Justin Smith, Inside Social Games
Explosive growth. Graph shows doubling every year.
2009: 490m revenues
Virtual goods in Asia 5bn in 2008, 7bn in 2009,
In the US, 1bn in 2009.
Three big players in US:
1. Zynga, 700-900 employees, a few 100m in revenue, growth 50-70%. 3x more DAU than #2.
2. Playfish, 250+ employees, 75m in revenue, purchased by EA in 11/09
3. Playdom, 300+ employees, 50m in revenue, #1 on MySpace
Crowdstar, quick rise to #2 based on DAU
RockYou, largest ad network on FB
Slide, was #1 for a long time by MAU (SuperPoke, etc), but not with games. Shifted to virtual goods model.
Interesting trend: a lot of interest from abroad, esp China. Developers who have been successful elsewhere porting apps to FB. FB is blocked in China. Rekoo (Animal Paradise, Sunshine Ranch), Elex (Happy Harvest), Five Minutes (Happy Farm), wooga (Brain Buddies), and 6waves, which follows more of a publisher model.
FB continues to grow, biz models converging on virtual goods. Value of cross promo going up. Publisher model and network effects on the rise.
FB, 400m users and rising, 70% outside the US. New rules every 6 months, evolving fast. This is where the most opportunity has existed. With rules changing, “there will be a new Crowdstar this year.” FB Connect, and Credits, both important changes.
Most FB users are relatively old now. Well over half are over 25, 40% over 35.
Also, not in the US. 10m Africa, 70m asia, 130m Europe, 140m NA, 35 South America. Many countries where they are growing at 10% compounded month on month.
MySpace gets a bad rap. Consistently declining but still second best fit for social games in the US. Good ARPU but only large devs can afford to build crossplatform.
Hi5 and Bebo have adopted the FB API. Other networks out there: Orkut, Friendster, QQ/QZone, VZ Networks, Maktoob. USers in South America complained when Xmas items had snow on them, hard to manage globally.
Twitter has grown a lot but he does not think it is a social gaming platform. Have been some interesting experiments.
Game portals — what is the value of the portal’s social graph as opposed to that of Facebook’s? That graph is the major value that FB brings.
In the future, we will see games where you play with strangers as strange and uncommon bc most people want to play with their friends.
Facebook Connect… the same social graph on any website or platform or device. Same id, same viral channel access. Still early, but think about what parts of the Internet never developed bc the graph was not there? Still subject to the same rules as on FB, but still opens doors.
Rise of virtual goods in the west is a major cultural change. The products and timing were simply not right before. This is going to continue to grow. With that comes the emergence of all these methods of payment. Direct payments, mobile payments, etc. Offers are still a portion of purchases but declining.
Rush of competitors… social media and widget developers, new startups, huge media companies interested in building or buying social game developers right now. Media companies believe that their brand assets will give them an advantage when you get to a given market size. We are seeing casual game developers get into the market. We have not seen a lot of casual games succeed — they do not monetize in the same way, and different engagement characteristics.
Paypal is still the largest source of virtual goods payments. But seeing the emergence of more… lots of precedent around the world but not here yet, but rising: mobile (Asia has a huge lead here, then Europe, US just starting). Mobile has a reasonably broad distribution, not just kids. Other methods like cards, etc.
Offers have been controversial. They represent a minority of revenues. The market has been whittled down a bit over the last few months. Some ads were deceptive. Seems to be self-regulating pretty well. May have an on-ramp role for people unused to virtual goods transactions. There usually isn’t a supply of enough attractive offers so people start there and migrate to other payment methods.
Many new offer providers in the last 12 months… 10-15 new providers. Many developers switch weekly… one developer even created a bidding page to make the offer providers compete for them!
Building your org is challenging. Monetization becoming horizontal in some large companies. Some developers make multimonth content plans (6-12 months) before release. Virtual economy optimization is now a core competency. It is hard to support these games in the way that the most advanced devs do — how to deploy the right content to the right ppl at the right time and price.
Zynga will have more employees than FB this year.
FB makes changes a lot.
Where will FB not succeed? What carveouts will exist?
In the future:
FB will grow to 700m
Virtual goods will be “normal”