Social Gaming Market Reaches Its Final Stage…and It’s Not Looking Pretty. Editor’s Note: This is a guest post written by Alex St.
John, President and CTO of hi5, on the state of the social gaming market. When Facebook recognized that early social media games were getting a free ride on their network, they shut down the free viral channels these games relied on for audience, started charging market prices for advertising, and demanded a cut of all commerce transactions (see “Facebook Credits”). This changed the economics of social games dramatically. Reaching a large audience easily and for free ceased to be a benefit of developing social media games. In the downloadable casual game business, game developers get a 25%-35% share of the revenue their games generate online when published via channels other than their own. This same cycle is now taking place in social media. What does it mean that Zynga abruptly canceled its deal with MSN to carry Farmville? Want to see which games dominate the online economy in a competitive market where distribution.
Zynga Pushing Nine Figures In Revenues Thanks To Micro-Transacti. Zynga, the online gaming publisher, is making a ton of money.
Just how much? Well, earlier reports put revenue at something around $50 million, but some new numbers obtained by Sarah Lacy suggests that it’s closer to $100 million. And clearly, it’s accelerating. We’re hearing that the run rate for 2009 may even be well above that. So in case it wasn’t already clear, there looks to be a bright future in the online gaming sphere and specifically around micro-transactions. And Zynga recently transitioned this model to the iPhone, but because the iPhone doesn’t yet allow for in-app purchases, it has been forced to sell expensive versions of its apps like Live Poker, with chips included.
Just last week, VentureBeat’s Eric Eldon speculated that Zynga, which is now the largest Facebook app developer, might be trying to raise another large round of funding — something to the tune of $30 million. The Economics Of Facebook Games. Last week at SXSW, John Pleasants, CEO of Playdom, spoke about “The Future Of Social Gaming”, but the greatest takeaway was the current economics of Facebook Games.
If you are looking to get into the business or are already a player in the space, there were a number of important facts disclosed by Pleasants. What’s clear is that the business is a smaller version of the movie industry with the difference being that games can be improved as users interact with them. One of the most interesting statistics disclosed by John Pleasants was the cost of developing games. According to Pleasants, the average game costs between $100,000 and $300,000 to produce. When asked about the total cost of marketing the game, he stated that it wasn’t included and that the marketing budget is often upwards of 50 percent of the cost of developing the game. So with such a large marketing budget, how much does it cost to drive users? Playdom started out with all of their applications being based on MySpace.