The Resurgence of Gaming On the Open Social Standard

[Editor's note: In the post below, entrepreneur and consultant Sean Ryan explains why he believes the Open Social developer standard is due for big growth this year. Although we expect that not all of our readers will agree with his points, we think they are worth consideration.]

OpenSocial is a set of social networking interfaces (APIs) created by a group originally led by Google and MySpace, but supported by a coalition of large sites in response to the growing power of the Facebook platform standard (FBML). Launched with great fanfare in late 2007, but adopted primarily by MySpace (and Orkut in Brazil), the standard languished for the next 2 years, although the community continued to evolve it until the 1.0 version was recently released in Q1, 2010.

Why did it languish? Primarily because every developer in the world was focused solely on Facebook as the best publisher platform and because the other social networks (SNS) didn’t fully understand how lucrative online gaming was, and it too long for OpenSocial standard to evolve, at least until the last 6 months. I consult with various SNS about their gaming strategies, as well as with a variety of game developers, so I see it from both angles, and what we now see in the marketplace in 2010 is a growing focus on OpenSocial, with a massive surge in adoption of the OS platform coming this year.

Why? The first reason is that it has become abundantly clear to anyone not living in a cave that social gaming is the only truly profitable feature of a social network. And even better, it drives higher user engagement, not just revenue, since users return repeatedly to the site and often contact friends in order to get them to participate in games. Since the Facebook FBML set of APIs is fully owned by Facebook, the top player in social network services, it is a significant danger for Facebook competitors to adopt that standard, especially as Facebook becomes a tougher place to do business for everyone. Therefore, social networks with any IQ points are rapidly throwing away their home-built proprietary standards in order to adopt OpenSocial so they can roll out a compelling gaming solution.

The second reason is that to everyone’s apparent surprise, Facebook has finally become a much tougher place to do business for game developers – in fact it almost resembles a traditional retail environment these days. There is an oversupply of content, Facebook is levying a 30% “tax” with Facebook Credits, and with significantly reduced virality due to platform changes, most developers are spending at least another 30% of revenue on advertising on Facebook, all of which is significantly reducing margins. This is all obviously great news for Facebook, but it means the gravy train of “free traffic and great virality” is over, making the site a much more difficult place for mid-sized and small developers, even though the core site features and massive traffic are still the best on the planet. Therefore, smart developers are again looking for Facebook alternatives.

So what should Facebook competitors do? Given that gaming is immensely profitable and that Facebook is starting to be less hospitable to many developers, it’s becoming clear that all social networks should launch OpenSocial-compliant containers, striking deals with a select set of developers to feature their games in return for a relatively big revenue share. However, these smaller social sites must become an attractive destination for content developers, even though they have less traffic than Facebook. The key is that the OS container must be fully OpenSocial compliant so that developers can easily port their applications to a wide set of smaller sites with almost no work – if it takes a lot of work for each site, then the return on investment won’t be worth it to the developer, and the site will struggle to attract strong enough games. Now that there is an agreed upon 1.0 OS standard, all sites should move to adopt it in order to make the developer experience more consistent. I also don’t recommend that the SNS offer a big open platform since it’s really hard to manage thousands of games and their developers without a huge staff – instead, feature a smaller set of games which pay a revenue split in return for the promotion/placement, and then market the hell out of them – the success of Tagged and MyYearbook in following this more focused approach are great examples of this approach and they continue to expand their offerings.

In addition, I realize everyone loves to hate MySpace, but it has significantly improved its product and its developer relations. At Meez, for example, we now have almost 500,000 active users after 6 weeks on MySpace, which was helped significantly by our promotional deal with them, as well as having a great app — so MySpace has again become viable as a good partner. Finally, there are numerous other social networks who will launch gaming solutions in 2010, all working closely with a small set of developers, but they are often still looking for more content partnerships.

What should social game developers with less than 100 employees do? For developers outside of the big 5-10, you really need to give up the FB dream – you’re not going to be Zynga or Playdom or Crowd Star. As of today, out of the top 20 games on Facebook, the almost all of them are from 4 developers, with a few remaining outliers, primarily veteran games like Farm Town or single games from massive app providers like Rock You – we’re not seeing big breakthrough game start-ups any more because the easy phase is over. The numbers I’m hearing from many talented, but smaller developers are simply horrific in many cases, with customer lifetime values less than $.50 and actual customer lifetimes being less than 30 days – it’s especially tough now that the Facebook advertising cost-per-click (CPC) rate has gone up in many cases to above $.50, so the customer acquisition versus revenue calculus just doesn’t work anymore.

I’d strongly recommend producing a great OpenSocial version of your game and trying to strike deals with a set of SNS not named Facebook – there are lots of them around the world with 10 million or more monthly unique users, many of whom are going to adopt the social games that are put in front of them if they’re good games and if they can play them with their core friends on those smaller networks. There is a theory going around that gaming works best on Facebook because it uses real world profiles, but the data from the other social networks shows that tight relationships can form with only online profiles, so that won’t be an issue with gaming. The revenue share idea seems expensive on the surface, but given the resulting increased promotion and reduced competition from other similar games on these sites, it’s absolutely worth it, especially versus the increased costs and worsening odds on the Facebook platform.

Facebook is still a world class developer and user platform – but no one can pretend that the landscape hasn’t changed in the past tw years. Smart developers and Facebook competitors are moving quickly to launch robust OpenSocial gaming solutions to drive their businesses – otherwise they will just continue to be demolished by Facebook, as we’re seeing in many cases around the world.

Sean Ryan is the chairman of virtual world service Meez and founder of pre-paid card services provider Zeus Research. He also consults with companies using social gaming and virtual goods, although none are referenced in this article.

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10 Responses to “The Resurgence of Gaming On the Open Social Standard”

  1. Zach says:

    Nailed it. Thanks for a very insightful and timely post. The March 2010 Facebook changes have made a hugely chilling effect on facebook games, as nearly every viral method of communication has been eliminated, or gated behind numerous tedious form and permission dialogues.

    I know many die-hard facebook games who dropped favoite games, as soon the game requested email permission.

    With any luck, social sites will think along the lines you describe to provide new and more level opportunities for independent games on the web.

  2. Adam says:

    Your reasons why someone would want to develop on another platform are valid, although you fail to note three key things:

    A) if developing on other platforms is profitable
    B) Assume that OpenSocial allows you to port a game easily
    c) That running live Ops on multiple platforms is not a linear cost curve.

    B could be close to true (it significantly is reduced but each platform is still different)
    A and C are tough and Myspace still has a LONG way to go to become a platform that a game developer can make money on without hundreds of thousands of free installs.

  3. Sean Ryan says:

    those are fair points from Adam – developing on other platforms can be profitable if you’re part of a small set of games being promoted heavily. Running Live Ops on multiple platforms has so far been a linear cost curve for sites I’m familiar with, but that might not be as true if the number of distribution partners goes WAY up.

    On the other hand, i can guarantee you that continuing to be a small developer on FB is a lose lose proposition due to the issues I listed in the post…

  4. Tadhg Kelly says:

    I don’t buy it, sorry. The problem is not platform strategy, nor viral channels. The problem is game quality.

    Virality is not finding easy ways to interrupt/bombard users with messages from your game. That is just another form of *advertising*. Facebook used to enable a huge amount of free advertising, and that in addition to paid advertising is why many games spread far and wide.

    *Virality* is what happens when users spread games on their own. So a lot of the early success of titles like FarmVille is very much to do with the context of when they launched and the sheer novelty factor. However fast forward a year, there are 50 farming games, each the same as the last, and no novelty. No novelty means

    The reason that a lot of new games don’t spread on Facebook is thus very very simple: They are boring. They may be good or bad pieces of software, faithful to the material or whatever. But in the eyes of the audience, they’re “been there, done that”. Bored now. Want something new to do.

    All Facebook did in controlling its channel was cap the abusiveness that was sustaining a lot of boring developers making boring games. It is very telling that since it has happened, newer, fresher games are still making waves while many of the major developers have stalled in growth, and some are reverting back to trying more sleazy tricks to get their growth up.

    Obsessing on channels is just another way of avoiding the hard work of making something great. It’s trying to extend boring lowest-common-denominator rubbish into new areas where exploitative treatment of users can try and drum up numbers again. It’s just as time-limited on other platforms as it was on Facebook.

    Content quality, as in making games that aren’t instantly boring, is where developers should be focusing their efforts.

  5. Rob Smith says:

    I feel this. I started a social games company after working at Activision and they shut down the studio I was at. We launched two games on Facebook and have made little movement with both. We’re pivoting now to accommodate for this, but little developers are essentially being swallowed up on Facebook. Managing to get even 1,000 users has been a struggle.

  6. Sean Ryan says:

    Tadhg makes some good points about game quality being the key driver, but there aren’t any stats to back up the statements. It’s a classic developer hope that “if you make good games, users will follow”. The entire point of the post is that isn’t true on FB. There are 50 farming games, and you know what, all 50 do better than almost any other genre out there, so it’s not about innovation, it’s about execution. I’ve been through many different game cycles, and this one has far more supplier concentration at an early age than any one in the history of gaming.

  7. Tadhg Kelly says:

    Actually Sean, the evidence is right there in the stats. At every major point of growth for the last 18 months, whether it be fish, city building, rpgs or farms, it’s always being driven by the fresh new game that changes the rules, and then the one major developer (usually, but not always, a Zynga version) that copies that. Everything that tends to follow-on copy tends to not achieve viral growth of any great regard because it’s already boring.

    Several conservative me-too games by big name players (I’ll be kind and not name-and-shame) in recent months have largely failed, even with their apparent scale and – in some cases – great production values. All this shows, as with every other game market ever, is that success is largely about doing neither the old thing (same-old same-old ideas) nor the good thing (execution), but the new good thing (ooh, I’ve never played that before, that looks cool).

    The Facebook market is really no different from any other in this respect: It’s just quicker.

  8. MySpace Welcomes Social Gaming Developers - MySpace Developer Team says:

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  9. MySpace Welcomes Social Gaming Developers – CaHLaS says:

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