So You Wanna Break Into The Facebook Social Gaming Market
By Anna Johnson on April 6th, 2010What could be more fun – and lucrative – than starting a company that makes social games for Facebook? Hold on there, you might want an insight into the economics of Facebook games first…
Social gaming is hot, with industry revenues projected to be USD $1 billion this year according to PopGames. Even hotter is Facebook social gaming, with Facebook being the most popular social gaming platform right now. But breaking into this exciting industry is NOT as easy as it may seem…
Social Times’ Nick O’Neill recently wrote an interesting article about the economics of Facebook games, based on a presentation by John Pleasants, CEO of Playdom, at the recent SXSW conference. Some of the interesting take-aways from Nick O’Neill’s article are as follows:
- It costs between $100,000 and $300,000 to develop the average social game for Facebook.
- It costs at least 50 percent more – $150,000 to $450,000 – and sometimes millions more to MARKET the average Facebook game.
- Large gaming companies measure marketing costs on a ‘cost per install’ basis i.e. the cost of a customer installing a game. The average cost per install is around 50 cents, but can sometimes reach $2 to $3 per install.
- Social gaming companies make money via advertising or micro-transactions, such as virtual goods sales. 90 percent of Playdom’s revenue derives from selling virtual goods.
Here’s the shocker: about 2 percent of Playdom’s customers account for its virtual goods sales.
- A ‘successful’ social game is one where the average paying social gamer pays $20 per month for 3 to 6 months.
- Based on Nick O’Neill’s math, Zynga’s super-successful Facebook game, Farmville – with 30 million daily users, an estimated 600,000 paying customers (2 percent) per day, each generating $20 per month – is generating $12 million per month or nearly $150 million per year.
Those development and marketing costs don’t look so ridiculously high now, do they?
Then again, as in the movie business (which, as Nick points out, is pretty much the model for the social gaming industry), you just never know whether your game will be a hit or not, so spending those huge amounts on development and marketing is a risky proposition for anyone without big coffers.
And, with the Facebook social gaming arena becoming increasingly competitive, costs are only likely to increase: production values will rise, requiring bigger development budgets, and the marketplace will become increasingly crowded, requiring bigger marketing budgets.
- Social game developers are increasingly using Facebook Ads to market their games. Apparently Zynga is the biggest advertiser on Facebook.
That’s probably not ideal from Facebook’s perspective i.e. having a company that is so reliant on the Facebook ecosystem also being the biggest supporter of that same ecosystem. Alternatively, having that position must provide Zynga with some relief in light of its own dependence on Facebook as the platform for its game.
- MySpace, what’s MySpace? Although Playdom began developing social games for MySpace, it now gets 75 percent of its traffic from Facebook, and MySpace is becoming less relevant as a social gaming platform.
If some or all of these costs have your head spinning or are putting you off the social gaming market… WAIT!
With so many people playing and making social games, creating an ebook or home study course on how to PLAY some of these games may be a better bet for the average Internet marketer…
Source: Nick O’Neill, “The Economics Of Facebook Games,” Social Times, March 22, 2010
Related Posts
- Social Networks: 1 In 2 Social Gamers Use Virtual Currency
- The Average Social Network Gamer Is a 43 Year Old Woman (and Other Interesting Findings About Social Gamers)
- Women are Active Social Gamers
- Worldwide Mobile Gaming to Reach $18 Billion by 2014
- Facebook Members More Valuable Than MySpace Members
