A social gaming manifesto

Zynga is in turmoil. Since its IPO, its stock has cratered, attracting public exposure of company morale problems that may be more than pockets of dissent. The company reorganized senior management, leading to the departure of its COO, veteran games exec John Schappert. Its emerging mobile strategy has failed to impress.

Zynga is the biggest fish in the social gaming pond, but videogame giant Electronic Arts is right up there on the charts, along with relative newcomers like King.com and Wooga. Disney never made much of Playdom in casual games, but its “Where’s my Perry” looks like it might be an iOS franchise. With increasing competition, it’s worth understanding whether Zynga’s troubles are unique to the company, or whether it is social gaming itself that is struggling.

Is “social gaming” a misnomer?

Tadhg Kelly, a game designer blogger, is on the money when he notes that most social gaming isn’t actually very social. Many so-called social gamers are just taking a quick break of time-wasting fun without necessarily involving a human opponent or collaborator. While there are unique characteristics to the current generation of social games – callouts to friends for help, integrated status updates – many are the natural successors to the kind of casual games like “Bejeweled” that have been around as long as the web. (And had paper-based predecessors before that.) In many ways, social networks are just a new vehicle to promote and distribute casual games.

Based on GigaOM Pro’s spring 2012 survey of U.S. online adults, social gamers and casual gamers have a lot in common. Twenty-five percent of online adults are monthly users of casual games – that’s a figure that hasn’t changed much over the years. Those casual gamers tend to be middle-aged women (61 percent female) and only 14 percent of them play multiplayer games like “Worlds of Warcraft.” Survey respondents who said they played games on social networks had similar demographic and behavioral characteristics. These social gamers make up about 15 percent of online adults and also skew female (60 percent) and middle-aged. Over half (58 percent) play casual games and 13 percent play multiplayer games. Thirty-six percent of mobile phone-owning social gamers play mobile games and 38 percent of casual gamers do so.

Social gaming strategies

Today, Zynga has built a billion-dollar business off of casual games built on Facebook’s social network platform. The company is metrics-driven – perhaps to a fault – in its effort to engineer games for frequent, casual usage, viral promotion, and virtual good sales to a relatively small number of heavy users. But there’s little evidence that those heavy users are classic hardcore videogamers or players of multiuser role playing games, so expanding into those genres probably won’t scale.

Casual gaming is a mature business in the U.S. Zynga and its social games competitors should follow these principles:

  • Manage the portfolio. It’s impossible to predict hits, so like other entertainment companies (movie studios, record labels) social games companies must manage a portfolio of titles, and jump on the ones that take off. Not every hit will be a franchise for sequels and spinoffs, so the key is launching lots of titles on a regular basis, doing as much analysis of them as possible, and vigorous cross-promotion.
  • Cultivate multiple revenue streams. Zynga has mastered virtual goods, but it needs to be more aggressive on sponsorship and in-game advertising. In fact, virtual goods-bartering shows a lot of promise as a sponsorship means. Facebook has enabled game and content subscriptions. That’s worth experimentation, but subscription may appeal more to hardcore gamers.
  • Build out the platform. I’ve given Zynga perhaps more credit than it deserves for starting to build its own platform. Successfully deploying APIs for technology and promotion to third-party game studios could help smooth out the ups and downs of the hits business, but only if social games platforms can generate revenues from licensing, advertising, or promotion fees.

Mobile might be different. Judging by the survey data, there’s reason to expect a similar number of mobile gamers will be high-spending “whales.” But that’s not proven yet, and apps stores are establishing a model of low-priced games rather than virtual goods. So mobile revenue experimentation is a must.

Question of the week

How can social gaming companies transition into mobile gaming?
Relevant Analyst
P1040724

David Card

VP Research Gigaom Research

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