Social Gaming – The Game Changer

Over the last many months, I have received numerous requests and gifts in my Facebook account from a game called Farm Ville. There is a friend of mine who is regularly playing this game and updating her status with the levels she has managed to crack in the game. I too played this game for a while and found pretty addictive but never realized that just within a year of its launch, FarmVille has become the largest online game with over 82.4 million active users (over 1% of world’s population).

Zynga’s Farm Ville has become symbol of success for social games but there are many other players making significant strides. In last one month, I have come across multiple VC investments or acquisition in this space. MTV networks acquired social game developer Social Express (MTV will use Social Express to develop games based on TV shows from MTV,Nickelodeon and other Viacom-owned brands), Playdom brought Metaplace apart from 5 other acquisitions, Disney brought game maker Tapulous, Zynga brought Challenge Games and XPD …. and the list goes on. This flurry of activity started last year when EA acquired Playfish for $400 million. Recently, there is another rumor doing rounds that Google has secretly invested $100-200 mn in Zynga and gaming would be the cornerstone of Google Social Networking site. Zynga managed to get half a million VC dollars last year and is estimated to have clocked $350 million as revenues. Zynga has a big hand is making Facebook popular and is the biggest customer of Paypal.

What is Social Gaming and how is it different from Multiplayer Gaming?

Social games are turn based, multi-player games that use social platforms to provide users with an identity and to provide the backbone for simple forms of communication (such as notifications, etc). Social gaming is probably not for hard core gamers and is more likely to attract casual gamers. The key component of social gaming is awareness of other’s actions in the games which acts as catalyst to attract other friends in the network. Top social games are Farm Ville, Texas HoldEm Poker, Cafe World, Mafia Wars, etc.

Social gaming companies rely on turn-based asynchronous game mechanics to lower the stress level and focus on playing with your current circle of friends. Games such as Warbook, Ikarium, and Friends for Sale have the benefit of closely matching the current behavioral model of social networks in which posting to walls and poking one other serve as the primary modes of communication. These games allow users to take time to make their decisions, they integrate well with a players current set of friends, and they do not require the “presence” that real-time games require. Multi-player games in contrast are synchronous games.

What makes Social Gaming a game changer?

People seeking cheap, escapist gaming fixes during the downturn has seen social gaming reach hundreds of millions of consumers globally leading to social gaming being named by Brandweek as one of the Top 10 digital trends to watch in 2010. There are many reasons for success of social gaming and the prominent ones are as follows:

1. Ability to use social graph of users

Zynga has shown how to creatively leverage the social graph to spread the word around about the application. Continuous postings and poking help generate the interest of non users to casual gaming. There are over 230 million social gamers playing games like Farm Ville or Mafia Wars.  The games involve gifting and rewards which keep the game’s interest in the game.

There are possibilities of cross selling other games from within a game like in Farmville, players are encouraged to play other games from Zynga (“Did you milk the cow? Take a break with a milkshake in Café World!”).

2. Sense of Achievement and need to consistently maintain high score (Engagement)

People are looking to be successful at things. Its hard to get ahead in business or careers, many things in life aren’t noticed as true achievements as they should be. People find these games addictive because they give them a sense of accomplishment and give them opportunity to achieve more. They like to announce their achievement to their friends and continue to play to get to higher levels. Social games are high maintenance games and the hard work goes waste if the user does not play the game regularly… the more you play, the higher are the chances of a high score. Social games are like soap operas that never seem to get over.

3. Micro-payments boosting Revenue Generating Opportunities

It has been seen that if a game is charged upfront, few users are willing to pay but the users are ready to pay for smaller value items that might be required to boost their score, e.g. a car racing game can be free but users can be asked to make small payments for alloy wheels or better engine or better looking car. Since the game is social in nature and the payments are of smaller denomination, the users do not mind paying for them. This strategy has led to huge upsides to the revenues of the social gaming organizations. About $1 billion revenues are expected this year from social gaming and still it is considered under-monetized.

4. Advertising Opportunities

The advertising on social games has so far been limited but has a huge potential. According to industry insiders, active social gamers spend anywhere from 45 to 90 minutes on the games providing ample of opportunities for advertising. Microsoft used advertising in social gaming when they launched Bing.com. Sony is promoting its Vaio Laptops on this media. In-game advertising is a huge opportunity waiting to be exploited. Many companies from movies and music to FMCG are likely to add social gaming as part of their marketing mix.

5. Key Statistics look encouraging

According to a survey commissioned by Popcap Games, an average gamer is a 43 year old woman (sorry all stereotypes on the gaming profiles have been proven wrong!!!). Other findings include – Facebook is the most popular destination for online games, with 83% of respondents saying they have played games there. Twenty-eight percent have purchased in-game currency with real-world money. The average gamer has played six social games, and more than 50% of gamers started playing a game because a friend recommended it or because they saw a friend playing it in a news feed or other social stream. Now this is viral effect!

6. Potential on Mobile Phones

The social games can be played on mobile phones. Imagine, you can continue to gain points on Farm Ville by playing on your mobile when you have free time – it will be highly addictive. Also, the total number of mobile phones far outnumber the PCs in the world. In case of social gaming, the primary user is a woman and in emerging markets, the women normally have a mobile phone but do not have access to a PC. Also, on the mobile phones, context (location) can be added to the game giving  a completely new dimension to gaming.

7. Use of Virtual Currency

Anybody who has played Farm Ville on Facebook would be aware of credits that you need to buy virtual goods. The virtual goods can either be earned by playing the game more often or by participating in research or by participating in viral marketing or by simply buying using real cash. The value of virtual goods was almost $9 billion in 2009 in Asia and $1 billion in Western countries. It is expected that the virtual money would continue to rise and has the potential to be used in both physical and online world. The advertisements are likely to become more engaging and interactive with the advertisers doling out virtual currency or goodies. So much so that Lolappshas predicted in a report that by 2015, the Government will regulate virtual currency and try to attach its value to real currency. Already, virtual goods are taxed in China and South Korea.

Summary

Social gaming has a huge potential and is not only a game changer for the gaming industry but also has a potential to impact the growth of social networks. Google is planning its social networking site with Gaming as one of the key plank. With social networks permeating our daily lives, entertainment is being redefined and social gaming is here to stay.

*** For those who do not know about Farm Ville ***

Farm Ville is a real-time farm simulation game developed by Zynga available on the social networking website Facebook. The game allows members of Facebook to manage a virtual farm by planting, growing and harvesting virtual crops and trees, and raising livestock.

FarmVille leverages the social networking aspects of Facebook. Along with their own farm, players can invite their friends to join and be neighbors. Acquiring neighbors has benefits in game play — not only can one earn money and experience (by visiting and helping on neighboring farms), but with eight or more neighbors, a player can expand their farm and own more acreage. Gifts (such as trees, animals, and decorations) can be sent to both confirmed neighbors and any other Facebook friends even if they do not use the application. The Gifts received from neighbors usually have relatively expensive buy prices in the market; so getting gifts from friends is one of the best ways to get relatively expensive items. Many of the items available to gift to friends are not available in the FarmVille market.

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