Social Games: The Business of playing with friends

This happens to be my very first post, and unfortunately it’s a long one but I do hope those who read take away some value from this and I welcome any further discussion that it may lead to. A while back I was doing research for an early stage startup who wanted to break into social gaming. My study not only involved helping solve their dilemma of whether to develop for smartphones or social networks but also highlighted game design flaws which exist in the current generation of social games in order to suggest a more robust game design. I’ll be discussing both aspects of this industry in different posts. The first one covers the business side of things since I am an MBA.

I just want it to put it out there for the record, anyone who thinks Facebook gaming is passé, is short sighted and is giving up the opportunity to develop for a platform which has tremendous reach (acknowledging the fact that smartphone penetration is even higher). Things to keep in mind though:

  1. Social Networks, smartphones and tablets aren’t primarily gaming devices. Gaming as a recreational activity is secondary for both these platforms so you can have a billion users on these platforms but you won’t have 100% of the population playing games but whatever fraction it is, it is a sizable audience for developers to take notice.
  2. Each platform has its opportunities and limitations. Facebook is limited to point and click type games, smartphones and tablets are limited to the size of the screen and touch based or motion sensing commands. The level of complexity of actions a developer intends a user to undertake is limited to the technological advancement of these platforms.

Video games like most product based businesses has two critical aspects – Content (Quality) and the number of users (Customer Reach) developers can attract. I read numerous articles where developers complained about the rising costs of creating and supporting games over social networks ever since Facebook decided to plug its viral nature. The 30% platform fee of any revenue earned and advertising budget is becoming too heavy for developers to bear in an industry where only 2% of users spend any money on a game. But is it that different for developers developing core games. They also pay a platform fee of 30% and the retailer margin for the distribution of games. The difference being that developers include all these aspects into the price tag which the user decides to pay based on an informed decision. The same holds true for smartphones as well, the platform fee is still there and promotion is done through various media outlets if incase people at Apple don’t take notice of the game.

Well Facebook eventually took a step it should have a long time ago and introduced the App Center. The quality of users trying games is legitimately better of course, since Facebook made discovery more inbound i.e. users who want to try games can discover new games through the AppCenter. It was critical for Facebook to do this though since if it wants to retain its billion dollar valuation you can’t exactly tarnish user experience of the general audience whose news feeds were plagued with game updates of their friends. But doing this isnt unique, Facebook has merely replicated Apple or Google’s approach of app discovery. And similar to the stores for smartphones, Facebook has made itself a credible information source for quality games. Media outlets for information regarding games for smartphones or social network games although may be there but as far as I know aren’t as well established as compared to core games, which is obvious since these gaming formats are relatively new and it would take time to establish these media outlets. As a result, users can only count on the recommendation of the platform owner or their friends to recommend a good game for the most part.

As far as the business model goes, I just want to tell developers who may be looking to venture into this particular industry that this is not an easy option to take. For those who think they can shortchange people playing games and run with their money need to probably look at putting a price tag on their game and hire the best marketing experts who can make that happen. F2P model is built on a promise of better things to come in future. The relatively new marketing gimmick in core gaming which is analogous to this would be the season pass for games which are releasing across platforms where developers are charging users who have bought their games in return for a promise of added content in future. From a business perspective, it makes sense to milk as much value from a license. But how is F2P different? Well for one if a user pays any money in-game it’s as good as gone. You can’t even sell the game to someone; you can’t share it with your friends unless you want to give them access to your profile. It’s an investment. It’s an investment of a user’s time and effort first and at some point money. And you don’t want the user to pay once, you want him to keep paying subsequently as well. It’s a promise to wow users and keep them coming back for more. And when it’s a matter of investing, a developer should pay critical attention to their game design. Should it be about creating hurdles which can be only cleared on receipt of some monetary transaction or should it about providing further value to users. Remember, the user has tried your game already without paying a dime, now its upto you whether you want to give them hurdles or do you want to give them a value proposition to be invested in your game. Don’t be surprised if the users don’t pay or if you find an imitation of your game coming up soon after you have released your brainchild.

Think of it as the most basic marketing concept, the AIDA funnel. There’s a stark difference between the levels of the funnel for a full priced game and a free-to-play game. The funnel is much longer which in simple terms means, if a developer was able to spread awareness of its game to 100 potential customers, maybe 40 buy the full priced game but since the funnel is deeper for free-to-play maybe only 20 users pay for certain in-game items for your game.

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Disheartening if you see it like this but there is a flip side. If you have the craziest possible game ever to be created in the history of entertainment!! The amount of money developers can command from its users has virtually no upper limit in F2P. $60 per game sold VS $1000 per paying user (not all users but yes there are users such as these). If you get it right that is. Over and above the other godforsaken problem developers are concerned about, PIRACY goes right out the window because you can’t pirate something which is free to begin with. But there is a different sort of piracy at play here, before you know it other similar games that would creep up. Again, something to remember hurdles or value proposition to attract and retain users, what’ll it be?

But just so I make it clear, Free-to-play is not the answer to everything. If a developer spends $20-30 Million to create a game it would be far too risky and unsustainable to even consider going free if in case the game sucks but yes if you are developing on a smaller budget (some news articles suggest Facebook games cost somewhere between $100,000-$300,000) going free can lower the barrier to entry for users to try your game and stick to it.

In my next posts, I will discuss the existing flaws in current game designs and possibly how one can integrate a robust game design with this business model. Looking forward to your views and feedback.

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2 responses to “Social Games: The Business of playing with friends

  1. Nice post dude.
    even within F2P models for social games as of now there are 2 different scenario’s
    1. Zynga – content based. here you have to churn out content on a very regular basis to keep the players in.
    2. Kabam – System based. Here you have a robust system which makes the core game and you don’t have to make a lot of content on a regular basis.
    what are your thoughts about these 2 sub-models of F2P ?

    • Hey Mohit,

      Thanks for the comment. I think developers are far too involved in the micro level aspect of a game while they are churning out content that the big picture is lost. I think what the games lack most is a matter of perspective. Consider three games, Farmville, War Commander and Criminal Case.

      As far as Farmville and War Commander are concerned, one is about building a farm the other about base building and battles. But both games lack a certain perspective of a bigger picture. You can build a farm or a base, but is there a reason for me as a user to keep on doing that without knowing what the end goal is?

      Now if you consider Criminal Case, its a basic hidden objects game. But solving each case is an achievement in itself. The story and different characters in it are very basic, but I feel they hold the game together by giving a perspective expanding the game episodically with each case.

      You can read my other article regarding designing social games if I am still being unclear. And I would in time be writing up my analysis of some of the games I have mentioned as well.

      Thanks for the comment and let me know if my comment or article help you.

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