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The State of the Social Game Nation

Last year I wrote that Zynga and other social game companies had troubling times ahead. This year, how have they fared? Are social games prospering or are they actually done?

Today was a day of really big social game news. Zynga announced that they're adding up to 1,000 servers a week sometimes to handle their every-increasing data load. AllFacebook published an article of ten mind-blowing (their words) statistics about social games claiming among other things that 50% of Facebook users play games and only log in in order to play games. Which, for 500 million users, is not bad at all. 

So all is well then?

Actually, neither of these things is the big news. The really big news is a post on the Facebook blog from Jared Morgenstern about a platform change that is, at a stroke, likely to effectively end the last so-called viral channel on Facebook: Wall publishing. 

Here's the key part of Jared's post:

"Previously, you've had the ability to hide an application story, or block it completely. Now, we're putting changes in place so game stories only post to your feed if you're playing them. This means people who play games can post stories to their Wall without worrying about overwhelming their friends who aren't playing, and people who don't play games won't see irrelevant stories in their feed for which they have no context."

Here's what this basically means: Uh-oh.

In a widely-read article last year called Zynga and the End of the Beginning, I outlined why the social game industry had grown to a huge size so quickly, but also how the use of viral channels had led to user dissatisfaction. I talked about the drivers of why players play games, player uptake and so on.

My conclusion at the time was that unless social game developers started to really do something about the quality of their content and worked hard to over-deliver on the value of their games, they would be stuck and possibly even start trending downward.

Nine months later, with big news hanging in the air, how are things working out?

The Lack of Growth

As I said last year, the predominant model of social games is and continues to be spam distribution rather than anything really social. A year ago there were several channels for all games. The most effective of these was Notifications and Wall publishing because they were wrapped up in areas where the user had to look (as opposed to Requests etc where they don't). At the time of last writing, Facebook were closing off Notifications because they had degenerated into a spam channel and users hated it. 

Killing Notifications essentially killed social game growth. Some new game trends came through and - predictably enough - got copied by major developer. But the overall user bases remained essentially static. Zynga have much the same number of users as last year, Playfish/EA lost some users, Playdom and Crowdstar have bobbed up and down. 

In short, as many predicted, the change to opt-in virality from Facebook really put the boot in with regard to growth on the platform. Farmville lost about 20 million users, Fronterville hoovered a number of those up, but on the whole life became a lot more about holding position and buying advertisements to keep everything going. 

This also validates what I wrote about Novices and Veterans. While the rate of social game growth has been essentially a net zero all year, the rate of new users on Facebook continues to grow. I predicted that it would take Facebook a long time to reach 500m users (and boy was I wrong on that) but also that the ratio of novice to veteran users would create downward pressure toward niche apps.

I think this has essentially been validated: the share of users in the mainstream social gaming apps as compared to the overall users in Facebook has fallen dramatically even though the levels of ad spending inside Facebook by the big game developers has increased. 

Now the interesting part is this: The Wall channel is now also being closed (or at least, much reduced) and is instead focused only on players that already have a game installed. The only time that a user will, in future, see a message from an app that they do not have installed is if other friends of theirs have installed the app. That does not answer the question of how users are supposed to discover apps in the first place however, so the network effect has just taken a serious dent. 

What that means is that wall publishing will only really be effective for apps that are finding their way into niche communities of friends that are already interested in those apps. Everything else is going to need mass advertising, which is good for Facebook's coffers but bad for would-be Zyngas that were hoping to replicate their path to success. That ladder has now been pulled up for good.

Uninspired Content

It is perhaps unfair to compare this year's content to last year's because it was the breakthrough year in may ways for big social game developers, but there really hasn't been all that much going on in new games this year. There are new titles, but they mostly feel as though they are not straying too far from the middle ground. And, as usual, there's quite a lot of copying going on.

The biggest one is Frontierville which, it could be argued, is essentially Farmville 2. There is a lot of similarity between the two of them. Their next biggest was Treasure Isle, a clone of another successful game called Treasure Madness. Aside from those two Zynga's top lineup is exactly the same Poker, Mafia, Yoville and Petville combination of last year, and many of those games have smaller user bases than their peak.  

Playfish also appear to have had successes with Hotel City, FIFA and and My Empire - but at the expense of many users from their other games (and, as predicted, their Mafia and Poker games languished). These games have been copied or are copies of other games now as well. A number of football games now exist, lots of city games exist, but none of them could be described as particularly exciting however. 

I wrote at length last year about the equivalent quality of the social game space, and high prevalence of "special sauce" thinking. This sort of thinking is still around. The problem, as I said before, is that content churning attitudes among game executives (treating your audience as much the same as fast food merchants do with their customers) tends to eventually lead to slides or breaks.

So the problem of undifferentiated content remains more or less as-was, and the boom period for most of these games is getting shorter. Social City, for example, has peaked at 12m users but already fallen back to 5m. Happy Aquarium at one point had 28m users and is now down to 12m. Again, this reflects a jadedness within the audience as a whole, reflecting the fact that because many of these games are much the same, act the same, charge the same and pester users the same way, they're being identified as the same by users a lot faster than they used to be.

The formula is wearing thin and there's not really a lot being done to solve it. A lot of developers have scrambled toward identical packaging, identical sounding game names and identical game types because - so far - they have not really seen the need to change up their successful formula. They are continuing to crank the handle.

The other significant risk posed by Facebook ending wall-publishing as a way to attract new customers is that it means that casual discovery will go out the window. While the thinking in Jared's blog post goes that friend networks will lead to greater discovery along those lines, I suspect that a lot of discovery of games comes through repeated appearance and accidental/incidental clicks. Actively asking users to look out for small posts, or go to the Games Dashboard and actively search for games, presumes that users really care that much.

The bet is that if the special sauce content is actually only mildly engaging to the point of boring, users may just not bother to go looking, or only look as far as the advertisements that they see (and then only for a while because web ads tend to become less effective). 

Bucked Trends?

I wrote that the other risk was the developer whose game is hard to copy, and yet addictive. While this is true in principle, it has not been seen to happen in Facebook this year. It is a constant threat, but there is an issue arising over whether the technology that powers most of the games on Facebook (Flash especially) is actually able to deliver such a leap. So far the answer appears to be no (and this is possibly why more interesting developments like Angry Birds have happened on iPhone), so for the moment at least it doesn't seem like a technological vaulting is going to happen.

Nobody has, as yet, created the game that is hard to study. Facebook has not yet had it's Sims or Doom moment where a developer makes a kick ass game that other developers are unable to decode immediately, and it may well be the case that Flash is simply not the technology to make that happen.

Many are looking to Unity3D as the game plugin of the future. Unity is in many ways still in its infancy, is not installed on a majority of browsers, and it has competition from both Adobe and Microsoft. On the other hand it is powerful, works natively with 3D, and has an excited an impassioned development community behind it. Unity is a trend that has yet to break.

For the moment, however, no trends have been bucked. And we may be a while away yet from that happening.

Still Not Sexy

Social game developers are still not sexy by the way. Everything I wrote about this 9 months ago is exactly the same as it was: These companies are failing to build a following and there's still no sign of much in the way of long term planning.

A good example is the lack of a Zynga API: With a customer base of the size that Zynga has, they really should be acting much more strategically to weave themselves into the fabric of the web, as other big successes in the web eventually do. Zynga's biggest asset is not its games, it's the sheer number of eyeballs that they have. That asset has two potential uses:

They can think like Yahoo, as a portal, and try to and hold onto the traffic that they have acquired for maximum revenue potential. This is largely what they have been doing so far, but the examples of what happens to companies that try to do this show that they often start to leak users as their way of treating users shifts over into exploitation. 

Or they could think like Google, Twitter and Facebook, and leveraging their user base to direct users at many more games from many more developers (possibly for a cut of their resulting revenue).

A startup from Finland is doing just that with a plug-in application called Applifier. The idea is very simple: Rather than relying on a big internal portal, developers can cross-promote through a common bar. Launched only a few months ago, Applifier is so far shifting something on the order of 55m users between games by different developers.

Applifier is an example of an idea with long term potential. But big game portals? That's a harder sell because they eventually get stuck.

Beyond Facebook

Even Facebook realises that there's more of a future in being part of the platform of the web itself rather than just a site that people go to. Facebook has enabled logins on thousands of sites, "Like" buttons are everywhere and their payment platform is not going to be that far behind. Mark Zuckerberg gets that it's all about the web in total, not just his corner of it.

Social game developers like Zynga are acting in a much more closed fashion however. There's been some ventures onto other social platforms, essentially setting up stalls in Bebo, Myspace and so forth, but these offerings are fairly limited. There's been dotcom addresses for some social games - which attract decent traffic - but not exactly a gargantuan leap forward. 

This trend toward an interconnected Facebook also increases the threat of an off-platform game becoming the next big social game. An off-platform game has much fewer restrictions in terms of screen size and content delivery than an on-platform social game. The main attraction for staying on-platform to date has been one of easy access to audience, and that's not necessarily such a huge draw any more.

At the same time, most of the major developers have just signed partnership deals with Facebook to remain on-platform and use Facebook credits for the next 5 years at just the time when Facebook may have killed off their last source of cheap oxygen. Does this mean that there's going to suddenly be a flurry of acquisition and consolidation of on-platform developers? Possibly. Price competition between similar games? Very possibly.

Is Facebook platform going to stay a peaceful and profitable source of easy money? I suspect not. Let's see how the next 9 months go.

(you can follow me @tiedtiger on Twitter)

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