[Editor's note: In the article below, Wooga product lead Stephanie Kaiser provides an in-depth look at her team's development of successful Facebook game Monster World. Kaiser has also been speaking about her experience at Casual Connect in Seattle this week and in Hamburg earlier this year (you can find slides and video from that presentation here). This article is also being published in the latest edition of the Casual Connect magazine.]

Some games don’t become instant hits right after launch. Such was the case with Monster World, a farming game developed by wooga and launched in April 2010. wooga is the 2nd largest developer of social games on Facebook. And Monster World is wooga’s most successful title today, growing virally and monetizing well with over 1.6 million daily active users.

With this in mind, I will describe some lessons learned during the development of the game, structured along the four topics: engagement, virality, monetization and non-metric related factors. But be forewarned: As you gain insights into relevant key performance indicators, you will more than likely fall in love with at least one of wooga’s monster characters.

Engagement

After launching the game in April 2010, Monster World was not an immediate success, but we were able to enhance the game step by step. Looking at the post-launch growth chart, our release cycles become very visible. Every Tuesday we are launching a new version of the game. And each Tuesday’s enhancements can be seen in the growth curve of the game.

We began by improving features related to engagement, reasoning that without high user engagement, any enhancement to virality and monetization would be useless.

The KPIs related to engagement are one-, three-, and seven-day retention and a game’s sticky factor (monthly active users divided by daily active users). Besides that, we dissected each step of the beginner’s tutorial and observed how many users reached steps one, two, three, and finished the tutorial. By undertaking A/B tests, we enhanced specific steps of the tutorial to help as many users as possible enter progressively higher levels within the first session.

In an A/B test, we send a percentage of our users to one version of the game including a feature we intend to test and the others enter a version of the game excluding this feature (the control group). By analyzing the relevant performance indicators afterwards, we are deciding to continue developing one of the tested versions. These tests need to be undertaken simultaneously in order to keep outside factors (such as weather or Facebook downtimes) from influencing the results.

For example, we tested a version of the tutorial that forced the user to perform exactly the action the tutorial character Mr. Tentacle suggests. Meanwhile, other users saw a version that left the decision to follow directions open to them. In the latter, Mr. Tentacle is still visible and giving tips, but any action was voluntary.

The result was pretty surprising. We had always thought that users would prefer freedom of choice. But looking through the results, we had to accept that users wanted to be guided. A lot more users got to the end of the tutorial when they were guided through it, so we selected that version for all users.

Features don’t get into the game simply because someone thinks they’re cool’; they get in only if they are proven by metrics. A very good example is the “Monster Choose,” which was initially the first screen in the game. Looking back at it today, I still think the screen looks quite nice. But after analyzing the numbers we had to acknowledge that we were losing too many users at this step. Surprisingly, there was no effect on user retention if users were not offered the opportunity to choose their monster anymore. So we cut the feature.

Because we had built quite a large user base (already around 300.000 daily active users at the time), we gained highly reliable data from A/B tests. Consequently, those tests became one of our favorite optimization instruments.

Along with cutting and enhancing existing features, we added new ones aimed at raising our users’ engagement like adding in a missions system. By giving users tasks to complete, they started to return to the game more often to fulfill the quests that were assigned to them.

After working on the tutorial and the missions week after week, the game began to grow virally. The users’ engagement was much higher than it was at the launch of the game and we could move on by enhancing and developing virality features.

Virality

Viral channels on Facebook change frequently. They are not what they were a year ago, and a superficial look could lead you to the conclusions that developers are suffering from the changes Facebook has made. But if you look at these changes in more detail, you’ll see that the changes were good from a user’s perspective. And since Facebook and social game developers are both trying to engage and retain users, you would have to acknowledge that ultimately the changes were good for developers also.

More than a year ago, users were able to send out unlimited feedposts from the games they were playing. Many users considered the feedposts spam, which in turn created a negative image for social games. And unhappy users are not sticky.

Feedposts today are only shown to those users that have registered with a game. This change ensures that the content in the users’ stream stays relevant. Relevance as the selection criteria in an always overloaded stream of news. With this change feedposts turned from a viral to a retention feature. As a new viral channel, Facebook has changed the way requests are shown and implemented in the platform. User to user requests are now counted and shown as a red number over the globe icon in the top Facebook menu bar. Requests can be sent to a user’s entire friends list, including those that do not play the game yet. With these functionality changes requests are a strong viral channel today.

Every viral feature needs to be socially acceptable. Therefore, any interaction between users in a game needs to be “share-worthy” and “click-worthy.” If a feedpost is share-worthy, the user is more likely to share it amongst their social circle. It needs to include a relevant message for the sender.

A good example is the Robert feedpost in Monster World. Robert is the customer robot standing at the gate to a user’s garden, asking the user to sell a specific set of plants to him. He pays well. This creates the incentive for users to post a help inquiry to their friends. Any friend clicking this post is sending a plant to the user, who can now finish the deal with Robert faster, gain points and level up earlier. This post is, in that sense, share-worthy.

The counterpart of being shareworthy is being click-worthy which relates to the receiver. Any clickable post that appears in a user’s stream with the intention of being clicked by them should be click-worthy. To generate this click-worthiness we changed all of our posts to include an in-game reward for the receiver. Whenever the receiver clicks a feedpost, he gets a gift, such as coins, some XP, etc. With this change, our response rate on feedposts jumped up.

In addition to these changes, we introduced new features that were intended to impact the game’s virality of the game. One very successful example was the introduction of the monster baby. Users become more engaged with a game once they start to have a strong emotional attachment to the characters in the game. The sad, lost monster baby caused people to feel a certain need to help.

The baby would cry constantly until the user would agree to build the toy the baby was demanding. To build the toy the user needed a certain quantity of varied materials. Those materials could either be found by harvesting plants (this is quite rare), by asking friends for help (through a feedpost) or by purchasing them. In that sense the baby added a social barrier to the game. The number of feedposts being sent increased rapidly when the baby feature was launched. No one could stand to watch the crying thing.

After completing the first toy, the baby would move into a user’s garden and start living there. From then on, it would ask for food and love at least once a day. And if it didn’t get what it wanted, it would start crying again. If users treat their baby well, however, they earn a daily bonus.

Recently we had a visitor at our wooga office in Berlin for a usability test. He was an avid player of Monster World and told us the game was part of his life. He had heard rumors that the baby would die if weren’t fed or hugged once a day. I personally love this rumor, although we would never let the baby die. Our Monster World is a very friendly one.

When Facebook changed the rules of their virality channels we switched from using feedposts to sending requests in order to use the full viral potential. Requests can be sent to all friends, not just the ones playing the game already and therefore invite new possible game users.

Monetization

After optimizing Monster World for maximum engagement and virality, we started to look further into the topic of monetization. By analyzing the number of buyers and their actual purchases, we discovered the obvious: consumables are monetizing much better than purely decorative items. They create a constant purchase cycle because consumables are used up as they are traded for game advantages.

In Monster World one type of consumables is the magic wand. Magic wands can be used in the game to either revive plants or to skip-over their growth time and harvest them immediately. In the real world our magic wands would equal fertilizer. Today wooga is the biggest seller of virtual magic wands in the world.

After understanding the importance of consumables, we added another one to the game: woogoo. Just recently have a series of new features that relate to woogoo been added into the game. We introduced Roberta, a character who has a constant demand for various products that cannot be manufactured without woogoo. Users can gain woogoo by selling to Robert, by harvesting, by asking their friends (via requests) or by buying it.

The game’s inherent woogoo supply is balanced to be below sufficient, but still the user has a chance to get woogoo without paying for it. It is just never enough. To fulfill all of Roberta’s demands or for example to use the auto-harvester the user needs more woogoo, than he finds by harvesting. He will always be able to sell some products to Roberta, but if he wants to sell more, he needs to either be viral or pay..

Consumables in that sense either help the user to progress faster in the game or allow him to prolong the playing sessions.

The Report Guy

As stated above, to enhance a game like Monster World you really need to know your metrics and need to analyze them on a daily basis. We are in the privileged position to look into the KPIs of over 1.2 million users daily and we do. An in-house reporting tool, built by wooga, is offering us a valuable insight into our games. Our “report guy” sends out automated report mails on defined KPIs, that we are interested in tracking daily.

Aside from all the metrics, there is a whole universe of non-metric related factors that have helped us to make Monster World a successful game.

Usability testing

From the very beginning of the development we invite people outside of our project teams to participate in usability tests at wooga. My first test on Monster World was done on a paper prototype, with a pen, which served as a mouse. I showed the prototype to possible users and asked them to use the pen and “click” as if it were a computer screen. The page behind the click would be the next step in the user flow and was also prepared as a paper prototype. By testing early and often, we tried to avoid conceptual mistakes at a very early stage, before we even began development.

During the development of click-prototypes, we started to test with real computers. Most of the time, we would just watch our test users. Not answering their questions or directing them would help us a lot in understanding the current iteration’s design flaws. The well known: “We listen to our users!” is changed to ”We look at our users.”

We test our games every two weeks. Product staff is always in attendance. Right after a test the “watchers” immediately discuss their findings and decide upon priorities for the next development cycle. We regularly invite everyone from the team to join a test. For developers and graphic people in particular, those sessions give a very deep insight into the world of user behavior.

Release Cycles

We work in weekly release cycles using a mixture (or, as we say: the best) of Kanban and Scrum. Every Tuesday we release a new version of the game on Facebook. The next development cycle begins on Tuesday and continues until that Friday. Over the weekend we refresh our minds and prepare to fix the bugs found in the new version that Monday.

These short release cycles are tough, and every team member must work in a very disciplined manner to avoid delays caused by inter-team dependencies.. But it pays off. We move fast, but we are still flexible enough to change priorities on a daily basis. Once a feature is finished, we usually release it while still maintaining the weekly cycle on top of that. Therefore, if someone in the team has an idea (or a finding of a usability test) today, it can be included in the next version—if its priority is high enough. In my experience, this direct impact on a game really motivates everyone on the team.

Localization

We localize our games in seven languages: English, Spanish, Italian, French, Portuguese, Turkish and German. From the early days of development onwards, we support different languages in the game via XML. Supporting accents is as important as the solution to the problem that some languages just need more space than others. Consequently, no text is embedded in images. wooga offers localized customer support, localized fan pages and virtual goods localized within the game. For example, during the soccer world championship last year, we had French, Italian and Spanish tricots hanging on washing lines in the game.

Emotions

As stated previously, users will be more engaged more in a game if they build a relationship with its characters. We focus a lot on all the little details in the game that make Monster World very loveable. The robot in Monster World is called Robert. Robert stands in the users’ garden waiting to make a deal. While he is waiting, he jumps rope, plays on his PSP, and flirts with Roberta. Users can visit their friends’ gardens and invite Robert to enjoy a bottle of oil. If Robert has too much oil, he gets drunk and will pay the user’s friend more coins in their next deal.

There are a variety of monsters in the Monster family, including the monster baby mentioned previously. Whenever we tested the baby with women in usability tests, they just went crazy when the baby appeared. Who can resist the happiness that comes after building a brand new rocking horse for a baby?

The Team

wooga is organized into dedicated game teams, with one product lead. All team members—developers, graphic designers, project managers and additional product managers—are dedicated resources that work on just one game. Each team has an individual office room which establishes a concentrated working environment with very short communication distances.

wooga was lucky enough to find a group of people wherein every single person is committed to building the best products they can imagine. With the love and dedication of every single monster on our team, we were able to work through the still ongoing optimization process of our game and transform it into a real Monster World.

Stephanie Kaiser is the Product Lead of Monster World at wooga (world of gaming), a top 15 social game on Facebook with over a 1,6 million daily users and over 8 million monthly active users. She is responsible for the design and development of Monster World, leading a team of 15. Prior to joining wooga, Stephanie worked as a Product Manager at Jamba/Jamster and as Manager of Product Development at MTV Networks where she was responsible for the development of clubnick.de, a subscription-based learning platform for children. Stephanie attended the Humboldt University Berlin (French Philologies and Information Science). She has a passion for dance and robots.

[Dan Jansen is Founder and CEO of Virtual Greats, an "IP aggregator" company that specializes in organizing partnerships between brands and social game developers to provide what we term "light" level brand integration in our ongoing article series on the subject. In this guest post, Jansen explains strategies for choosing to offer either branded virtual goods (BVG) or integrated virtual goods (IVG) to make money.]

Companies like Virtual Greats broker deals between intellectual property holders and game developers to drive revenue for the brand by selling BVGs. We believe this is an emerging multi-billion dollar product category that most brands have not entered. While General Mills and McDonalds have gotten attention through their recent Zynga promotional campaigns, most brands have only begun to consider advertising in the space, let alone selling; and though an entirely new revenue stream is great, the gross margins available in this category are even better than what most brands realize in their physical products. With minimal marginal cost and almost infinite shelf space (i.e. server capacity), gross margins can exceed 90%. One of our best selling items cost approximately $200 to develop, and we have sold more than $80,000 worth of the item.

While in-game virtual items may appear similar, there are two different economic models behind them: branded virtual goods are purchased by the user, while integrated virtual goods are funded by the brand and offered for free to the user. This is analogous to the television model where some of the stations are “free,” or ad supported, and some of the stations are consumer funded (i.e. pay TV for premium content on cable or satellite). Using targeted partnerships, BVGs allow brands to unlock value and capture dollars previously uncollected or unrealized. While all brands may not be appropriate for BVGs, there are still thousands of brands that have yet to realize a new audience and consumer base in social games.

Bridging the Gap between Brands and Developers

This concept moves brands from a traditional advertising model to a consumer-funded model by turning brand’s advertising costs into a new revenue stream. Instead of brands advertising their goods, they are sold as BVGs in the social media marketplace while still achieving many of the promotional goals for free. While this model is still “light” integration, it approaches the partnership from a revenue creation point-of-view and a different source of funding (i.e. consumer paid).

Because of the massive fragmentation of the social media market, licensed IP aggregators are able to bring scale to both the brand and game developer. IP aggregators like ourselves are trying to help a brand sell itself to multiple game developers at once, and help a developer to find licensed IP from brands to include in a game. This is especially useful for developers who are trying to get access to entertainment and consumer brands.

The Business of Branded Virtual Goods

Business models vary, but the business of branded virtual goods partnerships can be structured as flat rate fees or revenue shares. In the consumer-funded model, the end user is paying for the BVG and from these funds the IP holder takes a percentage. In the brand holder funded model, the brand advertiser pays, and the end user receives a free asset. Typically, the goal for this particular model is for the brand to create awareness for its product and not to generate revenue. This is an important distinction and the business model used will depend on the brand and the brand’s primary end goal: directly drive revenue (use consumer funded model/paid for BVGs) or drive awareness to achieve other promotional goals (use brand funded model/free BVGs).

All BVG campaigns are highly customized and collaborative between the brand and platform, with both parties focused on the goal of generating user engagement to lead to additional revenue and brand recognition/awareness. This collaboration helps determine which brand assets would be most attractive to platform users and how to maximize user response. Typically, assets are designed by host platforms, based on current looks and imagery to best incorporate the true style of the brand. From a brand’s perspective, they want mass distribution and exposure to create additional revenue. Authenticity and a high level of integration are paramount when designing a successful BVG for both the brand and the platform.

Activations in the virtual goods marketplace are most profitable, if the consumer is able to integrate the brand into their social media or game playing experience. For example, if a pair of branded Skechers shoes can help an avatar get fit/change body shape, there is a compelling reason to purchase that asset versus a regular pair of shoes. The brand goal is to use the virtual good’s functionality to support the brand promise from the real world. In general, some asset types typically sell better than others; for example, we find that hats are more popular than hoodies. Our data also shows counter-intuitive findings like more expensive items selling better than less expensive ones. We find that bundling items is also a powerful sales driver.

Measuring campaign results from both the brand and platform perspective can vary greatly, however most are judged on revenue, new user acquisition, conversion of non-buyers to buyers, growth in average price points, and other levels of engagement. In our experience at Virtual Greats, there is value for all parties and our partners frequently renew, with our average platform conducting several campaigns each year. One of our leading fashion brands is launching its seventh release in one game alone.

Case Study: Garfield Goes to Brazil

Brands need to understand that this is also a global market with fewer restrictions given the lack of physical product. As an example of a successful brand integration with a social media platform, Virtual Greats brought the classic cartoon character Garfield into the popular social game Vila Magica published in Brazil on Orkut by Latin American social gaming giant Mentez.

Together, we devised an asset list and product line that reflects the best game use experience, but adheres very closely to the authentic Garfield look and style. What followed was a youth focused line of Garfield hats, shirts, and even furniture items. While Virtual Greats created product ideas with Mentez, Garfield helped refine the proposed BVGs to ensure authenticity and keep consistent with the brand so that Brazilian Garfield fans bought in.

Virtual Greats was able to launch Garfield assets with Mentez within a few weeks of Mentez’s request for the brand. With price points for this particular brand ranging from $0.15 – $1.50 in Brazil, close to one million units have already been sold during this campaign. The Garfield assets are still live on Mentez and available for purchase.

The Facebook Factor

In addition to the numerous social media platforms in the U.S. and abroad, Facebook continues to be a dominant force within the industry. Brands have been very successful on Facebook and are making tremendous use of the platform for marketing purposes. However, the Facebook canvas does not easily allow for an individual brand to sell its own BVGs because Facebook no longer sells virtual goods outside of its games and apps, as opposed to advertising, which Facebook does sell directly.

In response, many brands must scale their own campaigns outside of Facebook by creating customized integration across multiple platforms at the same time in order to achieve scale in this fragmented space. This is not like traditional media where the same thirty second spot or print ad can be rolled out across numerous outlets as each activation should be customized to a specific look and feel or game mechanics. At times a brand’s assets can be repurposed with logos being swapped out and replaced with existing assets, however, so more time and investment is not necessarily required to diversify platform options for users.

Beyond Light Integration

Light integration means more than just placement of a BVG within a game. It is a revenue driving opportunity; in addition to the brand awareness impact any particular asset creates. We see continued growth in this sector on both consumer-funded BVGs and brand-funded IVGs. Both models are thriving and can be mutually reinforcing. The science of integrating brands into social games on this level is making a match between the platform and the brand and then focusing on creating a compelling BVG that is functional, relevant and popular.

[Editor's note: Charles Hudson is a co-author on our Inside Virtual Goods series of industry reports, a co-founder of Android game developer Bionic Panda Games and a partner at SoftTech VC. Bionic Panda recently began using Google in-app billing, which finally came out to consumers at the end of March after several months of anticipation from the Android developer community.]

We recently decided to launch Google In-App Billing in our first game, Aqua Pets. As a matter of background, we had been using PayPal to monetize our original game and were beginning to get user requests for support for credit cards. About one week ago, we released Google In-App Billing for Aqua Pets and decided to see how it would perform.

Our one major reservation with moving forward with Google in-app billing was the relationship between the 30 percent commission and what we anticipated the payment-enabled customer audience to be. While we don’t develop for the iOS platform, there are two compelling reasons why we think the 30 percent that Apple takes makes sense:

> Continue reading on Inside Mobile Apps.

[Editor's note: In the article below Adparlor chief executive Hussein Fazal discusses data his company is seeing around user acquisition on the Facebook platform through the Ads API.]

In previous articles, we have discussed the factors that affect user acquisition pricing overall and the interesting sub-topic around the rising cost of user acquisition over time. In this guest post, we will examine user acquisition in the “big four” English speaking countries – United States, United Kingdom, Canada, and Australia. Most Facebook games launch in English and many of them remain exclusively in English. So the goal of this analysis is to determine the ‘market attractiveness’ of these four countries by looking at three key indicators – available volume, advertiser competition, and user quality.

Available Volume

Looking at the table below, we can see that the United States makes up a large portion of the overall population and the Facebook population relative to the other three. This also translates when we compare the number of targetable game players in these countries. In fact, out of approximately 60 million targetable game players across these four countries, the United States encompasses 74% or almost 45 million of these users. (Note that targetable game players is different from total game players as Facebook ads allows you to target users who “like” the game – and not all of the games users.)

Many application developers, upon launching their game, focus strictly on the United States given the large user base available.

However, it is of course not just the user base that matters. Outside of the big four – there are many countries that have a significant Facebook population and consequently a large game player community. We also need to take a look at how competitive it is in advertising to these users versus how valuable they really are.

Advertiser Competition

For any particular country, the competitive landscape around Facebook ads is always changing. Tens of thousands of small advertisers constantly modify their ad spend – while the power players with large budgets strategically ramp up and slow down their marketing efforts at often unpredictable times. While the general consensus is that competition is increasing overall across Facebook Ads and that CPC bids are rising, we see that effective creative/copy along with efficient micro-targeting can still result in cost-per-install pricing being just as competitive as it was over a year ago.

Successful game developers will dig deep at the micro level and examine the competition specifically for targetable game players – and even deeper to determine the competition for players of their particular game genre. Trying to advertise a city-building game when other large advertisers are bidding on those same keywords will significantly increase the competition for those impressions, increasing CPC prices, and hence the cost of user acquisition.

Given that the market for game specific advertising is always changing, it is difficult to predict how much competition you will run up against when starting your campaign. However, some analysis can be done at the macro-level. We see that competition within a country remains relatively consistent over short time periods – with the exception of holidays like Christmas. Hence, by following CPI prices at several points over the past few months from the millions of acquisitions delivered for Adparlor’s gaming clients, we have been able to come up with a relative competition scale for all four countries on Facebook. The graph to the right has been normalized to give the US a relative competition score of 1.00 so we focus on the difference between the United States and other English speaking countries. We can see from the graph above that the US is in fact the most competitive and Canada is the least competitive. The section below on user quality points to why this is the case.

User Quality

Now we come to the most important part of the analysis – user quality. Regardless of the volume available and the competition – the quality of the users is paramount in deciding which countries to advertise in. While this is normally difficult to measure, AdParlor has run hundreds of campaigns for game companies and we often measure deep metrics. We have combined the three most important metrics and devised a Retention, Engagement, Monetization (REM) score for these countries by giving a certain weight to each component – i.e. monetization has more weight than the other two metrics. It is important to note that these scores can vary widely per game based on many factors. The number and types of payment providers as well as the associated payment flow can have a significant impact on monetization and hence REM score.

We see some general trends — females perform better than males, older users perform better than younger users, and hard-core games perform better than casual games. However, there are also differences at a very granular level where we see certain genders and age ranges within certain countries monetize better for certain game genres. To protect the IP of our clients, we have decided to keep the specifics internal and simply publish these scores on an aggregate level for these four countries.

Conclusion

Now that we have looked at available volume, advertiser competition, and user quality, let’s relate that to market attractiveness. The data above shows that the REM score for Australia is higher than the United States while the competition for those users is lower. This is a clear indication that your marketing efforts should include the Australian users – however, does this mean you should shift your budget away from the United States?

The answer is no if you understand the relationship between volume, competition, and quality. You will notice that while those initial Australian users provide some very positive ROI, CPI rates will quickly increase given the limited population of game players available in this market. The fact remains that there are over 15 times more targetable gamers in the United States compared to Australia, meaning that CPI rates increase slower over time despite more competition for these users. For large campaigns, the United States will quickly catch up to Australia in terms of ROI as there are simply more users available at lower price points.

While the analysis of volume, competition, and quality on the big four English speaking countries is interesting, the ‘fairness’ of the open market and an educated game developer community has balanced out the economy, making it difficult to gain a strong competitive advantage with this data. However, the breakdown across Europe, South-East Asia, and other areas prove to be more interesting where we see countries that have relatively high volume, low competition, and high REM scores. It is important to keep these three factors in mind, when assessing how valuable a country can be and deciding where to put your advertising dollars.

Hussein Fazal is chief executive of AdParlor, an ad management company for Facebook campaigns with social gaming clients including Ubisoft, PlayFirst and Five Minutes, as well as other clients on Facebook including deals site Groupon.

[Editor's note: How can social game developers create unique new products? In the first of a two part series below, guest author Tadhg Kelly discusses how the social gaming industry fits into the "red ocean/blue ocean" business framework -- basically, why social games are so often copies of each other and what developers can do differently in order to succeed. He covers the red ocean aspects below, and will get into the blue ocean part in a follow-up post.]

I was inspired to write this article by Blue Ocean Strategy. In the book, authors W. Chan Kim and Renee Mauborgne explore methods that companies can use to understand how everything that their competition is doing falls into well-defined types, and then create completely new ways to overcome them and consequently new markets.

Most companies, they contend, are locked into competition with each other in the red ocean (i.e. bloody) side of the economy. This means that most of the time they are trying to compete along well-understood existing lines, and that the results of this kind of competition are angry and merciless. In studying red ocean companies, they observe how they all tend to study competitors’ tactics and then emulate or attempt to differentiate themselves. Such tactics seem to be the main way that red ocean companies think and act, as though they are at war, and this leads to a lot of very similar products created, marketed and sold in much the same way.

One particularly effective example that the book cites is the US wine industry: Wine is sold along two lines, premium and budget, and all of the participants in the market tend to compete using the same factors. Premium wine makers talk about heritage, complexity of taste and image. Budget wines also use image, but they talk less about complexity of taste and more about price. While each wine works hard to differentiate itself, Blue Ocean Strategy argues that most of it tries to differentiate itself in the same way. Wine X has 12% more medals than Wine Y, while Wine A has 50 years more heritage than Wine B.

The authors produce a diagram to illustrate the strategic profile of the wine industry, called a Strategy Canvas. The horizontal axis shows the various factors, whereas the vertical reflects the offering level for buyers (meaning the amount invested by the winemakers in the factor, or the price to the buyer).

Their wine canvas looks something like this:

The book’s conclusion about red ocean markets is that they are a result of focusing on competition for existing customers, or existing types of customer. Red ocean companies offer better solutions for existing problems rather than alternatives solutions for new problems, so wine makers try to win medals and plaudits for the complexity of their product in order to win existing customers away from their competitors. Their customers, consequently, are educated enough in wine to look for more and better of those traits, and wine makers by and large ignore non customers entirely.

Facebook Games

I think that Facebook game developers find themselves in a newly red ocean. While it was blue in all directions a few years ago, increasingly it has become dominated by key factors and competition that are analogous to the wine industry. It may not be blood red yet, but it is certainly a reddish purple.

There are a lot of games from a lot of developers, some heavy hitters, one huge hitter in particular (Zynga). While many of the smaller developers (championed by Inside Social Games and others) certainly have grown to interesting audience sizes, the top of the end of the market outside Zynga has actually been declining for a while, with no obvious new competitor to shake things up. The Facebook market seems to reward financial muscle more than anything else in terms of raw marketing and distribution power.

Yet at the same time even the smallest developers are competing along much the same lines as the big boys. Like small wine makers talking up their own heritage and complexity, smaller Facebook developers commonly make games that are very similar to those of their larger brethren.

99% of the developers in the market are convinced that they are hunting after the same customer, and most of the successes are happening purely because the tide is still rising. Facebook itself is still growing, so in those conditions many clone games will still do well. A rising tide may raise all ships, but the problem with high tides is that they do eventually peak, leaving many boats stranded on the rocks.

Most of the games in the Facebook ocean are virtually identical as a product category. They look identical, are marketed the same way and try to engage the player in the same sort of relationship. They are also branded very similarly. Like wine, they seem to be trying to differentiate in the same way.

If true, then that would mean that Facebook games are also competing along well defined lines. So what would the lines be on the Facebook canvas, and what would the corresponding factors for those lines be?

Types of Games and Apps on Facebook

Broadly speaking, I think Facebook games fall into three easily-understood lines:

* Social apps
* Casual games
* Extended games

Social apps can achieve very high MAU for short periods of time, but even at their height they rarely see more than 5% DAU/MAU engagement from users. Early social apps featuring a single quiz or a top-movies list have long since given way to aggregator applications that allow users to create their own content. Aggregator applications are much more sustainable than their forebearers, but still pretty un-engaging on a DAU/MAU basis. They primarily monetize through advertising or cross-promotional activities.

Casual games are games which are meant to serve as single-play experiences. They may retain high scores, but their focus is largely based on skill. Bejewelled Blitz, Texas Hold’Em or the variety of games offered by Mindjolt are all in the casual ballpark. They monetise with a combination of virtual goods for things like chips, play bonuses or advertising for the game aggregators.

Extended games are the farm, mafia, city and pet simulators. They are the largely time management games that encourage players to creatively invest in them, but also meter play out to encourage virtual economy participation. Most of the very successful games on Facebook are extended games, mostly because they invite a considerable quantity of daily visits and just-checking-in behaviour. Early versions of this kind of game were PHP-built role-playing games, but in the last 24 months they have moved over into isometric sim games instead. This category also includes sports sims like Bola and FIFA Superstars.

Factors

So if those are the strategic lines, then perhaps these are the factors:

Virality: Social games, goes the conventional wisdom, are built on virality. What this pretty much means is that they are hooked into the Facebook graph, and they use whatever free marketing channels are available to publish, notify, email or otherwise message new and existing users on a constant basis. This makes virality a high priority for all social applications, and virtually every game on Facebook prompts its users to Publish at least once every 5 minutes, usually to announce a high score or ask for help.

Gameplay: Casual games use skill-based gameplay the most, social apps the least, and extended games are somewhere toward the bottom of the middle. What’s interesting within these three categories is how similar the gameplay is. Casual games will typically have a minutes-length gameplay with tight actions and dynamics (Poker may count as a bit of an exception here). Extended games are entirely based on timed activities such as spending energy, acquiring levels and completing gated tasks, requiring neither strategy nor skill. And social apps may have a simple test (like a quiz) with the objective of creating a socially relevant viral publishing action. There really are very few games outside those types.

Character: Facebook games are almost universally friendly. There is no bad language, no violent imagery, and a surfeit of cute characters. They generally have no dark side, nor much of a sense of humour. Both are unusual traits in comparison to many other kinds of video game but may well make sense given the tone of the site itself and the international nature of its audience. Certainly in comparison to many other kinds of game, the character of social games could at best be described as mainstream, or at worst bland. Regardless, it doesn’t seem to be of high concern to most of the existing players in the market.

Play Area: All Facebook games operate within a constricted page of 760 pixels width, and most are between 600 and 700 pixels tall. Most social apps are built with standard Facebook API components, while games are built in Flash. There are a very large number of commonalities across games, including isometric landscapes, social friend bars, lower action bars, right-side high scores tables, upper bar level and energy meters, and purely mouse-driven controls. Very few games (if indeed any) make innovative use of the play area, however, with games simply squashed in to the available space.

Financial Model: There are, broadly speaking, three distinctive business models in social games: Advertising (which is low value), Power-ups (medium) and Property (high). Social apps focus on the former, casual games on power-ups with some property, and extended games on property with some power-ups. Financial innovations were a big feature of why social games took off in the first place, and considerable investment is made by many companies in making sure that they are on top of their e-commercial activities

Branding: The game concepts in Facebook are generally describable by their names (in what the British call Ronseal marketing), and require the audience to understand nothing beyond that to immediately grasp the game idea. Level of recognition is based more on visibility than through marketing stories. More typical game branding (celebrities, licenses, movies and TV shows) are mostly not effective, yet at the same time the brands that have come through from Facebook are largely not well regarded nor sought after. FarmVille is probably still the most famous social game by brand, but it’s not exactly loved.

Advertising: Most companies (thought not all) take advantage of as many advertising channels as possible. Given the nature of the Facebook advertising space, advertisements tend to have to be immediate and blunt, with a variation of a Come Play Now message. Advertising content tends not to be too broad in terms of tone. Extended games tend to feature more heavily in advertising than any other, most probably because they can afford it with their revenue model.

Cross Promotion: Nearly every Facebook application cross-promotes. Cross promotion is conventionally held to be the best way to create visibility within the platform because of the positioning and the largely visual content. Big developers learned to cross-promote early, while later or smaller developers use Applifier or Appstrip to cross promote among one another. The positioning and type of cross promotion in all Facebook games is virtually identical, consisting of a long strip across the top of the game (this makes sense because of the width restrictions) showing 5 or 6 icons of other games. Social apps’ primary purpose is arguably to cross promote into other games, while extended games have used tactics to encourage audiences to move from one game to another. Casual games cross-promote, but feel like they don’t entirely want to send users away.

Reward-Drivers: Social apps have almost no real reward drivers, which is why their retention is generally very low. Casual games tend to make rewards all around skill, which is a compelling way for many players to pass some time, but has its limits as most players will reach their maximum mastery with most casual games early unless the game has a particularly good game dynamic. Weekly high scores competitions and special upgrades help. Extended games, on the other hand, use time as a factor to make players wait, obliging them to keep returning to tend their gardens, kill mob bosses or perhaps acquire more energy to do more of the same. It’s very clever, but also copied by many games in an identical fashion to the point that energy-and-levels are regarded as de-facto parts of making social game retention work.

The result is something like this:

Why Has the Red Ocean Developed?

While Facebook developers may talk a good game about using metrics to validate users and develop minimum viable products, the reality is – like most businesses – they tend to just copy each other. It’s simply faster and cheaper for companies to ape each others’ products where possible because successful standard bearers take all the risk, while more risk averse investors simply hang back and wait to see what’s a proven idea or not. We see this all time in technology, from tablets to netbooks, and also in games.

Conventional wisdom forms around the leaders in the market, and the choices that they make become baked in regardless of whether they actually are a good idea or not, nor whether later metrics then tell the developers that the idea doesn’t actually work. Red oceans develop because companies become convinced that their job is to compete along existing lines and for existing customers, so the market tends to calcify around certain ‘known knowns’ because it makes the business easier to understand.

In social games, my favourite example of this is the use of isometric perspectives. Since Restaurant City and Farm Town, almost all extended games from FarmVille to Crime City have incorporated isometric perspectives to give a sense of three dimensionality to their games. But if you stop and look at some of the more silly examples, such as Monopoly Millionaires, it simply makes no sense from a user perspective.

The Facebook environment is the most constricted in terms of screen real estate, and the most competitive in terms of distracting content around a game. And yet these developers go ahead making isometric games in which the players cannot see any meaningful amount of game real estate. Why? Because that’s just what everyone does, so there must be some reason to do it that way. Right?

In the real world of course, nobody knows. And that’s where Blue Ocean thinking first begins.

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”, entitled What Games Are. The blog for the book is whatgamesare.com. You can also follow his tweets on Twitter (@tiedtiger).

[Editor's note: We've been covering the latest discussion around possibilities in social game design this week. What's the place of synchronous gaming on the Facebook platform? What about races, tournaments, deception, tolls, and all sorts of other mechanics?  Below, Mike Sellers of game developer Online Alchemy shares his experiences building a game that featured a shared virtual space -- and the trouble he and his team encountered given the current mindsets of Facebook gamers. For context on the topic of social game design innovation, see this recent presentation by Playdom's Raph Koster and follow-up commentary by guest columnist Tadhg Kelly.]

Holiday Village is a social game developed by Online Alchemy and launched on Facebook in late 2010. It allows multiple players to create a small “Christmas village” together.

The game, in my view, is notable for several reasons: First, it’s a game that is actually social – you play collaboratively with your friends in the same space at the same time.  Second, it embodied several successful design concepts that do not derive from the current design tropes commonly seen in Facebook games. And third, we were able to develop it as an original IP with a small team in a very short amount of time – about 7 weeks from first concept doc to launch. In some ways this effort was highly successful, in other ways it didn’t match what we hoped for. As you might expect, we learned a lot along the way.

Holiday Village started out as an idea by Samantha LeCraft, a designer at Online Alchemy. We had one of those “wouldn’t it be cool if…” conversations during the holiday season in 2009 about people building little Christmas towns together – putting online the kind of experience many have at the holidays when they arrange little buildings into a sort of small fantasy town. I thought she had a great idea for a holiday app, and told her to remind me of it the next summer, when we might have time to actually do something with it.

By summer 2010 we were working hard on another project, and so we weren’t really able to get started on our “holiday game” as we loosely thought of it until the autumn. By then we knew we had a very short amount of time until the holidays and few resources to put toward the game. But we had looked at the market and it seemed viable, we had a technology stack that would support a collaborative social app, and we wanted to have this little game see the light of day. In the first part of October we wrote up the first iteration of the design, and by late November we launched Holiday Village on Facebook.

I should note that not only was the backend technology terrific, but we were fortunate to have amazing Flash/Flex programmers creating the client, a great art director who quickly understood how important the feel of the app was to it, and a fast, flexible, and professional group of contract artists. This team while small and geographically distributed (and working on other projects), was able to develop and iterate quickly and effectively.

The primary design goal for Holiday Village was to evoke an emotional response unlike those typically found in current social games: since this was a game built around holidays, we wanted people to feel a sense of family, warmth, comfort, and nostalgia – even nostalgia for a time and place they may have never seen.  We chose an abstract 1930s/40s American style for the art, evoking classics such as It’s a Wonderful Life without being directly derivative or too specific with the era.

We also chose the UI, sound effects and music very carefully: we wanted mellow nostalgia, the warm feeling for friends and family not present that people often feel at the holidays – but not tilting over into feelings of sadness or loss. Our primary experiential goal was for family and friends who are far apart to be able to gather together around building their own iconic, ideal holiday villages. We complemented the main initial activities of building the village with quietly falling snow, the ability to see the village in daylight or night, and the ability to turn on a “music box” mode where the village scrolls slowly by as the snow falls and the quiet music plays.

Based on the player reports we received, we believe we hit this emotional goal well. Our players (mostly women) definitely resonated with the emotional tone the game presented. They enjoyed being able to see their village in the day or night (and especially with the holiday lights on), playing with the falling snow, and actually playing the game too. Comments like “now I want a mug of hot chocolate!” were common.

In addition to the emotion-related design goal, another important goal for us was to try out having players on Facebook create and build their own shared spaces. Each village is a “space” defined by the players and private to them and their friends. Unlike many games on Facebook today where each player has their own space (e.g. farm, city, etc.), these villages are shared fully between players. One person starts a village and can invite others. Anyone who is a “member” of a village can edit it with equal authority (though the person who started it can always kick others out). Players do not share their personal inventory of buildings or in-game coins, but they can gift building to others — and the village itself acts as a form of shared inventory, since any member can move, add, or delete items there.

While shared spaces are nothing new in MMOGs and similar games, they are not yet common on Facebook. In fact, many of our players seemed to not understand the concept at first, or did not believe that they could actually be in the same village with another person and both be interacting with it at the same time. Facebook users seem to have been well-trained that games are single-player with carefully limited avenues for socialization (usually consisting of asking someone else for help – a form of “begging as gameplay” that we wanted to avoid).

The expectations set up in current players of Facebook games took us by surprise in another way as well. When we first released Holiday Village we did so as an “app” rather than a “game.” We knew that many people buy small holiday buildings at prices of $50 to $100 each to build villages in their homes (there are literally thousands of YouTube videos made by people proudly showing off their town displays).  The question was, would people be willing to buy a virtual building for a dollar or two, or a set of trees for fifty cents?

In part, the answer was yes:  Our initial monetization was good (as was our viral spread – we did a little advertising, but by far most of our users came in via word-of-mouth from other players), but it was paralleled by questions and complaints about the open-ended app-like rather than directed game-like experience we provided: “What’s my goal?” “How can I earn coins?”  “How do I play the game?”  “Why should I have to spend money?”  Clearly, the free-to-play mindset has taken hold in the players we were seeing, and the idea of an app that did not provide gameplay-that-makes-coins, did not lead the player somewhat by the nose, and did not provide non-monetary options for gaining rewards was not popular. This may seem obvious, but it was worth the experiment. While some are still wondering whether the free-to-play model will really work, our experience indicates that with the mass market, it has become the de facto expectation.

As a result we quickly added in gameplay to create a more game-like directed experience. The challenge was to make the gameplay thematically consistent with the idea of building your holiday village. Within a few days we designed and launched an integrated matching game based on which buildings you chose to put in your village: each day, each building in your village generates one or more “value” tokens that contribute to the well-being of a community – happiness, prosperity, and unity. A home tends to create more happiness tokens for example, while a store provides more prosperity and a church or post office creates more unity.

These tokens were then used to fill in matching spaces (randomly determined) in bars of increasing length. Abstractly, the bars represented “what your village needs to thrive,” with the value tokens supplied by your buildings. The more buildings of different types you had, the more bars you could fill, and the more coins you received.

Overall, this gameplay was very well received: players played and enjoyed it, and used the rewards to purchase more buildings.  This of course dampened our direct monetary sales, but also appeared to increase player satisfaction overall. Unfortunately, this also confirmed to us what we knew we were missing: while the gameplay and monetization connection worked well, we had insufficient “consumable” goods (speed-ups or other one-time-use items) that could be bought, and we lacked a secondary currency loop for purchasing premium goods. While we were aware of these shortcomings, at the time we lacked the resources to act on them.

This leads us into the “what went wrong” category, or perhaps, how our limitations constrained us. The gameplay we had was well-received by the players, but was clearly not sufficient.  This is an example of how we were exploring the “M” in MVP (Minimum Viable Product): because we were highly time-and resource-bound from the very start, we kept extremely tight control on the scope for this game. Our programmers and artists were able to put in a few extras, but overall we kept a firm, even ruthless clamp on the design scope for the game.

Keeping to this enabled us to develop and launch the game at all – but there is a minimum below which a product is no longer commercially viable. If you cannot start above that line or get above it quickly post-launch, even a game that is loved by its players and is nicely viral will die. We did not have the time during the holiday push nor the resources to devote to adding in the features that we believed were needed to keep the game’s popularity going once it has first flared up.

Overall, we learned a lot with Holiday Village as most companies do with their first Facebook game. Just putting a game up on Facebook these days is an exercise in learning and frustration — in part because the Facebook API is so poorly documented and changes so rapidly (without any versioning or way to tell what will work or not work, since older games are not required to match to new changes). We learned to trust our design instincts and research in terms of addressing the mass-market female demographic, as well as how this market has had its expectations set by current games. We also saw how readily they took to the more social aspects of villages as shared private spaces, and believe these will be a differentiator for games in the coming year. Finally, we learned quite a bit about the importance of recognizing what features can be removed from an MVP candidate and which must be present to maintain the “viable” part of MVP. By now everyone knows that launching the game is only the first big milestone, not the last; as we experienced, being resource-constrained at and after launch can strangle even a game that otherwise hits its design and technical goals.

Mike Sellers is the Chief Alchemist of Online Alchemy, a social games developer and designer artificial intelligence engines.

[Editor's note: This is a guest post by Brice Morrison, editor of game industry design site The Game Prodigy.]

When Zynga’s FarmVille hit 80 million players on year ago in February 2010, it was a breathtaking event for the entire games industry. The title had brought millions of new players into the market, many of whom had never played games of any sort before. And it encouraged a new generation of Facebook games, fueled by capital from excited investors and developers who would try to emulate its breakout success.

For Zynga, the success of FarmVille was exciting for sure. But it was also a ticking time-bomb. Suddenly, FarmVille had amassed millions of players who were farming their crops, building their buildings, and slowly leveling up through the game very quickly.

But for how long?

Many of these were players who had never been so involved in a game before. What were they going to be doing a few months from now? A year from now?

There were a few possible answers to this question. First, the 80 million could quit playing social games entirely. After all, they hadn’t been avid gamers before. After enjoying more than their fair share of wheat and pumpkins, they might just go back to where they came from: television, film, books, and other forms of entertainment.

A second possibility was that they could migrate to competitor’s titles. After having the door of online social gaming opened for them and other social game companies like Playdom and Playfish starting to pick up steam, it would be an easy transition.

Both of these options would mean a disastrous and mighty fall for Zynga, which at the time was still a young company. But it was easy to imagine — growing from 0 to 80 million users in a little over six months, a reversal in the next six months could happen just as fast.

But Zynga wasn’t going to let this happen, and through quick thinking and brilliant execution, it was able to defuse their 80 million strong time-bomb and keep their flagship franchise going.

Step One: Evolve the Current Game With Existing Players

When players play a game repeatedly and with a dedicated passion, they eventually evolve into experts. While simple raspberries were more than enough to keep early players entertained, later players require more complex gameplay and goals in order to keep them having fun.

Zynga knew this, and unless FarmVille was able to develop along with their player base, they would soon find millions of farms abandoned. No one was going to hang out at level 70, doing the same thing over and over, for very long.

Thus, Zynga began to ramp up, systematically providing new features and gameplay targeted for the expert players who wanted something more. In June of 2010, the FarmVille team unlocked levels 70 through 90, giving expert players more crops, content, animals, and buildings to create. Zynga also continued hosting new events and limited edition items, including the “7 Days of Summer” where old items were released for a limited time. In July of 2010, the FarmVille team released Crafting Buildings, including a Spa, Winery, and Bakery. These massive new features allowed advanced players to create their own goods to give to friends, something that delighted advanced players.

The updates didn’t stop. Slowly but surely, the game continued to grow along with its players, more advanced and more complex. They continued through the summer, fall, and winter, adding snowmen and snowball social features. The new gameplay, made specifically for players who had mastered the basics of FarmVille, was a huge success in retaining players, not just by adding new content, but by adding new features, gameplay, and even mini-games for their millions of newly minted experts.

Step Two: Offloading Players to New Games

But the FarmVille updates would only hold but for so long. Zynga also knew that many of its players were going to grow tired of the title, no matter what kinds of new gameplay was added. Thus, part two of Zynga’s survival plan was to help players migrate to new games, games that were designed with the former-FarmVille player in mind.

With the launch of FrontierVille, Zynga had created what was essentially a sequel to its farm-based hit. The game used many of the same gameplay mechanics that FarmVille players would recognize immediately, such as growing crops, collecting ingredients, and constructing buildings. But more importantly, it had even more features and advanced gameplay for FarmVille experts to enjoy, such as raising a family, a storyline, and reputation.

Yet Zynga wasn’t done with their migration yet. With the late 2010 launch of CityVille, previous FarmVille players were greeted again with a title that conformed to the same gameplay patterns and habits they had learned on the farm, this time with incredible production values and the polished experience that the Zynga studio had learned from previous titles. Slotting in friends to fill buildings, visiting others’ cities, all very similar, but more advanced. The game also built on gameplay that players had learned from FrontierVille, such as energy and reputation.

After each of the games launched, Zynga helped FarmVille players find their new homes not only with their Zynga Game Bar pointing to the new titles, but also strong in-game tie-ins. Billboards advertising CityVille and pop-ups calling farmers to go explore the Frontier were plentiful, helping to move millions of players over so that they could continue playing within Zynga’s network.

The Story Continues

In February 2011, FarmVille hasn’t deflated to one-tenth of its glory days as many predicted. Instead, it has only been reduced by a half, a success story on its own. Meanwhile Zynga has also been able to strategically migrate many of its users to FrontierVille and CityVille, games built for the FarmVille expert as well as the FarmVille dropout.

Today, FarmVille has 50 million monthly players and still one of the highest DAU/MAU in the business at roughly 30%, a full year after many critics said it was on the way down, according to AppData. Additionally, FrontierVille has 19 million players while CityVille holds a staggering 93 million players, many of these former FarmVille players. The blessing of a massively successful social game presented an oncoming challenge, but by growing the game along with the players as well as authoring their migration to more advanced titles, Zynga was able to keep their players playing on their terms.

A game designer who has worked at EA and CrowdStar, Brice Morrison is the editor of industry game design website The Game Prodigy and has been with teams for major titles like The Sims 3, Happy Aquarium, and It Girl.

[Editor's note: Veteran social gaming product leader Henric Suuronen shares his thoughts, below, on how to add appealing, in-depth gaming features to social games.]

Social games are often criticized for lacking “real” gameplay mechanics or even missing a game entirely. In some cases this criticism is warranted but more complex games with more advanced game loops rarely have success on Facebook. So can’t social games on Facebook have more game to them?

I believe they can and they should.

If done correctly, including more depth to a game in a smart way can have great effects on retention. The key is to add “Smart-Depth” game features with a few important things in mind:

a. Novice or beginner players should not need to consciously think about the feature until they figure it out or realize it on their own accord.

b. It should not require dexterity or hand-eye-coordination. Strategic thinking with variable solutions and outcomes is best. Compare Tower Bloxx, which requires users to time clicks in rapid progression to score higher, to a game like Angry Birds which has strategic elements but requires less coordination.

c. It should add a new “layer” on the existing game loop not create a separate one.

d. Players should be able to do it on a basic level almost by accident and feel smart for completing or solving the problem.

e. After doing it once and gaining the rewards players will carry on trying to find an even better solution. It is here the greatest retention effects are achieved.

These may sound difficult but are not as complex to implement as you might expect. Take Millionaire City for example; there players will have great fun simply buying houses, decorations and placing them arbitrarily on the map. However soon they will notice, sometimes by accident, that placing a house or decoration strategically will give greater rewards. This gives the player a feeling they are smart which is a strong emotional driver. In addition, the logic of having bonuses based on layout creates several different puzzle games inside the main game loop:

• How to place decorations strategically to have the highest possible house bonus
• How to optimize money generation in limited space
• How to use as little road space as possible

Other examples can be seen in wooga’s Monster World where players get bonus experience and coins from selling crops to Robert the Robot instead of the general market. Zynga’s Bonus Bar adds a light “clicking optimization” game in CityVille and FrontierVille. CityVille also included the area bonus from decorations concept from Millionaire City. While Zynga’s Bonus Bar actually adds a pseudo arcade layer (requiring dexterity) to the game loop I believe the best is strategic, optimization, logic or puzzle type features. These will fit all user segments and have nearly endless variations.

When designing games with broad market appeal on Facebook it is important not to be too light in gameplay or to be too complex. Using the theory of adding smart-depth gameplay you can achieve this goal and get amazing results.

Henric Suuronen is the Head of Studio at Wooga, and previously helped create Millionaire City, MMA Pro Fighter and Tower Bloxx for Digital Chocolate.

This is a guest post by Brice Morrison, former CrowdStar designer and editor of industry game design resource The Game Prodigy.

Commodities are products with no differentiation; oil, grain, and gold are some of the most common examples.  There are no competitive advantages, no deluxe features, no brand names or favorite companies that consumers like to buy from.  A commodity is bought by consumers based entirely on price; the cheaper the better.  If A is cheaper than B, then that’s all the information that’s needed to make a purchasing decision.

The early Facebook game ecosystem was made up of many commodities, games that originally were exactly the same as one another.  Farm Town and FarmVille, Mobsters and Mafia Wars, Happy Aquarium and FishVille, and countless others.  It led many players (and developers) to be confused by the early platform, asking, “Is this all this is?  Copies of cheap games?”  In the early massive user-grab time period, where virality was king and hundreds of thousands of users could be gained by clever features, it was often a race to who could get to the user first.  It didn’t matter that the games were very similar; since it was hard to tell the difference, why not just play the one that you found originally?

But as time has gone on, both the Facebook platform and Facebook players have matured, and commodity games are no longer acceptable.  As production values have skyrocketed, what used to be simple titles that could be copied in a few weeks have become massive undertakings, requiring dozens of developers, months of time, and careful understandings of the original game’s design.  With these production costs, players’ expectations have risen as well.

Thus, we are continually entering an age of a mature Facebook market, where game success isn’t defined by commodity rules of distribution and marketing muscle alone.  Instead, games are defined by differentiation, by a unique brand of fun, and by customer loyalty.  No one wants to play the game that is 90% as good as Cityville — they want to play Cityville.  While the games of yesterday appeared to be a crowd of clones, games of today and tomorrow look very different from one another and players are choosing what to play by comparison.

So what are today’s social game companies to do?  What kinds of games will resonate with consumers, and what kinds of games will no longer work?  Many of these answers can be provided by history, during a time when the game console market seemed very similar to today’s Facebook ecosystem.

Positioning in Early Console Days

In the early days of console games, developers for the original Nintendo Entertainment System were in a commodity-state as well.  Development was cheap, the platform and market was new, and ideas were easily copied and resold as new ideas.  All kinds of companies made all kinds of games, and early players were happy to try out whatever was in front of them…for the time being.

It’s interesting to look back and play some of the games from this era.  Many of the companies names you may recognize: Konami, Capcom, Enix.  But there are many other names you wouldn’t recognize: SOFEL, Electro Brain, or Bullet Proof Software.  While one group lives on, producing products that players love twenty years later, the other group has disappeared into obscurity, either through reluctant acquisition or bankruptcy.

Of course there are always outside factors to the success of a company, but it is telling to look at the lists of games that each group of developers made.  One group learned to focus their products into one type of game design they could be the best at, while the others continued to explore new genres with every release.  Companies that learned how to create a specific type of a game, with a style of gameplay, a common fanbase, a unique art treatment, these were the companies that survived.  They learned how to transition from a commodity-style game market to a positioning-style game market.

Companies that were unable to position themselves fell away.  ”What kind of games does XYZ make?”  ”Well, we make all kinds of games.”  This isn’t what a mature player wanted to hear.  While that absence of positioning worked during the early days of a platform, when players were still exploring and learning about their own preferences, the strategy no longer worked as the platform grew older.

Mature players wanted a positioned product, they said, “I want to play an action side-scroller; I’ll go play a Konami game.”  Or a slightly different type of player said, “I want to play a competitive fighting game, I’ll go play a Capcom game.”  Each of these positions were taken up by a company that became dedicated to their differentiation, and captured large numbers of players in the process.  And by training their development teams with each title to be able to deliver the best in that position, they allowed themselves to evolve successfully with the platform.

Commodity to Positioning Case Study: Blizzard

Blizzard is a company that is often cited as one of the most successful game companies in the world, citing massive success for titles like World of Warcraft, Diablo and Starcraft.  However, even Blizzard wasn’t always successful; in the early days of Blizzard, it was a “me too” company just like many of the others. RPM Racing, Battle Chess, MicroLeagues Baseball, and Blackthorne were all early Blizzard titles which barely managed to keep the company afloat.  These commodity titles all had similar game designs to competitors; Blizzard was mediocre at everything and master of none.

What made the difference?  Blizzard learned to position their games.  With the best selling “WarCraft: Orcs and Humans”, the game was a smash hit, far outselling any Blizzard title before it.  A less wise leadership team may have decided that it was marketing, advertising, or business strategy that had resulted in the success.  And while those undoubtedly played a factor, the key that made all the difference was the game design: what the game was, how it worked, and how players loved playing it.  And Blizzard’s team understood that.

Thus, after a string of mild successes from 1991-1994,  once WarCraft came out the company pivoted hard to focus entirely on creating one type of title: online competitive games.  Warcraft II in ’95, Diablo in ’97, Starcraft in ’98.  All competitive online titles.  By focusing on one style of gameplay and mastering it, Blizzard created a development team that was the best in the world at what they did, and a rabid fan base that loved what no one else could deliver.  By positioning themselves as the best developers of online competitive games in the world, they found their niche.  The rest is history.

The Cycle Repeats with Facebook

The cycle of platform release, commodity products, and differentiated products has repeated many times.  Each time, developers and designers that hit it big in the early stages but fail to evolve and differentiate themselves fall victim to the cycle and are forgotten.  Companies that learn to develop their specialty, their core experience, and their specific type of player find wild success in the later stages.

You can see much of this playing out now, as many social game companies are learning to find their niches and deliver experiences that no other company can.  Zynga is striving (and succeeding) to be king of the mass-market casual titles, simple games with great depth that focus on building, nurturing, and growing.  PopCap is continuing its tradition of elegant games that involve only a few player actions and lead to great depth and high scores.  Causal Collective is aiming to become a Facebook game company for violent and more male-oriented titles.

Other companies, on the other hand, have yet to understand what their “special sauce” is, the type of game that they are the best suited to make.  And until they figure their position out, DAU’s will continue to drop as players migrate to more targeted experiences.  As time goes on, more and more developers that try to copy others will burn through millions in dev and advertising costs without much to show for it.  While those strategies worked in a commodities market, it will not work in a mature market, where players are ready to settle down with their favorite game franchises and give their loyalty.

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A game designer who has worked at EA and CrowdStar, Brice Morrison is the editor of industry game design website The Game Prodigy and has been with teams for major titles like The Sims 3, Happy Aquarium, and It Girl.

[Editor's note: PapayaMobile chief executive Si Shen shares her perspective on the importance of location for social gaming in Asia.]

As social gaming on mobile devices continues to grow throughout 2010, so will the number of applications offering location-based services. But will 2011 be the year that location-based social games take off in the U.S? With smartphone ownership continuing to expand, we’re presented with an opportunity to add location awareness into social games, adding unique experiences for users and creating new business models for developers.

To provide inspiration to U.S developers and to offer a glimpse of the possibilities that location-based services bring to social games, I’d like to share with you some unique insights into the Asian Market, particularly Japan, where location-based gaming has been popular for some years now.

The largest social gaming platform in Japan, Mobagetown of DeNA, was released in early 2006. China’s Tencent launched its mobile QQ with a gaming platform at the end of 2006. Although we see some U.S. developers starting to integrate location elements into mobile social games, the Asian market has a longer history of using location-based services in mobile social games.

The Japanese market has been experimenting with LBS mobile social games since 2005. One of the first location-based games, Colonial Living PLUS, was released in May 2005 by COLOPL. This game is a standalone LBS social game in which users build and maintain their cities. In mid-2010, it had about one million registered users, with 90 percent over the age of 20. The games are designed so that users have to go back in frequently to take care of their cities.

The location information adds another dimension around which users can interact and explore new opportunities for fun and entertainment. Since the location information is relevant to most mobile devices, all existing social games can be integrated with some location elements. For example, a farming game can connect virtual farms with real locations; a mafia wars game can hide the weapons in virtual locations that are associated with real locations; and the “virtual neighbors” in a pet game can be associated with pets that are close to you in the real world.

Location elements can be made as a ubiquitous API that can be integrated into any social game. Google is the first company to share location information as open APIs. A Chinese company, Beiduo, that has millions of registered users, is a pioneer in sharing location information and my company, PapayaMobile, is the first to release a LBS SDK that allows other applications to integrate location information associated with users’ social graphs.

There are more games – in various categories – on the way that are specific to LBS. The largest category is the city development games, like My Town, where users build a virtual world based on their real location. It can be easily integrated with a virtual currency system. Since the city development games are associated with real locations where users have an attachment, it is very easy to build loyalty to the game. The Japanese game Colonial Living PLUS is a good example.

The other large category is “take-over-an-area” games, such as Foursquare, in which the company’s 5 million users occupy or conquer a location by continuously visiting it. These games can be combined with promotions for local businesses. There are also other game-oriented happenings in this area in Asia. The “Mobile Country Takeover Battle” developed by Japanese company Mapion is a great example. Players use the “takeover” command to conquer the region, and repeat until they conquer all of Japan. By conquering a certain area or by answering a quiz, users earn points. However, the “Mobile Country Takeover Battle” is a relatively small game in terms of registered users.

There are other examples including scavenger hunt games, photo uploading games and even location-based dating games. One interesting example involves GPS graffiti and traces a user’s whereabouts to create a drawing on their mobile phones. Several years ago in Japan, an interesting application came via a game that focused on signal gathering – users would go to different locations and gather cell phone signals to earn experience points. Although this game is not relevant in Japan anymore, a similar game for AT&T in San Francisco would be beneficial considering the connectivity issues – and consumer complaints – that the company faces.

LBS is becoming a common feature for many social games, but in order for it to be effective on a social platform, it must achieve massive user numbers. Sharing user locations and points of interest via social networks is a trend for all game developers (LBS and otherwise). Usually third-party developers can call on LBS APIs to get users location-related information so that it can be used to enhance and personalize games. Because a lot of third-party developers use a unified database of location information and user profiles, the LBS information is more effective because it is connected to social graphs. For example, more than 50 percent of Papaya Farm users actually use the LBS check-in function of the Papaya SNS. Sharing the Papaya location database with the other developers makes it much easier to achieve a comprehensive point of interest database. There are currently eight million registered users on Papaya sharing their location information with each other, and this location based information is used by 12 Papaya applications and 150 third party applications that have integrated our Social SDK.

More importantly, LBS will bring a new business model to social games by combining local business and gaming. For virtual city based games, the virtual currency system can be easily integrated into the game. For games where virtual currency is not relevant, the combination of gaming and local business coupons can provide a great way to promote services to relevant users. The social-graph-based recommendation system, combined with location-relevant information, provides comprehensive suggestions to users for local businesses.

China’s largest local business directory, Dianping, with 10 million users, has a great business model combined with location information. When players use Dianping’s local information, it provides coupons that are relevant to their specific location and profile. It allows users to check in to specific local businesses and become the “king” of the location. The “king” is then rewarded with coupons or discounts at the specific local business.

So what does this all mean for the U.S. market? Asia is leading the way in location-based social gaming and is many years ahead already. The region is showing the world the kind of location-based social games we’re likely to experience in the near future. Expect 2011 to see the continued rise of “take-over-an-area” games such as Foursquare, a deeper integration of location-based services into mobile social games and a new wave of popular location based games that you haven’t even heard of yet.

Si Shen is the Co-Founder and chief executive of mobile social gaming network provider Papaya Mobile Inc.