FarmVille 2 growth encouraging, but it’s not out of the woods yet

Zynga touted FarmVille 2′s growth as one of the single most encouraging visions of growth on Facebook for the past quarter, but it’s not clear that the sequel has the staying power of previous Zynga blockbusters.

On the bright side, FarmVille 2 is growing like a weed with over 61 million monthly active users and 9.1 million daily active users gained in the past 30 days. It’s currently the largest app on Facebook by MAU and the third-largest by DAU after Instagram and Microsoft Live. On its Q3 earnings call today, Mark Pincus revealed that the game managed to convert 500,000 of its players into paying customers, and — for one glorious day — the game saw nearly $1 million in FarmVille 2 purchases (before subtracting Facebook’s 30 percent cut).

On the dark side, strong performance in the first 30 days can’t forecast longterm success. With a massive cross promotion network like Zynga’s, it’s easy to direct a flood of players to a new game — and many of them might actually stick around for an entire month. But a bad game can’t hold onto its users, and if there’s no new game to go to after the 30-day grace period expires, most players will leave a game permanently and without ever spending a cent. Even with all the changes to the Facebook platform in the last two years, most developers will still tell you that the numbers that really matter to them are the retention rates posted after the first 30 days are done — because those are usually where the loyal users with the highest lifetime value show up.

Recall that almost a year ago, Zynga had another hit with CastleVille — a game that shot up the traffic charts so fast in its first 10 days that Zynga was rushing to shout it from the rooftops in press releases. Despite its popularity, that game’s growth phases lasted just over a month before winding back down the charts to its current position at No. 13 on our top Facebook games by DAU. This was the same pattern we saw with Facebook flop Mafia Wars 2, which isn’t even on our charts anymore as the game appears to be one of Zynga’s 13 sunsetted games. And again, we see it with The Ville — which met our predictions by shooting up the charts for just 30 days before dropping like a rock because the game wasn’t retaining users.

Zynga at least is aware that it’s dangerous to put all their eggs in a month-old game’s basket. On the call, CEO Mark Pincus and CFO Dave Wehner even stated that Zynga hadn’t kept up the pace in releasing new games to shore up the crucial drop-off after their games’ 30-day growth period. They also stated an intent to focus resources on games with more engagement potential, like the midcore title coming from A Bit Lucky sometime in 2013.

“I think we had a major breakthrough with FarmVille 2,” Pincus said at one point in the Q&A. But later, when an investor brought up the almost-$1 million day, he cautioned, “While that was an exciting milestone for the game to hit so early after launch, that’s not the average daily number that we’re seeing. It’s just showing that we’re growing that game to great numbers pretty early in its lifecycle.”

Here’s hoping the cycle lasts a lot longer than 30 days.

Zynga goes for a “must have mobile” game development approach

Zynga is changing its game development approach to incorporate a mobile component at the concept stage, CEO Mark Pincus announced during the company’s third quarter earnings call.

Just yesterday, Zynga launched a dramatic “cost reduction program” that eliminated 150 jobs, shut down Zynga Boston and includes the sunsetting of 13 older games. This program is designed to save Zynga up to $80 million annually and also includes “more stringent” resource management and allocation for the development of new games. Part of those resources will go to adding a mobile component to all new games as they are developed and eventually launched. This means that Zynga’s game teams will now probably merge its mobile and web developers early on in the development cycle.

This “must have mobile” approach resembles Activision, Ubisoft and EA’s approach to handheld consoles in the last decade — where every new game launched to home console also had to have a handheld version, usually developed by a more junior team or an external development team. The danger here is that these games feel like afterthoughts and usually don’t tie in well with the “core” game on console. While Zynga may not experience this challenge with its casual or arcade games (which tend to translate to mobile), it could present challenges for more in-depth sim games like CityVille and for the upcoming midcore game from A Bit Lucky.

Zynga partners with bwin.party for poker and casino games in the U.K.

Zynga announced a partnership with real money games operator bwin.party today to support real money poker and casino games in the United Kingdom.

A press release detailing the partnership explains that Zynga’s U.K.-based real money gaming service will launch both a poker game and a suite of 180 casino games in the first half of 2013 with bwin.party’s help. Many have touted the revenue potential of real money gaming as a means to “save” Zynga from a total collapse of its social games business. Others, though — including Inside Social Games — have expressed skepticism that Zynga’s current non-real money audience could be converted to real-money gamers.

This is the second social games partnership for bwin.party following its deal with sports social game developer Nordeus announced in September. Zynga’s third quarter 2012 financial results are being reported today following yesterday’s layoffs and a studio closure.

UPDATE: During the Q&A portion of today’s earnings call, CFO Dave Wehner reigned in investor expectations, saying that the deal “is a first step, so we’re not talking any details around the economics at this time.”

Zuckerberg: The games ecosystem is growing

Mark Zuckerberg admitted that the Facebook’s games ecosystem “is not doing as well as I’d like” today on Facebook’s Q3 earnings call.

Payments revenue from social game giant Zynga dropped 20 percent for Facebook compared to Q3 2011. In total, Zynga made up 43 percent of Facebook’s Payments revenue this quarter and just 7 percent of Facebook’s total revenue (including Zynga’s ad spend). This is down significantly from previous quarters where Zynga has made up as much as 63 percent of Payments revenue (last year) and 12 percent of total revenues (at the point of Facebook’s IPO).

Even so, Zuckerberg says the games ecosystem as a whole is growing with revenues from other game developers increasing 40 percent over the last year since Payments was made mandatory for game developers. Payments (and other fees) revenue for Q3 was up year on year almost 13 percent from $156 million to $176 million.

Zynga’s Q3 earnings call is scheduled for Oct. 24. Reports today indicate a large number of its employees were laid off earlier this morning and its Boston studio was closed.

Introducing Inside Social Commerce

Inside Network has a new blog in its lineup of industry-facing publications. We’re pleased to introduce Inside Social Commerce, our site tracking the convergence of social media and e-commerce.

As our readers know, Inside Network — home of AppData, PageData and Inside Network Research — is dedicated to mapping the intersections between social media and various verticals. Our existing blogs Inside Facebook, Inside Social Games and Inside Mobile Apps have all faithfully covered the branching ecosystems of social, game and mobile applications. Inside Social Commerce adds to the diagram by examining apps and pages that drive e-commerce on a variety of platforms.

The concept of social commerce is hardly new; advertisers and product marketers have long understood the need to generate social activity around a product to create purchase intent and enduring appeal. With the rise of Facebook and smartphone applications, marketing and sales practices have evolved significantly beyond direct mailing campaigns and jingles in TV commercials. Now we have consumer product companies building and launching apps to drive audience engagement, micro-social networks emerging around specific demographics of consumer and increasing marketing dollars being dedicated to Facebook campaigns and promotions within social and mobile games. New ad networks have sprung up on Facebook, mobile and the open web to direct the eyeballs and clicks of the most engaged audiences to online storefronts. We even see Facebook itself becoming one of those online storefronts with Gifts and the new Collections feature for retailers.

The point of it all is to make someone somewhere buy something, to guide a user from the point of interaction with social media (e.g. pinning a picture of a baby covered in lipstick to their Pinterest board) to the point of sale (buying lipstick from a cosmetics website). The goal of Inside Social Commerce is to document this emerging area and all of the techniques various product sellers, social networks, ad networks and third-party service providers use to make the process better, faster or at least more interesting.

Using our PageData and AppData tools, we can identify and document the various pages and apps that are successful in attracting audiences and potentially converting them to paying customers. By following relevant news and analyzing the trends of the major players in the social commerce space, we can characterize the rapidly growing field and predict where investors and marketers are most likely to spend their money. Our goal is to keep our readers up to speed on social commerce and help them understand how it can improve their own businesses.

Whether you’re selling something or not, we invite you to check out Inside Social Commerce here where you’ll already find a number of articles tracking current events in social commerce — like ShopIgniter’s new engagement and promotion platform, Amazon’s credit lending to Amazon.com retailers or Yellowdog Media’s expansions beyond its Yardsellr app. Our blog is currently headed up by Damon Brown, author of The Complete Idiot’s Guide to Facebook Marketing among other social media publications. Be sure to follow both him and the blog on Twitter and Like the Inside Social Commerce page on Facebook. You can expect great things in the months to come.

Zynga’s newest ‘Ville is sequel CityVille 2

A few months shy of its two year anniversary on Facebook, CityVille gets a sequel in beta form from embattled developer Zynga.

CityVille 2 is currently in geo-locked beta in the Philippines, which is the same region where Zynga tested FarmVille 2 several months before its launch. A brief blog post announcing the sequel declines to name a launch window for the game, but based on FarmVille 2’s timeframe and on statements made in Zynga’s latest earnings report, we anticipate a December launch assuming the geo-beta runs smoothly. As you can see from the screenshot below, it looks like CityVille — but with slicker graphics and apparently a day-and-night mechanic as this appears to be a nighttime shot.

The announcement comes just as the frenzy surrounding Zynga’s lowered 2012 outlook reaches a fevered pitch. The company’s stock opened trading today at $2.42 — down more than 75 percent from its IPO opening price of $10 a share. Two more high-profile departures hit the developer’s ranks last week. Over the weekend, our friend and former Inside Facebook lead writer Josh Constine over at TechCrunch ran an article provocatively titled, “Why Zynga Failed,” although the article stops short of actually claiming the Facebook games giant has completely flatlined. Today, we see that doom and gloom sentiment being reiterated by articles from The Wall Street Journal, Forbes and AllThingsD.

Despite the obvious turmoil at Zynga, it’s still a far cry to call the developer “failed” at this stage — particularly if it’s still launching games and making money. In the rush to declare 2012 the year of another internet bubble burst, it seems as though many people forget that a games company is defined by its ability to release games — something Zynga has never not done regardless of what its stock was trading at. Plenty of social and mobile developers have actually failed in 2012 — as in shutting their doors, laying off their entire development staff and never releasing any new games — and yet none of them seem to register with an audience that was just so eager for the No. 1 Facebook developer to fall off its pedestal. Incidentally, it’s a pedestal still occupied by Zynga; our AppData traffic tracking service shows that the top three apps on Facebook by monthly active user are all Zynga games — ChefVille, Texas HoldEm Poker and Zynga Slingo.

For a bit of historical context, CityVille was both the largest game and app on Facebook in terms of MAU and daily active users for a run of more than 12 months. At its peak between January and March of 2011, the game boasted more than 101 million MAU and just above 21 million DAU. It currently sits at 16.8 million MAU and 2.2 million DAU.

Zynga reports Q2 with $332M revenue, lowers 2012 outlook on game delays, Draw Something decline

Zynga made $332 million in revenue and $302 million in bookings for Q2 2012, the developer reports. That’s up 10 percent for both year-on-year, but down in bookings about 5 percent from its highest-ever bookings rate of $329 million reported in Q1 2012.

Monthly active users are up year-on-year by 34 percent at 306 million compared to 228 million in Q2 of 2011 and up 4 percent from Q1 2012′s 292 million MAU. Daily active users are up 23 percent at 72 million from 59 million from this same quarter last year, up 16 percent from Q1 2012′s 62 million. Meanwhile, monthly unique users are up 27 percent year-on-year from 151 million to 192 million, up 5 percent from Q1′s 182 million. Monthly unique paying players are also up from 3.5 million in Q1 2012 to 4.1 million in Q2 2012.

Zynga saw six releases in Q2 between social and mobile with an even split between the platforms. Facebook saw the launch of match-3 arcade games Bubble Safari and Ruby Blast; Bubble Safari is the larger title at 28.2 million MAU and 6.1 million DAU, while Ruby Blast is at 1.2 million MAU and 390,000 DAU. Also released at the tail-end of the quarter is life simulation game The Ville, which now has 21 million MAU and 6.8 million DAU. On mobile, Zynga launched Zombie Swipeout, Zynga Slots and Matching With Friends.

The company is lowering its 2012 guidance on account of game delays, rapid decline in web-based games on Facebook and under-performance from Draw Something. Bookings are now projected in the range of $1.15 billion to $1.225 billion, down from the $1.425 billion to $1.5 billion reported in Q1.

More to come.

Facebook mobile game users play longer, spend more

Mobile game players logged in via Facebook generate more revenue for developers, Facebook Games Strategic Partner Manager Sara Brooks said today during a Casual Connect presentation.

The session, titled “Unlock New Frontiers of Growth with Facebook,” primarily covered the expansion of Facebook-based social games into both established casual game genres and into international territories. At the end of the presentation, however, Brooks shared interesting statistics reported by mobile game developers that feature Facebook-enabled logins and viral sharing tools. According to Are You Smarter Than a 5th Grader developer Ludia, mobile users logged in through Facebook generate 70 percent of the game’s revenue for the platform. Roughly 50 percent of its total mobile player base is logged in via Facebook. Bingo Bash developer BitRhymes Inc. reported that its Facebook mobile players engage in 65 percent more sessions, play 30 percent longer and spend up to 80 percent more than non-logged in players.

These stats are no doubt meant to convince game developers that Facebook still represents opportunity, particularly on mobile devices. Many developers are disillusioned with the platform given Zynga’s dominance, issues with discoverability prior to the launch of App Center and rising user acquisition costs. Even with all those marks against it, however, Facebook still boasts some of the highest average revenue per user rates among games platforms. App Center could even increase ARPU on Facebook. According to Brooks, War Commander developer Kixeye sees higher ARPU from users coming in from the game’s page on App Center.

Zynga may be looking to core games for growth

Zynga’s corporate development team has been sniffing out developers of web-based hardcore video games, sources tell Inside Social Games.

Speaking on the condition of anonymity, two persons from separate companies confirm that Zynga’s acquisitions arm is reaching out to small and mid-sized developers with core games already live on open web and other games platforms. We understand “core” here to mean massively multiplayer online games, strategy or card games similar to Magic: The Gathering and possibly first-person shooters. Core games typically enjoy smaller audiences than Zynga’s casual games titles, but reportedly enjoy higher conversion and volume. The biggest player on Facebook in this space is currently Kixeye, with just over 5 million monthly active users and above 1 million daily active users.

Up to now, Zynga’s business has been firmly casual with a flavoring of i-gaming through its casino franchise games. While still reportedly profitable, it may be that the developer is reaching a point of saturation with audiences on Facebook and mobile. Zynga’s games destination site, Zynga.com, also doesn’t seem to be opening up its games to an off-Facebook audience. Our AppData traffic tracking service reports that the Facebook audience on the website numbers 5.2 million MAU and 1 million DAU and the user ticker on the site has reported DAU much above that.

Branching out to core games (and possibly other genres) could be a shot in the arm to Zynga’s growth. The developer has some experience with core games via Empires & Allies, which introduced turn-based unit combat vaguely similar to the combat system in Digital Chocolate’s Army Attack. It’s not clear how successful the experiment was in terms of increasing bookings; audience-wise, the game maxed out its audience within a month of launch at 52.3 million MAU and 7.7 million DAU.

A Zynga spokesperson says the company does not comment on rumor and speculation. The company’s Q2 earnings report drops tomorrow.

Applifier debuts Facebook-only video ad network for game trailers

Cross-promotion pioneer Applifier is upgrading from display bars to a video ad network called Impact, debuting on Facebook this month with King.com, Gaia Online and Song Pop games.

Impact allows developers to display 30- to 60-second game trailers from within a Facebook game at key points of the user experience. The idea is that the videos increase monetization or acquisition, depending on how they are implemented. A user may be prompted to watch a video in exchange for a virtual good for that game after failing a level, for example; this would increase monetization as the user is more engaged (and therefore more likely to spend) and any advertising seen in the video will yield pay-per-view revenue for the developer. On the acquisition side, a user may see a persistent module in a game’s UI that shows a video trailer of a second game, which could drive cross-promotion.

Whatever method a developer chooses, Applifier’s policy mandates that Impact video ads are opt-in only — no forcing them on users unasked. The video ads can be targeted at either the most engaged users (the ones more likely to monetize), or at users who could be losing interest and are therefore in the mood to try a new game (more likely to become a new acquisition). The targeting is based on player behavior collected from over 250 million anonymous player profiles. Developers can choose to reinvest earnings from displaying the video ads to receive a 25 percent boost in user acquisition.

Impact might seem like a stretch for the noble-spirited cross-promotion network of 2010 that wanted to share traffic between small- and mid-sized developers. Applifier CEO Jussi Laakkonen explains, however, that game trailers are very much an extension of his company’s core values.

“We still believe in Facebook gaming,” he tells Inside Social Games. “It’s not exploding anymore, but there’s still business there. We believe Facebook games deserve more [recognition] for the quality. Trailers can provide that — banners are just not enough.”

Around this time last year, Applifier had just entered the mobile market with a game discovery and cross-promotion app similar to what it offered on Facebook. The company has been very quiet since then; Laakkonen says that we can expect to hear more about Applifier’s efforts in the coming months. Next up on the company’s to-do is a panel on user acquisition panels during the IDGA Summit at Casual Connect in Seattle next week.

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