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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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/
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?
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.
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.
And the same applies to Playdom btw.
I’m not sure where they’ye going next either.
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wow… millions? c’mon man…..
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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
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Sure the competition is big, but for sure they will get back every penny they spend on advertising, social games are very popular today.
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