Social Game Developers Spending Millions on Facebook Advertising

While Facebook’s in-house platform ad network is still in early stages of alpha testing, it may in fact be driving significant revenues from social game developers purchasing Facebook Ads to help boost the launch of their games. This slightly more indirect method of monetizing its platform may actually be a pretty substantial line of revenue for the company.

For example, in an interview with Silicon Alley Insider, Zynga CEO Mark Pincus said the company regularly spends large sums when launching new titles.

“We do spend a lot of money on advertising when we want to, like when we launched Farmville,” Pincus said. “We spent a couple million dollars advertising it and we’re not shy about that.”

While Pincus didn’t say that that its advertising spend is exclusively focused on Facebook Ads, it’s likely that a hefty chunk of its was spent through Facebook’s performance advertising system. Therefore, we believe that large app and game developers like Zynga are likely some of Facebook’s largest advertising customers. Facebook sells ads on a CPC or CPM basis, but doesn’t offer a pure CPA/CPI (cost per install) product.

At the same time, Zynga probably directs a portion of its spend to Facebook Platform ad networks like RockYou, SocialCash, and AdParlor, many of which still operate CPI programs for other app developers to drive traffic to their apps.

At the end of the day, as competition between social game developers grows, it’s likely to mean good things for Facebook Ads revenues and others helping drive game adoption. Developers like Zynga who have figured out how much new users are worth are likely to be happy to pay whenever new titles launch or new competitors are encroaching on their territory.

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22 Responses to “Social Game Developers Spending Millions on Facebook Advertising”

  1. Social Game Developers Spending Millions on Facebook Advertising says:

    [...] > Read more at Inside Social Games [...]

  2. Saad Fazil says:

    This is interesting because Playfish, Mytopia, livingsocial have almost zero ad spend. Or at least what they told me. If you want to read more, here is my piece about them:

    http://www.sramanamitra.com/2009/07/03/social-gaming-on-the-rise-and-lessons-for-would-be-entrepreneurs/

    http://www.sramanamitra.com/2009/07/10/social-apps-vs-social-games/

  3. Jason says:

    Millions? Wow, that’s crazy. I wonder how effective it is for its Facebook advertising. It makes me worry about my plan to advertise on Facebook with low budgets. Or as long as I am targeting a smaller niche, I should be ok?

  4. Tadhg Kelly says:

    The rule seems to be that big developers with crappy games (especially Zynga and Playdom) are spending large to keep their games floating. Playfish don’t and neither does Farm Town, Mind Jolt, Living Social, or most of the others.

    Zynga’s a bad company built on bad games but with lots of money but they’re not the good companies that will do well in the long term. They advertise lots *because they have to* to stay in the charts.

  5. Tadhg Kelly says:

    Oh that came out way too ugly and apparently I can’t edit it. Apologies.

    What I’m trying to say is they have a problem with relying on undifferentiated games. “Crappy” is the wrong word because millions upon millions of people are enjoying those games.

    Similarly, “bad company built on bad games” is just bad writing. (Sorry to any Zynga folks reading this. It’s late here and I’m tired.)

    I mean “bad” in the sense of “unsound”. Zynga have risen very high in recent months but I do believe that they are under threat from a slow increase in the expected quality of games. Playfish is attracting a lot more positive press and managing to build userbases on the principle of novelty and fun first, but I haven’t seen anything from Zynga in a while to indicate that they have a response. And to be fair, Farm Ville is doing very well but the inspiration for it is quite clearly Farm Town.

    I do wonder what Zynga’s plan is overall. I know they’ve hired in quite a lot of talent in the last while establishing studios here and there. It is not uncommon for suddenly successful game companies to do that, however. Take Two went on a similar spree when it struck gold with Grand Theft Auto, but very few of those activities really paid off. When studios are in hyper-growth mode (as Zynga appear to be) it often means that they are sitting on a cash cow but don’t actually know what to do with it.

    With reports of legal eyes being pointed at Texas Hold Em (i.e. is it gambling) there are a lot of questions in my mind exactly what Zynga’s next step is supposed to be.

    Hope that explains what I mean better.

  6. Tadhg Kelly says:

    And the same applies to Playdom btw.

    I’m not sure where they’ye going next either.

  7. Nadya Jahan says:

    Gamebook, the first blog dedicated to facebook games!
    http://www.gamebook.fr (english & french)
    Become a fan on facebook : http://www.facebook.com/gamebook

  8. Zynga Encouraging Users to Tweet to Spread Facebook and MySpace Game says:

    [...] social game developers are finding additional ways to spur the growth of new titles – including spending millions on advertising. However, now we’re seeing incentivized grassroots promotion for Facebook games spill over to [...]

  9. Raph’s Website » New boss, old boss? says:

    [...] via Social Game Developers Spending Millions on Facebook Advertising. [...]

  10. New boss, old boss? « Austin Entrepreneur Network says:

    [...] via Social Game Developers Spending Millions on Facebook Advertising. [...]

  11. good man says:

    wow… millions? c’mon man…..

  12. Virtual Goods Now Funding Most Development on the Facebook Platform says:

    [...] Payments program is still in very limited alpha testing with only a few applications), it is deriving substantial revenues from developers paying to promote their applications to new users. For example, here are a few ads [...]

  13. Facebook: 300 Million Monthly Active Users, “Free Cash Flow Positive” says:

    [...] growth? A combination of revenue streams: Facebook’s self-service ad business has been very strong lately, it continues to invest heavily in brand advertising efforts, and it also continues to [...]

  14. Facebook finalmente consigue cash flow positivo y alcanza los 300 millones de usuarios says:

    [...] 200 millones de dólares de los “self-service ads“ [...]

  15. Mike Jarema says:

    Great news for the Facebook Ads platform, bad news for fellow FB advertisers.

    As far as I can tell, the CPC price has jumped up recently (at least for Canadians 18+). Likely the millions of dollars in FB advertising spent by the social gaming companies have put upward pressure on bid prices!

    Mike

  16. ICO Partners » Blog Archive » Up and down the online game value chain says:

    [...] out a few months ago, acquiring users (call it marketing, or traffic acquisition) is hard and expensive, which lends considerable power to other actors in the chain, such [...]

  17. Developer Spending on Facebook Ads Continues to Soar says:

    [...] summer, Zynga CEO Mark Pincus made headlines when he said that Zynga spent a “couple million dollars” on FarmVille’s launch on Facebook. At [...]

  18. Dear Facebook – why are you being so difficult? (part 2) says:

    [...] The shift is increasingly in favour of those with the advertising dollars, which is good for some, but unfortunately makes Facebook less of a social platform. And if anyone thinks that all it takes to become a viral hit on Facebook is a good idea, then you should read how much Farmville spent on advertising. [...]

  19. Multimedia in Business 3 « Diarmuid Mc Donnell says:

    [...] on the right-hand side of a users Facebook profile, Facebook ads are becoming big business and offer a range of benefits over Google Adwords: the ability to specify the demographic you wish [...]

  20. العاب فلاش says:

    Sure the competition is big, but for sure they will get back every penny they spend on advertising, social games are very popular today.

  21. Facebook’s Revenue Depends On Advertising « Ajstrat's Blog says:

    [...] daily users and in 2009 became the largest and fastest growing social game in history. Zynga spent $2 million in just advertising the game on [...]

  22. Social games, virtual goods, and monetization opportunities: Part 3 | MatomyMarket says:

    [...] In some cases these affiliates are local providers in the region you wish to target with better understanding and connections to Facebook and better targeting capabilities.  Working on a performance-based level is preferred as you only pay for results.  It is worth trying and most companies are already using this method. [...]

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