As an amateur video maker who works in social games, I find it extremely surprising that Social Games, once derided as having no possible profit potential, are able to generate powerful revenues. Because in the video world, ‘monetizing content’ is still a far-away dream.
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This evening Mark Pincus, the CEO of Zynga, announced on his blog that Zynga would begin phasing back in offers after temporarily shutting them down due to the whole “ScamVille” controversy. The primary source of controversy was IQ Quiz advertisements which we’ve covered extensively on AllFacebook over the past year. While sources vary on how large of a revenue stream offers were, sources stated that accounted for upwards of 33 percent of Zynga’s revenue.
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Yesterday Mark Pincus, the CEO of popular social gaming startup Zynga, went on Charlie Rose to discuss the future of the social gaming space. There’s nothing really new stated except for a brief mention of a new startup created by Mark Pincus’ wife. Over the past couple years, Zynga has surged to the top of the social gaming space, now attracting over 230 million monthly active users across all their applications. While growth has appeared to slow for the holidays, Zynga is leaps and bounds beyond any competitors at this point.
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Zynga is really ramping up funding for the company with a new investment of $180 million from Digital Sky Technologies (DST), the same company which has purchased $300 million worth of Facebook stock, earlier this year. Included in this funding round will be a portion of the money which will be allocated to allow employees to sell some of their shares as well as other investors in the company.
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Zynga’s at it again. The social gaming company has launched a mobile version of Scramble Live for the iPhone and the iPod Touch.
The game itself, if you’re unfamiliar, is a grid of letters that can be connected to form words (think word search with options for all-directional word creation). While the words themselves cannot be re-ordered, the grid can be rotated in its entirety. This gives you additional perspectives in order to find your words. As with many other Zynga games made for the iPhone, Scramble Live takes advantage of the accelerometer, though this particular use case may not be as exciting as an action-oriented video game.
I gotta admit this game is pretty addictive for me in its online Facebook app version. I know… I’m a sucker for word games and they’re of the few things I get viciously competitive about. So I’ll be happy to take advantage of some of Scramble’s social features in order to beat all of you.
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Don’t thing social gaming is a big business? Think again. Zynga, one of the leading social gaming platforms on Facebook and MySpace announced at the end of the year that they were cash flow positive. Today PaidContent quotes Tim Chang of Northwest Venture Partners who says, “they’re making something like $30 million to $40 million per year mostly from people buying Texas Hold ‘Em chips on Facebook.”
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Last week I posted about Zynga’s Live Poker application. Within days the application has jumped to become the number one free application on the phone and number 8 overall. Social Gaming Network, a competitor of Zynga, experienced similar success on the iPhone with the launch of a could Wii-like games but their success appeared to come at the expense of their social application network.
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This morning Zynga, the leading social gaming company, announced this morning that they have launched their “Live Poker” iPhone application. The company claims that this is the first “live game” on the iPhone, meaning that it’s the first to interact with other players in real-time. I’ve actually played a version of the classic game Connect Four in real-time but perhaps this is the first high-end live game. I’m guessing that they mean this is the first live poker game on the iPhone.
The application lets you play with other players that are actively playing the company’s popular Texas Hold ‘Em game across other social networks including Facebook and MySpace. Also of interest is that this is the first iPhone application to leverage Facebook Connect. The free version of the application, which you can access here, provides you with 1,000 free chips a day.
If you wish to upgrade you can purchase the $10 version of their application and you’ll have 40,000 chips daily. As Erick Schonfeld points out, trying to get any more chips on a daily basis will be challenging since the iPhone platform doesn’t allow for micro-transactions yet. Zynga is the first social gaming company which continues to grow on other platforms while extending on to the iPhone platform.
Social Gaming Network (SGN) has experienced massive success on the iPhone platform but it has appeared to sacrifice their social platform games at the expense of their mobile games. Playfish, the current leader on Facebook (according to Adonomics and Developer Analytics) has yet to expand into the mobile space. When I interviewed Sebastien de Halleux back in August, I asked him about whether or not they planned on expanding on the iPhone.
He said that they were looking into it but didn’t provide anymore details. It’s clear that the social gaming space continues to heat up and Zynga continues to be one of the leading competitors in social gaming.
When the Facebook platform launched over a year ago, many observers of the new platform quickly realized that gaming was quickly becoming one of the most popular category of applications on the site. What appeared to be revolutionary about this new series of games was the turn-based model that was seamlessly integrated into the Facebook experience.
Once other platforms launched, this “new” genre of games quickly followed. At the time, I think many people were simply amazed at the sheer number of users playing extremely simple games like “Scrabulous” (which was recently shut down). What many began to realize was an explosion of casual gaming through which I believe the awareness of each others’ gaming activities was a catalyst for.
More recently I’ve been wondering about the concept of a “social games” segment as part of the general gaming industry. Prior to sharing my personal thoughts on the matter, I thought it would be best to give a general overview of social games and the companies behind them.
Within months of the platform there was an explosion of “social gaming” and soon enough, many people (including myself) were convinced that social games were the next big thing on social networks. So what exactly makes a social game different from other games? I believe that there are a few factors which differentiate social games from the others:
So for the purpose of this article I’ll go ahead and put forth a definition of social games. As you will see toward the end of this article, there is still room for debate over whether or not such forms of classification are justified. So here is my best definition of social games:
Social games are a structured activity which has contextual rules through which users can engage with one another. Social games must be multiplayer and have one or more of the following features: turn-based, are based on social platforms for providing users with an identity and are casual.
Since the launch of the Facebook platform a little over one year ago, a new set of companies have emerged to tackle the social gaming market. Each different in their approach, a number of companies have begun developing a wide range of games that target a broad audience of users. Below are a few of the leading companies that are involved in social gaming in one form or another. If I miss any, please feel free to let me know.
Zynga Gaming Network
I’ve written about Zynga a number of times on this blog. The company was started by Mark Pincus (who I previously did a podcast with) and really became a leader thanks to their Texas Hold’em game which now attracts over half a million users daily on Facebook and has close to 1 million total installs on MySpace (where active daily users are not publicly reported).
The company has raised a number of rounds of funding, the most recent one bringing in a whopping $29 million. Zynga is a company to keep you eye on as they have a killer set of investors and advisors and continue to grow at a steady pace.
Social Gaming Network
Social Gaming Network was founded by Shervin Pishevar and was an outgrowth of Webs.com (formerly Freewebs) after having a successful launch of what remains to be one of their cornerstone games: Warbook. Since the launch the company has raised a number of rounds of funding including a recent round from Jeff Bezos.
While the company has been building and acquiring games, making them the 4th largest network on Facebook in terms of installs, none of the games continue have the same sort of blockbuster quality that a number of Zynga’s games have. That’s not to say that this company is out of “the game” (pardon the pun), they are far from it.
This company definitely needs to start launching new games though. While speaking with Shervin Pishevar at last week at f8, it sounded like launching a number of new games on multiple platforms is part of the short-term game plan. With this company’s team of advisors and investors, there is a ton of potential moving forward.
Kongregate
When it comes to social gaming, Kongregate was in this space before it was defined “social gaming”. The company’s largest presence is their destination site but back in May the company made a play for building their presence on social platforms with the launch of the Kongregate Facebook platform. It doesn’t appear that their first attempt was highly successful but the destination site continues to attract a considerable amount of traffic.
Kongregate attracts a network of game developers and helps them promote their games through their site. The company also occasionally develops games of their own. So far their model has been effective at generating a substantial amount of traffic. Whether or not the company can translate that success onto social platforms has yet to be seen but as long as the company keeps innovating it doesn’t matter where they decide to position themselves.
Gaia Online
Gaia is one of the other large social gaming companies that doesn’t have a substantial presence on social networks. The company has developed a site in which users interact via their own custom avatars. Those avatars can then choose to participate in games, watch movies and simply participate in the community.
Playfish
Playfish is a more recent company on the social platforms but they have a solid team of developers and management. The CEO of the company has a history in mobile gaming and is trying to convert his lessons learned to the social gaming sphere. Right now it looks like the company is doing an amazing job. They only have three games so far but each of them have over 200,000 active daily users and appear to be growing.
The company’s most popular game is Who Has the Biggest Brain? and it has been around for months as it continues to attract the attention of Facebook users. I’d keep your eye on this company as it looks like they have some big plans cooking.
Serious Business
Serious Business is best known for their immensely popular Friends for Sale application, written by Siqi Chen. The application was so popular that it has since been duplicated on the MySpace with great success by other companies that ripped off Siqi’s idea. One of those companies (or individuals) now has the most popular application on Facebook.
The company became serious about social gaming when they raised $4 million from Lightspeed Venture Partners back in April. They have yet to release a second game yet but if the second game is anywhere near as popular as their first one, this company could become a serious force to be reckoned with. They already have the 9th most popular application on Facebook so the company has a lot of opportunity to extend that success to future projects.
One key thing that I’ve been trying to determine over the past couple weeks is if “social games” should really be granted their own category. While there is a new set of companies that have emerged as a direct result of the opening of social platforms, most social games mimic the features that make other multiplayer games successful.
Personally, the launch of the iPhone has transformed my idea of “social games”. There are now a number of games that I can play at dinner with my friends and family such as Connect Four, Tic Tac Toe and a number of others, all of which I would consider “social games”. While the users I’m playing against may be physically present and don’t have an identity tied to an online social network, it’s inherently a social activity.
As such, I believe that the “social gaming” networks will slowly begin to mimic traditional gaming companies and simply become part of the group. Those that don’t adapt quickly will slowly drift into oblivion while those that do adapt will quickly become leaders in the gaming industry, not just in this newly created category of “social games”.
Do you believe that social games deserve their own category? How would you define social games? Is there any important points that I missed?
Yesterday it was announced that Zynga game network had raised a massive $29 million round of funding led by Kleiner Perkins. This follows a $15 million round raised by Zynga’s competitor Social Gaming Network and further emphasizes investor confidence in the future of social gaming. Earlier this year I spoke with Mark Pincus about the future of Zynga networks and social gaming in general.
The timing couldn’t have been better as rumors had been spreading around that Zynga was having trouble getting their new round of funding among economic turmoil. With the news of funding, the company also announced the acquisition of YoVille, one of the largest virtual worlds currently on Facebook with over 150,000 active daily users. The acquisition of YoVille also positions Zynga ahead of Social Gaming Network as the largest social gaming company on Facebook based on the total number of installs.
Measuring the top gaming companies based on the number of total installs doesn’t paint a totally accurate picture though. Social Gaming Network for instance, appears to be dwindling. Their active daily users have dropped and according to a number of sources, the company is now having serious problems with developer turnover. I will be interviewing Shervin Pishevar, CEO of SGN, later today to find out more about challenges facing the company.
According to Techcrunch, things appear to be booming at Zynga, “The company raised $10 million just last January, and Pincus claims he still has all of that money in the bank and is cash-flow positive with 80 employees.” While there appear to be new competitors popping up on a regular basis now, Zynga has established itself as the leader with the third most active game on Facebook (Texas Hold’em Poker), a dominant position on Facebook and now probably the largest war chest of any company in the space.
With funding galore for social gaming companies, there is no doubt that this space will be heating up over the coming months. In my opinion, the real test will be how the social gaming companies adapt with increasing competition from other platforms, especially the iPhone. Will we begin seeing more graphic intensive games? Will we see the launch of games on other platforms? For now we will have to wait and see.
