DIGC102 Industry Analysis Report- Michelle Diab
Industry Analysis Report: Social gaming
How has social gaming added a ‘new layer’ to the gaming industry?
http://www.socialtimes.com/images/mytopia.gif
Introduction
This report will discuss the ways in which social gaming has altered the established gaming industry in terms of revenue, nature of social games, target market, platform mobility and the future of social gaming. Perry (2008) believes this type of asynchronous gaming is suitable for people who have busy lives, or even live in different time zones. He also notes that the long-term future of the gaming industry is “digital” and physical consoles will become obsolete. The term “new layer to gaming” was coined by Lee (2008) as he believes the mixture of social networking and games has invited previous non-gamers to play, as well as paving the way for new types of games. This report will focus on three popular social gaming companies; Zynga, Playfish and Social Gaming Network (SGN). Due to concentration of ownership within the social gaming industry (in particularly Zynga) and the short nature of this report, it is important to note that results may not be completely balanced.
Revenue
Although social gaming is a cost-free application for users facilitated by social networking websites such as Facebook and Myspace, the social gaming market is already approaching $1bn in annual revenues. Since December 2008, the amount of people playing games developed by social gaming producer Playfish has tripled to 9m, with 45m active monthly users. Unlike conventional gaming companies who rely on advertising to sell their product, 99 per cent of Playfish’s distribution is from user-to-user invitations, according to Sebastien de Halleux, Playfish ‘s chief operating officer and co-founder (Bradshaw 2009). Most social games depend on advertising to generate profit, which is why many of these games are of a simple nature to attract large amounts of people (Lee 2008).
Along with generating revenue from advertising, social networking companies earn most of their profits via payable upgrades to premium gaming and virtual goods. The world’s leading social gaming company Zynga turned in $50m in 2008, with the majority of profit coming from 2 to 10 per cent of users who chose to upgrade their social gaming experiences (Carlson 2009). Parallel to Zynga, Playfish is due to make $30m in revenue this year, mostly from payment for virtual goods and subscriptions (Eldon 2009). However, Social Gaming Network (SGN) has taken social gaming to the next level with over 12 million of its games installed on iPhones and iPod Touches, with 25 per cent of users crossing over with Facebook. This collaborative method has proved to be very successful in reaching consumers who are not on their computers. Furthermore, Apple will soon enable “microtransactions” on its iPhone, allowing the flexible purchasing of virtual goods, which has heavily contributed to the revenue from social games (Eldon 2009).
A “new DNA”
Although video/computer games and online social games fall under the same category of ‘gaming’, they are of different natures. According to Bradshaw (2009), the video gaming industry has faced disturbance by the internet. Social gaming companies have a “new DNA” of social interaction, unlike the traditional gaming market of shelf space games with sequels (Bradshaw 2009). Social games are not designed for dedicated game-play; rather, they are made to be played throughout the day – whether at home, work or school. Furthermore, Zynga’s popular game Farmville runs on time-specific game mechanics of the farming simulator, requiring players to continuously maintain theirs (and their friends’) crops to prevent them from dying (Caoili 2009). Social games are designed to draw in all types of social networking users- many of whom do not play games. Thus, they need to be easy to learn, whilst also enjoyable, so users continue to play these games (Lee 2008). The social gaming industry has designed novelty games for all ages, requiring a limited amount of skill or practice. They were designed to reinvent the traditional activity of physical social game-play that defies geographical boundaries through the Web 2.0 phenomenon.
Neo-Gamers
“We create games that let you play together with real-world friends and family using the infrastructure built by social networks. This is in some ways a return to the roots of games. You play with the same people you would play cards, board games or go bowling with in the real world” (Playfish 2009).
The types of individuals who are participating in the social gaming sphere are often foreign to the concept of game play. CEO of Zynga Game Network, Mark Pincus, admitted to designing his games for non-gamers; those individuals who do not have time for games (Lee 2008). A Zynga designer believes that social game-play is a form of online bonding that can accelerate real-life relationships (Caoili 2009). Users of social gaming applications are not competing against strangers, rather they are engaging in an enjoyable activity with their friends. Zynga’s Texas HoldEm Poker allows players to buy their friends virtual drinks, demonstrating the extra dimension of interactivity in social gaming (Lee 2008). Pincus believes social gaming becomes “powerfully addictive” when users are playing against their friends who spread the word by inviting other friends. Justin Smith of Inside Facebook revealed that the social networking giant has over 30 games with more than 1m users. The success of Zynga is remarkable; having only opened in 2007, it now had more than 50m active monthly gaming users, 300 employees, 50 contractors and 80-90 vacant positions (Takahashi et. al. 2009).
Platform Mobility
Although SGN only has around 2.4m monthly users for its 25 Facebook applications, compared to Zynga’s 41.5m (AppData 2009 cited in Eldon 2009), they have taken social gaming to another level with cross-mobility game-play. CEO of SGN, Shervin Pishevar, believes it is crucial to “unify the user experience” across mobile, social networks and the world wide web, in order to create a “seamlessly and consistently enjoyable” product across all platforms to further expand social gaming consumers (Au 2009). According to SGN (2009), more than 1m people play their games per day across social networking platforms, whilst over 10m games are downloaded on the iPhone and iPod Touch. The advantage of mobile gaming can be seen through SGN’s Golf, which uses an accelerometer, allowing users to golf using their “virtual club” (i.e. iPod/iPhone). It is predicted that participation in mobile game-play will rise simultaneously with the development of advanced game-play technology on mobile mediums (Davis 2009).
Conclusion
It is evident that social gaming has added an extra dimension to the gaming industry, through its production, distribution, circulation and active clientele. They differ from conventional gaming methods and at present do not appear to threaten the profitability of shelf-games. However, the integration of social networking and game-play has attracted a new audience of non-gamers who are driven by the (chiefly) cost-free form of social-connectedness. Users are not dedicating a set amount of time to social games; rather they are weaving the novelty throughout their daily lives as they interact with real-life social connections. Thus, the future of social game-play appears to be positive, with the possibility of existing gaming companies such as Electronic Arts (EA) partially migrating to social networking platforms to compete with successful companies such as Zynga, Playfish and SGN.
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