Posts Tagged ‘Zynga’

Social Games and Offer-Scams: Sorting Through the Noise

ScamLittle did I know at the time of writing Dissecting the Success of Social Gaming - that only a few days later, Michael Arrington of TechCrunch would send the industry into a frenzy with his blowing the whistle on offer-scams (the shady lead-gen and subscription offers provided by some advertisers in exchange of points to be spent in-game on virtual goods).

While Michael deserves huge kudos for bringing attention to the issue and for triggering action (Zynga and MySpace have since announced tighter controls on 3rd party offers), much confusion has arisen across the media from the cyber-echo of his points. Here’s an attempt to clarify:

  • Scams are not generated by the gaming companies. They come in through the third party suppliers of lead-generation offers that allow players to gain virtual points without having to pay for them.
  • Offering free points to players for filling out surveys, signing up for newsletters, etc is not a scam nor is it unethical business in principle. What is a scam and absolutely unethical is for advertisers to ask for mobile phone numbers as a way to sneak-in a charge or a monthly subscription fee to the unaware user.
  • The social gaming business model is still sound. As reported by Zynga, about 1/3 of its revenue comes from offer suppliers. To understand what impact scams have on a gaming company’s business, the more relevant figure would be the percentage of that 1/3 that are scams.

There is no doubt everyone in the supply chain needs to recognize the issue of scams and eliminate them by doing their part in vetting the advertisers: Facebook, the gaming companies and the third party offer suppliers (OfferPal, SuperRewards, etc). Well done Mark Pincus of Zynga for being the first to act.

For a balanced reaction to this loud debate check out this article on Inside Social Games.

Facebook’s New Roadmap: A Business Model Dilemma?

Puzzled!With its Platform Roadmap announcement on Wednesday and judging by the headlines, Facebook seems to have launched its own version of a H1N1 crisis in the application development community.

Though under the auspices of giving app developers “new ways to attract and engage” users, Facebook has actually taken away the tools they have most relied on to grow their user-bases: status updates and notifications. In exchange, access to email addresses and the Inbox have been introduced through the API – virtually eliminating the viral one-to-many communication that has been essential to the success of gaming and other app developers.  As the success of social gaming companies is as much about stickiness and retention as it is about viral marketing, I’m not subscribing to the call for a crisis. With respect to Facebook’s strategy though, a few inquisitive considerations are in order:

Is this about improving the user experience? Nah, I don’t buy it. It was already easy enough to “Hide” updates from games and third party apps. Plus, has anyone figured out what qualifies a status update as a “News Feed”?

Is this about Facebook wanting a piece of the gaming success? Absolutely. By eliminating the viral marketing tools that have been vital to user acquisition, Facebook is basically pushing app developers towards promoting via paid advertising.

Does Facebook have a business model dilemma? Advertising has been the primary business strategy to date, one that’s worth in excess of $500M in 2009. With the micro-payments for virtual goods market set to clear $1B in 2009 in the US alone, and with the astounding success of social gaming companies on Facebook – shouldn’t Facebook try to capitalize on its applications platform position by introducing a micro-payments solution of its own rather than stifle the growth of these companies to maximize ad revenue?

Dissecting the Success of Social Gaming

IWouldntDissectYouSo what’s so fascinating about the Social Gaming space beyond the entertainment factor for those of us who enjoy the occasional game?

Simple: just about every company in the space is astoundingly profitable.

In dissecting the success of companies like Playfish, Zynga, Playdom, MindJolt, etc – a few things become clear very quickly: Their expertise is more about viral marketing than it is about game development. They’ve mastered massive user acquisition at lowest possible costs while introducing simple business models to generate revenue. Even more importantly, they own the relationship with users/players which is not only critical to their promotional strategies but also to game development and future business models.  In other words, their success formula looks something like this:

SUCCESS = SIMPLE GAMING + CLONING + VIRALITY + FREEMIUM BUSINESS MODEL + DIRECT USER RELATIONSHIP

Simple Gaming – The simplicity approach taken on by game developers, both in terms of access and game mechanics, has significantly facilitated user adoption and repeat visits. Access, which for all companies is browser-based, is also about being on or off platform.  On-platform games (those on Facebook, MySpace, etc) get to leverage massive and easy-to-target user bases. Off-platform games have more flexibility with game development at the expense of “viral-ability”. On the game mechanics front, enabling users to quickly understand game play, making that game play light touch, interactive and competitive have been key aspects in triggering user adoption and return. The light and casual approach to game mechanics has also dramatically reduced game development times (3-6 months for most developers), but has also facilitated a cloning wildfire.

Cloning – Very much a legacy of traditional gaming as the Ataris and Nintendos of the world can teach us. Though easy to frown at companies who constantly release obviously cloned games, cloning is arguably a smart business approach in early stage and immature markets. After all, people like to play instantly recognizable concepts just as they like to watch familiar formats on TV (what’s the last original Reality or Game Show format you’ve seen?). Additionally, if the uptake of Facebook games is of any indication, a cloned game is more likely to fulfill areas of the market that haven’t been reached by the original game developer than it is to erode at that developer’s existing market.  For example, when Zynga introduced Café World earlier this month (16M users in its first two weeks), it didn’t visibly impact Playfish’s Restaurant City user and growth counts. As the market matures with users demanding games with more depth and sophistication – cloning will become more difficult and as a consequence, an un-sustainable model. The first test of this may come with the recently announced Facebook version of Sid Meier’s Civilization classic.

Virality – Let’s be clear upfront: Zynga and Playfish have both invested millions in advertising to gain their initial player critical mass. They have also mastered making the most out of that initial investment, using virality to significantly reduce additional user acquisition costs.  (more…)