Mar 092010

Justin Smith, Inside Social Games

Explosive growth. Graph shows doubling every year.
2009: 490m revenues
2010: 835m

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

Other players:
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.

The platforms:

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.

Big deals:
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”

  8 Responses to “GDC10: Justin Smith, State of Social Games”

  1. 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.

    A stranger is a friend you haven’t made yet. Or a necessary and vital component of a target-rich environment. Take your pick.

  2. 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.

    This is both true and false. Most people do want to play with their friends. But they also want to “massive”, and this leads me to conclude that they want to play with more than “just” their friends. Take another social activity and look at it. Team activities where small groups of friends join as a team, and join a much larger arena. Bowling, going to concerts or dances, vacations. People generally do these things as part of a team (family or friends), but they wouldn’t participate nearly as much without the social “massive”. People want to get out there. Meet new people, talk, associate. They just want to do it from the safety of a more personal and core “team”.

    This whole thing reminds me of when Impulse sales and end caps came into the stores years ago. You know those displays next to the check outs at stores? They didn’t used to be there. Those shelf displays at the ends of the long aisles? Weren’t there. Although grocers always had small displays of candy next to their cash registers and clothers always had shoe strings next to theirs, because yeah, it worked. And the ends of those long aisles always had stacked boxes or large containers of merchandise. Then the big money got the idea to expand that. “Impulse sales” was born. Displays were manufactured for the purpose. Source suppliers had their own to offer, full of their own merchandise of course.

    Much of the excitement was generated by those who wanted to sell from that space.

    Still, it does work. When “impulse sales” first hit stores in the guise of checkout displays, it worked really well. It was new, people wanted things they didn’t intend to buy until they were confronted with the items directly. Some people found quite an excitement from it. Like a window shopper but able to actually buy something because it’s cheap and right there to grab. But it did lose it’s luster after the newness wore off. These days, people make a point to not look at those checkout displays. Go ahead, go to a Walmart and watch people going through the checkouts. Most won’t look at those displays. Some will buy something off them because it’s something they had a mind to buy already and they knew it was there. You’ll see some kids grabbing some candy, and more often than not their parents grab it out of their hands and put it back. The impulsiveness is gone. People learned what it was.

    That’s not to say it isn’t something that’s going to happen. It’s not to say that sales aren’t generated. What it really is is simply cramming spaces. And just as Walmart is a more interesting place because it has those things, so will gaming be. It’s just that it’s not going to be as big as everyone thinks it will be right now. The impulsiveness is still there right now. My main point is that the figures are misleading to some extent because of this. All those numbers of growth, and the sales generated as a percentage, it’s going to drastically reduce. And when every Tom, Dick, and Harry is cramming into that space, it’s just not going to turn out like some are making it seem now.

    That’s where the real games, the deeper games, the games like what we are used to, they come into play. This is a new space for them. They are better products. You get more for your money from them. People come in already having a mind to buy them. This is where it’s all going to end up.

  3. I would disagree about the playing with strangers aspect. Many times it’s very hard to find 2 or more people who want to play the game you do. Instead, I think there will be a new kind of relationship allowed at FB/social sites — the “game friend”. Someone who shares an interest in a given game with you.

  4. There’s already a phenomenon growing on Facebook that could be called the “game face”… people who have second accounts under an assumed identity used solely for playing games and interacting with other players. Pseudonymity in this context protects your real data from bad actors and keeps the friends and family on your regular account from getting annoying game spam.

    Despite the fact that pseudonymity is effectively against TOS for the unwashed masses on Facebook, the unwashed masses are ignoring that arbitrary ruling in droves.

  5. Ah, but Andrew, then those “game friends” are no longer strangers, are they?

    I read the “end of playing with strangers” as being more the “end of PUG based games”. We already see this in MMORPGs where everyone lives inside their guild.

  6. @Andrew Wooldridge
    “Game friends” is nothing new to me! I’ve had those since I started gaming, although as Brask says, the lines tend to blur very heavily into ‘real’ friends especially over time. “Game friends” are increasingly important to me as more games become co-operative & shared experiences they are more fun, yet I don’t have enough friends that game (or at least ones that share my gaming tastes). I need more game friends! 😉

  7. […] (This is what the commenter “Brass Monkey” is referring to on Raph Koster’s blog post regarding this comment I made at GDC.) It’s certainly true that this is a fundamental dynamic […]

  8. […] (This is what the commenter “Brass Monkey” is referring to on Raph Koster’s blog post regarding this comment I made at GDC.) It’s certainly true that this is a fundamental dynamic […]

Sorry, the comment form is closed at this time.