Long before social networking sites such as MySpace and Facebook set up shop online, there was a social element to playing video games. Gamers have always congregated together, extolling or deriding the merits of one game over another, participating in tournaments and broadcasting their gaming exploits and accomplishments.
However, the flap that erupted in January when board game makers Hasbro and Mattel tried to the put the kibosh on “Scrabulous,” a Facebook application very similar to the “Scrabble” word game, as well as the uproar from Facebook users that followed, highlighted a growing trend — social networks’ gaming potential.
“You take a look at the nature of social networking, and the notion of them being able to play casual games as an extension with the people on my network is a very logical thing. Then we see the reverse for years. Xbox has built out their whole Xbox Live community on the notion of social networking,” said Michael Gartenberg, a JupiterResearch analyst.
“They didn’t call it that. They called it a ‘gamer community,’ but that’s essentially what it was. I could interact with those people. I could send them messages. I could chat with them. Of course, I could play games against them,” he added.
A Game Changer
With at least 200 million combined users, Facebook, MySpace and other social networking sites have a vast and varied audience. When Facebook created a developer platform for site-based applications, many others followed, and it opened the door to an entirely new genre of online games.
“Scrabulous” was developed by brothers Rajat and Jayant Agarwalla, and attracts nearly 650,000 daily users on Facebook. As the legal dust-up demonstrated, in less than a year, social network gaming has emerged as a major draw for users of the sites.
“This is sort of flipping the idea in reverse and saying, now that there are these networks that exist for social interaction on the Internet, what are some things people are going to want to do? Well, they’re gonna want to play games,” Gartenberg told TechNewsWorld.
“That’s sort of what the ‘Scrabulous’ folks tapped into pretty quickly and said ‘Hey, what’s a great game you might want to play with someone online?’ A perfect type of game for that is ‘Scrabble.’ I’m not surprised that it was a particular hit. It really meshes well with the type of social interaction that people have,” he continued.
On Facebook alone, there are currently more than 2,700 gaming applications. Of the site’s most active applications, “PathWords” and “Word Challenge” hold the No. 1 and No. 2 spots. Two of the applications with the most active users are games — “Scrabulous” and “Texas Hold ‘Em Poker.”
Recent data points to a “one-to-one relationship between the number of game or application uses and the number of people on Facebook,” according to Shervin Pishevar, CEO and cofounder of Social Gaming Network (SGN). SGN offers both games as well as a platform for developers that leverages people’s social connections.
“You’re not going to see a one-to-one relationship like that yet on Bebo or MySpace because those platforms don’t have the level of app or game infrastructure yet. That’s not to say it couldn’t happen in a year,” he pointed out.
Only some 10 percent of the applications on Facebook are games, Pishevar explained, citing a study by Flowing Data on the 23,000 applications on Facebook during the week ending May 3. Games, however, came in behind so-called “just for fun” applications as the second largest category.
“It looks like 3 percent [to] 15 percent of Facebook [users] are using our product on a typical day,” he told TechNewsWorld.
While not every member of a social network plays games, as social networks become more heterogeneous age-wise, the amount of non-gamers increases just as the amount of gamers increases, Pishevar said.
“So you have got both populations growing as the size of each network increases. If you were to add up the populations of MySpace and Facebook right now, you’d be looking at something the size of say, Mexico, California, Washington and Oregon combined,” he added.
Casual Gamer Paradise
The increasing popularity of social network gaming has not gone unnoticed by at least two major game publishers — Electronic Arts and Activision. In an interview published in an April issue of Conde Nast Portfolio magazine, Bobby Kotick, president and CEO of Activision, said he believed the company’s growth rate would continue to outpace that of the market and Activision’s competitors. The one thing he identified as capable of holding the company back was the challenge to figure out how to make a gaming experience more fun than any of the many Facebook applications out there.
In February, game maker EA announced EA Blueprint, a new division charged with, among other things, the creation of social media games as well as using smaller teams to develop games. That followed the December 2007 release of “Smarty Pants” for Facebook, a scaled down version of the popular trivia game for Nintendo’s Wii.
Other signs pointing to the growing recognition of the importance of social network gaming are recent reports that EA has purchased social network gaming startup Rupture, by Napster creator Shawn Fanning, for $30 million.
Also recently, during Europe’s Gamers Day event, Sony Computer Entertainment Europe highlighted its pursuit of the social gaming genre. The PS3 maker said it has focused on the creation of games in which players “of all ages socialize through gaming.” The company touted its EyeToy products, puzzle and trivia games such as “Buzz: Quiz TV,” available at home or portable via the PlayStation Network.
“There’s such a low bar of entry to doing this type of applications for building them on top of Facebook, which is really a core platform tool. We’ll see different games and lots of people experimenting here. What we’re going to see is that any place there is a community, any place where people are establishing those type of get-togethers, one of the natural activities within those spheres is playing games,” Gartenberg stated.
This is a trend that will only continue moving forward, he added, with game vendors absolutely continuing to scale down popular console-based games for social networking communities.
For the most part, the sector will remain heavily devoted to casual gaming. Games such as “Warbook” on SGN, which brings social networking games one step closer to something like “World of Warcraft” and away from the widget-like simplicity typical to most social network games, is for now the exception rather than the rule.
“Social network game play usually last between five and 15 minutes, and that matches up with the average length-of-play for casual game play. Most of the new games that are coming online in the English-speaking networks are fairly immersive in that they take up 80 percent of the screen,” Pishevar noted.
A Path to Dominance?
While the popularity of social network gaming has attracted the attention of industry leaders, the segment’s gold rush sort of atmosphere could prove problematic unless new avenues of profitability and distribution are explored.
“The problem with the sector is that there are few barriers to entry, and a lot of companies chasing share of the rapidly growing revenue pie. Thus, there will be tons of competition, and most participants will have trouble making money,” said Michael Pachter, an analyst at Wedbush Morgan.
Developers have few options when it comes to developing games for social networks and generating income. For those who think they have the next “Scrabulous” on their hands, it’s difficult to find viable routes to profitability, said SGN’s Pishevar.
“The developer could simply create the game and pay a PR or a social media firm $50,000 to $100,000 to promote it and hope for the best, hoping that any advertisers or sponsorship would offset the difference,” he explained.
What developers need to understand, Pishevar continued, is that social network applications and games do not follow the “Long Tail” curve, meaning that there are not varying levels of success for these games, typically.
“Essentially, developers are staring at a really ugly hockey stick-shaped graph when they’re evaluating successful games on social networks. And that makes for crummy odds for talented game developers to break through,” he said.
SGN, introduced in beta in February, is trying to change that, according to Pishevar.
“Rather than taking the frustrated game developer’s stand of ‘Hey, this sucks,’ we’ve decided to take a more ‘Palo Alto’ position on this and say, ‘Hey this sucks; let’s order a pizza and reinvent the business model.”
The viability of the sector does not hinge upon how robust the developer tools are, but on how brands decide to monetize the totally engaged audience that these games bring to the table, Pishevar stated.
Non-intrusive advertising from big brands such as Comcast and the NBA has been added to games on the SGN network. The ads are opt-in, so gamers can choose to watch a 30-second promo for cable or not, he said.
Another possible revenue stream is charging users for the application if they want to play with other gamers, but the ad-supported business model will continue to dominate.
“It’s the most cost-efficient way to get people to pay for this type of functionality, of getting some value out of the functionality,” said JupiterResearch’s Gartenberg.
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