Social gaming: The hype is justified

There’s no shortage of hype about social gaming at the moment, resulting in substantial buyouts of social gaming startups by large media conglomerates. The statistics are pointing to massive growth numbers, specifically around micro-payments and around the vast numbers of users playing social games on a daily basis.

Martin Walfisz on Quora.com defines a social game as “a digital online game that: (1) uses a player’s social graph to provide an enhanced game experience, (2) facilitates and encourages communication about the game while outside of the game; and, (3) has a minimal barrier to entry”.

Most definitions refer to a social game as a game that is played within a social network environment, with asynchronous communication taking place in the form of messages, gifts or requests.

Typically, social games have some form of virtual currency built into them as publishers need some way to offset the massive investments needed to develop a world-class social game. It is estimated that the Virtual Goods Market is set to generate US$7-billion per annum by 2012, with US$1.7-billion turnover expected in the USA during 2010, the bulk of which is revenue derived from social gaming.

There is no doubt that these numbers and the popularity of social games will continue to grow, especially with the increased penetration of smartphones across the globe. Nokia is now shipping 280 000 smartphones a day and this segment of the mobile handset market is what’s fuelling the growth of the mobile web.

This is an important point, as social gaming is not only played through traditional web browsers, but is accessed from browser-enabled mobile handsets. This trend is set to continue on a spiralling growth path.

Gaming is serious business, and the figures speak for themselves:

• Zynga, the largest social game provider, recently announced that Digital Sky Technologies (DST), along with other investors, has agreed to purchase approximately US$180-million of the company’s shares. South African emerging market media giant Naspers holds a stake in DST.
• Industry insiders believe that Zynga could be valued at around US$1.5-billion to US$3-billion;
• Playfish, a rival social gaming company, was acquired by a traditional gaming company, Electronic Arts, for US$300-million in November 2009;
• Riot Games, a leading independent developer and publisher of premium online games, has closed a round of financing with the top venture capital firms, Benchmark Capital and FirstMark Capital, and the Chinese online services company TenCent in September 2009 to the value of US$8-million. TenCent is another company that Naspers has a stake in;
• Playdom builds games that run on social networking sites such as Facebook and MySpace. Disney is in talks to acquire Playdom for US$500-million. Previously the company raised a total of US$76-million in funding;

Social games are attractive to advertisers and publishers for a number of key reasons:

• Even longer gameplay – a deeper brand experience
• Leverage the social networks and their viral power
• Leverage the trust of social networks
• Leverage the technology of the social networks
• Take advantage of the acceptance of virtual currencies
• Long term benefits — the game becomes a property that a brand can leverage off for years, it’s no longer “just a campaign”

The facts speak for themselves with 24% of the US/UK online population now playing social games. In the US, 56-million people play social games. Twenty-four percent of people now see social networks as their primary source of “gaming” and 83% of all social gamers use Facebook to play. Ninety-five percent play multiple (2-3) times per week, and 61% play for more than 30 minutes each session. Social gamers play on average 6.1 social games. (Source: PopCap, Gamezbo & Mashable.)

There are countless solutions available to publishers and advertisers and it’s often an onerous task to try and understand what elements are required when embarking on developing or launching a social games solution.

This is a typical checklist of features to look out for when deciding on a solution:

• Superior game or games catalogue, including multiplayer and single player titles
• High score logging, with live Leaderboards
• Challenges, allowing users to instantly challenge their family and friends
• Tournaments with a form of recognition, possibly in the form of virtual trophies
• Messaging & Comments
• Micropayments for buying power-ups, customising games and pimping avatars
• An avatar creation platform — allowing users to create custom avatars, pimp their avatars, message, set moods and access themes for free, and/or, to buy sponsored content
• Game customisation platform, allowing users to create their own custom games
• Enhanced post-game screens, featuring Rankings, Featured Content, Friends Achievements and Challenges
• Badges for achievements
• Virtual Gifts, allowing users to buy gifts when inviting friends and/or to send to existing family and friends
• Invite Friends to join them in the social games platform
• Extensive Backend Features and Reporting for publishers to manage the users, promotions and content

There is no doubt that all this activity is great for the game playing population. The choice is endless, with users being able to play their favourite social games from home, work, or while commuting and, sadly, even while on holiday.

The reality is that there are now more businesses developing games than ever before, and each one of them is looking to strike it rich. This is no easy task as the key to this pot of gold is that you need users — and lots of them. This is either achieved by having relationships with publishers or developers that have large user bases.

There are numerous opportunities available for publishers and advertisers to increase their brand and product awareness and even to earn revenue from aligning with successful social game brands.

Publishers can leverage off opportunities that include CPA deals for referred users that sign up or in some cases they can create white-label versions of the social games, which allows them to offer the solution to their user base within their website. Often, this includes the integration of their user registration engines, with those of the social games registration platform.

The opportunities for advertisers to increase product or brand awareness in social games include traditional banner advertising around the games, inclusion of product and/or brand within the games, sponsorship of virtual goods, and banner or video ads as pre-rolls which can also be flighted during the various levels within these games.

There is no doubt that the social gaming market will continue on its current growth path and become ever more entwined in our daily lives.