Social Gaming Expands as Casual Gaming Gets Nervous

Giff Constable games, social games, social media, virtual goods

Casual Connect just took place in Seattle and Dean Takahashi over at GamesBeat has done a great job capturing some of the trends in this part of the games world: Part 1 and Part 2.

Some of the most interesting quotes:

  • Social games might hit a half billion in revenues this year. In 2007, before a price war began, casual games were an estimated $2.25 billion industry. … In the past year, the “try before you buy” model collapsed.
  • Playfish has 8 million daily active users, has raised $21 million, has 200 employees, is profitable, and doesn’t spend money on marketing
  • Playdom, which is the leading social game company on MySpace, has 75 employees and is expanding to 200 in the next four months, if it meets its hiring plans. … Zynga is already at 350 employees and contractors, and still hiring aggressively.

While a lot of attention is paid to the relative ease of distribution on the social networks due to viral capabilities that come with those sites, and which are cleverly designed into the games themselves, I do not see journalists paying proper due to the cross-promotional power that Zynga and Playfish have created.

Every time a player engages with one game, they are exposed to the rest of their games through cross-promotional toolbars. I believe this plays a huge role in why Playfish and Zynga’s new games leapfrog to the top of the charts, and it is of course why these companies have become attractive venture capital investments, because the cross-promotion power takes a lot of the risk out of the publisher model (i.e. you’re not simply relying on good design).

I also strongly believe that the microtransaction (virtual goods) business model plays a big part as well, as it not only allows players to get hooked for free, but it is essentially a personalized pricing model, i.e. every player sets their own level of “value” (often as impluse purchases), and this has expanded the overall market size.