Social gaming has been the biggest success story of the four-year-old Facebook platform, but only now is Facebook rolling out a plan to offer a dedicated gaming experience, get game developers to stop spamming its non-gaming users, and make some serious money off of them.
Facebook has now implemented two ways to extract its cut of game developers’ success — Facebook Credits to pay for in-game virtual goods and advertising bought by application creators to attract users. Credits alone could be a $1 billion business next year, according to sources, from which Facebook will take a 30 percent cut (and we should have more info on that when the next Inside Network virtual goods market projection comes out next week).
Game developers have had incredible success attracting users on Facebook; 200 million people actively play games like “FarmVille,” “Bejeweled Blitz” and “Happy Aquarium” on the platform today. And advertising paid for by game developers accounts for a significant portion of Facebook’s revenue. But overuse and abuse of Facebook’s viral channels has led the social network to cut back the functionality game developers depend on — a move that has caused public feuds.
The new developments announced this week give developers better ways to engage gamers through a left-hand column games dashboard that includes usage-based game bookmarks, requests and notifications. But they also make a clear divide between the 200 million Facebook users who play games on the network and the remaining 300 million who don’t and are often annoyed by game updates splattered all over their feeds. Now gamers will see stories about their friends playing games they themselves also use, while non-gamers will see an aggregated update about a game only if a bunch of their friends are playing it. Gamers can’t even use a game to post on a non-gaming friend’s wall to invite them to play. These channels had previously been significant sources of viral growth for games, a major attraction of the Facebook platform for developers.
The Death of Virality?
One game developer described the changes as “the nail in the coffin of virality on Facebook.” Since it will be much harder to reach people who don’t already play games, developers will have to spend more money on Facebook ads to attract new users. It already costs something like $2 to $3 in advertising to acquire a user who becomes an active player, said developers. That’s an amount near-impossible for many to recoup. “Certainly we are not seeing $2 to $3 lifetime value,” said one CEO of a gaming company.
The reason Facebook is removing viral channels is because spammy games were ruining the site for many people. Users who don’t play games delete “10s of millions” of applications’ wall posts per day, said Facebook. Griping about game notifications has been Facebook’s no. 1 topic of complaint from its users, according to a source. And employees at Facebook were frustrated the company wasn’t getting a cut of developers’ hundreds of millions of dollars of revenue on virtual goods.
Game developers are happy that they’re finally a Facebook priority but say they are worried by this new walled-garden approach. They’re also upset about being relegated to a games dashboard that’s out of the main feed. And they would have appreciated a heads-up about the change so they could have developed for it in advance. Still, calling game developers into to its Palo Alto, Calif., headquarters on Tuesday to woo them with new features was a nice gesture compared to the past. In March, Facebook removed game developers’ ability to persuade users to come back to games by using the site’s network notification system. Since losing access to those notifications, Zynga’s “FarmVille,” for instance, has dropped to 62 million monthly active users from 84 million.
It’s About Time
Nearly everyone can agree that Facebook is trying to create a better customer experience and encourage better games. Whether or not the social network giant can attract users who pay for themselves is another question. One long time Facebook developer told me, “focusing developers more on retention rather than engagement will end up being a positive thing for the platform in the long run.” Another said, “I don’t think Facebook is obliged to give away its users for free. I think it’s been an absurd situation — a bonanza of heavily discounted user acquisition.”
But it’s possible that by allowing spammy games to exist for too long, Facebook conditioned many of its users to be comfortable in the non-gamer category. Those users may be irretrievable at this point. And it’s possible that without the viral channels they’ve come to depend on, game developers will look to other platforms like Apple’s iOS. Facebook will need to figure out ways to encourage up-and-coming game developers and recruit non-gamers to play. It should also offer new ways to make games themselves engaging, such as “features and policies that encourage social interactions between friends during gameplay,” said Peter Relan, executive chairman of CrowdStar. On the game developer side, there’s an opportunity as well; often these times of flux are a good chance to shoot out in front of the competition and succeed in the new paradigm.
The reality, however, is that game developers are going to benefit in spite of the hurdles laid out above, because Facebook now wants them to grow, because it can make money off of them. Of course, the platform-maker will maintain control and continue to make chafey moves — but everyone’s interests are aligned now.
Please see the disclosure about Facebook in my bio.
