Are Social Games Losing Their Lustre?

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Social gaming is now a multi-billion dollar industry expected to pull in $14.2 billion by 2015, analysts say.  Yet developers in this space are finding it harder and harder to get their slice of those billions ($6.1B this year).  Growing pains are hitting the social gaming industry hard.

King of the game gang is Zynga, whose titles like Mafia Wars and Farmville have been the most-played games on Facebook for years.  The company is about to go public and expects to raise about $1 billion in revenue from that move.  Money that will pay off some debt and get their next titles out to the public.

Something that Zynga needs to do as Mafia Wars 2, it’s latest release, appears to have been nothing near the blockbuster they’d hoped for.  The follow on to the previous time killer has been wracked with bugs, user complaints, and abandonment after only a few hours’ play by the average player.

While revenues at Zynga are up ($306.8M at least quarter), profit is down by more than half from last year ($12.5M, a 54% drop).  This is reflected in the rest of the social gaming industry too, where costs of acquisition (money to get players) are rising fast as increased competition makes building a fan following difficult.

Electronic Arts, which has only recently moved into the social gaming sphere with the hit Sims Social, a knockoff of their popular Sims series for the PC.  Despite that game’s huge following (33 million users to date, 19% of which play daily), the game has yet to turn a profit.  Why?  Marketing.  EA spent millions marketing the game aggressively, which largely accounts for its popularity.

Analysts predict that only about 1/3 (or 33%) of social games are reaping a profit.

Innovative ideas are changing how games monetize, however.  Zynga has started making in-game ad deals, doing the video game equivalent of product placement – something movies and television have been doing for years.  Others are likely to jump on board with this plan.

However it works out, the social gaming industry is getting highly competitive and over users who are becoming more and more discretionary about their online time.


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