Announcing Inside Virtual Goods: The Future of Social Gaming 2011

2010 will be remembered as the year that games on social networks became a billion dollar business and transformed the way millions more people socialized with friends online. With an up-to-$750 million acquisition of Playdom by Disney, Playfish’s integration across Electronic Arts, the continued growth of Zynga, the rise of CrowdStar and Kabam, and continued venture investments, social games are impacting businesses across the media landscape. Despite the challenges facing the market, it’s become clear that there are still substantial opportunities for social game developers with virtual goods revenue models, but the market is still evolving rapidly.

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Inside Network is proud to announce a new original research report by Justin Smith and Charles Hudson that is exclusively focused on the future of the social gaming market, entitled Inside Virtual Goods: The Future of Social Gaming 2011. This is Inside Network’s second annual edition of the Future of Social Gaming report. It will be released on November 16, but is available for discount pre-order now.

How big is the market, and where will social gaming go in 2011? How will existing players fare as Facebook shifts the social gaming landscape through the rollout of Facebook Credits and continued changes to the platform? Inside Virtual Goods: The Future of Social Gaming 2011 provides deeper insight into social game monetization, development, customer acquisition, and the key questions facing the space in 2011 than you’ll find anywhere else.

About the Report

Inside Virtual Goods: The Future of Social Gaming 2011 gives you an inside view of the future at this critical juncture in the intersection of social networking and online games.

We have compiled months of original research from dozens of top executives and entrepreneurs from all parts of the social gaming ecosystem to produce eye-opening source data and analysis that is not available anywhere else. Inside Virtual Goods: The Future of Social Gaming 2010 takes the closest look at the present state of social games and the future of this strong but still rapidly changing industry.

What We Cover

  1. Social Game Development and Studio Models – There is an emerging consensus around how social game developers are choosing to organize themselves for game development. How do small, medium, and large developers organize their teams? What do development cycle times for original titles and “expansion packs” look like? What is the role of testing and metrics in the development process?
  2. Social Game Design and Mechanics – The emergence of a few key game genres with proven mechanics and monetization have spawned dozens of fast followers. Understand how publishers are continuing to innovate as we head into 2011.
  3. Monetization Data and Payment Trends – Now that developers have proven the virtual goods model, what are ARPUs, ARPPUs, and LTVs really like for different game genres? What is the lifetime value of users, and how long do players stick around? We take an in depth look at monetization methods and rates, and shed light on where payments are headed in the coming quarters. One more note on monetization – you may be wondering about everything you’ve heard about the rollout of Facebook Credits. We cover:
    • Both the goals and benefits, and challenges and costs, of Facebook Credits for developers
    • Changes that developers have – and haven’t – made
    • How the rollout of Facebook Credits will affect the payments ecosystem (looking at both direct and alternativee payment methods globally)
  4. Customer Acquisition and Marketing Trends – As the social gaming landscape has evolved over the past three and a half years, so have the ways that developers acquire and retain new users. How have user acquisition costs changed, and what do Facebook’s changes spell for the future of the marketing funnel? We take an in depth look at data and trends.
  5. Facebook’s Platform Changes, Credits, and What’s In Store for the Future – Facebook has continued to change Platform communication channels and functionality over the last year, significantly altering the way social games reach users through Facebook. Continued change is likely – what will it be, and how will it impact the industry? In addition, as Facebook rolls out its much-discussed Credits currency, how will monetization and the payments landscape be affected? Finally, will we see another dominant platform emerge? Our overview covers these developments, their impact on the industry, and what else is in store.

What you get

In addition to our deep dive into key aspects of the social gaming ecosystem, the report also offers extended coverage on:

  • A brief history on the evolution and growth of this space in the US, including a description of all key players and how they rose to the top.
  • Total social gaming market size estimates for 2011, including estimates on the “big four” developers.
  • Our take on the key issues facing the growth of social gaming, including our outlook and projections for 2011.

See the full table of contents below:

Table of Contents

Section I – Overview

1. The Evolution of Social Gaming

  • What is Social Gaming?
  • Social Games as a Unique Games Genre
  • A Brief History of the Major Eras in Social Gaming
    • Era I – The Virality Era
    • Era II – The Emergence of Paid Distribution
    • Era III – The Rise of the Big 4 and the Network Model
  • Key Changes in the Social Gaming Landscape in 2010 as 2011 Begins

2. Social Game Development and Design Processes

  • Studio Composition
  • Small and Medium Developers
  • Large Developers
  • Platform Services
  • Development Cycle Time
  • Developing Franchise Titles
    • Expansion Packs
    • True Serial
  • Role of Testing and Metrics
  • Multi-platform Development

3. Social Game Design and Design Mechanics

  • Resource Management and Simulation
  • Gambling
  • Caretaking
  • Casual and Arcade
  • Emergence of New Popular Genres
    • “Hardcore” Strategy Games on Facebook
    • Continued Rise of Sims and Appointment Games
    • Branded Games
    • Social and Mobile: Is It Going to Work This Time?
  • Category Coverage for Major Facebook Developers
  • Intellectual Property
    • Fast Followers vs Innovators
    • Building Games with Third Party IP
  • The Importance of Templates and Engines

4. Monetization

  • How do social games monetize?
    • Virtual Goods
      • Functional Virtual Goods
      • Decorative Virtual Goods
      • Consumables
    • Advertising
      • Sponsorships
      • White Label Games
      • Branded Virtual Goods
  • Monetization Rates
    • Defining terms: Understanding the user acquisition and conversion funnel
      • Registered Users
      • Active Users
      • Average Revenue Per User (ARPU)
      • Average Revenue Per Paying User (ARPPU)
      • Lifetime Value (LTV)
    • How do social game developers manage their businesses?
    • Monetization Rates of Key Social Game Genres
      • Role Playing Games and “Hardcore” Mini-MMOs
      • Simulation and City-Building Games
      • Pet Games
      • Poker Games
      • Arcade Games
      • Flirting Games
    • How has monetization changed over the last year?
    • Consumer Demographics
    • Whales in Social Games
  • Impact of Facebook Credits
    • Goals and Benefits
      • More Paying Players
      • Less Friction
      • Higher Trust
    • Challenges and Costs
      • Loss of Control
      • Facebook’s Fee
      • Breakage
    • Developer Sentiment
      • Large Developers vs Small Developers
      • Different Implementations
    • Impact on Payments Ecosystem
      • Offer Providers
      • Direct Payment Providers
  • Payment Methods Breakdown
    • Understanding Offers and the Offer Controversy
      • The Offers Controversy
      • Offers in Social Games
      • Increased Competition
    • Direct Payments
      • Direct Payment Methods Breakdown in Social Games
      • Direct Payments vs Offers
    • Mobile and Alternative Direct Payments
      • Mobile Payments
      • Pre-Paid Cards
      • New Payment Providers
  • Lifetime Value of Social Games Players (LTV) – What do we know?
    • How long do players stick around?
    • When in their lifecycle do users monetize best?
    • Seasonality and monetization lifecycles in social games
    • Banner advertising’s role

5. Customer Acquisition and Marketing: The New Distribution Landscape

  • The Rise, Fall, and Re-rise of Viral Acquisition
  • Impact of Facebook Platform Changes on Viral Distribution
    • News Feed
    • Invitations
    • Notifications
  • Cross Promotion
    • Large Developers vs Small Developers
    • Publishers and New Third Party Cross Promotion Networks
  • Paid Acquisition
    • Facebook Ads
    • Third Party Facebook Platform Ad Networks
  • A Look at Growth and Decay of Games Launched in 2010
  • Off-Facebook Promotion
  • Network Strategy and Economies of Scale

6. The Big 4: Head Count, Strategy, Challenges, and Revenue Estimates

  • Zynga
  • Playfish
  • Playdom
  • CrowdStar

7. 2011 Market Size Estimates

  • 2011 Social Gaming Market Size

Section II – The Future

1. Facebook Platform Changes and the Relationship Between Facebook and Application Developers

  • Impact of Platform Changes
  • Facebook Platform Policy and the Lolapps Example
  • Developers and Advertising Spend

2. The Future of Facebook Credits and the Changing Monetization Landscape

  • Impact of Facebook Credits
    • Rollout Timeline
    • Off-Facebook Credits Availability
  • Offers and Performance Advertising
  • Role of Alternative Payment Systems

3. Key Customer Acquisition Questions for Small and Medium Sized Developers

  • Impact of the Rise of the Big 4
    • Growing Value of Cross Promotion
    • Marketing and Customer Acquisition
  • How can small/medium developers succeed in a “cold start” situation?
    • Reasonable Goals
    • Examining Success Stories from 2010
  • Can an independent developer dominate a category?

4. Off-Network Games with Facebook Connect

  • Intersection of Social and Mobile
  • Open Internet and Facebook Connect

5. Will Another Platform Other Than Facebook Emerge?

  • Google
  • MySpace
  • Twitter
  • International Social Networks (China, Japan, Russia)
  • Casual/MMO Portals
  • Global Portals: Yahoo, MSN, and Others
  • Mobile Social Networking Platforms

6. Competitive Response in the Broader Media and Games Industry

  • Casual Game Developers
  • Console Games Companies
  • Casual MMOs and Virtual Worlds
  • Media Companies

7. Investment Landscape

  • Venture Capital
  • M&A and IPO Landscape

Appendix – Related Companies

More Data, More Actionable Insights

In 2010, social games began to show what kind of value can be created on top of social networks. 2011 will be an even more important year.

Social gaming, powered by virtual goods, is this year’s industry to watch. If you’re involved, or are considering jumping in, Inside Virtual Goods will be one of your most important tools.

One year of original data and exclusive in-depth reports delivered on a quarterly basis is $2,495 and contains:

  • A detailed overview of the current state of the industry
  • Specific estimates on market size by segment
  • Diagnosis of key opportunities and issues by segment

About the Authorsjustin-smith-headshot

Justin Smith

Founder, Inside Network

Justin Smith is the founder of Inside Network, the first company dedicated to providing news and market research to the Facebook platform and social gaming ecosystem. Justin leads Inside Network’s Inside Virtual Goods and AppData research and data services, and serves as co-editor ofInside Facebook and Inside Social Games.

Prior to Inside Network, he was formerly Head of Product at Watercooler, one of the leading application and game developers on the Facebook Platform. Prior to Watercooler, Justin was an early employee at Xfire, the largest social utility for gamers, which was sold to Viacom in 2006. Justin holds a degree in Computer Systems Engineering from Stanford University.


charles-hudson-headshotCharles Hudson

Former VP Business Development, Serious Business

Charles Hudson is the former VP of Business Development for Serious Business, a leading social games developer on the Facebook platform.

Prior to Serious Business, he was formerly the Sr. Director for Business Development at Gaia Interactive, a leading online hangout for teens. Prior to Gaia, Charles worked in New Business Development at Google and focused on new partnership opportunities for early-stage products in the advertising, mobile, and e-commerce markets. Prior to joining Google, he was a Product Manager for IronPort Systems, a leading provider of anti-spam hardware appliances that was acquired by Cisco Systems for $830 million in 2007. Charles holds an MBA and BA from Stanford University.

Get The Annual Membership

Get Annual Membership (Includes Report + 3 Additional Quarterly Issues): $2,495 $1,995 USD*

OR Buy Single Report: $995 $795 USD*

* Pre-order discount ends November 15, 2010. All pre-ordered reports will be delivered on November 16, 2010.

Although the report will not be released until next Tuesday, November 16, we are offering a special pre-order discount for those who purchase now. A one year subscription is $1,995 until November 16, at which point the price will go to US $2,495. The one year subscription includes three quarterly updates on key developments in the space.

Or, you can download just this report. The pre-order price is $795 until January 26, at which point the price will go to US $995.

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