[Editor's Note: The following article comes from Vostu co-founder and Chief Scientist Mario Schlosser and Chief Researcher Neil Molino. It compares retention patterns between Vostu's city-building sim, MegaCity, and its recently-released real time soccer sim, Gol Mania.]

In Vostu’s experience, what makes a successful traditional social game (defined here as games with common social features like quests and gifting) is building a highly dedicated and engaged long-term userbase that plays up into very high levels in the game. Game play in high levels becomes complex and extremely social. (High-level users exchange a lot more gifts than low-level ones, for example.) These games lose a lot of users early on, but those who stay (at least in a good game) are there for long periods of time and are highly engaged with the game. And, hopefully, they’re paying users.

In contrast, casual games (defined here as games that are social but rely less heavily on traditional social features like quests and gifting) have a tougher time engaging a long-term audience. Gameplay in high levels tends to be the same straightforward, simple activity that it was in lower levels. That means it is harder to continuously engage users in casual games when they reach high levels. This game type does have its advantages, however, as it is easier for users to re-engage with a casual game after a lapse.

From our perspective, social games are soap operas while casual games are sitcoms. The retention characteristics for a traditional social game like MegaCity, our city-building simulation, are very different than those we see in a casual game like Gol Mania, our real-time soccer game. But some of these differences clearly point to opportunities for casual games to learn from social games and vice versa.

We’ll quantify a number of key differences between MegaCity and Gol Mania below. First, at a very basic level, we see the amount of minutes that users play per day shows a divergence between the two games. When we drill into this and break down the userbase of the two games by level, we see that this divergence really stems from the fact that (a) social games have a higher portion of high-level dedicated users and (b) these high-level dedicated users actually play longer each day than their analogous users in casual games. The chart below shows the percentage of users who play x minutes or less per day. “Social game” stands for Vostu’s MegaCity, and “Casual game” is Vostu’s Gol Mania. For example, in Gol Mania, 80 percent of users play 30 minutes or less per day, while in MegaCity, just 60 percent play 30 minutes or less per day.

In the graph below, we see that low-level users show very similar time played per day for both games. Note that it normally doesn’t make sense to compare levels across games, as level 10 in a poker game is bound to be different than level 10 in a cafe game. In our case, however, we can calculate our games’ level curves in a way that an average user levels up every 1-1.5 days regardless of which type of game they are playing. This is interesting: in a user’s early days, casual vs. social games don’t differ.

Mid-level users start to show differences in the duration of play per day:

This difference becomes even more extreme as we progress to very high levels. Hard-core users in MegaCity are highly engaged. A full 50 percent plays more than 30 minutes per day. That’s not the case for long-standing fans of Gol Mania, which are less engaged.

As we can see, the main difference between the two games in minutes played per day is that MegaCity enjoys a larger portion of high-level users and that these users play more minutes per day than those we find in Gol Mania.

Similarly, we see that as a whole, the games show a different distribution of their users’ “login intensity.” We define this term as the fraction of distinct days since registration that the user actually played the game. For example, if you played eight out of 10 days since you joined, your login intensity would be 80 percent.

The left skew for MegaCity is apparent. As a whole, its userbase logs in more frequently; in fact, nearly one in five MegaCity users has logged in more than 80 percent of the days since registering. We can attribute some of this behavior to the fact that MegaCity does a better job pulling users into higher levels. We can also say, however, that the game’s age plays a significant role, as MegaCity is old enough to have accumulated a lot of high level users whereas Gol Mania is comparatively young.

So we’ll look at login intensity by level below, across both games:

In terms of login intensity, casual and social games actually turn out to be pretty similar once you normalize correctly for game age, etc. While active users log into both games at about the same rate, they play casual games less intensely once they’re logged in, however. This behavior is very clearly a function of the fact that casual games are less social than social games.

The chart below illustrates the point. It shows the percentage of game sessions that started with the user entering the game through a “social” channel, like clicking on a news feed story or accepting a gift.

There are a number of powerful observations in this chart. First, casual games and social games work very similarly when it comes to viral acquisition. In early levels, users are about equally likely to enter the game because of some viral channel like a canvas app ticker story.

But social games exhibit a higher virality via in-game activity. At higher levels, users in a social game are a lot more likely to get back into the game because of some viral activity like an in-game gift request. This is because viral activities like exchanging gifts to build stuff are the bread-and-butter of the high level user experience. That type of gameplay also explains some of the differences we’ve seen in previous charts: viral mechanics like gifting lead to more intense engagement for higher levels in social games.

In contrast, there is no high-level gameplay loop at work in casual games. We’ve recently begun experimenting with this by adding more personalization to Gol Mania. For example, we introduced in-game “private rooms,” where users can directly challenge their friends to an immediate real-time match. In a period of a few days, roughly 7 percent of active users invite their friends to Gol Mania, whereas 17 percent of those users who enter a private room invite their friends to a match. So, there are ways of making casual game more social — and therefore more viral.

To us, this represents an opportunity for casual games. An important share of a social game’s everyday traffic is users who had left the game “waking up” from a lapse in daily play and returning. If casual games could recreate the viral “wake up call,” they could potentially enjoy an even larger audience of high level users.

That may be easier said than done, however, as social games naturally encourage users to return — or suffer consequences like withering crops or expired storyline quests. Here, casual games gain the upper hand as users suffer fewer consequences for a lapse in gameplay, meaning there’s less of a barrier to returning. The chart below is a bit complicated: it shows the probability that a user returns to the game after being gone, depending on how long the user has been away from the game. While it is true that the longer a user is away, the less likely they are to return (the lines both slope down), an extended break does not decrease the probability as rapidly in a casual game as in a social game:

In casual games, crops don’t wither, quests don’t expire and the gameplay is more or less the same as it was when the user left. No matter how long a user is gone, it’s just as easy to return to the game as it was when the user was playing daily. The effect is powerful. Casual games get a lot more out of waking-up users than social games.

Moreover, once a user wakes up in a casual game, they are more likely to play more frequently. We believe this is because a casual game feels new and more self-contained each time a user plays. The graph below shows the login intensity for users who wake up and return to a game:

Social and casual games need to learn from each other. Social games need to make it less burdensome for users to return: ease users back into the game instead of showing them the one hundred feature launches they missed while they were gone. Casual games need long-term investment opportunities for the user.

For Vostu, it makes sense to keep a portfolio of both social and casual games. Our casual games have a higher chance of getting users back into our portfolio and also bridge the gap between big social game launches. We think of them as the sitcoms you flip to during the commercial breaks in your prime time soap opera. Having the soap opera, though, is necessary to really build a longer-term, engaged and paying audience.

[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: Brenda Brathwaite is a game designer with over 20 years of experience and credits on classic titles like Jagged Alliance and the Wizardry series. She is currently creative director at social game developer LOLapps, and a regular Inside Social Games contributor.]

Getting players to post to the viral channel is a challenge every game designer faces when he or she is making Facebook games. It’s known that players are most likely to post when they’ve just started a game, but what motivates returning players?

Four things:

• It helps me. There is a particular item or objective that is core to the progression of my game with which I need your help. Typically, the game allows you to buy your way out of the “Ask Friends For Help” option. But if I need your help to progress, rather than paying cash, I’ll probably post it.
• I know it helps you. It’s key here that it actually does help other players. I am likely to post something to my feed if it gives you something I would want for myself. I understand the item’s value and scarcity. It’s also important to consider that over the lifetime of a game as well as the curve of player progression, the value and scarcity of an object may change. What I care about in an early game may not mean anything to me later on. Does that mean the viral messages should change? Not always, but catering to player’s needs and a player’s perceived value is critical. I have seen messages in feeds which offer stuff I have absolutely no desire for. There is just no reason I would click. Other times, I am prompted to post a feed which will give my friends something that I know has no value. Likewise, I am not likely to post through.
• It helps us both. Parody though it may be, Cow Clicker suggests players post a message to their feed. Anyone who clicks on the viral message not only gets “mooney” with which they can buy “clicks” to add to their “click” total, but also gives the original poster “mooney” as well. It is an example of a mutually beneficial viral which trades in the only thing that matters in the game — “clicks”.
• Pride. I will post if I am actually proud of what I have achieved, be it a quest, an item or something else. Generally, I am proud of this because I want to show off the great thing that I have done. Recently, I posted that I’d leveled to 17 in a game, because it took me quite a while. When I finish building the epic chapel I am working on in another game, I can assure you I’ll post about that, too.

Does this mean we should only include virals which fit the above themes? No. What makes one player proud could make another feel frustrated at the conclusion. For instance, an epic quest to gather a lot of materials could challenge and excite one player but irritate another. Likewise, some players abhor all forms of feed messages, while others are happy to click through a wide variety of virals.

In fact, there is a whole class of player for whom “playing the feeds” has become a pleasant meta-game to the game it supports. Of course, we also don’t want to limit a player’s viral opportunities, particularly when our games depend on it, nor do we want to overdo it.

Ultimately, your only defense against subpar virals is playing your own game. Do you actually feel motivated to click your own viral message? If not, why do you think others will? Are you aware of the click through? Have you investigated the good ones vs. the lame ducks to understand what hooks they’re using? Are you watching your competitors like a hawk? Remember, though, that you are only one player in your game. Watch how others play, too, particularly if their play style is different than yours.

Analyzing your own play, feeling the hooks in the game and watching the results via metrics offers the best chance of creating compelling virals that players feel motivated to click through.

[Editor's note: Hussein Fazal is CEO of AdParlor, an ad management company for Facebook campaigns with social gaming clients including Ubisoft, PlayFirst and Five Minutes.]

One of the most frequent questions we are asked is ‘How much will it cost to acquire users for my Facebook game?’ The answer to this question depends on many factors.

A brand new casual game targeting both genders and all ages in Indonesia can pick up tens of thousands of users very quickly, for pennies per user. On the flip side, a poker application with a large existing user base and a laundry-list of permissions, targeting 40-year old American males, can pay several dollars per user. Important background information on the many factors that affect pricing is discussed in our longer white paper – this post instead examines an interesting sub-topic around user acquisition. We dig deep into the rising cost of user acquisition over the length of a campaign, and why this occurs.

On average, for every 100,000 users you attract to your application via Facebook Ads, you can expect your cost of user acquisition to increase by 10%. Before examining why this happens, we’ll first take a closer look at click-through rates (CTR) and how Facebook makes money on a cost-per-click ad campaign.

CTR and its value to Facebook

If you were to bid and be charged $1 per click with a CTR of 0.01%, you then have an effective cost per thousand users, or CPM, of $0.10 to Facebook. For every 1,000 times Facebook shows your ad, they are only making 10 cents.

If you can double that CTR to 0.02%, your ads will have the same value to Facebook, even if you’re paying only $0.50 per click. By increasing your CTR, your ads can be much more valuable to Facebook, allowing you to significantly drop your bid.

The screenshots below highlight a target market in the US and compare the suggested bid for a new ad versus a proven high CTR ad. In the case of the high CTR ad, we can get a fair amount of clicks even at $0.10!

Why does the cost of user acquisition increase over time?

Once we look at why the cost of user acquisition increases over time, you’ll understand why we started by examining CTR. But first, remember that user acquisition pricing and volume goals go hand-in-hand. For the same application, you may be able to acquire users for $0.30 or $3.00. For the purpose of this discussion, we’re going to assume that the daily volume desired stays consistent – while other factors need to be changed to sustain this volume.

Let’s say we build a brand new city-building game on Facebook application and decide to launch a Facebook Ads campaign. We have several good things going for us. There are a ton of users who are ‘low-hanging fruit’ which we can go after – the subset of hard core Facebook game players who are constantly looking for the hottest new game to play. We can also leverage interest targeting and go after players who are fans of other city-building games. The game and the creative in the ads are brand new, and hopefully spark interest in those users you’re targeting.

Given these favourable conditions, a click-through-rate (CTR) of 0.15% and a conversion rate (CVR) of 65% is very achievable. If you’re willing to pay $0.50 per user given these metrics, you should be able to bring in 15,000 users per day in the prime English speaking countries – US/CA/GB/AU. The question now is, how long can this last?

As you continue your advertising campaigns, a few things are happening. Users are starting to get tired of your ads, despite an attempt to keep refreshing new images and copy. More importantly, the most hard core game players are starting to dry up.

The market of active targetable users who are interested in other city games is starting to diminish, and in order to keep the volume of users up without increasing the rate, we must open up keyword targeting on the users. While these other keywords / interests also work well, the CTR will not be as high as when specifically targeting city-building games. Gradually there’s a drop in CTR across the campaign. (Click the image below for a higher resolution.)

From the anecdote above, we saw the effect a drop in CTR can have on the value of that ad to Facebook. On an aggregate level across our ads, we’re now getting fewer impressions for our same CPC bid. Additionally, the conversion rate (CVR), or the percent of users who end up clicking on allow and entering the game post-click, also begins to drop, having a direct effect on our cost of user acquisition.

As CTR and CVR gradually declines, and if we want to maintain a consistent volume of new users, we eventually have no choice but to increase the price we’re willing to pay per user. Our cost of user acquisition begins to rise roughly at the rate mentioned above – 10% for every 100,000 users we bring on.

Is this always the case?

Every application is different in terms of its appeal and the size of its target market – hence, the speed of its CTR and CVR erosion. With constant refreshing of creatives, an appealing application, and a commitment to finding the target markets that work on a granular level, it’s quite possible to fight off the rising cost of user acquisition. We’ve worked with applications that were able to drive half a million US users at $0.50 within a relatively short period of time, without having to increase the CPI rate. But even in these cases, the market forces eventually win, and in order to sustain volume CPI rates must be increased.

NOTE: Please join me on January 25th at Inside Social Apps for a lunchtime roundtable discussion “Purchasing Facebook Ads – user acquisition pricing & strategies” and provide your feedback on this article in person. Look forward to the open discussion.

[Editor's note: Brenda Brathwaite is a game designer with over 20 years of experience and credits on classic titles like Jagged Alliance and the Wizardry series. She is currently creative director at social game developer LOLapps.]

The most exclusive game on Facebook is also the most lucrative and intense: the game design of the games themselves. For designers in the space, particularly those from the traditional game industry, game design has become its own game, complete with a leaderboard.

“Every night at midnight, I check AppData,” says John Romero, a veteran video game designer, consultant and lead designer of Ravenwood Fair. The site has become a de facto leaderboard for many developers, backed up by weekly top games lists.

Imbued by a deep love of game play, many designers view social game design, and the competition it creates with other designers, as a real-time strategy game, complete with in-depth stats and armies composed of coders, artists, animators and product managers. Indeed, our ability to respond to the current state of the game — both the actual game on Facebook and the larger meta game of game design — is critical.

Don Daglow, another veteran game designer, watches the numbers like a general. “Social game design is unique,” he says, “because you get a score for every facet of your performance every day. It’s like SEO on speed. How many first-time players came back the next day after the latest tutorial tweaks? What’s our DAU? How is monetization changing since we adjusted item prices? Did the test players like the new gorilla suit costume? All of business is a game, but the social games business has 24-hour scoreboards on every corner.”

As much as we respond to the player behavior in our games, game designers also must respond to the other “players” in the meta game of design, too. If one player makes a move, invents a particularly clever tactic or introduces a new mechanic or theme, the other “players” respond accordingly by trying out the move themselves, watching their ARPU or doing recon behind enemy lines. The mass proliferation of games about farming, cooking, and running resorts serve as perfect examples.

The idea of game design as a game in itself first occurred to me in an active, front-of-the-brain kind of way when I was on stage at this year’s Game Developer’s Conference in San Francisco with fellow game designers Steve Meretzky, VP of game design at Playdom, Brian Reynolds, chief game designer at Zynga, and Noah Falstein, president of The Inspiracy. We were there to talk as video game veterans who had entered the social game space. As the room began to fill, we talked of the things we’ve talked of for the decades we’ve known one another, but there was something else there, too: a new gamestate between us.

Brian was the obvious current leader at Zynga, and every day, his numbers just kept rising. As we talked of the games we were working on, our numbers and, in a veiled way, our future plans, it quickly became apparent that our conversation had all the earmarks of hardcore board game players yapping about their current gamestate while keeping their next move carefully guarded. That we four actually do regularly play board games together made the comparison all the more obvious, amusing and interesting. “Finally, game design is a game,” I said to the audience. It was promptly tweeted and retweeted dozens of times.

Says Falstein, “I look at my design job partly as a social status issue with my fellow designers. I want to improve the best of their games’ features while adding my own innovations, thereby earning status points at our next board game party, as well as earning RMT equivalents for my client – and therefore, me too.” Meretzky even jokingly alluded to the resource management that happens behind closed doors. “I beg my co-workers for resources. After asking four or five times, I often have everything I need to complete a task!” The rush and instant feedback is particularly exciting for game designers entering the space after years in the traditional AAA console game industry.

“Good games have regular feedback loops and social game development has these in spades,” says John Passfield, creative director at 3 Blokes Studios. “The majority of time in traditional game development is spent building a game behind closed doors which is more like training for the Olympics. Whereas social game development puts you smack in the middle of a full season where you’re constantly adjusting your game by listening to your coach (product manager), watching the other team and playing to the fans. It’s about being in the moment, not preparing for the moment.”

That moment, that hour and that day, each allows for iteration and tweaking of the meta-game state and a hopeful resultant climb in DAU. Quick to compare it to his own game, Reynolds said, “Every week I  harvest my features and plant some more, and then we run around collecting all the doobers!”

From a game designer’s perspective, it is a wonderful, exciting time to be a “player” in the game of game design. The play space feels wide open, like a game of Civilization Revolution only a few minutes in, with lots of room to explore and many things to discover. Games are being made with small teams about unique topics for new audiences, and in many ways, say the game industry vets, it feels like 1981 again. It is good, too, that we remember 1983, the year of the North American video game crash, and can adjust our strategy accordingly.

[Editor's note: Vijay Chittoor is CEO of Mertado, a startup that offers real-world merchandise within social games. He was previously director of product management at Kosmix, and worked as a consultant for McKinsey.]

By all estimates, U.S. social gaming revenues are growing robustly and are expected to reach $1.25 billion by 2011. However, individual game developers still monetize an average of only one to three percent of their audience through virtual goods.

As a result, alternative monetization techniques have been developed for non-paying users — primarily advertisements and promotions linked to virtual currency (including offers, surveys, cross-promoting other apps, etc.). But these have historically come at the expense of reduced user engagement.

All of these traditional methods involve clicking on an ad or an offer to go to a third party website or app, taking users away from the game experience. The best offers have a conversion rate of around five percent, i.e. 95 percent of offer clicks take users away from the game without adding to revenues.

How can game developers enhance their monetization beyond direct payments without losing their users? A few recent solutions have started bridging the gap between game engagement and monetization. These solutions not only keep the user within the game, but also add to engagement by speaking the language of the game:

• Branded virtual goods: McDonald’s recently sponsored Farmville’s first branded farm, which users could simply click to earn virtual currency. This provided instant gratification for the user, great branding for McDonald’s and, most importantly, a great new way for Farmville to engage and monetize its user base. A report by Viximo shows that branded virtual goods are currently a small fraction of game revenues, but projects the number will grow to $150 million in 2013. Not only do branded virtual goods attract 10 times the click-through rates of non-branded goods, they are also proven to increase brand awareness and purchase intent. Companies like Virtual Greats, Viximo and Playspan are starting to distribute these branded virtual goods inside games.  I see a couple of different forms of branded virtual goods today:

1.      Branded goods linked to real-world items: Some marketers are looking to drive sales through virtual goods, and to do so they often link the virtual good to the purchase of a real world item. In another deal, 7-Eleven partnered with Zynga to offer branded virtual goods that get unlocked after users make a purchase at a retail location.  Another example is Old Navy’s recent Black Friday integration with Crowdstar’s It-Girl.

2.      Branded goods linked to brand awareness: Other marketers are not looking for increased brand awareness instead of sales, and in this case, the branded good is not directly linked to any purchase. An example is the McDonald’s farm mentioned above, or Volvo’s campaign around the use of virtual goods to create a “naughty” branding for the newly launched S60.

• Videos: Branded video content, distributed through offerings like RockYou’s Deal of the Day, is another form of brand advertising that can be particularly effective in monetizing games. The key idea behind these is to deliver the ad message though a video that can be embedded within the game, instead of taking users to a landing page outside the game.
• Contests within a game: While one way of increasing monetization is to get more users to become direct paying customers, an attractive alternative is to get the current set of paying customers to engage and spend more. BringIt’s platform for running contests within a game aims to do precisely that, acting as an additional currency sink inside the game. The entire contest experience is delivered in-game, and the contests can even act as a hook to bring users back to the game.

It’s clear that this trend toward monetizing games without taking the user away from the experience will eventually be paramount in successful social game monetization strategies.

There are also a few newer, more experimental monetization techniques. At Mertado, we recently launched an Embedded Shopping unit that offers a new way for game developers to monetize through e-commerce inside the game. Game users are presented with an offer to earn virtual currency or goods if they purchase the deal of the day inside the game; before they buy, they can view a video about the deal, read product details and complete the transaction, all within the game.

The merchandise inside the embedded shops can be customized to the game to some extent; for instance, if your game is themed around baking, the merchandise selection may include products like a cupcake maker, or if the game appeals to a fashion conscious audience, the merchandise can revolve around apparel and accessories. Post purchase, the embedded shops can also suggest ideas for users to spend their freshly earned currency within the game.

In the future, I expect that we will see even more methods of monetization that add to the engagement within the game:

• Bundling of real and virtual goods:  Role-playing games and virtual worlds mirror many aspects of the real world, and that provides a great opportunity for marketing products that are contextually relevant to the game. In the future, I expect that we will see integrations where bundles of real and virtual goods are sold together to users: e.g., buy a real Wine Cooler to earn a virtual one in your game.
• Adding game context to offers: Today’s offer walls display the same offers to everyone. What if offers got unlocked only for players who have reached a certain level of game-play? For gamers this would be a great way to get recognition for higher levels of engagement. For brands and marketers, this would be a great way of connecting with a highly engaged audience and adding to the brand’s story.
• Users as brand ambassadors: Through the use of branded virtual goods, gamers would be in a position to act as brand ambassadors within their circle of friends. Games can reap rich rewards in engagement and monetization by enabling these interactions.

All of these methods will continue to make it easier for developers to create amazing gaming experiences that also monetize very well.  By adding these new options for monetization, developers can potentially expect to double the percentage of monetizing users.

A lot of this analysis has focused on the U.S. market, and I am curious to see how these trends play out internationally.  China is one of the biggest virtual goods markets, and it’s interesting to compare advertising spend in China to the amount of money spent on virtual goods. China’s online advertising market is estimated to be $3.7 billion, which is smaller than its virtual goods market at $5 billion. This is in stark contrast to the United States, where the virtual goods market is much smaller than the online advertising market size of $25.8 billion.

Because of this difference, direct methods of monetizing gaming users might continue to prevail in markets like China over methods that rely on brand advertising or direct response for real goods/services. I would be very interested to hear readers’ opinions on whether some of the new monetization trends emerging in the U.S. will become relevant in China and other international markets.

[Editor's note: Brenda Brathwaite is an accomplished game designer with credits on classic titles like Jagged Alliance and the Wizardry series. She is currently Creative Director at social game developer LOLapps. This post previously appeared on her blog, Applied Game Design.]

The player of a social game needs to feel closure.  The principle of closure is so important that without it, a game will struggle with low retention and all the problems inherent therein.

What is “closure?”

I will define closure as the ability to leave the game with a feeling of certainty that one has done all one can do and that things will be okay until one returns so long as the player abides by known rules. It’s all wrapped up — or knowingly left unwrapped (e.g. the player runs out of energy) — and the player perceives that she understands the complete game state.

In any Facebook game, closure exists if:

• I understand the primary grind of the game.
• I know when I need to come back to tend to the primary grind of the game.
• I know precisely what will happen if I fail to come back either because the game tells me what will happen or an implicit mental model exists.
• I know the things that can modify this stability (being whacked or assisted by another player, for instance).
• I have a means to protect my game state or enact revenge for things happening in my game which I perceive are beyond my control (and returning in time is within my control).

If players are unable to achieve a state of closure, they leave the game feeling confused at best or failed at worst. Typically, failure to achieve a state of closure results in players feeling uncertain in their decisions or uncomfortable with what they perceive will happen while they are away. Players who leave feeling something in this range are less likely, then, to come back. Why come back for more “confused” or “failed” or “uncomfortable”?

Closure is a tricky thing to identify, too, and it’s closely tied to a word I’ve used several times — perceive. The player’s perception of the game state is more important than the actual game state.

For instance, during the development of Ravenwood Fair, there were multiple times where I perceived the game state was doing something when, in fact, it wasn’t moving along those lines (though I am a designer on the game, I didn’t design the creature AI, so I was free to perceive whatever I wanted). The Fair is surrounded by a scary forest, so I felt uncomfortable leaving them there, fearing something would go very wrong. I needed to know they were safe while I was away, otherwise, I didn’t feel good leaving.

Interestingly enough, when I was assured my perceptions were false, it didn’t actually make me feel much better. My perceptions about the way I thought the game was working and my buy-in of the perception (and the mental model upon which it was based) were too strong. So, instead of saying, “Okay, cool”, I struggled with how I thought the game should behave and felt a strong need to see it rectified. It was an odd moment of dissonance for me, but the resultant design solution gave me closure. The “Protectors” system you see in the game today was designer John Romero’s effective solution to the problem.

It’s worth going into this a little deeper on two points:

1. It was a gendered problem.
2. It couldn’t be a gendered solution.

Not all problems of closure are gendered, meaning that one gender feels a much stronger need for something than the other, but this one clearly was. It was something that genuinely affected how I felt when I left the game (and therefore affected my likelihood to return to it). Researching the issue, I found it was a feeling shared by other female players, but the male players seemed completely unscathed by the issue. As its lead designer, Romero worked to fully understand the root of the problem, but his design solution needed to do more than solve my issue — it needed to be fun for all game players. Otherwise, it risked appearing like a Band-Aid on an otherwise tight system. For those interested in gendered issues in game design, I recommend Sheri Graner Ray’s Gender Inclusive Game Design.

So, closure.  In the social space where the player has absolutely zero investment, it’s critical. I must leave feeling that I know what happened, what will happen, and what role I am expected to play in it. I need to know (not merely feel) that everything has gone right. I need to know I have maxed my gameplay session. If I don’t understand your grind, the role of various components in the grind, or what my role is in some part of it, you’ve lost me (and some part of your DAU, too).

Closure allows players to comfortably leave the game with a plan, and that means they are much more likely to return.

[Editor's note: James Zhang is CEO of Concept Art House, a high-end art service provider based in San Francisco and Shanghai, China. CAH has done visual development work for top social and mobile game companies including Zynga, Crowdstar, Rockyou, Kabam, LOLapps, Openfeint, and Ngmoco.]

When asked if high quality art matters in social games, developers’ responses vary widely. To some, art is absolutely critical, while others treat it as an after-thought of game design.  To quantitatively answer such a subjective question, let’s look at some ways that high quality visuals might directly affect the success of a game.

• Increase retention on initial install: On average, over 50% of initial Facebook installs are lost after the first minute of gameplay, for one of three reasons:  the UI is too complicated, the game is not what the player expected, or the ‘intro’ experience wasn’t appealing enough. Art can drastically improve the last of these elements. Consider console games or movies, which often rely on a trailer or intro to bring the player into the story. A new book may need a great cover for an unfamiliar reader to pick it up. While art may not matter as much for players already engaged in a game, it is extremely important in converting new players.  As the saying in the comic book industry goes: The artwork sells the first book, the story sells the series.
• Better monetization: Virtual goods are, by nature, digital art assets. Vanity purchases for premium items that simply make your virtual farm/city/ville/kingdom more beautiful are often based on the aesthetic or ‘cuteness’ of the art asset alone, and more appeal equals more buys at higher prices. Additionally, if friendly competition is a draw for aggressively building your space, then the trophy “check out what I got” assets should look like something worth grinding or paying for. Therefore, high quality art not only command higher prices and more buys, it can also prolong the duration of gameplay.
• Competition is stiff: Social games are highly visual mediums. As competition increases in this industry, players have ever more options for where to spend their time and money. Having ‘better’ art than a competing game can mean the difference in winning a player over a competitor, especially when combined with the short attention spans of the casual gamer/web-surfer. On close examination, almost all top games on mobile and social platforms have cohesive, appealing art styles, even if graphics are not the primary reason for a product’s success in the market.

To examine further, we can look at what social games are heavily art dependent and which are not.

Puzzle Games

The value of art is not as high for a puzzle game, as it is for a resource management game (more on these below). For a Bejeweled-style game, the gameplay experience will be largely similar whether the moving assets are jewels, fruits, or beach balls. The experience is about the problem solving and accomplishment, not to dazzle neighbors or feed hungry customers.

The exception to this rule is a title like the Aurora Feint series, a puzzle game for which the developers took extra care to build up a background fantasy world with creatures and magic out of a dark fairy tale. The added screen size of the iPad also allows more creative graphic additions to the standard puzzle game.

Resource Management Games

Although a resource management game like Diner Dash is played by making good game decisions, the game is made compelling by Flo and her story. Here, the art quality needs to be good enough to engage the player in the game activity while still gently reminding him or her that Flo is a young woman trying to succeed as a young entrepreneur. While the developer may not need a full team of Disney animators to pull of these graphics, the visuals need to be strong, coherent, and reinforce a brand every time the game is fired up.

Text-Based RPGs

For text-based RPG titles such as Mafia Wars and Castle Age or illustration heavy games such as Kingdoms of Camelot, the art is extremely important.  Simply put, without the key illustrations to propel the experience forward, the player is left staring at a complex menu of text and numbers, with no game immersion or bad art as payoff.

Players look forward to being rewarded by banner art saying “here’s your new sports car,” after succeeding in a series of hard-fought battles. As with the resource management style of gaming, even if the player rarely looks at their avatar, the gritty style of the Mafia Wars title becomes the brand that gets reinforced through visual elements from the dark colors to the story panels of fast cars, tough mobsters, and seedy alleys.

In collaboration with 5th Planet Games, we released a text-based RPG game called Legacy of a Thousand Suns earlier this week. Our focus was to bring a cinematic, console quality experience into a Facebook game. In a sub-genre of Facebook games that’s focused on ‘do quest’ button clicking, we knew that artwork, storytelling, music, can make or break an otherwise monotonous experience.

Our process included multiple rounds of concept art, an opening cinematic, and an advanced UI system that was still simple to use. While it’s still early to say whether the high production value translates into MAUs and DAUs, the early fan and consumer reviews have been very vocal about how much they love the art.

Decoration Management Games

Despite fewer new releases in 2010, the largest market share of on Facebook still goes to decoration management games like FarmVille and Happy Aquarium. The monetization of virtual goods in these games can be dependent on how visually desirable an asset is. While some players only look at statistical benefits (earn more money, faster cool-downs), other players (such as my girlfriend) will buy anything cute or anything Unicorn. In the latter case, art drives monetization, whether through the number of items sold or the amount they’re sold for.

The successful games in this genre have done so with either stand-out visuals or by expanding to a variety of gameplay. Happy Element’s My Kingdom (above) adopted a bright and colorful 3D look which makes each building asset look like a collectable miniature toy.  LOLapps’ Ravenwood Fair (below) has received considerable praise for their look which is reminiscent of Arthur Rackham or Brian Froud’s fantasy illustrations.

These 2 games used quality artwork to distinguish their game from Zynga’s ‘ville’ series or Playdom’s pastel colored social city game titles. For games such as Crime City and Mall World, decoration is still a core motivator to raise levels in order to improve your ‘hoods’ or store. However, there are plenty of other things to do to keep you busy such as robbing record stores or buying a puppy.

Games that rely heavily on decorations as the key drivers in the game (such as Ravenwood Fair and My Kingdom), graphics become extremely important.  Where decorations are a supporting feature, the emphasis on premium visuals is less so.

Summary

Despite the above examples, great graphics remain a subjective factor for social game developers. To help further refine the argument that it is valuable, I consider three areas related to those discussed above: retaining initial installs of new players, better monetization of virtual goods, and extending game-play durations. These areas all play a large part in a games’ success or failure in an increasingly competitive market.  The question then becomes not whether high quality is important, but the level or value of that importance.

Average Facebook game development costs (excluding marketing) range from $200,000 to $400,000, with 20 to 35 percent dedicated to art and graphics. My own company has seen significant increases in overall art budgets as more companies seek production values on the level of console games. Comparing 2009 to 2010, this year we’re seeing more requests for game intros, fully painted ‘matte painting’ quality backgrounds, and long preproduction cycles for R&D, game style development, and character explorations. For 2011, I fully expect the trend to continue to ever-higher budgets and higher caliber art direction.

[Donghee Yvette Wohn is a Ph.D. candidate at Michigan State University; her post, below, is based on research she is doing in social games. Wohn is also editor of Play as Life, a blog examining the cultural impacts of gaming.]

Only two years ago, I was attending a conference on virtual worlds and people were discussing whether or not microtransactions would be a viable business model. Many people were skeptical about whether the success of microtransactions in Asia would translate to North American users. Now, there seems to be less talk about whether or not microtransactions work, and more talk about what makes them work.

Industry stats show that yes, people are spending real money on social games. That said, however, the percentage of players who actually spend money is extremely small. From a research standpoint, it has been difficult to find out the characteristics of these spenders because of the difficulty in getting enough people to provide a sample size large enough to derive results that we could generalize.

To look at a larger population, my colleague at Keio University and I collaborated with Puppy Red, a social gaming service in South Korea, to collect de-identified log data. The game that we looked at was for children and tweens, similar to services like Club Penguin.

We collected the data of users who had accessed the site at least once during three months from November 2009 to January 2010. After conducting filtering process on missing data and outliers, the dataset showed 224,827 users. Among this population, 64,076 users (less than 28.5% of total active users) had spent real money at least once and only 17,750 (less than 8% of active users) had spent real money during the most recent three months.

The below graph shows the number of paying users and their cumulative spending. You can see that 2,000 of 18,000 users accounted for nearly half, 46 percent, of the total money people spent on the site.

Factors that contribute to spending real money

We looked at factors that contribute to spending real money, and found several positive predictors: time spent playing the game, length of membership, and overall number of items. However, players who had received more free items spent less real money. This point was interesting, because a lot of marketing research shows that free items are good for getting consumers to purchase more items. Our research suggests that too many free items can decrease the likelihood of spending.

Impact of Gifting on Spending

Perhaps our more interesting findings were those on “social” factors. For instance, giving virtual gifts and receiving virtual gifts were positively associated with the spending of real money. The number of friends did not determine whether one player who purchased virtual goods spent more money than another, but spenders did have significantly more friends than non-spenders. This implies that while more friends don’t lead to higher spending, players without a lot of friends may not spend any real money at all.

Implications

For those who want to cash in on microtransactions, our research suggests the following:

1. Provide a lot of virtual goods so that players can customize their game space and avatar.
2. Limit your amount of free virtual goods.
3. Encourage multiple types of exchange behavior between players; this is the second study we’ve done that implies that social players spend more
4. Incentivize having friends. Friends can increase playing time, encourage social interaction, and create competitive elements that contribute to spending.

[The following is a guest post by Joel Augé, the co-founder of Facebook developer HitGrab. His company is best known for its RPG title MouseHunt, while Augé himself also leads a parallel life as a solo recording artist.  This post first appeared on Augé's blog.]

So Tuesday evening I was privy to an event put on by Facebook and their games team at FBHQ in Palo Alto. Eighty or so attendees watched as Zucks and team announced their dedication to games, the launch of some new features, and the closing down or tweaking of some others. One of the features which is being tweaked is the newsfeed. It’s being modified so that if you don’t play a game, you won’t get newsfeed items from that game. Some people are livid. I’ve even had conversations where a leading developer has gone as far as saying, “It’s been fun. Good knowing you all”.

The fact of the matter is, every time the rules change, opportunity knocks. I’d even go one step further and say that a lot of Zynga’s success is due to their ability to capitalize on shifts in the platform.

Example #1: Multi-photo posts to the wall from within apps. This was a feature, made available to developers, to allow users the ability to share “photo” content to their walls in an easy way. Zynga saw an opportunity and used it extensively (in Mafia Wars at least) as a way to post game leveling and cool in-game art to the walls of users with the end-goal being new user acquisition. The stream was now Zynga’s play thing. I’m sure they acquired millions of users using that method.

Example #2: Incentivizing the gathering of user contact details. Seeing as Facebook was “clamping down” on friend spam in late 2009 with some further tweaks to the feed, invites, and requests, Zynga promptly countered, and was (arguably) the first to incentivize the gathering of permissions to email via in-game bonuses. A giant bar was placed across the top of their apps with a message stating something of this sort: “Do these four things to become a complete human being”. One of those things was giving Zynga permission to email you directly without Facebook as the proxy. Zynga now has a war chest of millions of gamer emails.

My point is, the limitations (read: rules) of the platform instigated Zynga’s creativity to build new acquisition and engagement channels. Now (ahem..)… “creative” and “Zynga” aren’t commonly used together in the same phrase, but where game creativity may have lacked, their recognition of this space as a land-grab Wild West is to be commended. I’d be very surprised if Frontierville isn’t a real-world tongue-in-cheek metaphor of this very truth.

Where does that leave HitGrab and others like us? Doom and gloom? Sorry. You won’t find whining here. The fact is, gamers love games. Plural. We make great games. And as the acquisition costs and channels fall under the pressure of a growing platform, we need to keep creating and innovating great games. I personally love the fact that Zynga has invested so heavily in training non-gamers to become gamers. Eventually, those gamers will spill out of Zynga’s game-loop (either by accident or by advert) and find their way to our games. The communities are tighter, the customer experience better, the relationship with the development teams are real. Some companies are out to grab as much land as possible. For HitGrab it’s not the amount of land that counts, but the communities living on the land we do have, that matters. Lots of land means nothing if it’s fallow. (Thanks for that training, Farmville!)

(Some might mistake this previous paragraph as blind idealism and devoid of any understanding of the cost of acquiring users and retaining them — to that I say look at our track record. Forty percent of the first 100,000 players who installed MouseHunt are still with us, 3 years later.)

HitGrab is focused on making our players the happiest and most tightly connected communities around. Want proof? Go play MouseHunt and when you run into trouble (because it’s quite tough), ask for help on the forums. One of our many groups of dedicated hunters will pick you up and dust you off and a life-long friendship will be born.

Welcome to the new world. It’s been found. We’re here. Now it’s time to make it fun to live in.