Industry Insights

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At our upcoming Hackathon in Boston, we'll be sharing a first glimpse of our Android SDK for mobile app developers who want to add social hooks to their apps and games.  Sure, some Android games can connect to your personal network of friends on Facebook now, but how does that happen?  What the players don't see or likely care about is how much time the app developers need to spend keeping their apps updated to take advantage of the back-end services that the social networks provide.  That's where Viximo shines.

By leveraging this newest SDK, mobile app developers can write their social network integrations once, and we'll take care of the heavy lifting and updates when they're ready to open their games up to the world of users on multiple social networks.  Heck, we'll even take care of native messaging, real time presence detection, recommendations and tracking requirements for those platforms too.  We've been doing it on the web for years, and now we're going mobile.  Learn more at the Hackathon and watch for detailed resources posted to the site coming soon.

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To follow up on my last post, I decided to take a look at how men and women use social notifications on our platform. For the uninitiated, notifications come in three flavors:

●     Invites, which are sent from one user to another, encouraging new users to come play the game
●     Messages, also sent from one user to another, often used for sending gifts or other specific items
●     Activities, which are posted to a users’ wall or other social feed, highlighting an achievement, mission accomplished, level-up, etc.

Looking at behavior over the past 6 months, activities by far are the most utilized form of social sharing on the Viximo platform. Nearly twice as many people have posted an activity than have sent an invite. That doesn’t mean that activities are more efficient for viral growth; the conversion rates from invites and messages are higher than from activities. In other words, users are more likely to click on a private message from a friend, rather than an activity post that is likely to get lost in their social feed.

What about gender differences? On average, men on our platform are 10% more likely to post activities to their social feeds. Women, on the other hand, are nearly 20% more likely than males to send invites. They also tend to invite more friends (22 on average, vs. 18 for men). Both genders are equally likely to send messages, but women send nearly 50% more messages per user.

Is it any surprise that guys like to blast their entire friend group with posts about their accomplishments within social games, while gals prefer one-on-one interactions? Maybe not. But considering the long-held stereotype that social games are made for bored housewives, I wasn’t expecting men to be big social sharers when it comes to game activity (at least not publicly).

Notifications are an important component of social game play (they put the “social” in social gaming). Obviously, they are key to growing your user base, but can also contribute to retention. It can be a challenge for both game developers and social networks to make the most of viral channels. Knowing how men and women use different types of notifications can be a key part of the optimization process. After all, viral channels are free, and who doesn’t want to reduce their marketing costs?

Anyone else out there surprised by these results? ...

Now that social games have evolved past simple farming games to a full-fledged multibillion dollar industry, does anyone still believe that the typical social gamer is a 43-year-old woman? While most of the initial games on Facebook appealed to this demographic, social game content has grown in both volume and variety. Sure, there are still a lot of clones out there - look at the sheer number of farming games - but new genres and game mechanics have emerged that pull in a much wider audience.

To demonstrate this, I took a look at three of the most popular games across the Viximo network, focusing on gender.

GAME 1 - Big Business. This graph is probably what we would typically associate with a social game. Females account for about 60% of the users, views, and revenue for the game across our network:

GAME 2 - Ravenwood Fair. This game, deployed on similar sites as Big Business, has a slightly different pattern. Males make up half of the audience, but are much less engaged and certainly don’t monetize as well as females:

GAME 3 - Backyard Monsters. On the other end of the spectrum, this game blows the whole “housewives are the only ones playing social games” theory completely out of the water.

As these data show, social games aren't just for women in their 30's (despite what your core gamer friends might have you believe). As with traditional games, social games can appeal to many different demographic groups by providing carefully tailored content and functionality. Each segment of users has different - and potentially advantageous - usage habits and spending patterns. This is where Viximo comes in.

As a social game distributor, we use a game’s demographic data (among other things) to inform our approach to advertising, cross-promotion, community messaging, sales and incentives, and more. Making a great game is a big part of success, but getting it into the hands of the right users is even more important. ...

Read an interview with Viximo's CEO

Wondering what the opportunity is for social game developers beyond Facebook? Our CEO, Dale Strang, sat down with Gamasutra to enlighten them on the subject. Some of the highlights:

• Many developers either think the off-Facebook opportunity isn't there, or is too difficult to take advantage of.
• While Facebook may be the single dominant global player, there are a number of high-quality, regionally targeted social networks with engaged audiences across the globe.
• Understanding these markets can be a difficult task for developers (this is where Viximo comes in).

While the freemium model originated in Asia, the North American social gaming industry has so far been evolving in an inward-looking fashion, focused on consolidating products and users in America or, generally, the Western hemisphere. However, recent trends suggest that the industry will begin to see some transpacific activity; there will be a push in Silicon Valley towards moving into other markets – especially to Asia where there is an existing history of and demand for social games – and an equal level of incoming interest from Southeast Asian developers looking to expand into the U.S. market and cross pollinate their offices, products and personnel.

Zynga acquired XPD media in China and Unoh games in Japan, a clear indication that the company has plans to grow eastwards. Zynga would need to localize its games for the Asian market but with such strong partnerships, the expertise is likely to benefit them greatly. Indeed, Zynga just launched its public beta for its first international title, Zynga Texas Poker, in traditional Chinese, catering to local cultural norms by offering prizes in denominations of the lucky number 8, such as 8,888 poker chips.

Other stateside game developers are also expressing an interest in distributing to Asian social networking sites. Earlier this year, Viximo conducted a survey of the industry’s top independent social game developers, and 35% indicated that they plan to distribute their games on RenRen in the next 12 months, while 32% plan to be on Mixi.jp by next year.

Interest from Asian side has also been strong: SoftBank Japan invested $150 million in Zynga and $10 million in RockYou, while Japanese mobile and social game developer DeNA is on an investment spree in the U.S. and having acquired or invested in four American gaming companies this past year, appear to be aiming to become a household name in the U.S. gaming market, particularly in the mobile realm.

Additionally, traditional video game makers in Japan are facing with a shrinking home market demand as the social games sector explodes. Following a fiscal year net loss of $316 million, Namco Bandai is preparing to supply two games to Facebook, and it is very likely that Capcom, developer of Street Fighter and Resident Evil, will also begin to offer social versions of these games on Facebook and other U.S. based social networks. China’s social networks tend to create their own games and have otherwise closed platforms and sites that are experimenting with open platforms are often accused of promoting their own games with more viral notifications than those created by third parties; thus, they are more likely to find success distributing on American social networks that are more open and third party friendly. ...

It took a while for social gaming to become accepted as a legitimate genre by the gaming giants, but major game publishers are now embracing virtual goods and the industry is heating up with activity.  Big software players like Electronic Arts and THQ are getting their feet wet in social games through acquisitions of independent studios and by launching free-to-play versions of popular console games. Ubisoft has entered the arena already, launching games like Tick Tock, Horse Gaga and Vineyard Country on Facebook, but has not seen much success with those titles.

On the console side, Microsoft is estimated to have earned over $600 million through virtual goods on Xbox Live, and Playstation is looking to social games to breathe life into its barren Home virtual world. We expect that these companies will inject huge amounts of production and marketing dollars to support these new ventures, especially as they compete with Zynga and Playdom, and many are heralding this as the inevitable end of the independent game studio. However, we believe that the “little guy” will actually continue to thrive in the social gaming sphere, particularly because the big players’ strategies will be lacking in three critical areas:

1. User Acquisition

Software gaming giants are used to traditional distribution models of in-store purchases or direct downloads. In contrast, social games have a very different purchase funnel: purchase intention is flexible and highly influenced by viral factors; commitment cannot be guaranteed because the games are free to play; and conversion to a paying user involves providing just the right kind of incentive at just the right time. Moving a player through the funnel and monetizing their activity require an intimate understanding of how social game mechanics tie in with their respective distribution platforms, and over the past year, social game studios have invested a lot of money and energy into learning these nuances. The big software developers who are just entering the space will pump marketing dollars into the social game sphere, but without knowledge of how to properly monetize users, their user acquisition costs will end up exceeding the lifetime value of the user. Instead, smaller social game developers will have a treasure trove of knowledge about how to aggressively monetize a smaller audience, and will succeed in cultivating a more profitable user base, through better game design and improved use of the social graph and viral notifications.

2. Distribution

Major game publishers entering the social space will play it safe and look to follow Zynga’s lead by distributing on Facebook – we have already seen Ubisoft launch three Facebook games. Facebook is attractive to game publishers because of its ability to deliver large audiences and because it is the only place where they can leverage their marketing budget, as no other platform has an advertising platform that they can utilize so effectively. But as described earlier, Facebook is oversaturated – there are over 550,000 active apps on the platform – and the big software players will fail to take advantage of the opportunity represented by so many other distribution channels because they will be so focused on Facebook. Instead, smaller developers will innovate in the way their games are distributed and see greater success this way.

3. Content

The online gaming industry operates like the Hollywood studio model: find a formula that works and create one mega hit that recoups all costs; after all, a large share of the gaming industry’s software revenues are generated just by the Grand Theft Auto franchise. Major game companies will take a similar cookie-cutter approach to social gaming and this will be a big flaw in their strategy. It’s no secret that current social games are all variations of the same theme – the numerous lawsuits between social game companies point to the lack of creativity – and users are starting to get worn out with the simplistic, repetitive game play dynamics of first generation of social games. And while the big players will be improve production values through larger budgets (including leading the march towards 3D social games), true innovation will be hard to come by in their offerings since many social gaming hits have come from acquired IP. As Zynga’s and Playfish’s acquisition spree slows down, its growth and innovation will also stagnate.

Instead, smaller, independent game developers will lead the process of improving game design and understanding how to convert players to payers during different trigger points within the game. They will also lead the way with game play innovation and making social games more social by adding text and voice chat functionalities between avatars, combined activities, tournaments and shared goals, and more interactivity between individual user environments.

Like our predictions for the future? Let us know what you think in the comments. ...

We’ve been saying this for a while: while Facebook is the biggest player in the market, it has now come to be synonymous with a cluttered marketplace, incredibly high user acquisition costs, and minimal access to viral notifications. The site has amassed half a billion users, but the growth of new social gamers on the site is steadily slowing down, with the drop off becoming exacerbated by increasingly stringent viral notification polities. In March 2010, Facebook reduced the effectiveness of notifications and 18 of the site’s top 25 games saw a loss in MAUs, including Farmville, which was dropped by over 4.5 million users over two months. In September 2010, Facebook came down harder on notifications by shutting down all feed items about games for anyone not playing games on Facebook. The impact of this change is yet to be seen but although Facebook needs social games to keep the site engaging, it is clear that it will remain focused on being a general social networking site and is unlikely to ever put the needs of game developers, such as improving discoverability of games through viral channels, at the forefront of the site’s functionality. Developers are realizing this and starting to look for other distribution options.

So what are these alternative distribution outlets?

Social Networks

While it is massive, Facebook comprises less than 30% of the worldwide social networking audience, and there are still millions of users beyond Facebook that can be monetized.

Other social networks are beginning to see the power of social games in helping them monetize user activity and providing a reason for users to keep returning to the site. MySpace is inviting game developers to work in its offices and collaborate closely to integrate social games; Hi5 is aiming to become a social game destination site; and niche social networks like Black Planet and QuePasa are making aggressive efforts with social games by working with Viximo.

For their part, some developers have also gained tremendous success by distributing their games entirely off Facebook; Vostu, the largest social game developer in Brazil, has more than 10 million active users playing its suite of games on Orkut. All of these moves point to an overall industry change that is afoot – social games will soon no longer be synonymous with Facebook, but become a standard feature on all social networks.Destination Social Gaming Sites

Despite having access to an audience the size of Facebook, social gaming companies like Zynga are feeling the pressure to diversify their distribution. The company has signed a 5-year deal with Facebook to use Facebook Credits, but is still pushing players towards Farmville.com, partnering with Google for additional distribution and is moving ahead with plans for Zynga Live, an independent platform where users will likely be able to play and socially interact between all of Zynga’s games through one platform. While these alternative distribution outlets for Zynga may complement its Facebook presence rather than compete with it, there is certainly a clear move to creating a destination gaming site that focuses on attracting casual gamers who want to play social games, not social networkers who might also be interested in harvesting a crop or raising a pet fish while they upload photos and comment on Walls.

Non-Zynga developers will also experiment with destination social gaming sites, mostly in an attempt to consolidate their players into one effective platform. Bigpoint, creator of Farmerama, is already seeing success with the dedicated Farmerama.com website, and with smaller players banding together to help cross-promote their games through tools like Applifier, it is possible that these same players might pool resources to create, and cross-promote, a destination site containing all their games.

Finally, Google’s recent acquisition spree has almost certainly confirmed its goal of launching a destination Google Games, and media companies are also making moves to incorporate more social games on their websites. MTV Networks, whose games sites (such as AddictingGames.com, Shockwave.com, Nickelodeon gaming sites and Neopets) are the number one destination for online gaming, recently entered the social gaming market through the acquisition of game developer Social Express. This raises the possibility that the company’s growth strategy involves harnessing the loyalty of its repeat users through social games that aggregate to create a social network-enabled destination gaming site.

A warning to destination sites, though: implementing Facebook Connect might be a tempting way to add a social quality to a gaming site and tap into the power of a user’s social graph on Facebook. But while Connect may seem to offer a best-of-both-worlds solution, some developers and site operators may find that it thwarts their efforts and siphons users away from their destination sites. Creating a destination site by leveraging the power of another social network makes the experience less about the site, and more about Facebook, defeating the purpose of going it alone.

Mobile

While the transition of social games to mobile might take longer for developers, and be tougher to accomplish due to very different technology and user experience requirements, the mobile platform will certainly represent an area of future growth for social games.

According to a recent study by Frank N. Magid Associates, over 5 million Americans are buying in-game goods on mobile platforms – to the tune of $168 million. It is becoming evident that successful monetization of mobile gaming mirrors successful monetization for web gaming—it does not lie in app sales or advertising, but in the free-to-play business model where players download the game for free, and pay to get ahead or enhance their in-game experience.

Mobile analytics firm Flurry also recently released data indicating that iPhone games, now enabled for in-app purchase of virtual goods, were generating an average of over $14 per user in June 2010, vs. $1 the previous year (before virtual goods could be sold within games). This exponential increase is only a precursor to the amount of growth that is coming to the platform as smart phone penetration increases and big players from the gaming and mobile industries start to enter the space. Zynga has already launched Farmville on the iPhone and iPad to resounding success; mobile achievement and leader-board provider OpenFeint is partnering with four game developers to develop a scalable mobile virtual goods platform; while simultaneously game studios, including Playdom and Zynga, are hiring mobile product leaders.  With Microsoft, Google and RIM also in the market for a slice of mobile gaming pie, the market is ripe for an explosion of virtual goods being distributed on the mobile platform.

Like our predictions for the future? Let us know what you think in the comments. ...