Gamehouse, a developer best known for bringing UNO and Scrabble to Facebook, recently released The Secret Plant Society, a new take on plant growing/farming games.  Though similar in many ways to earlier farm games, Secret Plant Society introduces a few new mechanics, including hybridizing plants to create newer and more profitable strains.

Secret Plant Society is based around plants and pots.  The game starts you off with a small greenhouse, a couple ornaments, nine “starter pots” and some seeds.  Unlike most other farming games, you have no avatar present on screen, so all interaction is based on clicking your plants and tools.

You start by learning how to plant the most basic plant, the Common Clover, which takes 15 minutes to mature.  After 15 minutes, you click the harvest button to harvest, and receive a new Common Clover seed to plant, experience, coins, and an empty plot to plant in again.  The interesting mechanic is that sometimes side-by-side plants will hybridize and create a seed for a new strain of plant.  For instance, a Common Clover planted next to another Common Clover will sprout a Vigorous Clover seed.  All plants and their hybrids are recorded in your Almanac, allowing you to see which combinations have been tried and what combinations might still be undiscovered.

For plants like the Common Clover that mature in 15 minutes, and the Vigorous Clover which matures in 3 hours, the starter pots are just fine as they hold up to 3 hours of water.  However, more advanced plants such as the Scarlet Spiral Begonia take 10 hours to mature.  Plants will only mature as long as there is water in the pot. So, if you logged in only once a day, on the second day your Scarlet Spiral Begonia would have matured only 3 of the necessary 10 hours.  Higher level pots hold more water, allowing plants to grow longer without your help. These are especially helpful as you reach higher levels, where plants can require up to 2 days to mature.

Other familiar mechanics and concepts find their way into Secret Plant Society, providing recognizable incentives for players.  Quests give players goals to work towards and introduce new concepts.  Plant Society also gives you the option to unlock or purchase items using a virtual currency called “Green Bucks.” Some items are merely decorative, but you can also purchase fertilizer which reduces the amount of time required for plants to mature.  As mentioned above, players gain experience points and levels from raising and breeding plants, which unlock more plants and tools from the shop.

Though you can invite friends to play Secret Plant Society with you, there aren’t many social aspects so far.  You can add friends to your Members list, visit the greenhouses of people on your Members list and vice versa.  Upon visiting, you can help them to water their plants, and they can help you water yours, but apart from that there doesn’t seem to be anything else you can do for your friends.

Overall, Secret Plant Society is a fun game that almost feels like a real foray into growing, harvesting, and breeding plants.  The mechanics of the game mesh very well with the overall design, making the overall experience quite fluid.

One issue that might dissuade some players is that gameplay can become slow and stale when you grow higher-level plants, which take 18-48 hours to mature.  Furthermore, the lack of any real social aspects doesn’t encourage inviting friends. Likely because of these two problems, The Secret Plant Society is struggling to retain users, with about 140,000 monthly actives but only 6,500 daily actives.  Still, at its base, the game is a new and enjoyable experience with some real potential.

In the last panel of Inside Social Apps InFocus 2011, we’re examining the merger and acquisition landscape for small and mid-size developers.

The panelists:

Terence Fung, Head of Corporate Development, Zynga
Sean Ryan, Director Games Partnerships, Facebook (former EVP and GM Games, News Corp)
Atul Bagga, VP Equity Research – Games, ThinkEquity
Raph Koster, VP Creative Design, Playdom (former President, Metaplace)

EE: What do you do if you’e a game developer and you’re considering merger and acqusition options?

RK: I hope you get into the business because you have a passion for entertaining people. Hopefully you’re not here just to merge and acquire and sell. What makes you valuable is being good at being an entertainer. It’s a creative business that’s driven by passion.

EE: Why did you sell?

RK: It’s so dependent on the circumstances. Are you reaching your goals? Are you bored with what you were doing? Were you running out of money? There are plenty of reasons someone would want to sell. It’s far too personal a question to give a blanket answer.

EE: Why did you sell to Playdom?

We had pivoted from doing a UGC virtual world we’d been working on for three years, then we pivoted to doing social games and got to touch more users in one day than in three years as a virtual good. Playdom said, “you can touch even more, we can help you.”  It was the opportunity to touch a lot of people and it was an exciting time in entertainment.

SR: The standard console cycle is 7 years long. We believe as a company that this is only the beginning of what the social ecosystem is.

We cut back on virality, but we’re going to be expanding the ecoystytem this year.  The question is ‘are you making something in an area that’s growing?’ We’re gonna grow the game business, Apple and Google are going to build their games businesses. What the best way to maximaize creativity? Value to investors?  To your self?  [The market] slowed down a bit, had some very big outcomes. Now people are looking to see if it is slowing down. There’s growth amongst the mid-size developers.

Is the ecosystem you’re in growing? Can I raise money? Can I get profitable quickly? Can I grow, if not you should sell, if you can, you should invest in your business.

[Facebook] has more plans and features coming.

AB: What we’re seeing in the social gaming industry – there are RPGs, there’s a lot of space to explore. Mobile is just getting going, monetization has only been 1 or 2% – a huge opportunity. The space is going to evolve – we estimate to be a 12 billion dollar market over the next 5 years.

EE: Zynga’s been buying a lot of comapnies since launch – from the guys who did FarmVille to people making RPGs. What’s next?

TF: We manage a large pipeline of opportunities. We look at lots of games studios. We encourage anyone witha an app, technology, or product that’s intersting to come to us. We believe there are synergies. You might not seem like they fit with Zynga, but we have a tactical view of where we’re going in the next 6 months.

EE: What do you tell people like RK?

That’s exactly how you should look at it. We tell people thinking about joining Zynga that we have network operations, analytics, recruiting. As a manger of a company you would be thinking about payroll, but if you’re about making a big game, that’s an ability we can integrate. Come work with really smart talented people, come join Zynga.

EE: We’ve seen toolbars do well, where games can share traffic with each other. Are there other platform service providers or non-gaming companies that have a lot of potential right now?

TF – There’s a lot of dislocation in the market. People are trying to get a steady feel for the market. Applifier is a good example of the disruption in the market. Overtime, developers gravitate towards a network with signifcant power behind it. We’re trying to create a Dog-powered network – when you see the dog (Zynga’s mascot) on Facebook or mobile, you equaite it with fun. We’re working with independent developers to bring innovative things into our business.

SR: [Upon acquisition}, there's a tendency to pull features. When google bought social gold, people held their breath to see what that meant. When Apple released Game Center - what did it meant to OpenFeint? You need to move either faster or get bought or just be differenet enough. Lots of ways value creation opportunites. The things that a are closer to a platform tend to have the platform (replicate) them. But OpenFeint have continued to thrive, despite Game center.

EE: Were all those [acquisitions] worth it?

TF: Yes, I’m dead serious.

EE: Even with people leaving quickly?

TF: All of the acquisitions were very positive. What we encourage is for any acquisition target who considers us to speak with other people who’ve joined about the good, bad, and hopefully not too much ugly, and come in with eyes wide open.

EE: Do you feel burned by some acquisitions in the past?

TF: Is buying struggling games makers a good or bad strategy? We see that there’s a large pipepline of struggling developers. It is a challenging market, not that there aren’t talented teams and founders. We look for people who’ve looked at their mistakes, say “this is how I messed up. We wanted to focus on a feature and it didn’t really produce DAUs.” But we don’t throw the baby out with the bathwater.

EE: If you’re starting a new gaming company, do you start on Facebook, Mobile, iOS, Android?

SR: If you’re building something social, why not build on the biggest social network that’s still growing like crazy. But not all games are social. Angry birds on Facebook wouldn’t make a lot of sense. What’s the type of game you’re building? Fit it into a platform that makes sense.

AB: If you believe games are moving to persistent games that you can only play 2 or 3 at a time, then you want to allow users to stay in contact with the people they play with across devices. It is going to be more about a multi-channel aporach and less about one channel.

EE: TenCent and other Chinese developers have done experiments in the US, but when are they going to come to the U.S. and buy someone big?

SR: 2010 was first time growth has slowed, so people are looking for how to grow. The Chinese have some of the best expertise on running games. On Facebook we’ve created this huge army of users for free to play games.  There might be 10% with the gamer instinct, and they’ve greaduated and want to play something more hadcore than a simulation. The Chinese will be looking for designer talents. What works in the U.S. may or may not work in China. The only non-Chinese games that is successful is World of Warcraft. In the U.S. we’re not familiar with their stories, so they’ll be looking for content, for expertise.

EE: Do you see the Chinese focusing internally or buying small or mid-size developers.

AB: They are sitting on a big cash balance so I wouldn’t be surprised to see people making a big acquisition in the next 12 months. Take 2, Electronic Arts could be places they could look for designer talent.

EE: You see big gaming companies making moves>

RK: There are some making moves. The story that’s most interesting is Ubisoft. They tried a half-dozen games and a lot didn’t hit and they just kept trying. It’s symptomatic of any large indutry shift that old companies will have trouble adjusting to a new landscape, and this is a very new landscape. We’re talking about companies who’ve hardly gotten into digital distribution. They have a lot to learn about how to weave their DNA into a [social] company. That’s the ultimate goal of M&A, to reshape the DnA of your company to bring new expertise into every level.

EE:Any psecific advice for new developers?

RK: Ubisoft did the right thing buy trying, learning, trying again, and being willing to be patient. You either build or you buy. If you buy it, you need to leave it alone and learn as much as you can from it. There’s a history of acquiring and not using the acquisition very well. It takes patience , you can’t turn an organization of that size on a dime.

SR: When I was at NewsCorp we started a games unit, acquired Making Fun to get up to speed. Packaged game companies [could] buy a 20-peson company.

As DeNA did with NGMOCO, or Disney – they wanted to make a big play, take a big swing. I think the Chinese will tend to buy smll. We’ll see if they play something big and say  ”now you’re in charge” like DeNA dd with NGMOCO.

EE: You track a lot of markets. What would you do different?

AB: Success is open to definition. In a short-term view, acquisitions may not be successful. Disney acquiring Playfish wasn’t about driving the net year revenue, but a longer term view.

Just to step back, the console gaming market was up 35% during the dot come bust, up 30% when the whole economy was down 5%. Now it is down 10% a year. Businesses need to leapfrog the conslole and get into the next level. Social flows beyond games into monetizing media across your brand.

EE: Physical promotions opportunities are all over the place. Are you looking to long established intellectual property lines for how you’re going to build Zynga in the future?

TF: Zynga is firing on all cylinders, identifying brand sponsorships like Farmers Insurance, State Farm, and helping promote some movie releases, but I don’t see the need to make the next Tron game considering our ability to knock out successful new intellectual property.

Audience Question: Like everyone, we’re  looking for funding and support. Where in the game development cycle does an idea need to be to attract someone like Zynga or angel funding?

SR: Publishing is coming back into vogue. You need someone to fund it, someone with expertise. The developer itself needs the help of a larger partner, even if they’re a great studio. They should focus on making a great game, let someone else focus on things that detract from mking a great game. Numerous folks like Zynga and NewsCorp look at the game, see if a game fits into their portfolio. There’s options to own it , fund it, or publish it.

RK: Here’s the dev-centric answer, practical advice. If this is your first game , then don’t build your dream game. Take the first game as a learning opportunity. Start building something that will be fun. Launch as quickly as you can. Learning from that will help you go chase the deals. It iss easy starting out to try to build something ambitious when you don’t know what you don’t know yet. Might not be what you want to do, but launch something relatively simple.  Doesn’t meean it can’t be awesome.  Launch it, start building a following, learn the lessons, that gives you the leg up to start swinging for the fences, what you believe in. Companies will want to know,  ”do they know their stuff? Can they execute – that’s always what matters – and do you have something fun and playable for your second idea. Can you show it to someone who doesn’t know the difference beteween PHP and Perl, between bitmap and vector graphics.

I would grab a free edition of UNITY or flash – I did it perosnally – I built the first the first iteration of my game with Blitz Basic (audience applause). While looking for funding, I was able to show blue spots log into an MMO space. Then said, “I think I might just launch this”, and then I got funding.

Audience question: Should people go work at Zygna, or get some experience first before they go try build their own game?

TF: Were not going to take a leap of faith on someone with no experience building games. There are some strong game designers who haven’t stepped into the social game world. I think they have great potential at Zynga

EE: What do you think about buying a smaller traditional game studio?

TF: It’s hard because of how fast we iterate. We have real time strategy game people. There are obviously traditonal game developers dabbling in social and mobile.

Audience question: If you’re thinking about about getting into social, would you build your own thing or look to get hired?

RK: I’ve been bitten buy the entrepreneur bug now.  If you think you can get the learning on your own – and you can if you have the will and the discipline -there’s no reason not to try it your self unless you want to work with a specific great designer in the space. Coming at it as a traditional game designer, at GDC, social game designers were booed. They were called a soulless exercise based on metrics. There is a lot to learn from metrics, but metrics are just a fast way to do play testing.

It may be harder to dive into an organization that knows it already because there may be a lot of culture clash. If they understand what you bring as a traditional designer, it can be a great marriage.

Audience question: The game that are successful right now are more of the same. What about games that are really agaisnt the grain, out of left field . What do you look for?  -

SR: Wer’re looking for as diverse a platform [as possible]. PVP, arcade, etc so that all types of gamers will find something that really interests them. Sports games are doing well on Facebook, they’re montetizing really well. Focus on the top 5 DAUs is a soulles excerise. The better games that we’ve seen come from small developers who are really passionate about the core, or things we don’t normally associate with the platform.

Audience question: As a young developer studio, what are the gotchas that we should look out for?

TF: Teams that hav been slamming their heads against the wall for two years on a new product, who haven’t shown abiliy to learn from their mistakes is the #1.

SR: It is very specific to what the company is looking for in an acquisition. Building another city game right now is not going to work well. If you’re a PVP game and saying “this is why it works, here’s the data”. It might not get you to 100 million users, but will help you get acquired or funding.

TF: Zynga isn’t looking for specific game types, we’re looking for intelligence we can integrate into the company. New IP out of the box is great if it can be transferred to other IPs. We have a network of users and we want to get the fun to them.

What are stock option pitfalls companies being acquired should look out for?

RK: Get a good lawyer

SR: There’s this movie called The Social Network…

RK: There’s a lot of blogs. I tried to read as much as I could. My best advice, find people who’ve been through it before who you trust who can guide you. Trying to learn it on your own can be incredibly difficult. You can’t overestimate the value of advisors.

SR: Having a good lawyer who has been through this many times who can tell you what’s typical.

For many small developers on Facebook or the iOS, the future likely looks like an intimidating place. The largest social platform, Facebook, failed to produce any major new companies in 2010 that weren’t already heavily capitalized; smartphones look like an attractive market, but growth points like in-app payments for Android or better distribution on the iPhone are unpredictable. Our last panel of the day at Inside Social Apps considered whether these small players should consider selling.

The first and most important realization should be that an acquisition can’t be the reason for being a game developer. “I hope you get into this business because you have a passion for entertaining people, because no matter what this business was a year or two ago, it’s now about entertaining,” says Raph Koster, whose company Metaplace was acquired by Playdom last year. “Hopefully you’re not here to merge or acquire or sell, because in the long run what will make you successful will be having been good at being an entertainer.”

That said, there’s also no imperative to sell right now if you’re a Facebook developer. “Making any recommendation now is silly, it’s far too dependent on circumstances,” says Koster. In his case, “Playdom came to us, and said, you know, you could touch even more people. In the end, it was that more than anything – the opportunity to touch a lot of people, and be engaging in a really exciting time.”

Facebook itself thinks that small developers face an open field. “We’re still in early days,” says Sean Ryan, Facebook’s recently hired director of game partnerships. “We’re going to grow the games business, and Apple and Google will grow their own game businesses. What we saw last year was that it slowed down a bit, as we saw a couple very large outcomes with Playdom and Playfish, and people were looking to see what would happen next. Now there’s a lot of growth in the midpoint of the market, as we saw from the article on Inside Social Games the other day. We made some changes last year, and we’re seeing growth back in the system.”

That seems like a fairly self-interested view, but the rest of the panel participants agreed. “I think there are a whole lot of genres of games that need to be explored. On Facebook has done well, now we need to look at off Facebook, as well as at mobile. Monetization has been one or two percent, that will change. There’s a lot of room to grow in social gaming,” said Atul Bagga, a vice president and game researcher at ThinkEquity.

If you do want to consider selling, Koster’s reason, increased exposure, is a good one, according to Terence Fung, Zynga’s head of corporate development. “You can accelerate those [game development] dreams at Zynga, because we have netops, analytics, we take care of recruiting. As a manager of a company, I could be figuring out payroll, but that’s not what my heart is in, I want to hit 10 million DAUs or 50 million DAUs. That’s something we have learning in,” he says.

Google’s group manager for the Android platform,  Eric Chu, is on stage with us here at Inside Social Apps. His interviewer is Kim-Mai Cutler, lead writer for Inside Mobile Apps.

The live transcript (paraphrased in parts and edited for brevity)

KM: What is going on in app payments?

EC: Helping app makers monetize is very important to us, so we’ve been building an in-app payment system. We were actually going to release it last quarter, but with developers focused on their Christmas apps, we couldn’t get enough feedback to be comfortable launching. So look for it soon.

KM: What has held it back?

EC: My team, and the engineering team, we’re all involved in the preparation and development of the in-app system. Developers were busy, but now we’re completely focused on getting it out.

KM: What should developers do in the meantime? Should they use other methods or wait for you to roll out in-app payments?

EC: We’re focused on a user having a great experience, so we want to see a consistent purchasing experience from apps on the platform. Android as a platform is open, so developers have complete latitude to release apps, but we ask that you use our payment system on our app platform.

KM: Is it OK to use another SDK?

EC: I think our policy is very clear, so you’re fine as long as you do things within those boundaries?

KM: When in-app payments do roll out, are we looking at carrier billing? Other methods?

EC: I think it’s very important to separate how we build the application and the forms of payment. Carrier billing is an area that we’ve invested a lot in, we rolled out payments with AT&T in December and we’ll be doing that around the world. As we add additional forms of payment, developers don’t have to do anything.

KM: Does Google have in its culture to offer good payments, given that it has always been driven by advertising?

EC: My team is 100 percent focused on the success of the developers — are users downloading apps, are they buying them? You can expect to see more investment into merchandising, payments, discovery, downloading, those are absolutely top areas for us.

KM: Can you offer any specifics on paid apps?

EC: Nothing I can announce right now. Maybe it’s in the area of merchandising and billing.. when we first started with the Android Market, we had a vision of it being like the internet. But we found that some developers took advantage and uploaded apps that violated our terms. So we’ve created a team that looks at apps that violate policy and actively takes them down. That’s a way to improve our catalog and the consumer experience.

KM: When you say improved merchandising, what do you mean by that? How will you improve discovery?

EC: Nothing I can announce right now, but expect something to come really soon.

KM: And what about the ranking algorithm for the top paid apps?

EC: We get a lot of questions about our ranking algorithm. We really don’t want people to be able to game the system. A developer with deep pockets could just buy a lot of ads to get to the top. So we try to use other signals to help us understand, do users actually like the app? We’re trying to fine-tune to make sure that great apps do well.

KM: On iOS, some of these third-party companies say that it’s meritocratic enough that if you’re good you’ll do well.

EC: Yeah, but we’ve also seen cases where people will find themselves prompted to download apps to get extra credits, and then the app never gets used again. We want to use more signals to surface great apps.

Read more at Inside Mobile Apps >

In our third panel of the day, Inside Network editor Eric Eldon is moderating a panel on monetization, platform growth and Facebook Credits.

The panelists:

Deb Liu, Commerce Product Marketing, Facebook
Kevin Chou, Co-founder & CEO, Kabam
Rex Ng, Co-founder & CEO, 6waves
Jens Begemann, Founder & CEO, Wooga

EE: What has changed on the Facebook platform from a year ago to today?

RN: I think the notifications changes hit pretty hard, and you can see the results in DAU. We haven’t done as badly because we have a lot of games on the network, and smaller, niche games have also done OK.

KC: When we saw the shift in messaging features, we started to focus on content that appealed to a very specific set of people on Facebook. We really wanted to say, how do we create content for a very specific type of audience for whom there’s very little gaming content they want to engage with? We purposely didn’t design many viral features in, and that served us well. It became a big challenge to find that audience, but once we did it was a nice business.

EE: What were features that Facebook changed that really made a difference in 2010?

KC: We purposely said, if we’re going to make a core game mechanic, let’s not design it around a social channel, because we want that mechanic to be totally a content experience instead of wrapping it around a communication channel that may or may not be useful.

JB: Bookmarks are now more prominent — if you play a game more often, it moves up on the bookmark bar. That’s one of those things, if you don’t spam people, but they want to play, they’ll click on that bookmark.

EE: Rex, your business is a bit different, you distribute games. How has that changed? Do you consider cross-promo bars competitive?

RN: Not really. The difference between us and them is that we drive a lot of users into a game very quickly, where they’re slower. A lot of developers are using them to trickle traffic in for testing.

EE: How are other markets developing?

JB: At Wooga, we’re extremely strong in Europe, and in 2010 Facebook grew a lot in key countries for us. It looks like 50 percent of the population is becoming Facebook users, that is the magic number. In those countries where it’s less, that’s where the growth is coming:

RN: Right now our traffic is pretty balanced in Europe, the USA and Asia. I think there are emerging markets, and the games there have higher virality and retention, so it’s easier to go into those countries, and I’m bullish on there being more and more of those.

EE: Which countries will be big in 2011?

RN: I actually like eastern Europe. A lot of the western European games would actually transfer very well.

KC: We’re interested in international growth, but it can also be distracting to chase new markets. As we think of the core gaming markets and the 18-34 male, we’re most interested in North America as a huge market that we just want to serve better and better. As we look at priorities, we think about, not just how much will it cost us for localization and customer support, but how much does it slow down development? How much do those other versions of the game lag behind? That’s a tradeoff that’s easy to overlook. We do have a significant and growing portion of our revenue overseas, but we see a big opportunity at home too.

EE: Deb, how do you feel about it at Facebook?

DL: We’ve been ramping hugely, we’re working with 150 developers and 70 percent of transactions are through Credits.

EE: I’ve heard some negative things from developers, that they’d go out of business if they had to implement Credits…

DL: Every day, developers get to choose between our platforms and other platforms. We think a platform that includes payments is much more compelling. Having users available, the millions of credentials already there when a developer comes to the platform, can be a big positive.

EE: How will you work with developers to help them make more?

DL: Over the next five months, we’d like to open the doors and hear from our developers, what’s working and not working? Some people have already sent us very detailed data, what works in which country, and that’s what we need. Not every developer has the ability to hire a payments person, build out a system, and collect all the credentials. If someone is playing five games, and have to pay separately in each, that’s a lot of friction.

EE: Can you go into any more detail on your efforts?

DL: We’re definitely expanding our payment footprint. We’re continuing to expand to new countries, new payment options, we have partnerships with PayPal, TrialPay and others. Those things are important, because it’s not something that a developer can do on their own. We have gift cards in stores, etc. Another thing we’re doing is really building up a virtual currency system and building in liquidity. And if you have Credits, you’ll be able to participate in future promotions on the Games Dashboard. We’re actually releasing a new feature for micropayments that developers can have directly in game.

EE: Is there more you can share to let developers know what your plans are?

DL: I did want to mention one more feature we’ll be releasing, Buy With Friends. If a user wants to, they can share a purchase they made in the game with their friends. We found that more than 50 percent of users actually elected to share their purchase, and their friends can elect to buy the same thing — get 40 percent off this special monster food, etc. We’re really innovating on social purchasing, and you’ll see a lot of these features roll out over the next few months.

EE: Kevin, your company actually doesn’t use Credits. How do you feel about this?

KC: What’s emerged for us is that we have a very different payment ecosystem. We have a lot of stored value… as we transition to Credits, how do we recreate the payment flows that are unique to our game, and create a similar experience? The other thing when we’re thinking about the program, is that when Deb says there are things only a platform can do, that’s very correct. So how does Facebook get people to not only think of the platform as a virtual economy, but also get more stored card accounts in? The numbers I hear are that Apple has about 160 million.. Deb will have to speak for Facebook. But that’s a huge amount of value, and the ability to reduce that friction in a payment process is so key to the whole ecosystem, that if Facebook can create that…

Audience question: Will there be a policy about killing off payment processes? Will others be prohibited from using other payment flows?

DL: All payments will go through our process, but we actually have a relationship with PayPal that allows us to go through a really seamless flow with them. But yes, you’ll be prohibited.

Audience question: I’m curious about where Credits is going in terms of Facebook’s plans for ecommerce.

DL: We really built Credits with virtual goods in mind.

Audience question: I’ve heard a lot of horror stories about promotional Credits, where you see a high spend and then find out you only earned 50 percent of what you saw. What’s the plan to make sure people aren’t screwed?

DL: We actually seeded many of our users over summer of last year and giving out promotional Credits. This was an opportunity to educate users, and a lot of them came back to make more purchases. We’re not planning a massive seeding campaign again. We may do targeted campaigns again, but not a massive one.

RN: In the beginning, we took a pretty hard hit. But over time it progressively went to a more sustainable portion, for us it’s around 10 percent. So it’s OK, because it brings more people who hadn’t paid before. I think it’s positive for us.

JB: I’ve been talking to a lot of developers who tell me that 60 to 70 percent of their volume is promotional. At Wooga we’ve been using them for a long time — what I can tell you is that when the promotional Credits rolled out the paid volume stayed the same, and there was a huge spend on top of that. Our revenue never went down. I think probably long-term they had a positive effect.

DL: I do want to say, this is actually a reporting issue, and one of the things we weren’t great at was getting reports to users to help them understand.

EE: Across a lot of games, when people buy a block of game currency, the left over game coins were a big incentive to make impulse buys later. Do you have any plans to structure Credits so that people make similar impulse buys?

DL: One of the good things about Credits is that there are usually some left remaining, and also our gift card systems will do that, and there will be other websites that drive Credits purchases. It’s having a balance and liquidity to spend, and we’re seeing really good conversion.

EE: You’re trying to get people to use Credits as their in-game currency, but some developers think it’s better to have their own. Why are you pushing that?

DL: Developers have a choice today. But we’re offering additional incentives to developers who use Credits as their in-game currency, and we think it’s really good for education.

Audience question: Our game is similar to Kevin’s, and we’re very dependent on our whales. Facebook Credits converts really well for small payments, but it seems to be really poisonous to the whales — overwhelmingly, people will choose PayPal, especially when you get up to $500 or more. We’re really concerned that will erode our audience. If we’re going to prohibit people from making that choice, how will that affect an app that works on multiple platforms? Could a user go to an open web version to buy currency for a better rate than they do on the canvas?

DL: I think you have a couple questions. One, you’re asking about whether our system works well for whales. We’d like to take a look at your data. In the next five months, we want to learn about these kinds of things. In the second part of the question, the ability to make purchases on the web, the policy applies only to the Facebook canvas. One thing that’s important to us is that there be price parity, but in your case, let’s talk about it.

We’ve been live-blogging our Inside Social Apps conference today over on Inside Facebook. The highlights, to briefly summarize, are that developers are planning for a healthier year on Facebook following what they obliquely referred as a tough 2010. For its part, Facebook is working hard to allow more growth, and better experiences for developers and users.

Developers are cautiously optimistic about Credits, they said on stage, as they plan for the virtual currency becomes mandatory later this year.

Meanwhile, everyone so far has said that mobile is a major focus. Facebook wants to improve its presence, especially for developers building for mobile. All the gaming companies are building mobile-integrated games, if not moving their focus more exclusively to mobile. Our stories so far, below in chronological order.

• ISA 2011: Live Blogging The Future of Social Gaming Panel
• ISA 2011: Fireside Chat with Facebook CTO Bret Taylor
• Facebook CTO Bret Taylor: “Mobile is the primary focus for our platform this year.”
• ISA 2011: Live-Blogging New and Alternative Social Platforms Panel

We’ll also be publishing more from the conference on Inside Social Games later today. Stay tuned.

Facebook, and social gaming, appears to be a vastly different place for game developers today versus just a year ago. While social gaming visibly grew at astounding rates through 2009 and into early 2010, producing massive successes like Zynga, growth seemed to suddenly stop in the spring of 2010 as Facebook began limiting the viral channels that made big gains possible.

Since then, Facebook itself has repeatedly changed the rules that app developers play by, and has increasingly forced usage of Credits, a virtual currency that skims 30 percent of in-game sales when used, leading some developers to conclude that Facebook is now too difficult to work on.

Growing a game on Facebook is certainly more difficult today than it was in 2009. However, the view that succeeding is too difficult, and that growth has ended on Facebook, is belied by the experience of savvy developers, and hard data about Facebook apps from our AppData tracking service.

Our own view of the Facebook market considers each facet of the market separately. Here’s what we’ll cover below, in brief:

1. Overall audience size for large developers has declined on average, but this is not necessarily cause for concern
2. Small and medium-sized developers are steadily growing
3. Good game design is increasingly important and effective
4. Monetization is improving in several ways

Large Developers

Before we can look at the performance of games across all Facebook developers, we should split out data for what were considered the “top 5” developers on Facebook in early 2010: Zynga, Playfish (now part of Electronic Arts), CrowdStar, Playdom (now part of Disney) and RockYou. This is because views that Facebook’s heyday has already ended are largely based on the performance of this handful of companies.

The trouble for these developers began last March, when Facebook made the first of several viral channel changes that would end their fast-paced growth:

The above table is not an entirely straightforward measurement of how any of the five developers listed is doing, since MAU / DAU measurements alone don’t directly predict revenue; CrowdStar and RockYou also lost significant amounts of traffic from non-game quiz and gifting apps. Even so, only Zynga is arguably doing about as well as it was in early 2010, and only with the massive success of its brand-new game CityVille. Its four competitors lost 30 percent or more of their DAU, which is the best publicly-visible predictor for success.

If Zynga, with over $500 million in venture capital, can’t continue growing on Facebook, what chance do smaller players have? This question has clearly resonated with the wider community; many Facebook developers are now shifting their attention to smartphone games, and investors have by and large ended their investment in pure-play web-based social gaming.

In our view, however, the market still offers healthy opportunities. Expectations were distorted by the outsized success, over just a year or two, of Zynga and its peers. Before the social gaming boom, it typically took several years to build successful companies; now that the “boom” is over, this reality has resumed. The fact that more players of Zynga’s size have not popped up in less than a year of Facebook’s matured social gaming market is neither remarkable or distressing.

This view proceeds from real market data, which we dive into in the following two sections.

Small and Medium Developers

We first found evidence that the social game market was growing for small- and medium-sized developers last September, when we looked at a dataset of 250 Facebook games using AppData. The nascent trends that we discovered at the time have continued as we’ve updated our data. (Note that you’ll need to be an AppData Pro subscriber in order to access full categorized historical data.)

Three brief notes on methodology. First, we’re again measuring daily active users (DAU) here, which (along with other sanity checking) is the best public indicator of healthy engagement. Second, the specific games measured change from month to month; the list includes only the top 250 games for each given month, with a natural churn of older titles slipping off the list and newer ones taking their place. Finally, these users are non-deduplicated, meaning that one person can be counted as a DAU for more than one game; however, since such power-users often monetize well, that is not a problem for our purposes.

The first trend is a flattening of growth for the social game market as a whole. The chart shows one significant uptick at the end, caused by CityVille:

From here, it would be an easy guess that if the “top 5” developers considered above are uniformly declining but the market shows a plateau, some other group is experiencing growth.

To measure this growth, we simply remove games by the top 5 (again, these are Zynga, Electronic Arts, CrowdStar, Playdom and RockYou). This leaves us with a set of about 175 titles, which do show gains:

Note that the above chart, and the two that follow, show a dip at the end, unlike the top 250 chart. This dip is a predictable effect of Christmas, when growth slows for all social games, and is (we think) only temporary; we’ll check again when we record the numbers for February. Still, the chart shows growth of about 23 percent over the course of a year, and 40 percent from the low point in May 2010.

The largest games in the set above include a dozen titles with over a million daily active users, like Millionaire City , Monster World and Car Town – all of which were launched after Facebook made its spring changes that impacted viral growth. In all, the top 25 games excluding the “top 5” includes 22 different developers, all of whom have enough DAU to succeed if their users are well monetized (more on this in the next section).

We can get a final, and most impressive, look at growth by considering games 26-175 on our list from AppData, which takes us from titles developed by growing medium-sized companies down to very small developers:

In the past year, DAU traffic to these titles has more than doubled. In other words, more developers than ever are growing. Among the full top 175, excluding the top 5, the number of games with over 100,000 daily active users rose from 67 last February, to a peak of 107 right before Christmas.

It’s Not the Size of the Boat…

One measure of success that can’t be easily shown in the above graphs is relative profitability of games. Most companies keep this data close to their chests; however, ARPU (average revenue per user), for different games can vary widely, even within the same genre.

Understanding of the correct methods for monetization has varied widely between developers. However, some early examples of games that were finding more success at monetization began to appear in 2010. One example was Millionaire City, the successful city-building game by Digital Chocolate.

As a genre, city-builders have sometimes struggled to make much from their users. By contrast, Millionaire City has at times enjoyed an average revenue per user (ARPU) of several times what normal sim-style games make, according to our sources. The reasons for the game’s better monetization likely lies in fundamental design choices. Millionaire City was able to combine a strong virtual currency system, competitive elements and a clear theme and story, in contrast to the rather bland design of most city-builders.

Other sim games that have led the way in their theme and design have also done well. For example Baking Life, another of the big successes of 2010, was the first baking-themed game on Facebook, and has had better than average ARPU, we’ve heard.

The advantages extend beyond monetization, of course, as games with more unique themes and strong design fundamentals have also attracted more players. In 2010, titles like Nightclub City, Monster World, Car Town, Crime City, Ravenwood Fair and Monster Galaxy all stood out, both attracting more players and, in most cases, making more money than competitors.

Putting effort into theme, story and “fun”-based design would seem like a no-brainer to any traditional game development team, but the social game industry is still learning how to combine those characteristics with its heritage of virality and metrics-based design.

Some developers are also doing quite well with purely competitive, or “hardcore”, games. Kabam is well known for its success with Kingdoms of Camelot, but there are also less-known games like Wild Ones that benefited early on from player vs player mechanics. But for the most part, developers are still learning how to combine competitive gameplay with higher user numbers.

The ongoing shift at some developers to a newer, more creative model is in plain sight. CrowdStar, for instance, is still one of the top developers, by playerbase and revenue, on Facebook. However, its older generation of games, including the hits Happy Aquarium, Happy Island and Happy Pets, all made generally lower ARPU, we hear.

As the first company to sign up to use Facebook Credits exclusively, CrowdStar signed away up to 30 percent of its revenue, plus, in all likelihood, another 10 percent or more for the promotional Credits that flooded Facebook’s economy early on. We’ve thus seen CrowdStar change its strategy significantly this year. Not only did the company switch CEOs and lay off some workers, its last two titles have also been RPGs with their own unique personalities and competitive elements, It Girl and Mighty Pirates.

Risks and Rewards

Despite some clear trends, we can’t necessarily describe what the next hits on Facebook will look like. However, we can make some predictions about life on the platform.

One is that developers should continue to improve monetization, and not always as a direct result of game design. As players become accustomed to playing games online and paying for virtual goods, they become more likely to spend real money. In our most recent Inside Virtual Goods report, which covers the future of social gaming in much more depth, we predict a reasonable increase in ARPU/ARPPU in 2011, and growth of the US-based virtual good market to $2.1 billion.

Another trend is increasing access to international audiences. As we recently pointed out, over half of CityVille’s 100 million MAUs are international players. Finding ways to accept payments from a diverse international audience is difficult, but luckily, developers will not have to handle this problem on their own; dozens of payment networks and publishers are rapidly growing, and Facebook Credits is also constantly adding to its list of supported payment methods used in various geographies. Since a large majority of users on Facebook are now international, developers have a significant opportunity to monetize hundreds of millions of new users opening up to them.

There are challenges. Returning to the example of Millionaire City, the game is Digital Chocolate’s one and only big hit; no matter how well it monetizes, it still has its limits. Having a single hit is not all too uncommon in the social gaming market, caused in part by the necessity of keeping a team of people constantly at work on games after they’ve launched. Some developers seem to be having difficulty getting past their first big game.

Marketing costs also continue to rise. Despite some predictions that Zynga, Electronic Arts and Disney would drive up ad rates on Facebook, pricing pressure is also coming from other industries that have found Facebook’s performance ads a relatively cheap way of reaching new clients. Any industry that can draw high lifetime values from users who click their ads – from merchandisers to online universities – can potentially outbid, and thus push out, competing social game advertisers.

The biggest challenge of all may be staying committed to producing new Facebook games while the fast-growing smartphone market is beckoning. However, the mobile market is still missing social elements and the sheer scale of Facebook. It also offers unique challenges around distribution and, if not on the iOS, payments.

Tomorrow at Inside Social Apps, we’ll be speaking to top players across the whole social gaming market, as well representatives of both Facebook and Google,. When we finish, we’ll have an even clearer picture of where the market is going.

For in-depth stats on applications and games on the Facebook Platform, check out our AppData service.

Starting at its developer conference last April, Facebook has been saying publicly that Credits would eventually be the only payment option in social games on the site (although it started saying so to developers months before).

It had originally slated all developers to have completely made the switch by the end of 2010. While that has mostly happened, there are still many games not using Credits.

So the company is announcing today that all developers who have games on canvas pages will need to move to only use Credits by July 1st of this year. New games will be required to use Credits as the virtual currency when they first set up their canvas pages; older games will also be required to switch to exclusively use Credits, too.

For users, that means no more paying for currencies directly with credit cards or other methods that don’t somehow use Credits.

For developers, it means more costs and benefits to plan for.

Credits, along with whatever benefits it brings, also comes with a 30% revenue cut that developers have up to this point not had to pay. Although many have already adopted Credits in whole or in part, the potential cost of exclusive implementation continues to be an issue for the ecosystem. Facebook’s mandatory push could, beyond the risks to developers’ businesses, also help increase the prevalence and ease-of use of Credits to the point that the currency makes relatively more money for developers even with the fee — or that, at least is, Facebook’s plan.

New Credits Promotions, More Stats

As part of the news, Facebook is also releasing some big updates to its promotional plans for Credits, and stats on adoption.

Perhaps the biggest piece of news is that Facebook is going to be strongly encouraging developers to use Credits is the premium in-game currency, beyond requiring Credits to be the only virtual currency payment option. According to Deb Liu, a lead platform marketing manager  at Facebook, the company could offer additional benefits for developers who do this, including free advertising on the Games dashboard, in other Facebook ad inventory, and in other special features. She tells us to expect more news on that front soon. Note that we’ll be asking her for more details tomorrow, as she’s on a monetization panel at our Inside Social Apps conference in San Francisco.

> Continue reading on Inside Facebook.

CityVille has lost users for the first time since it launched in early December, according to our latest look at our leaderboard of games that gained the most new users in the past week.

Instead, according to our AppData tracking service, Lolapp’s Ravenwood Fair, Zynga’s Chinese version of FarmVille, and a Chinese-language version of Texas hold’em poker by Booyaa are the biggest winners.

Name MAU Gain Gain,% 1. Ravenwood Fair 5,620,149 +881,384 +19% 2. 德州撲克(中文版) 7,120,465 +754,400 +12% 3. FarmVille 中文版 3,628,827 +689,067 +23% 4. GodsWar Online 1,458,615 +560,766 +62% 5. Farmandia 2,393,268 +515,719 +27% 6. Paradise Life 1,232,573 +440,651 +56% 7. Epic Fighters 1,517,775 +332,917 +28% 8. Texas HoldEm Poker 36,693,515 +322,739 +0.89% 9. Dragons of Atlantis 1,166,436 +227,499 +24% 10. The Pokerist club — Texas Poker 424,371 +218,165 +106% 11. Bubble Island 5,632,655 +208,193 +4% 12. Kingdoms of Camelot 5,952,493 +204,465 +4% 13. It Girl 7,913,997 +202,177 +3% 14. Jersey Shore 1,047,279 +196,421 +23% 15. Happy Hospital 1,323,419 +189,179 +17% 16. Bingo Island 888,250 +180,849 +26% 17. CSI: Crime City 2,237,539 +179,300 +9% 18. 鋤大地(大老二) 569,970 +155,739 +38% 19. Gambino Poker 590,251 +148,232 +34% 20. Miscrits: World of Adventure 874,730 +145,495 +20%

Although its traffic had appeared to level off as of a couple weeks ago, Ravenwood Fair is back on the up-and-up, now in its second weekend of growth both in monthly and daily active users. It tops our our list today with 881,000 daily active users, for a total of 5.62 million.

Boyaa’s version of the decades old Texas hold’em poker card game comes in second. Its Chinese title is literally 德州撲克(中文版) or ”Texas Hold’em (Chinese Version)” — a fearless nod to Zynga, the lawsuit-oriented developer with a much larger and older app of the same name. The Chinese-language app has had a solid month in terms of MAU, growing by nearly 50%, including a quarter of a million users in the past week.

[Editor's note: Below, game veteran and industry thinker Tadhg Kelly shares his ruminations on the nature of social gaming mechanics, and similarities they have to that arcade classic, pinball.]

I once thought of social games as being very similar to slot machines, but I now think a better analogy is pinball. The art of great pinball is not the skill (which tends to put off more people than it attracts) but rather the rewards. While social games are clearly very different from pinball in many ways, the two share some surprising similarities.

Pinball Wizards

Great pinball navigates the middle ground between agency and luck by giving the player fast-paced activity (repeatedly hitting balls with bats and hoping for the best) that is rewarded with prizes, color and sound. The game has no overarching strategic elements beyond achieving sets of bonuses, and so it is very much a game of the moment. In the engagement hierarchy, pinball is an amusement for most players.

The main game dynamic is the warding off of gravity to achieve scores. Shooting the ball creates a variable loop with many possible reactions, some pleasing, some not. There are bonuses and multipliers to achieve, but there is also failure: Most pinball games have side chutes into which the ball can fall, which the player cannot prevent. Also, the space between the bats in the center is usually just a tiny bit wider than the diameter of the ball, also a source of unpreventable failure.

This means that pinball is a self-limiting activity for most players. When they insert their coins and shoot their balls, it is implicit that the activity will only last a few minutes before more coins are required. But the reward in those few minutes will be (if done well) exciting and engaging.

Social Sorcerers

Social games are sort of similar. They lack the need for physical skill, but what they have in common is the deliberate use of timed play, coupled with an easy but bright reward structure.

Successful social games serve activities, such as objects to collect, things to build, friends to visit, etc. All are delivered in what feels like a basic game, but the objective of the game design is not formal victories and big wins. Instead it is focused on small wins, things to do, little rewards to earn, and happy bonuses. The joy of these games is the endless colorful achievements, payoffs and unlocking more of the same.

Where social games differ from more traditional sim or role-playing games is a lack of overarching goals. There is creative appeal, but very little by way of interdependencies and complex effects to understand. Long term objectives and deep game-play are toned down on purpose, as with pinball, to create simple task/completion scenarios.

The result is that players visit little and often, performing a few tasks, collecting a few rewards, achieving some small goals and occasionally being awarded a level or a lucky item drop. A social game permits the player a certain quantity of energy or activity (which savvy players learn how to maximize) which means that the game is self-limiting. Somewhat like pinball really.

Why Pinball Is A Better Analogy

Playing a game on Facebook is like standing in an amusement arcade. Pinball is primarily available at arcades, and each pinball machine has to fight for its right to be seen and heard by being louder, more visual and more immediately fun than its competitors. Other people and games are constantly in your peripheral vision, and the sounds and distractions that they create drain your attention.

Just as there is no room for an absorbing game like The Legend of Zelda at the arcades, the environment of social games restricts their ability to be deep. What social game makers have realized is that Facebook is so loaded with distraction that deep gameplay is almost impossible to achieve. So the game you are playing has to keep things light, fast and fun because the rest of the player’s social graph is only a Notification Request away.

More serious games are better at achieving depth simply because they exist in full screen rather than browser windows. If I’m playing Starcraft 2, all I can see on my monitor is that game. It blanks out the rest of my desktop and browser, and so I am completely enclosed in the Starcraft universe. On the other hand, if I’m playing CityVille I might also have FarmVille, Twitter, Google Reader,Facebook and BBC iPlayer open on different tabs.

Distraction rules the Web, so about the best that social game makers can hope to achieve is the delivery of great amusement. Like pinball, the secret to social game design is thus to be quick and simple, obvious and unconcerned about grander ideals. Keeping things simple (to the point of lame) is a good fit for the Facebook platform because the rest of the world really is only a click away, and as humans we are notoriously bad at paying attention unless all distractions are removed.

Environment Matters

It’s important for any game designer to realize what environment he is working in, in order to avoid fooling himself. Like a pinball designer, you have to understand not only what the game that you are making is, but the environment in which it will sit.

There’s no point trying to build quest elements into family sports games on Kinect, for example, because the environment is fast-paced as the family members jostle to take their turns. By the same token, there’s little value in introducing artificial mini-games into single-player explorations that are intended to be played for 100 hours. They feel oddly out of place.

What pinball knows, and social games have learned, is that environment plays far more of a factor in how engaging a game can really be than we sometimes realize.

An Irish lead designer and producer living in London, Tadhg Kelly is the author of a challenging book about, as he describes it, “Reclaiming games as an art, craft and industry on its own terms” titled What Games Are. The blog for the book is whatgamesare.com. You can also follow his tweets on Twitter (@tiedtiger).