Digital Chocolate Enters Facebook Cross-Promotion With the VIP Games Network

Over the past six months, cross-promotion between games on Facebook has become one of the most vital tools for small developers to grow their apps. Digital Chocolate, one of the largest developers on the platform, is releasing its own third-party cross-promo bar today, the VIP Games Network.

The first third-party cross-promotion bar to grow large was Applifier, which was followed by AppStrip. Both use the same exchange model, in which developers get 0.9 clicks back for every 1 they send out; the extra clicks left over are sold by the service.

VIP Games Network is undercutting the competition by starting as a straight 1 to 1 exchange. It will also offer analytics and ad optimization tools to measure the results.

The negative side to this model, at least for some developers, is that the network will be selective, only accepting games that meet Digital Chocolate’s quality standards.

The advantage to Digital Chocolate seems fairly obvious. If it can pick and choose which games go on the network, the company can tailor the selection to be beneficial to itself, including only games with desirable players who may not have been exposed to Digital Chocolate’s games before.

Self-interest on the part of Digital Chocolate shouldn’t hurt other developers who are accepted to the network, since they’ll have an equal opportunity to reach high-quality players who haven’t been exposed to their games before.

Of course, Applifier, the largest cross-promotion network, has also been selective in the developers that it accepts, and most developers using it have reported good results. The real advantage to the VIP Games Network will be the straight 1:1 exchange; Digital Chocolate can forgo profiting from the network indefinitely, since it has its own lucrative stable of games.

The analytics tools could also prove valuable, and Digital Chocolate COO Jason Loia says that the network could eventually extend to other platforms.

Look for competition to heat up in the cross-promotion space in coming weeks. Most developers will only want to run one cross-promo bar, but Applifier is unlikely to go down without a fight, and AppStrip was recently acquired by TapJoy, which will likely work to capture a new clientele with the bar.

Google’s Chrome Web Store Puts Social and Casual Games Side-By-Side

At a conference today, Google unveiled the new Chrome Web Store, a custom-built destination for its Chrome browser with downloadable apps and games, including social games.

The social titles available are limited so far to just a few games like FarmVille by Zynga, Millionaire City by Digital Chocolate, and OMGpop’s Balloono. Google doesn’t appear to have put a lot of effort into the integration; the “apps” are effectively glorified bookmarks leading to preexisting destination sites.

But with Google claiming that 120 million internet users are now on Chrome, the Web Store nevertheless deserves a look from social developers.

All of the Web Store’s featured offerings so far are actually paid casual games like Onslaught! Arena and Wordico. If that business model succeeds, the Web Store could recreate the paid vs free app battle taking place on mobile devices.

On the other hand, Google may have trouble convincing many users to hand over credit card information, so free apps may do best on the Web Store. Over time, a base of repeat payers using Google Checkout or Google acquisition Jambool may build up, but Google has yet to even figure out monetization of paid apps on its Android mobile OS.

Developers who want to move off Facebook could do well with Google, either creating destination sites for Google to point to — effectively making it a directory and discovery service — or as more full-featured downloadable apps.

Google is also offering hardware acceleration for browser apps, opening the way to more animation and better graphics, and attempting to further establish HTML5 as acceptable for game development.

For now there’s no reason for any social developer to go out of their way to work with the Web Store, but with the Chrome OS and new iPad competitors launching next year, it’s worth keeping an eye on.

MySpace Gets Its Own Applifier-Style Bar With Game-Promo

With Facebook cross-promotion bars like Applifier and AppStrip having gained traction, the idea is spreading into other social networks.

A newly launched cross-promo bar called Game-Promo for MySpace claims to be use the same click-trading concept: if a player of your app clicks on a game title shown on the bar, you get a credit which entitles you to a click from elsewhere on the network.

The network makes its money from taking a 10 percent commission on outgoing clicks, with the left-over clicks being sold so developers who want to bring in more traffic than they send out.

Cross-promo networks are hardly a new idea on the internet, but they’ve only recently taken off on Facebook. Applifier, the first to launch, appears to have a majority of Facebook’s small developers on its network, while Tapjoy recently bought AppStrip, Applifier’s main competitor.

Datameer Brings Hadoop’s Processing Power to Social Gaming Analytics

As social gaming practices spread throughout the larger gaming industry, we’re seeing more companies show up offering heavy-duty analytics packages for serious developers to track every move made by millions of users. Datameer is the latest, with an offering built on Apache Hadoop, an open-source, heavy-duty data processing framework.

Datameer’s offering is basically a spreadsheet on steroids, built to juggle terabytes of information. Any game that uses common web log files can feed into Datameer, after which an analyst process the data and examine metrics like engagement with specific mechanics and monetization by player groups. The below slides give an example of the feel of the program:

After a base payment of $12,000 per year for Datameer, it costs $3 per gigabyte. Datameer expects larger monthly charges to run up to $20,000 per month, giving an idea of the scale modern gaming analytics operates at.

Social game developers are among Datameer’s target audience, but CEO Stefan Groschupf, a veteran of several companies built on Hadoop, says traditional gaming companies are also looking for analytics tools for their web-based games. “They all understand that the future is in understanding better what happens in their game,” he says. “They’ve gone beyond focus groups.”

TeePee Games Takes $500K Seed to Launch Game Discovery Platform

A common complaint from game developers on nearly any platform is that discovery is hard — players that should know about their game often don’t, unless the developer advertises heavily. TeePee Games, a British startup, is the latest to try to tackle the problem. The company is announcing its plans today, along with a $500,000 angel funding.

TeePee has a wider focus than most discovery sites. The company wants to show users the way to games on any open platform. At launch, that will mean Facebook games, web-based Flash games, and mobile games. “To date, there isn’t yet a portal that aggregates content across the three different platforms,” says founder Tony Pearce. “I look at the [existing] aggregation sites as Web 1.0.”

The company has invested into an algorithm that Pearce likens to Amazon’s suggestion function, which offers new products based on old ones that you’ve viewed or bought. A new member of TeePee will go through a short signup process that involves clicking through a picture-based quiz, giving TeePee an idea of their likes and dislikes. Afterward, the user’s ratings and plays will determine what they’re shown.

What happens next depends on the game the user chooses. If it’s a mobile game, TeePee will send a text to the user’s phone with a link to the download.

If, on the other hand, the user wants to play a Facebook game, they’re not simply bumped over to Facebook. Instead, TeePee plans to run the game within its own frame on Facebook, which will add some additional social features to play. This frame isn’t complete yet, but TeePee shared a very early mockup with us that shows a few potential functions:

The “My Tribes” button on the lower-right refers to TeePee’s built-in network, which will let players join and interact with groups that share their gaming interests.

As for monetizing itself, TeePee has a plan for each platform. The core of its efforts will go toward striking deals with individual publishers, in which the publisher pays TeePee a small amount per install. Pearce says TeePee has already been receiving signups, especially from Facebook developers.

We’ve seen algorithm-driven discovery before, like Chomp, which focuses on mobile discovery. It’s not clear yet what place these platforms will have in the ecosystem. But given the slowness with which Apple, Facebook, Google and other large companies have address improving discovery, there’s still a window open for these companies to draw in motivated gamers.

New Groups Functionality Offers Potential for Gamers

Facebook’s product announcement today, a major change to Facebook Groups, was touted by Mark Zuckerberg as a big shift for real-life social units like families and business colleagues. However, there’s also an important potential for game-related groups.

New groups will be created and administrated by individuals on Facebook. Each will come with three potential settings: Open, Closed and Secret. The last two options are for private groups, while all the content and members of Open groups will be publicly visible.

We’ve covered the new features in depth over at Inside Facebook. In brief, there are four important points to note: ease of creation, notifications about new messages, group chat, and API access for developers.

Here’s how Groups could end up helping games:

  • More communication channels for players. While this point seems obvious, having to coordinate channels off Facebook has been a barrier that has kept all but the most hardcore players from having real interaction around a game.
  • Real-time coordination between players. While most Facebook games are built for asynchronous play, some have experimented with in-game chat and groups. Facebook is now offering another channel for real-time communications, left under the control of players.
  • Potential benefits to retention. Once players have  formed tightly-knit groups around a certain game, they’re less likely to stop playing. Users shy to talk about games in their main feed will now also have another outlet.
  • Fewer spam apps. Hundreds of apps built specifically for players of large games like FarmVille have popped up on Facebook; most have subsequently been banned. Groups provide a good alternative.

There could also be downsides to the new groups. Players will find it easier to coordinate activities meant to break or circumvent the structure of games, for instance, and unlike the communication channels on MMOs, game administrators won’t be able to secretly tap into their communications.

And since the new Facebook Groups functions are designed for smaller social units, the functionality may break down when a group becomes larger. Facebook has addressed this to a degree; for instance, the company already plans to turn off group chat when a group has over 250 members. But there will ultimately still be a need for forums, blogs and other external communication channels.

Overall, the Groups changes look positive for games. How useful Groups will be depends on users, who will how to show how far they are willing to take the new features.

Announcing Inside Virtual Goods: Tracking the US Virtual Goods Market 2010 – 2011

With an up-to-$750 million acquisition of Playdom by Disney, an up-to-$400 million acquisition of Playfish by Electronic Arts, the acquisition of Tapulous by Disney, and hundreds of millions of dollars in venture investments, virtual goods are impacting businesses across the media landscape. Virtual goods, and the companies that create them, may be bringing the largest disruption entertainment, communication, and e-commerce infrastructure businesses have seen in years.

Inside Network is proud to announce a new original research report by Justin Smith and Charles Hudson that presents a comprehensive examination of the size and future of the virtual goods market in the United States, entitled Inside Virtual Goods: The US Virtual Goods Market 2010 – 2011. This is Inside Network’s second annual edition of the US Virtual Good Market report. It will be released on September 28, but is available for discount pre-order now.

Where will the virtual goods market go in 2011 and what are the biggest opportunities left unclaimed? How will existing players fare as Facebook continues to reshape the social gaming landscape, and larger and more sophisticated players enter the market? Inside Virtual Goods: The US Virtual Goods Market 2010 – 2011 provides deeper insight into monetization, development, and the key questions facing the space in 2011 than you’ll find anywhere else.

Get the Annual Membership
Get Annual Membership (Includes Report + 3 Additional Quarterly Issues): $2,495 $1,995 USD*
OR Buy Single Report: $995 $795 USD*
* Pre-order discount ends September 27, 2010. All pre-ordered reports will be delivered on September 28, 2010.

About the Report

Inside Virtual Goods is a new report researched and created specifically for entrepreneurs, investors, and analysts interested in the growth of this exciting new category of online commerce that is fueling the growth of games-as-a-service businesses. During a research phase spanning the last few months, co-authors Justin Smith and Charles Hudson have spoken with dozens of executives and entrepreneurs from all parts of the ecosystem in order to form what we believe are the most detailed estimates, analyses, and predictions for 2010 and 2011.

We focused and organized the report around the following areas:

  1. Social Networks, Applications, and Games - The explosion of the virtual goods market on social networks is one of the biggest stories of 2010. We delve deeply into the trends, stats, key players, opportunities, and challenges facing the space this year and next.
  2. Mobile Applications and Games – Mobile application developers that have been early adopters of the free-to-play model are now seeing significant growth in 2010. Our study breaks down the key opportunities and challenges facing this emerging space going into 2011.
  3. Casual MMOs and Virtual Worlds - Virtual worlds and casual MMOs continue to grow as a meaningful share of the virtual goods opportunity in the United States. Our study breaks down the key drivers for success in this segment, trends in monetization and engagement, and the prospects for the future.
  4. Hardcore MMOs and Free-to-Play Online Games – Developers in the MMO / MMORPG space have been among the earliest adopters of the free-to-play model. We explore why free-to-play MMOs are succeeding, revenue and user trends, and the key issues facing this space as we head into 2011.
  5. Emerging Areas: Console Games and Subscription MMOs – As the virtual goods business model becomes more well understood, it is beginning to show up in new and interesting areas of the games and entertainment landscape. We highlight a few of the more promising areas where virtual goods are emerging as a promising opportunity.

Each section contains:

  1. A brief history on the evolution and growth of this space in the US, including a description of key players.
  2. Estimates on the size of the US virtual goods market in 2010 in that area.
  3. A diagnosis of the key opportunities and issues facing the growth of that space, including our outlook and projections for 2011.

In addition, prior to delving more deeply into each market segment, we’ve provided an overview of the emerging payments ecosystem that is growing to serve these new businesses. Traditional e-commerce infrastructure providers only offer a partial solution, and the virtual goods payments layer is currently in a major state of flux. In the report, we describe the variety of solutions that have been brought to market to date, and the key challenges facing the industry from a payments perspective as a whole.

For more details, check out the full table of contents below.

The annual membership, which includes the report and three additional quarterly updates, is USD $2,495. Alternatively, you can obtain just this report for USD $995.

The annual subscription brings you a total of four comprehensive reports comprising months of original research. Recent reports have covered:

  1. The Future of Social Gaming. Social games make up over half of the US virtual goods market. This report provided detailed coverage of exactly how this industry has managed to thrive, who its most valuable players are, and deeper insight into monetization, development, and customer acquisition than you’ll find anywhere else..
  2. The Spending and Usage Patterns of the Social Gaming Audience. Who are the millions of users whose time, money, and engagement have made social games into household names and their developers into technology industry celebrities? This report presented the only independent, original research into user profiles, behaviors, and attitudes toward social games and virtual goods.

Although the report will not be released until Tuesday, September 28, we are offering a special pre-order discount for those who purchase now. The pre-order price of US $795 for this report or US $1,995 for a one-year subscription is now available until September 27.

We are looking forward to continuing to cover the evolution of the space over the coming year. We look forward to hearing from you!

Table of Contents

1. Introduction

  • How We Got Here: A Brief History of Virtual Goods Worldwide
  • Defining Terms
    • Registered users
    • Active users
    • Average revenue per user (ARPU)
    • Average revenue per paying user (ARPPU)
    • How do different developers manage their businesses?
  • Growing Virtual Goods Markets in the US
    • Social Networks, Applications, and Games
    • Casual MMOs and Virtual Worlds
    • Hardcore MMOs and Free to Play Games
    • Mobile Applications and Games
    • Emerging Areas: Consoles, Subscription MMOs
  • Methodology

2. The Virtual Goods Payments Ecosystem: An Overview

  • Large Payment Platforms
  • Mobile Payment Providers
  • Offer Providers
  • Direct Payments vs Offers
  • Pre-paid Cards
  • The Arrival of Facebook Credits
  • New Payment Providers
  • Managing Fraud
  • Related Companies

3. Social Networks, Applications, and Games

  • Introduction
    • The Global Rise of Facebook
    • The Virtual Currency Payment Ecosystem Explosion – and Migration to Facebook Credits
    • Increased Optimization for Virtual Goods
  • Social Networking Platforms Today
    • Facebook
    • MySpace
    • Twitter
    • Google
    • Others
  • Significant Changes to Facebook Platform Dynamics in 2010
    • Distribution & Engagement
    • Monetization
  • Social Application and Game Genres: How Do They Perform?
    • Role Playing Games and “Hardcore” Mini-MMOs
    • Simulation and City Building Games
    • Pet Games
    • Poker Games
    • Gifting Apps
    • Arcade Games
  • Who’s Buying Virtual Goods?
    • Gender Breakdown
    • Age Breakdown
    • Geographic Breakdown
  • How Are They Spending Money?
    • Item Type Breakdown
    • Payment Method Breakdown
  • Market Size Estimate
    • Total Number of Monthly Paying Users
    • Total ARPPU Per Month
    • Total US Virtual Goods Revenues from Social Networks in 2010
    • A Quick Look at Revenues for Top Social Game Developers
  • 2011 Outlook
    • Growth Rate
    • Major Risks that Could Hamper Growth
  • Leading Companies

4. Casual MMOs and Virtual Worlds

  • Introduction
  • Demographic Breakdown
    • Gender
    • Age
  • Payments
  • Analyzing the Market Opportunity
    • ARPU
    • ARPPU
    • Market Size Estimate
  • 2011 Outlook
    • Growth Rate
    • Key Challenges
  • Leading Companies

5. Free to Play MMOs / Hardcore Games

  • Introduction
    • History of free to play MMOs
    • Emergence of the free to play MMO market opportunity in the US
    • Major genres for free-to-play MMOs and hardcore games
  • Analyzing the Market Opportunity
    • Total Player Base
    • ARPU
    • ARPPU
    • Payment methods
  • 2011 Outlook
  • Leading Companies

6. Mobile Applications and Games

  • Introduction
    • History of virtual goods model in US
    • Major genres for free-to-play iPhone apps and games
  • Analyzing the Market Opportunity
    • Total Player Base
    • ARPU
    • ARPPU
    • Payment methods
  • 2011 Outlook
  • Leading Companies

7. Emerging Areas

  • Console Games
  • Subscription MMOs

8. Conclusion

  • Overview: 2010 Market Estimates
  • Looking Ahead: 2011

9. Appendix: Company Index

About the Authors

charles-hudson-headshotCharles Hudson

Former VP Business Development, Serious Business & Host, Virtual Goods Summit

Charles Hudson is the former VP of Business Development for Serious Business, a leading social games developer on the Facebook platform. In addition to his work at Serious Business, Charles Hudson organizes two of the leading conferences in the social gaming and free-to-play games industries, the Social Gaming Summit and Virtual Goods Summit.

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

justin-smith-headshotJustin Smith

Founder, Inside Network

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

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

Get the Annual Membership

The annual membership, which includes the report and three additional quarterly updates, is USD $2,495. Alternatively, you can just download this report for USD $995. Although the report will not be released until Tuesday, September 28, we are offering a special pre-order discount for those who purchase now. The pre-order price of US $795 for this report or US $1,995 for a one-year subscription is now available until September 27.

Get Annual Membership (Includes Report + 3 Additional Quarterly Issues): $2,495 $1,995 USD*
OR Buy Single Report: $995 $795 USD*

* Pre-order discount ends September 27, 2010. All pre-ordered reports will be delivered on September 28, 2010.

Facebook Game Cross-Promotion Network Applifier Grows to 55 Million Players, Fully Opens

Less than three weeks have passed since the last time we wrote about Applifier, which offers Facebook developers a cross-promotional bar that is shown to players alongside games. But in that short time the company has already added 20 million new monthly active users across the network, according to CEO Jussi Laakkonen.

Applifier is becoming more public today, opening officially to any Facebook game developer, with a new web page showing off top clients and how the bar works.

But the real news, as it was in August, is the size that Applifier has grown to. As a network, it’s now larger than any Facebook developer with the exception of Zynga — Electronic Arts comes a close second with 54 million.

The promotional network has been growing so quickly because there are a large number of developers, like ZipZapPlay and Booyah, who have millions of monthly active users but only one successful game, which means that they can’t do significant cross-promotion on their own.

Mid-sized developers like Wooga and Digital Chocolate, who do have multiple games, are also taking part. Laakkonen says that Applifier has had to concentrate almost entirely on scaling since its launch four months ago; it now delivers 200 million impressions daily.

Asked whether a top five developer like Playdom could potentially take part in Applifier, Laakkonen says it likely won’t ever happen. “When we think about ourselves, we think about leveling the playing field,” he says. “The whole point is the portfolio. Zynga, Playfish and so forth can build that portfolio for themselves, and they can try to capture the whole game-playing of a particular player.”

At the same time, Laakkonen is still coming to grips with Applifier’s growth to date. “When we started four months ago, if someone told me we’d cross 50 million, I would have laughed. At 10 million, I thought we’d made it, that there was nothing more to be done,” he says.

Although Applifier does paid campaigns, its main premise is that player traffic between games is free; it’s now up to 10 million click-throughs, according to Laakkonen. For more on how the network works, check out our stories from its launch and 35 million milestone.

Apple’s Game Center Nears with Latest iOS 4.1 Beta

For mobile game developers, Apple’s Game Center may be one of the most important developments this year. The social networking platform is coming to users with iOS 4.1, and available to developers now as part of 4.1’s third beta, which AppleInsider recently looked at.

Now that more of Game Center’s features are coming to light, it’s becoming evident that Apple is building something closer to an existing game network like Xbox Live than a standard social network.

The initial sign-in to Game Center uses the Apple ID, but users will be identified to each other by a nickname. Apple likely expects players to connect with people they don’t know for real-time multiplayer, unlike Facebook’s asynchronous games, which are played mainly by real-life friends.

However, there’s also a prominent “Find Me By Email” option, which suggests that Apple is also hoping to connect people who do know each other — thus taking advantage of both game networking styles. At the moment, there’s no obvious tie-in to Facebook accounts.

Since every iDevice user will potentially be part of Game Center, it should prove valuable to existing social platforms like OpenFeint and Plus+, which have had to ask players to sign up thus far.

Those services seem to be counting on Apple giving access through an API. Since Game Center was announced in April, the independent platforms have been working on new features beyond leaderboards and challenges — which should be part of Game Center — to differentiate themselves.

This Week’s Headlines on Inside Facebook

IF LogoCheck out the top headlines and insights this week from Inside Facebook— tracking Facebook and the Facebook platform for developers and marketers.

Sunday, August 15th, 2010

Monday, August 16th, 2010

Tuesday, August 17th, 2010

Wednesday, August 18th, 2010

Thursday, August 19th, 2010

Friday, August 20th, 2010

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