Justin Smith State Social Gaming Industry Gdc 2010 San Francisco

The State of Social GamingGDC - San Francisco9 March 2010
Justin Smith
justin@insidenetwork.com

Focused on the Facebook platform and social gaming ecosystem

The Social Game Landscape

The Western Market
2009: $490 million
2010: $835 million
Growth on every continent

Virtual Goods in Asia
2008: $5 billion
2009: $7 billion
Source: +8*

The Big 3
Zynga
700+ employees
$200+ million in 2009
~3x more DAU than #2
Playfish
250+ employees
~$75 million in 2009
Acquired by EA 11/2009
Playdom
300+ employees
~$50 million in 2009
#1 on MySpace

US Players
CrowdStar
Quick rise to #2 on Facebook by DAU
RockYou
Operates the largest ad network on Facebook as well
Slide
Was long time #1 by MAU (but not games), transformed business into virtual goods model

The International Players
Rekoo– Animal Paradise, Sunshine Ranch
Elex– Happy Harvest
Five Minutes – Happy Farm
wooga– Brain Buddies
6waves – Adopting a publisher model

The Developer Opportunity
Facebook continues to grow around the world
First “truly global” social network
Business models converging on virtual goods
Can rapidly spend, test, and iterate for revenue
Some challenges lie ahead
Market getting more crowded, network effects kicking in

Social Gaming Distribution

Facebook
400 million users and counting – 70% of which are outside the United States
Rapidly evolving Platform – new rules every 6 months
Facebook Connect – bringing Facebook to every website and device
Facebook Credits – coming soon

Facebook

Facebook
Africa: 10M
Asia: 70M
Europe: 130M
North America: 140M
South America: 35M

MySpace
Used to be #1, now declining slowly
Still #2 social gaming platform in the US
Good ARPU, but only the largest developers can afford to build cross-platform games

Global Social Networks
Hi5
Orkut
Friendster
Vkontakte
QQ/Qzone
Bebo
VZ networks
Maktoob

Twitter
Is this a social gaming platform?
I don’t think so.

Game Portals
What is the value of your portal’s social graph vs. Facebook’s social graph?

Game Changers

Facebook Connect
Now, the same social graph is on any website, platform, device (mobile!)
Same identity and “viral channel” access, less Facebook.com constraint
What parts of the Internet never developed because the social graph wasn’t available?

Rise of Virtual Goods in the West
Now the major revenue model for western social game developers
Variety of direct payment methods
Offers still portion of purchases, but declining

Rush of Competitors
“Social media/widget” developers
New startups
Traditional publishers
Casual game developers
Asian developers

Monetization

Direct Payments Inside Social Games
PayPal still dominant
Mobile increasingly important
Asia with a commanding lead, Europe just behind, US just getting started
Other alternative direct methods, like pre-paid cards, growing
Zynga, Playfish, Playdom arriving in US retail Q4 2009

Performance Ads and the Offers Controversy
Represent a minority of social game developer revenues – now smaller %
Some ads were deceptive
Self regulating pretty well, though platforms have most leverage
Ultimately, developers need to get users monetizing directly pretty quickly

Increasing Competition
Many new offer providers in the last 12 months
Regional focus
Ad networks bringing relationships
Offer providers becoming payment aggregators

Organizing & Optimizing
Monetization becoming horizontal in some multi-studio companies
Some developers make multi-month content plans before releasing
Virtual economy optimization is now a core competency

The 12-18 Month Horizon

The Big 1: Zynga
From 0 to 10 million in 7 days – rinse and repeat
Tough to defend against…
The increasing value of cross promotion
Smartest ad spenders behind LTV
Could have more staff than Facebook in 2010

Facebook’s Relationship with Developers
The only constant is change
4 weeks ago: Email sharing
2 weeks ago: The death of notifications
What’s coming next month?

Changing Monetization Landscape
Facebook Credits coming soon – but what will the rules be?
Fees?
Restrictions for other providers?
Banner ads hanging around

Who will challenge Facebook?
Is Facebook going to keep steam rolling social networks everywhere?
Where will the carve-outs be, even where Facebook is far and away #1?
Who is going to challenge Facebook’s social graph?
Other games portals?
Consoles, or device manufacturers?

2010 and Beyond
Facebook grows to 500, 600, 700 million…
Virtual goods become “normal”
International opportunities grow
Who will be the next CrowdStar?

Focused on the Facebook platform and social gaming ecosystem

http://socialgamestudies.org	3033
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http://maurawelch.typepad.com	222
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Justin Smith State Social Gaming Industry Gdc 2010 San Francisco

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