The future of social media gaming

Online gaming has been big business for some time, but social network gaming has really taken off over the last year with titles such as Farmville, and Mafia Wars spreading their viral tentacles into facebook news feeds, and picking up thousands of new users in the process.

Who would have thought a few years ago that people would spend real money buying virtual tractors and fertilizer. The graphic below shows that there will be an estimated $1.6 Billion spent on virtual goods this year. Companies such as Zynga (makers of Farmville), RockYou, and Playdom are generating some big revenues in this way.

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This all seems rather impressive, but some recent stats show that it is starting to get harder to achieve this level of success. Earlier this year Facebook changed the way developers need to create applications. These changes limit the notifications that show up in peoples news feeds. This has resulted in an improved quality of content showing up in the average news feed (less application “spam”), but also a significant drop in numbers of active users for these games. Farmville has dropped from a high of 85millions users in March to its current level of around 66million.

Obviously the popularity of games will rise and fall, but it is interesting to watch how people’s reactions have changed to wall posts generated from applications, and Facebook’s resulting shift in policies and guidelines for developers. Just like what has happened in the world of online display advertising (banners), people initially clicked, but now advertisers are getting increasingly diminished returns from their spend. Clicks are earned only with relevant and well targeted messages that add value to the consumer.

The same is now starting to happen with social networks. Applications within social media need to not only add value to a user, but also add value to that users social connections. People want more from their news feed than to find out that an old primary school friend that you haven’t actually spoken to since you were 11 years old has just bought a virtual cow. I suspect we will start to see a shift social media applications that will place more value and relevance to a users connections rather than treating them as purely a potential audience to broadcast to. If application developers can tap into these connections and even enrich them, then that is where we could see something truly remarkable.

This doesn’t seem to be stopping Farmville maker, Zynga from looking at ways to further promote its games. They are in the process of launching a campaign in the “real world” through 7-eleven stores in the US where characters from the game will appear on Slurpee cups. They have also secured an exclusivity deal with Facebook to form a 5-year partnership which will ensure that Zynga applications will remain part of our Facebook lives for the foreseeable future.

What’s your prediction on how social media games and applications will evolve?

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