Ronnie05's Blog

Social redefines the gaming domain

Posted in Gaming by Manas Ganguly on November 23, 2010

Zynga’s m-Cap ($5.51 billion) has reportedly edged Electronics Arts’ m-Cap ($5.22 billion) in NASDAQ a month back. Zynga, maker of Farmville is remembered for its contribution to social gaming and analysts in bouts of enthusiasm have called it “Google of social games”. EA’s identity on the other hand is more of a traditional videogame giant with blockbusters like FIFA.

So then, is this the rise of one social game startup over the fall of a traditional videogame giant? Not quite. This is not about social versus traditional anymore. Instead, let’s look at this match-up as competitors battling it out across new platforms.

EA has been aggressively expanding into new gaming territory, including social. The company bought startup Playfish, then the second-largest social games developer, in November 2009 for around $400 million. The course of transitioning out of being a traditional console game publisher hasn’t been easy for the company and it has been rocked by declining profits, share value and layoffs. Inspite of the fact that turnarounds take time, and EA’s online revenues are looking pretty good. This fiscal year, EA expects its digital businesses — including mobile, downloadable games and social games — to reach $750 million, or about 20% of total revenue. That’s about the same, if not more, than what Zynga’s total revenue is estimated as. And that’s not to mention EA’s more than $3 billion in revenue from console and PC game sales.
Impressed by the success of Zynga and Facebook, virtually all of the major traditional game publishers have begun incorporating social games or elements into their products. In effect, everyone in the industry has become “social”. Seen through this longer-term lens, the competition among these companies will ultimately come down to what it always come down to — who has the better games.

The social games business is a hits-driven one, because players flock to whatever game is new and popular at the time.
That’s still as true now as it ever was. Zynga clearly has a lead in social games with its popular FarmVille title. But even that hit is on the decline in terms of number of users, down more than 25% since its peak. It is very possible we may never see a social game with as many users as FarmVille again because the market is fast fragmenting.

Smaller audiences in games aren’t necessarily a bad thing. A game like FarmVille may have all the users, but the average spend per user per month is low, around 10 to 20 cents. But a social game under an IP that commands a smaller but more loyal user base, like EA’s FIFA Superstars, can see an average as high as 50 cents to $1. And EA has a number of traditionally strong franchises under its roof that it’s been rolling out onto Facebook.

Meanwhile, both companies know that social alone isn’t enough either. It’s about having an entertaining game experience that exists across multiple platforms. To that end, both have been pushing out mobile titles and making acquisitions of mobile game developers. EA, for instance, just bought the Chillingo, the publisher of the popular iPhone game Angry Birds, last week. (Though the purchase did not include rights to the game, which belong to its developer Rovio.) And Zynga bought iPhone developer Bonfire Studios, earlier this month. The company also recently released FarmVille for the iPad.
Zynga has certainly been a rocket-ship of success, achieving what it has in just four years. But that doesn’t mean social gaming is poised to capture the larger market. Instead, Zynga’s success has brought the company to a new level of competition that’s not social — it’s about the games.
4

Advertisements
Tagged with: , ,

One Response

Subscribe to comments with RSS.

  1. […] and more people are spending more and more of their online times playing social games with their friends. Users are willing to spend money on games that they find valuable. Marketers are exploring this […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: