside the game. The US has been so focused on the retail purchase of $50 games, but Korea has opened our eyes to better models. There seems to be a preponderance of strategy style games in Asia. All the Blizzard-style games do incredibly well in Korea and China. We're also seeing an interesting mix of resource management games now that are starting to mirror what has been very successful in Asia. Facebook now has 6 games with a larger audience than World of Warcraft. WoW is pretty flat, and they have new user experience challenges. Whereas to join Pet Society, my friends are there and the game is very compelling very quickly. When you're in the free to play model, there are two ways to drive revenues. One is to increase the number of people paying, the other is to increase the average spend. I think it's important to focus on both. It's been great to see the Facebook Connect integrations on Xbox Live and Nintendo DSi. Obviously, these are more complicated relationships than a traditional Facebook Connect website integration. Do you expect Facebook to do more console integrations this year? We believe that all devices are going social. In the future, any device that you access at home or at work will be Connect enabled - it just makes sense. It's a simple integration, it instantly personalizes the experience, and the device instantly knows the identity information you've provided to Facebook. Your friends are there so you're not alone, and you can filter the world by your friends and get their recommendations. The games industry is one of the more forward leaning industries, but really the history of gaming is all social - from chess to Monopoly to Pong to Guitar Hero, all these games require friends to play. Before E3 they thought social was cool, now they're thinking about how they can make cool things that are social. Most of the people I talk to are building games for holiday 2010. We'll see some more soon, but it will come over time. This cycle, social is on their core list of features they want to build. The next cycle, it will be the core they build around. The shift will take some time to manifest itself in the retail store, but it is happening. We're seeing that people especially want to have Connect on their mobile devices. The next form factor in the "three screens" vision will be the TV. I think we're going to see a lot of great social experiences in the living room. We've met a lot of people at large publishers who are either trying to build social game initiatives inside their company, or leaving to start or join a social gaming startup. What are some of the best initiatives you've seen inside larger publishing companies so far? My understanding is that Ubisoft is releasing a series of games on Facebook, of which TickTock is the first. I think they're going to do a mix of original titles on Facebook and bringing some other titles to Facebook as well. In general, there's a lot in the pipeline now. PopCap is another great example. They defined the casual space. The challenge is most casual games are single player - and so what PopCap has done is take a classic game, Bejeweled, one of the most played games in history, and they took a few months tinkering with it on the Facebook Platform until they found a formula or version of it that took off. They did some interesting things, like restricting it to a minute. No one in their right mind would do that, but through iteration, they found that the one minute version was really addictive. Here's a game you might have played for 30 minutes before, but now you play it 30 times for 1 minute each. They added a social leaderboard, which creates intense competition with your friends and drives more adoption and game play. And then they have one other innovation, which is to refresh the scoreboards weekly, which sounds crazy, and yet they found tremendous repeat use because it levels the playing field. Are you seeing more original game development or adaptation from traditional developers? Both. There are some games that people just want to play with their friends. There are some new kinds of games being built on the social graph. Some game companies think it's good to just move games over and make them social, and occasionally that's prudent, but almost everyone I've talked to is interested in making original games designed for the social graph. But we've seen an audience for both Bejeweled and Pet Society. We've seen that some social game developers are spending a lot on advertising inside Facebook to launch their games. Yes. We're seeing the leading developers pairing the social, organic growth with strategic, targeted advertising. There's really a lot of sophistication there that many of the traditional developers don't have. What's your favorite game on Facebook? Crazy Planets is a really nice progression for Playfish. They've taken everything they've learned building social games and applied it to a very traditional mechanic. Earlier in the platform we saw some purely social games without substantial game mechanics behind them, but the right blend is putting the two together. It's fascinating watching companies like Playfish and PopCap expand in that regard. What's your prediction for the future of the developer landscape? Will there be significant consolidation or many independent developers? My prediction is that there will be both. There will be a set of studios that will be able to successfully build multiple games because they have become expert in combining compelling game mechanics with social mechanics. Facebook is so open, and we provide an incredible distribution mechanism. If you think about building a game for the Wii, it requires huge production and distribution infrastructure, and millions of dollars to build on that technology. But on Facebook, every month or two, we see a game come out of nowhere that doesn't come from a studio. It comes from an independent developer, who is able to get distribution using the social graph and change the industry and the type of games people play. There is a parallel in the movie business - even though cameras have become inexpensive, distribution is still expensive. We've had inexpensive means of production for a while, but now we have the means for distribution as well. This is the first time in 20 years that anyone can create a #1 game, and I think that's why people are so excited. Thanks for your time Gareth. For more in depth coverage of the social games industry, check out our sister site, Inside Social Games.

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The Future of Social Games: How Facebook is Connecting Players, Developers, & Dollars

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