Social Game Learnings Part 1

Day 1 of the Game Developers Conference is over and what did I learn? The social gaming world is in excellent health. The sessions were oversubscribed and at times it was difficult to move around the conference due to the number of participants.

My key takeaways from the first day:

1. The big are getting bigger and the industry is consolidating. New entrants are still entering the market but it seems like the barriers to entry are rising, e.g. cost of building an audience, cost of developing and maintaining games.  In the medium term, the top tier will continue to dominate - Zynga, Playdom and Playfish.

2. Next generation social games will take graphics and game play to another level. Social games are moving up in terms of quality and consequently investment required to build them. The novelty value of a Mafia or Farm games will wear thin and game publishers will need new ways to wow people. 

3. Virtual goods is the monetization strategy of choice. Although in-game advertising, or product placement, is also showing good results for publishers and advertisers. The imperative to monetize games quickly has spawned a whole new sub-industry of virtual currency providers and monetization platforms.   

4. Gambling has a role to play in the social games space. Both in terms of engaging customers in the game and potentially in terms of monetizing the games. Zynga Texas Holdem is still the best of example of this on Facebook. Others are Roulette Madness, Blackjack Madness and Poker Madness.

5. Operating as a publisher in the social games industry requires special capabilities. 3 month development cycles for new games. 3-5 release per week to update content, add new features, promotions etc. Localisation of content and promotions. Constant demand for more levels, more advanced features and novel game play from high activity players. Near real-time data analysis and content optimisation.  

Then there are the statistics:

• Facebook is dominant (400 million registered users), except in Russia, China, India and Brazil. 
• Virtual goods is a large and growing industry ($8bn in Asia, $1bn in US). 
• Zynga is a big, fast growing company (800-900 employees, $200M revenue)
• Without Facebook notifications, the split between paid acquisitions and organic growth will be 80/20
• 97% of people are willing to engage with a brand in a game if they get something for it, e.g. levelling up.