Inside Social Games

It wasn’t all that long ago that Facebook apps were thought of as another infinite repository of low value advertising inventory that would slowly erode to no one’s great concern. Now, 18 months later, just about every major media company is sniffing around the Facebook gaming leaderboards, evaluating how to get into the virtual goods-based games-as-a-service business.

For media companies interested in getting into the game, it’s not a matter of if, but rather a question of how. As execs and corp dev departments are working to fit together build vs. buy strategies, they’re also trying to figure out how to align all of the parts of the organization to move towards a structure necessary to run a social gaming operation.

Over the course of the last year, it’s become clear that many traditional media companies have gained increased regard for the role of social gaming in their future online monetization plans. Many of these companies have struggled to build significant revenue streams on the web, but now see virtual goods-based social games as one of their most promising opportunities.

As social gaming becomes increasingly mass-market in the US and throughout the west, the thesis basically goes that new IP can only take you so far; existing IP will become increasingly important in separating from the pack of developers vying for consumer attention. As a result, rights holders now want to find the top independent developers to pair with their IP portfolio.

For Facebook social gaming shops, that means good things.

“You would be surprised at the seniority of those with whom we have had regular conversations,” one social gaming executive said recently.

Indeed, we’ve been hearing continued rumors in recent months, the latest of which is News Corp’s interest in Playdom, one of the largest developers on the MySpace developer platform and an increasing presence on the Facebook Platform. Given Zynga’s size and Playfish’s recent acquisition by Electronic Arts, Playdom and fellow developer CrowdStar are two of the more likely acquisition candidates over the coming year. And Fox’s involvement would certainly make the dynamics between it and Facebook even more interesting.

Before Playfish was acquired by Electronic Arts last November, we heard that it had had discussions with multiple large media companies as well before the deal with EA was consummated. However, don’t be surprised to see more small shops being snapped up too, as several smaller developers are showing encouraging vital signs and may be more affordable options or better strategic fits than the bigger guys.

All in all, we expect to see more activity in the space over the coming year from the media companies. However, along with interest in social game developers from Chinese gaming giants, some are concerned that price expectations could be getting too high, slowing down potential deals.

We’ll be going in depth on the future of IP in social apps and games at our upcoming Inside Social Apps 2010, our first conference on the future of monetization on social platforms, on April 20th in San Francisco. We hope to see you there.

For Inside Network’s in-depth research on the social gaming market, check out Inside Virtual Goods: The Future of Social Gaming 2010

Over a year ago, we saw one of the first 3D games on Facebook, Paradise Paintball. At the time, the game was reminiscent of old PC first-person shooters (FPS) such as Delta Force. However, it was seen more as a proof of concept to the Unity Engine’s 3D capabilities on Facebook, and felt unfinished. Well, the game’s been about for some time now, and Cmune’s paintball FPS looks very different — and better — today. And it’s also available on a wider range of social gaming platforms.

Again, the game is an FPS that pits players into synchronous battles with each other in either team matches or free-for-alls. The idea is to rack up as many “splats” (kills) as you can before time expires. Of course, that’s a game 12 months past, and a little bit has changed since then.

Aside from visuals, such as foliage in the game’s tropical settings, looking significantly better, players have a handful of weapons at their disposal. Like the original version, there is still a pistol, machine gun, grenade launcher, and sniper rifle that all players enter a game with. Some weapons still feel stronger than others, but with five maps, as opposed to the original two, none of the weapons feel that much stronger.

The level design, overall, is not too bad. Most of the levels, save Lost Paradise, are small enough and have enough cover that a sniper can’t often sit unopposed, and a grenadier needs to be a surgeon with their shots lest they end up blowing themselves up. More than this, however, is the introduction of random items and power-ups throughout each world.

There are items floating about the various levels that grant users one of two types of power-ups: Player Power-ups or Weapon Power-ups. The former includes increasing movement speed and jumping height, which, by the way, is very cool, a “secret power up,” the ability to walk on water, and, well, ammunition. Each of these add a nice enhancement to play, and nothing is so powerful that an experienced player cannot handle it.

The latter, the weapon power-ups, are another story. These can be frustrating, and include “Old Man,” which slows you down (not a big deal); “Drunken Master,” which blurs the screen, making it more or less impossible to see; and the coup de grace, “Flipper,” which is quite possible the most obnoxious ability ever conceived. It turns the entire player upside down and puts everything backwards, making it not only dizzying and disorienting, but pretty much guarantees that you’re about to die.

That said, if you’re worried about dying, get used to it. It’s going to happen a lot. Most of the games people play – at least among Facebook’s 48,000, or so, monthly active users – are free-for-all games. These are usually unlimited time, and just meant to be fun, but some of the levels are so small that you’d be lucky to live 30 seconds.

Another change is that players can now improve their avatars Battlefield-Heroes style. Every day the user logs in, they earn 500 points which can be used to buy a handful of items to increase their chances of survival in battle… or just look cooler. Each item can be bought for either one, seven, or 30 days and include everything from a shotgun, to special hair and clothing, to body armor. Every weapon and piece of actual armor costs Credits, a virtual currency, that must be bought via PayPal or Zong, or earned through offers (however, the latter is currently only on Facebook, and an almost unnoticable link next to the giant PayPal buttones). Basically, if you want to spend money, you get rewarded, but not so much if you are loyal and play a lot. Furthermore, a recent study by Offerpal Media and comScore, just last week, showed that only 22.8% of players are willing and able to buy virtual currency or goods, yet 52.3% are likely to complete marketing actions for it. Basically, that means that Paradise Paintball’s monetization methods are limited.

Nevertheless, the game was still fun. Granted, the majority of social network users prefer asynchronous game play – as most do not consider themselves gamers – but Paradise Paintball was good enough to win the award of “Best New MySpace App” during the Game Developer’s Conference, 2010. Furthermore, with the game on Facebook, MySpace, Apple Dashboard, and Cmune’s own game portal, it’s hardly doing bad. Overall, it just needs a few tweaks here and there in the monetization department, but beyond that, if you like free shooters, this isn’t a bad one to try.

Zen Bound 2 Revealed for the iPad – Despite the buzz circling Apple’s new iPad, little has been actually seen regarding games on the coming platform. However, via a post from Kotaku, we’ve been able to catch a glimpse of Secret Exit’s Zen Bound 2, a “sequel and a revision” of the original iPhone application. In a nutshell, the original rendition is about attempting to wrap a rope around an oddly shaped object, with the sequel’s concept being more of the same. However, as you can see, the bigger and more powerful iPad sure does make it look better. A full gallery can be found here.

Frosmo Expands to Asia – Frosmo has seen a good deal of success with its tournament and team-based platform of the same name, in terms for social gaming. Already the company has expanded its collection of titles across Europe and into Facebook, but now the Finnish company is expanding into the Asian game market as well. Currently, the company is slated to let 10 different Asian game companies use its tournament system, and be available through 51.com, China.com, Ren Ren, and Mixi.

Platogo Gets Casual Games Facebook Ready – Though third party firms helping developers socialize their titles is nothing new, a social games platform from Austria, Platogo is looking to socially enable casual games directly for Facebook. Dubbed “Platogo Wrapper” this tool allows developers to integrate their games into Facebook withonly a few lines of code. With this new tool,  apps will be able to take advantage of Facebook friend invitations, leaderboards, achievements, and player challenges.

Game Investments Dropped 29% in 2009 – It would seem like the video game industry has seen some hefty decline due to the recession as VentureBeat reports that of 115 game startups, only $663.1 million in funding was raised during 2009 (discounting those with undisclosed amounts). That is 29% lower than the $936.8 million raised in 2008. In fact, had it not been for Zynga’s acquisition of $180 million deal from Russia’s Digital Sky Technologies, the year would have been down a depressing 48%.

Tapulous Taps Into Kings of Leon – The popular rhythm-game company for the iPhone, Tapulous, has added another new title to its collection of Tap Tap games. The new app is dubbed Kings Of Leon Revenge, and if you hadn’t guessed already, features, well, the Kings Of Leon. In addition to hosting 10 of the band’s top songs, the new game will also include a curious ”Battle Mode” that will allow users to directly compete with each other using the iPhone’s bluetooth capabilities.

Unity Games Gain a Social Platform Through dimeRocker – More and more frequently, social games empowered with Unity3D are appearing around both Facebook and the web. To that end, Overinteractive Media Inc. has announced the launch of a new social platform, specifically tailored to support Unity enabled games, dubbed dimeRocker. Through the platform, games will be able to support microtransactions, achievements, leaderboards, friend invites, challenges, and be deployable on both the Facebook and MySpace networks. Already, around 150 developers have signed up for the service’s beta stages.

Facebook App Penny Drop Teams Up with Kiva – A simple Facebook application called Penny Drop – powered by CircusPop - is out to help the working poor. The quasi, game-like app consists of players using tokens (earnable through logins every few hours and inviting friends) to drop the price of featured items by one cent until someone purchases it. However, working with Kiva, from March 11th to March 22nd, for every token used in Penny Drop, a penny will be donated to Kiva in order to help poor entrepreneurial individuals and businesses grow.

Gowalla Adds New Platforms & Branded Goods – Location-based iPhone app Gowalla has launched its social game on two new platforms this past week: The Android and Palm’s webOS. In addition to this new support, the game is also bringing branded virtual goods to the table from the Travel Channel’s show, Food Wars. With the new deal, players will be able to earn special badges and virtual items by visiting locals featured during the show.

IMVU adds Voices as a Virtual Good – Popular teen-oriented virtual world IMVU announced a curious partnership with Vivox this Thursday. Now, the virtual world will be capable of integrating voice services, but beyond being just another feature, it will also add a new source of revenue. Currently, 25 different voice styles are being offered for the cost of 990 IMVU Credits.

Sometrics Launches GameCoins.com – Social analytics firm, Sometrics announced the launch of GameCoins.com this week - the company’s first direct-to-consumer play. Game Coins will serve as a community site for gamers, allowing them meet new people as well as participate in forums and blogs that revolve around various social games and virtual worlds. More than this, however, the site, per its name, will also be an online marketplace for virtual goods and currencies. From the portal, players can make use of the Sometrics Offer Solution to complete ad offers and earn goods and currency for their MMO, virtual world, or social game of choice. The company tells us it plans to help grow the community through users discovering relevant content in searches. The idea is that by helping people play these games better, its monetization services will get even more usage.

50% of Gamers Will Earn Virtual Currency – According to a survey performed by comScore for Offerpal Media, and released at the Game Developers Conference this week, alternative payment methods enable greater monetization capabilities that one would think. Derived from comScore and Offerpal’s own monetization analytics, 53.3% of players are “very likely” to complete a marketing actions (i.e. completing a survey, watching a video, or shopping online) in order to earn virtual currency for their favorite games. Conversely, only 22.8% of those surveyed stated they’d be willing and able to buy it.

In fact, 29.7% of social gamers actually don’t have the means to buy virtual currency in the first place; at least not with cash options. Curiously, even among those that could, 34.9% stated that they were “very unlikely” to do so.

With each passing month, more casual gaming companies turn their attention to Facebook, despite previous success running their own sites or licensing out games (we listed off 10 reasons why last year). One of the latest to join the exodus is Big Fish Games, a noted developer of downloadable casual games.

Big Fish launched its casual MMO Faunasphere on Facebook in February. Last week, it added a second game: My Tribe, which is something like a cross between Settlers and Gilligan’s Island. After picking a desert island to play on, you start off with a small band of tattered refugees, huddled around a single hut. Your job from there is to build a civilization.

The island premise isn’t unusual for Facebook. But Big Fish has gone beyond the usual fare with the functionality of My Tribe, which actually offers a large number of distinct actions. There are huts and buildings to erect, and later upgrade. Villagers have ages and different skills, and wear clothing, created with dyes and gems, that modify their abilities. There are items to pick up, resources to harvest, and new technologies to research.

My Tribe’s complexity stands out from the beginning, when the game’s tutorial — slyly disguised as “quests” — guides the new player through each action in turn. An hour into playing, when you’ve finally run through all the initial quests, there’s still no shortage of things to do: collecting seashells, managing villagers, planting new crops, visiting a friend’s island. The game also drops a random special item every few minutes that you can search for.

The endless to-do list makes My Tribe noticeably different from the time management games that are currently available on Facebook. Developers using the FarmVille mechanic usually intend for players to dip in and out of the game multiple times throughout the day. Players frustrated with running out of energy or crops to harvest are welcome to play for longer, but it’s only easy if they pay.

With My Tribe, a player could certainly dip in — although it might take more than a couple minutes to tidy up the island. But Big Fish meant to go against the grain with its game. “It was a conscious decision to build a more in-depth game and bring that to Facebook,” says Will O’Brien, the company’s VP of social gaming. “It’s the richest experience on Facebook.”

O’Brien was encouraged by Facebook platform manager Gareth Davis’ call yesterday for “iconic games” that can provide a defining experience for the social network. “I think he’s issuing a challenge and a mandate to the social gaming industry to raise the bar,” O’Brien says.

So that’s what Big Fish is trying to do with My Tribe, a game that it originally released in 2008 as a downloadable. For Facebook, the company added social features, but didn’t dumb down many of the other features. A hardcore gamer might not find the game either complex or engaging; a lot of time is spent scrolling around the screen, picking up seashells and setting your islanders to the same task over and over.

But most Facebook games have all the depth of a rain puddle; My Tribe tries to offer more. What remains to be seen is how far players will want to go with the game — after playing through far enough, it’s possible to build an ark and move to another island with different possibilities. Whether they’ll want to go that far is the only question.

While Hi5 has increased its amount of rhetoric against Facebook, it has made some precise moves to attract game developers — especially from the Facebook Platform. It’s not clear if the moves will work, in part because Facebook has likely grown by the size of Hi5’s 50 million monthly active users already this year.

Hi5 is continuing to aggressively make the social network more of a gaming destination. Last week, it began supporting Facebook’s platform APIs, meaning developers with Facebook applications can more easily repurpose them to Hi5’s platform. Now, it’s announcing a special “Game Developer Program” intended to give third parties numerous advantages in reaching Hi5 users and making money. The catch is that all developers need to apply (here) to get into the program — a way for Hi5 to maintain quality. The specific benefits of the program include special ways for developers to reach users and make money.

Facebook recently took away notifications, a tool that many apps engaged users. Hi5 says it will give games a special one-click game install interface, access to let them send notifications to users in friend updates, and “un-capped invitations.” The last item means that developers in the program will not have apps limited by, say 30, invites a day — Facebook has made limits to help control spammy behavior. Hi5’s solution is to carefully approve and monitor its game developer partners, presumably kicking them out of the program if they get too spammy. Other special access points include APIs allowing games to add items in to user profiles, including user achievements and high scores.

And, Hi5 is going to be providing free banner ads, special appearances on its Games page (which is linked directly from the homepage) and in its games toolbar, recommend games to users, and more it will announce later. The plan here is to give smaller games a boost in users without having to buy advertising — on-site advertising is an increasingly important way for developers to reach users on Facebook.

Regarding money, some developers have been using Hi5 Coins, the site’s virtual currency, in their own games for many months. Now, anyone in the program will be able to, although it’s not saying what payment cut it’s taking. The currency includes 60 payment methods in 30 currencies. Hi5 also runs premium advertising alongside games, and it will share some of this revenue with games in the program.

So, while Hi5’s application platform will still exist, the program is intended to lure developers in to a tighter relationship with the company. New partners include: Detonator Games, Exponential Entertainment and Immortal Games.

Given its size and mature platform, Facebook is still going to be the priority for many developers. The second-largest social gaming platform, MySpace, has also just made big improvements to attract game developers. Hi5, however, is arguably the social platform most focused on games — specialization is a classic business strategy for a smaller competitor, and given where Hi5 is at, we think it’s making the right moves. We’ll see if it will work.

The number of big social applications that use Facebook’s virtual currency, Credits, continues to rise. The latest is Zynga’s smash hit farming game, FarmVille, the largest application on Facebook with nearly 84 million users a month.

The integration is pretty straightforward, as you can see from the screenshot below. Credits is shown as the first of several payment options — others include direct credit card payments, PayPal, and a variety of other payment services, including prepaid cards and offers.

Zynga has previously been running Credits in some of its smaller Facebook apps, like role-playing game Pirates: Rule the Caribbean. Credits is now also appearing on some of its other big applications, like pet-caring title PetVille. However, it’s not on others, including Café World.

> Continue reading on Inside Facebook.

Monetization service providers that first got traction on Facebook are continuing to diversify, with the latest example being offer company Super Rewards. It has just launched a new version of its offer wall, intended for Flash game developers who distribute their creations across the web. The service is basically the offer wall that Super Rewards already provides, but available for developers to embed within their Flash game interfaces. Advertising offers are performance ads, drawn from various ad networks and advertisers, and users can participate in the ads in exchange for virtual currency in games.

Super Rewards is letting people who play Flash games that use virtual currency take these offers and earn the currency without having to leave the game page. In this example, you can see how it works: Click on “get more coins” and you’ll see the offer window appear overlaying the game. Then you take the offers, get the currency, and buy virtual goods within the game.

While the company offered a way to add offer walls via an XML integration, the new service allows developers to do so in what it says takes less than an hour. Developers can check out the implementation information here. Other companies that provide in-Flash payment services include Jambool and its Social Gold product. We should note that social games on Facebook that use Flash normally include offer walls on separate pages within applications.

Super Rewards, a part of online advertising company Adknowledge, hasn’t announced any developer partners yet. But the service is live, so we expect implementations to start popping up soon.

Offer quality has been an issue for basically all offer providers on Facebook, and Super Rewards has been trying to improve what offers appear where. Here’s what the company tells us about its efforts for Flash developers: “All the functionality of the core SuperRewards product applies to this including the industry’s first white and black listing functionality. We work as closely as we possibly can with both platforms and publishers to ensure that our offers meet both the letter and the spirit of platform guidelines as well as more specific controls that the publisher wishes to apply.”

Mochi Media, the Flash gaming platform company that sold to China media giant Shanda Games for $80 million earlier this year, is continuing to focus on social. It’s announcing new tools for developers today, allowing them to provide ways for users to play games against friends and share activity to their social networks. It’s also offering a new $10 million fund for Flash and social games, in conjunction with its new corporate parent, to help finance promising new ideas.

The company worked last year to apply concepts from free-to-play social games to the Flash widget games on its site, introducing a platform-wide virtual currency, Mochi Coins, and a way for users to find friends from social networks and share things like high scores with them.

Mochi had begun live providing ways for developers to integrate pre-roll and other advertising into their widgets. Developers can then let anyone embed their games anywhere the web, and make money for themselves (with Mochi also getting a cut). On top of this, Mochi provides game analytics tools so developers could track usage and figure out where to improve their products. The company now says it reaches 150 million monthly active users, who play 15,000 games on 40,000 different web sites.

The Social API (application programming interface) lets users sign in to play a game via their identities on Facebook (using Facebook Connect), MySpace or Twitter, then play friends from across these sites and and access each site’s communication channels — say, posting a big gaming win to your Facebook wall.

But the API goes beyond what the company launched last fall, as vice president of product management Ryan Nichols tells us. It’s a layer on top of these other networks, and mimicks Facebook’s API so a social game developer on Facebook could easily port their game to it. Once a user adds a friend on Mochi from one of the social sites, that person becomes their Mochi friend — if Facebook goes down, for example, Mochi can still maintain its connection between the two people. The API =also includes a way for developers to message all users on a game, regardless of which social platform they are on.

This is a smart idea, but one issue is that many social gamers prefer playing games on social networks. Why? Many don’t even realize that they’re playing “games,” per se, but rather passing the time doing something entertaining with friends on the site.

The $10 million fund, meanwhile, “will be managed by members of the management team of Mochi Media and Shanda Games. Through participation with the fund, developers will gain access to technical, design and testing resources from Shanda Games, as well as a host of development tools and distribution….”

The big picture here is this: Shanda Games, a publicly-traded company controlled by Shanda Interactive Entertainment Ltd., wants to compete outside of China. Mochi offers distribution and monetization services that allow it to do so; the social features are another step in that direction. The fund is, too. The other interesting angle we’ve been hearing is that netbook usage is exploding in China, and the lightweight devices can’t handle the processing power required for many of the downloadable and massively multiplayer online games popular in the country. The company has organically gained millions of users in China — people who have just found Mochi-powered games on their own — so Shanda is aiming for Mochi to bring its 15,000 games to bear on the Chinese market.

We’ve been talking a lot about Slide recently, and for good reason. After staying pretty flat for months at around 20 million monthly active users, Slide’s growth started to explode a few weeks ago. Since February 14th, the company has doubled its MAU to almost 40 million, of whom over five million are daily active users.

What happened? A combination of Facebook’s redesign, plus some cross-promotion, a little advertising, and the clever use of viral features. We talked with Keith Rabois, Slide’s vice president of business development and strategy, to get some background.

FunSpace has grown the most since mid-February. On the 16th, it was still at 4.5 million MAU; today it accounts for about half of Slide’s MAU, at 21.7 million MAU. It is focused on sharing videos and other content. This is generally what Facebook wants to enable, and its own data reflects the trend.

Our regular readers will notice that around two weeks elapsed between Facebook’s design changes in early February and the explosion in growth for FunSpace. This is where Slide’s viral tactic comes in, a method Rabois describes as letting users share videos with a lot of friends in a way that follows Facebook’s developer policies.

Besides FunSpace, most of Slide’s other apps also involve content sharing, of sorts, and this may be helping them grow, too.

Cute mammal-caring games like SuperPoke! Pets, SPP Ranch! and SuperPocus, and aquarium game Top Fish are more virtual worlds than games. Slide began testing out virtual marketplaces in some of these apps in January, letting users create their own virtual goods, sell them and make money, similar to aspects of virtual worlds like Second Life and IMVU.

In January, Rabois says that users made $160,000 on their creations. To expand the model, Slide will need to manage fraud and provide creation tools but the results so far suggest that the effort would be worth it. The company already offers virtual goods creation tools, the marketplace and ecosystem features designed for user-created goods, like a method for selecting the best user creations and promoting a limited number to other users. So far, so good — we’ll be watching to see if other application developers adopt similar virtual goods marketplace.

While none of the apps are seeing nearly as much growth as FunSpace, they are all growing — partly due to cross-promotion from FunSpace, it seems. Still, SPP Ranch!’s traffic was already on the way up, according to AppData. Slide doesn’t spend much on advertising, so on top of the other reasons mentioned, the virtual goods marketplace — and the profusion of additional goods that players are getting access to — could be playing a role in drawing making the apps more popular.

Overall, Slide’s combination of content-sharing apps and virtual world-style games seems to be helping it gain more users, and monetize them. Having been one of the largest developers on Facebook since the platform launched in 2007, its reach, experience and funding — and its range of growing apps — put it in a promising position to build its business.

Although the vast majority of Facebook’s user growth has occurred outside the United States over the last couple of years, one of the most notable countries where it hasn’t grown is China. Access to Facebook within China is largely blocked by the Chinese government, as is the case with many other western websites. But while most Chinese Internet users can’t access Facebook and vice versa, that isn’t stopping social game developers and publishers in China and North America from eyeing – and moving into – each other’s markets.

It’s been well documented that much of what is happening today in the West in terms of the proliferation of virtual goods-based free-to-play business models has actually been around in Asia for a while. Historically, however, these markets have generally been led by local players. In 2010, we’re beginning to see what could become a larger and quite interesting trend: Chinese developers moving into western markets via Facebook, and even some western Facebook game developers beginning to move into China. The trade routes for virtual goods exports are picking up.

> Continue reading on Inside Facebook.