the state of social gaming gdc - san francisco 9 march 2010

The State of Social Gaming

GDC - San Francisco

9 March 2010

Justin Smith

justin@insidenetwork.com

News Inside Facebookwww.insidefacebook.com

Inside Social Gameswww.insidesocialgames.com

Research Inside Virtual Goods: The Future of Social Gaming 2010Inside Virtual Goods: The US Virtual Goods Market 2010www.insidevirtualgoods.com

Annual Conference

Inside Social Apps 2010: Bringing Together Leaders in Social Games and Virtual GoodsSan Francisco | 20 April, 2010www.insidesocialapps.com

Focused on the Facebook platform and social gaming ecosystem

The Social Game Landscape

The Western Market

2009: $490 million

2010: $835 million

Growth on every continent

Virtual Goods in Asia

2008: $5 billion

2009: $7 billion

Source: +8*

The Big 31. Zynga

700+ employees $200+ million in 2009 ~3x more DAU than #2

2. Playfish 250+ employees ~$75 million in 2009 Acquired by EA 11/2009

3. Playdom 300+ employees ~$50 million in 2009 #1 on MySpace

The ContendersCrowdStar

Quick rise to #2 on Facebook by DAU

RockYou Operates the largest

ad network on Facebook as well

Slide Was long time #1 by

MAU (but not games), transformed business into virtual goods model

The International Players

Rekoo – Animal Paradise, Sunshine Ranch

Elex – Happy Harvest

Five Minutes – Happy Farm

wooga – Brain Buddies

6waves – Adopting a publisher model

The Developer Opportunity

Facebook continues to grow around the worldFirst “truly global” social network

Business models converging on virtual goodsCan rapidly spend, test, and iterate for revenue

Some challenges lie aheadMarket getting more crowded, network effects kicking

in

Social Gaming Distribution

Facebook 400 million users and counting – 70% of

which are outside the United States Rapidly evolving Platform – new rules every 6

months

Facebook Connect – bringing Facebook to every website and device

Facebook Credits – coming soon

Facebook

Facebook• Africa: 10M

• Asia: 70M

• Europe: 130M

• North America: 140M

• South America: 35M

MySpace Used to be #1, now

declining slowly Still #2 social

gaming platform in the US

Good ARPU, but only the largest developers can afford to build cross-platform games

Global Social Networks

Hi5 Orkut Friendster Vkontakte QQ/Qzone Bebo VZ networks Maktoob

Twitter Is this a social

gaming platform?

I don’t think so.

Game PortalsWhat is the

value of your portal’s social graph vs. Facebook’s social graph?

Game Changers

Facebook Connect Now, the same social

graph is on any website, platform, device (mobile!)

Same identity and “viral channel” access, less Facebook.com constraint

What parts of the Internet never developed because the social graph wasn’t available?

Rise of Virtual Goods in the West

Now the major revenue model for western social game developers

Variety of direct payment methods

Offers still portion of purchases, but declining

Rush of Competitors

“Social media/widget” developers

New startups Traditional

publishers Casual game

developers Asian developers

Monetization

Direct Payments Inside Social Games

PayPal still dominantMobile increasingly

important Asia with a commanding

lead, Europe just behind, US just getting started

Other alternative direct methods, like pre-paid cards, growing Zynga, Playfish, Playdom

arriving in US retail Q4 2009

Performance Ads and the Offers Controversy

Represent a minority of social game developer revenues – now smaller %

Some ads were deceptive Self regulating pretty

well, though platforms have most leverage

Ultimately, developers need to get users monetizing directly pretty quickly

Increasing Competition

Many new offer providers in the last 12 months Regional focus Ad networks bringing

relationships

As offers become smaller part of the market, becoming payment aggregators

Organizing & Optimizing

Monetization becoming horizontal in some multi-studio companies

Some developers make multi-month content plans before releasing

Virtual economy optimization is now a core competency

The 12-18 Month Horizon

The Big 1: Zynga From 0 to 10 million in

7 days – rinse and repeat Tough to defend

against… The increasing value of

cross promotion Smartest ad spenders

behind LTV Will have more staff

than Facebook in 2010

Facebook’s Relationship with Developers

The only constant is change

4 weeks ago: Email sharing

2 weeks ago: The death of notifications

What’s coming next month?

Changing Monetization Landscape

Facebook Credits coming soon – but what will the rules be? Fees? Restrictions for other

providers?

Banner ads hanging around

Who will challenge Facebook?

Is Facebook going to keep steam rolling social networks everywhere? Where will the carve-outs be, even where

Facebook is far and away #1?

Who is going to challenge Facebook’s social graph? Other games portals? Consoles, or device manufacturers?

2010 and BeyondFacebook grows to

500, 600, 700 million…

Virtual goods become “normal”

International opportunities grow

Who will be the next CrowdStar?

News Inside Facebookwww.insidefacebook.com

Inside Social Gameswww.insidesocialgames.com

Research Inside Virtual Goods: The Future of Social Gaming 2010Inside Virtual Goods: The US Virtual Goods Market 2010www.insidevirtualgoods.com

Annual Conference

Inside Social Apps 2010: Bringing Together Leaders in Social Games and Virtual GoodsSan Francisco | 20 April, 2010www.insidesocialapps.com

Focused on the Facebook platform and social gaming ecosystem