Gaming Platforms Compared [Infographic]

There are a number of terrific platforms repositioning their strategy to become a social gaming centric network, including Hi5, Friendster, and others. With the introduction of Gamecenter, Apple has entered the fray as well from the mobile side.  But how to shake out the winners and losers early on?

It strikes me that Facebook’s own growth in the casual gaming market provides a template to assess the new entrants.  AllFacebook provides the following infographic which I found interesting in comparing the adoption, average revenue per user, and developer ecosystem size. I’ll highlight one point I think is grossly inaccurate however: they claim the average revenue per gamer is $0, compared to Apple’s $2.43 and Android’s $2.96.  Facebook’s games usually monetize using virtual goods, which are not included in the calculation. Still, average revenue per user is a bit lower on Facebook games (for more info, see appdata.com for ARPU per game).

Here’s the graph which otherwise is fascinating..

Inside the Google Gaming Hivemind

I’m sure you’ve noticed Google’s been on a bit of a shopping spree of late in the casual gaming space. First Slide, then Social Gold, Adscape Media, and now Social Deck. The rumor floating about is that Google is currently building a social network of their own to be named “Google Me” focused on social gaming and casual play as a direct broadside to Facebook’s success in drawing in gaming revenue and mindshare.

I’m hearing from a trusted source (sorry can’t name the person) that the project is focused on casual play as a differentiation angle, because let’s face it, simply providing a Facebook look-alike isn’t likely to draw a large army of switchers.  They’ll have to improve upon the original or create a new niche. That would make sense in light of Google’s pickup of Mark DeLoura, a gaming industry veteran with a resume including the likes of Ubisoft (more on that hire in a bit).

Former Facebook CTO Adam D’Angelo poured fuel into the rumormill fire on a Quora thread with the following (emphasis is his):

  • This is not a rumor. This is a real project. There are a large number of people working on it. I am completely confident about this.
  • They realized that Buzz wasn’t enough and that they need to build out a full, first-class social network. They are modeling it off of Facebook.
  • Unlike previous attempts (before Buzz at least), this is a high-priority project within Google.
  • They had assumed that Facebook’s growth would slow as it grew, and that Facebook wouldn’t be able to have too much leverage over them, but then it just didn’t stop, and now they are really scared.

So that’s the buzz (no pun intended) on the possibility of a Google Me project.

However…

There are mixed signals. Google CEO Eric Schmidt was fairly ambivalent on heavy gaming investments when asked about it at the Techonomy summit. Now I mentioned I’d return to the hire of gaming veteran Mark DeLoura. He delivered what was considered  a strong debut presentation he gave at GDC Europe showing off the Chrome Web Store for the first time. A few key slides DeLoura focused on showed games such as the popular game Plants vs. Zombies coming to the store in fact. Then he leaves Google after just 4 months on the job, quite suddenly and unexpectedly.

What Does it All Mean?

So we have some mixed signals but also  This post is my attempt to connect the dots here and what it means for you if you’re a game developer. I’ll note that I have had nearly no contact with Googlers and this is unabashed speculation on my part. However, I think you’ll see that when we tie together a good deal of publicly available data, a coherent picture comes into focus. Here are three data points to consider:

1. Apple Does More Paid Apps, Google More Free Apps -  Take a peek at this chart of the day, courtesy of SAI and Pingdom:

The difference might be due to a number of factors – for example, one is a walled garden while the other is an open source platform. It’s possible in the minds of many consumers open source and “free” are synonyms. In short, for Google to make a strong monetization push, they’re better off leveraging a free to play model than an app purchase model.

2. Mobile games are flying off the shelves

Take a look at 148 Apps.com, and count how many of the top ten paid apps are games. Yep, that’s 8 out of 10, and yes, the two non games are in the 9th and 10th spots. Of the top 20 grossing applications, a full 16 are games – same percentage. The takeaway is hard to ignore: if you’d like to make money in the mobile space, develop a game rather than an application. In-app/game purchase numbers are harder to quantify, but our own data across publishers suggests virtual goods in games are likewise outpacing in-app purchases by a similar margin.

3. The Hottest of the Hot are Free to Play Games

There’s been some speculation about free to play games and the amount of investment going into those games, and some (understandably) wondered whether a new bubble is forming.  It’s understandable considering Disney paid $563 million for Playdom, the sector’s third largest developer, last month, and as CNBC says, “That price could escalate to $763 million if the unit hits performance targets over time. The bubble argument falls flat when you consider there are real revenues behind the investments – poised to hit between $2 billion USD to $7 billion USD by 2015. The payback periods of some gaming investments might be measured in 2-3 years by worst case estimates, and even be measured in months the most optimistic estimates. That hardly sounds like a bubble.

EA's Battlefield Heroes - a free to play game

It’s about the Mobile Free to Play Games

Put all of the above data points together and think about what it means for Google.  I’ll wager Google’s logic goes something like this: ” We’ve become the default repository for the web’s data. The next frontier is mobile game data, which will drive web gaming and stands to become even more lucrative based on early returns. It’s not a bubble, it’s the real deal, and if we don’t move in quickly, we may ceed that position to Apple.”

Hence the Google pickup in three substantial areas of game development and publishing, including the trifecta of game development studios, game publishing infrastructure, and monetization/currency/advertising platforms.

Again, this is all wildass speculation on my part – what do you think?  Comment away below!

Casual Connect 2010 Presentation Slides

Yours truly spoke for about 15 minutes on real world pricing strategies and how to boost game or social network revenues using virtual goods at the Casual Connect Virtual Goods Lessons Learned: Real World Strategies panel. This was by far one of the most data intensive panels at the show; if you love data, you’ll enjoy going through the panelist presentations. Check it out and as always, feedback is appreciated!

Pairing Real and Virtual for Fun and Profit

It seems there’s no escaping Farmville – not on Facebook, and not in the grocery section of your local 7 Eleven market.  As cafemom puts it:

From Slurpees to sandwiches, you can now be lured by the appeal of the FarmVille crew. And not only will you be getting some pretty packaging marketing the game, you’ll also get codes for items you need/want to play the game.

For example, if you buy a cold sandwich, you will get a FarmVille Sandwich Cart. If you buy a fresh cup of fruit (at least it’s not all junk food!), a FarmVille Chocolate Persimmon Tree can be yours; and if it’s a FarmVille Neapolitan Cow you seek, then what a great excuse to pick up some ice cream.

“You will be assimilated” – Zynga

The idea is a clever spin on the offerwall concept, which provide an indirect monetization path for users who would not buy virtual goods or virtual currency outright. There’s a couple of things to be gleaned from Zynga’s foray into the convenience store isle.

Here’s our top 5 lessons to take away from the uber-sharp marketing partnership:

1. Spin the traditional model on its head. Most of the time offers involve a gamer deciding to purchase a virtual good and only then browsing purchases of subscriptions or physical goods to tender payment to the game publisher.  That simply means that a player who does not find an offer she likes will think twice about whether that virtual good is in fact worth the trouble.  There is the possibility that gamer might monetize directly, but since the player decided to engage in offers in the first place it seems unlikely she would do so (the data we’ve gathered supports this conclusion). The takeaway is that when building or evaluating a virtual economy management system, make sure it supports code based redemption like Doubloon’s Marketplace product or you’ll be limited to a reactive offer strategy.

2. Keep the List Simple. Here’s the list of offerings a player can redeem at the promotion website. Notice there aren’t many here; just enough to acquire enough good data to determine whether the promotion is goosing Zynga’s virtual goods sales or not. Simplicity also lets them plug the plug quickly and quietly if the promotion is a failure.


High Dive
Big Gulp $1.49

Fun Slide
32oz Slurpee Premium Cup ($2.49)

Neopolitan Cow
Vanilla Ice Cream Pint ($2.29)

Persimmon Tree
Fresh Cut Fruit Cup ($2.99-$4.99)

Water Tower
1 Lt. Bottled Water ($1.49)

Coffee Cart
Large Iced Coffee ($1.49)

Sandwich Cart
Sandwich (2.99-$4.99)

Goji Berry Crop
Unlock after any redemption

 

 

3. Pair Goods Strategically. Think synergy here. Buying an ice cream pint and getting the cow is a logical tie in of course, and good gameplay design even. But we’re not talking about just theme synergy here.

Some product tie-ins are way, way better than others

The tie in needs to make sense given the gamer demographic. John Deere farm equipment wouldn’t make sense here since Farmville’s demographic seems to be stay at home moms and their kids. The Farmville Neopolitan Cow is a perfect example. The promotion involves an elastic demand, splurge good like ice cream where an added bonus will nudge undecided buyers to buy.  A little treat from time to time won’t ruin a diet, and that extra goodie might be the motivation needed to make the purchase.  Teenage boys are arguably the target demographic of choice for Mafia Wars. The result? Zynga and 7 Eleven smartly connected Mafia Wars goodies with Slurpee purchases too (the breakfast choice of teenagers).

And while we’re talking about ice cream and sugar water..

4. Leverage Splurge Purchases. Tying the Farmville cow to a staple good like milk reduces the game publisher’s bargaining power, since milk purchases are fairly inelastic. That means the extra nudge isn’t very effective and thus won’t monetize well for the game publisher. Who’s going to buy a second liter or gallon of milk just to get another virtual good? The purchase of a second pint of ice cream is much more likely to happen.

5. Build Urgency Through Limited time Offers. Want that slide above? You have about 20 days to go buy a soft drink at 7 Eleven to get it. A lack of time boundaries eliminates the incentive to run over to pick up the paired real world good immediately. At least it did for me: I purchased one tonight just for the novelty of it.

More reading here, here, and here.

Three Trends To Follow in the Virtual Goods Space

Virtual goods have been all over the digital media space of late – more than usual. We can certainly confirm a big uptick in the interest we’ve received here at Doubloon about how to use market data to make better virtual goods pricing and marketing decisions. We’ve come a long way from the original indications that virtual goods are a viable way to grow revenues and engagement back in 2007. Today, indications that the hot item next Christmas may not even have a physical form at all and that governments are placing restrictions on minors buying virtual goods. If that’s not mainstream, I don’t know what is.

Amongst all the coverage, three key trends seem to stand out:

One stream of revenue among many

Who do we think of when we think of virtual goods? Mostly, Playdom, Crowdstar, and Zynga, whose Farmville raked in $145M in 2009. But there’s a much larger player in the virtual goods space who has kept a low profile. Thanks to its approximately 10 million Xbox Live Gold level subscribers, Microsoft has earned an estimated $625 million in virtual goods. Live subscribers typically buy shiny new gear for their avatars with all that virtual coinage. Microsoft isn’t the only player in the space betting big on virtual goods: competitors PlayStation and Nintendo are as well, with Nintendo also requesting dollars for Nintendo Points, while Playstation only accepts real world money (also a viable model if done correctly – some Doubloon customers do the same).

This multiple stream of revenue model isn’t new – think about your experience at movie theaters. Bought the movie ticket for you and your date? Great, how about some popcorn, a drink or milk duds too? The premium console guys have done a terrific job of realizing that multiple streams of revenue, including virtual goods transactions, are a great way to mitigate risk.

And just wait until virtual goods includes buying tokens to see a movie online. It’s already here – and Microsoft has been inking lots of content deals of late.

Motion Controls Tip the Scales Further

There’s ultimately two reasons why players buy virtual goods – to obtain a game play advantage, or because of a sense of ownership of one’s avatar in- game (and the associated social benefits). Now consider how that sense of ownership is strengthened by the big story at this year’s E3 gaming conference:

Nintendo’s strategy has been to differentiate the Wii platform with motion detection, proving the uptake in the casual games market rather convincingly. Sony now followed suit with Move, and Microsoft upped the ante by removing the hand held controller altogether with Kinect. Touch-based tablet computers removed mouse the abstraction layer and opened up computing to people like my mom. The logic here thus is simple: if motion controlled games do the same, you’ve got a bigger market. And bigger market plus a stronger sense of avatar ownership should lead to a marked uptick in virtual goods sales. We’ll be blogging about this far more on this in future months as we continue to track market movement in the motion controlled era.

Small time no longer

Virtual goods have been historically a great way to build a big player base by removing barriers to entry (such as subscriptions). The trick was to balance out revenues and eek out a solid profit stream by making virtual goods games simple and low cost to develop. That’s beginning to change and social games are beginning to think about player crafted items, and player to player transactions. In other words, something coming close to real virtual goods economies. Per coverage on news blog Techcrunch (emphasis added):

“Zynga spent more money developing FrontierVille than any other game so far. It lets players interact with their friends’ game boards, increasing the social aspect of the game beyond simply buying someone a virtual gift…. Pincus believes there is a huge opportunity in pumping up the social aspects across all of his games. In Farmville, for instance, Zynga recently turned on a new farmer’s market feature where players can sell their produce. Up next will be craft fairs, which will allow different players to specialize in different skills such as wine making or energy production.

In other words, Farmville and other Zynga games will behave more like virtual economies, with trade centered around specialization. And where there is trade and markets there are more social interactions, just like in the real world.”

Or put another way, some publishers are racing to develop the next ebay of virtual goods. One of the reason our clients are excited about our company’s platform is that the capabilities for smaller publishers are already baked in and ready to publish.

Smartphones are the Future of Mobile Gaming

ComScore’s latest report leaves little doubt that mobile gaming is increasingly dominated by smartphones and less by feature phones (i.e. non-smartphones). The numbers on the surface look worrisome, since the report indicated a 13% decline in the number of U.S. mobile gamers. Ouch. But if you look underneath the covers, that’s largely driven by a 35% decline in feature phone (i.e. non-smartphone) subscribers which more than offsets a 60%.. yes sixty percent growth in smartphone gaming. Here’s the comScore data in a nifty chart:

Mobile Subscribers Who Have Played Games at Least Once During the Month
3 Month Avg. Ending Feb. 2010 vs. 3 Month Avg. Ending Feb. 2009
Total U.S., Age 13+
Source: comScore MobiLens
Mobile Subscribers (000) Who Have Played Games At Least Once During the Month
Feb-09 Feb-10 Percent Change
Total 58,603 50,932 -13%
Non-Smartphone 45,236 29,538 -35%
Smartphone 13,368 21,395 60%

More info is available at the ComScore website , from which we shamelessly lifted the above chart.  The gist of all this is that as smartphones become ubiquitous, the total number of mobile gamers is expected to rise at a pretty fast clip. That’s not surprising to us at Doubloon because we are gamers and we think some of the mobile games on the market are just wonderfully fun. The obvious question becomes when will smartphones overtake feature phones and thus when will mobile gaming surge. Silicon Alley Insider and Nielsen predict smartphones crossover from niche to majority will happen sometime in late 2011:

The next obvious question is do mobile players convert at similar rates to web, console, and social network gamers? Does the average optimal price for virtual goods exceed that of web games, or fall behind it? The data Doubloon has collected over several games is still inconclusive, but early signs point to similar conversion rates and generally similar optimal price points. If that holds, the future of mobile for game developers indeed looks bright.

(Note: this is a cross post from my Doubloon blog post here)

Weapons of Mass Distraction

wotlk

Having trouble getting your laptop fixed today? You’re not alone. Blizzard Entertainment took a massive digital dump on IT departments all over the country today with its 12:00AM release of Wrath of the Lich King, which is the latest installment in the massively mutliplayer online timewaster World of Warcraft.

The outbreak of productivity drain will follow the same pattern of “Prequelitis“, the phenomenon which gripped IT departments when so many IT guys called in sick the day after a midnight showing of The 1999 Star Wars prequel movie The Phantom Menace.

In other words, today is basically the day after a night binge drinking. For geeks.

Now if you’ll excuse me, I have a Death Knight to create.