SponsorPay’s growth reflects the increasing popularity of video advertising, as the format has gained traction in both mobile and social games over the past year. SponsorPay launched BrandEngage last July, following on the heels of competitors like Flurry and Tapjoy, who began offering video advertising products after it began to become apparent they performed far better in mobile apps than traditional banner ads. SponsorPay’s BrandEngage product allows advertisers to show players both videos and brand engagement campaigns, which the player can watch, Like and share.

SponsorPay began its life as a virtual goods monetization company on Facebook, but followed the same trajectory as many of its clients, looking to mobile after the mandatory use of Facebook Credits made the platform far less lucrative.

The Berlin-headquartered company picked up $5 million in funding from Nokia Growth Partners in February to develop its mobile product lines. SponsorPay’s advertising appears in games from Ubisoft, Bigpoint, Gameview Studios and Digital Chocolate. The company is predicting similar growth in 2012.

We did a quick survey and found that 21 out of the 25 most popular Facebook games have incorporated holiday themes, items, quests, giveaways and content this year — a massive increase over last year, when we saw less than half the most popular social games put in the effort. Here’s a breakdown of the various ways in which these developers have introduced holiday-related content in the weeks leading up to Christmas and New Year’s Day.

Timed Holiday Quests

As seen in: Pet Society, CityVille, Animal Town

As most developers are already aware, adding new objectives and goals can maintain or raise retention rates in social games. Christmas offers the perfect excuse to roll out new quests that coincide with the holiday. In previous years, these themed quests had no time limit — but in 2011, most holiday content is now specifically timed to expire if the player doesn’t complete the quests before the holiday itself. These limited time quests may actually produce better retention rates as players feel pressured to log more time to complete the quests. This year we’ve seen games with lighter campaigns, such as Animal Land’s holiday plant and shop quests; and much more engaged campaigns that add to the overall plot of the game, like CityVille’s Holiday Saga.

Themed Decorations

As seen in: The Sims Social, Gardens of Time, The Smurfs & Co.

While social games monetize in a variety of different ways, one of the most common is through the purchase of premium decorations and items. Just as people decorate their homes and workplaces in real life, developers assume that some players won’t mind spending a few extra Facebook Credits on holiday decorations, particularly if the game has already made seasonal cosmetic changes that make those extra items seem even more appropriate and desirable. As with quests, the type of decor a game adds can range from something minimal but Christmas-inspired, like Tetris Battle’s present shaped tetriminos, to The Smufs & Co’s Christmas themed decorations that provide additional bonuses besides looking festive. The Sims Social’s in-game store is so far the only game we’ve seen that offers Hanukkah decor items like dreidels and menorahs.

Cosmetic Changes and Gifts

As seen in: Triple Town, Ravenskye City, Car Town, Bubble Witch Saga

Cosmetic changes and holiday giveaways are probably the lowest impact way for developers to incorporate Christmas into their games. This is a trend we’ve seen far more of this year as mid-market and smaller developers have invested more in art quality and presentation. Gifts are useful because they keep players logging in every day, and we’ve seen quite a few games doing 12 days of Christmas-themed events. However, what might be the most common theme of all this year is snow — a simple decoration that developers can automatically add to games without involving the player. Most cosmetic changes we’ve seen this year have been paired with premium decor items.

Seasonal Sales

As seen in: Tetris Battle, The Sims Social, FarmVille, The Smurfs & Co.

It’s a common practice for retailers to discount items in December to take advantage of relaxed credit card limits and increases in spending behavior, and we’ve seen a lot more developers add seasonal sales this year. Ubisoft has introduced a discounted Christmas decoration kit into The Smurfs & Co. that bundles together a value pack of the game’s new Christmas decor items and buildings, and Tetris Battle and FarmVille are taking an even more straight forward approach, discounting the amount of Facebook credits required to purchase in-game currency until after the holidays. The Sims Social offers less of a discount on holiday items in the Specials section of the store.

Charitable Efforts

As seen in: A Better World, FarmVille

Last but not least is a trend we’ve seen some developers pick up on — converting in-game items and quests into results for real-world charities. While there are a few social games that were created specifically with charity in mind, such as Sojo Studio’s new game WeTopia, this year we’ve seen a couple of games incorporate specific holiday giving campaigns. Toon Ups’ A Better World has challenged its players to perform a million good deeds in real life and report them in the game. If the goal is met by January 31st, the developer will donate $10,000 to Cure.org. Zynga has also incorporated its charitable arm, Zynga.org into FarmVille’s gameplay this year, allowing players to purchase special holiday themed decor items for their farms, the money from which will be given to Save The Children.

While it looks like The Sims Social may have lost its chance to pull ahead of Zynga’s CityVille in traffic during 2011, the game could potentially be one of the top-grossing Facebook games of the year.

EA Playfish’s life simulation game has captivated the media with its massive growth, but as the game enters the mature part of its lifespan — where traffic decreases as average revenue per user rises — we turn our attention to the revenue potential, estimating an annual run rate of at least $82 million to $163 million. Our bullish estimate is based on the game’s current demographic spread and monetization activity, EA Playfish’s probable expansion plans in the next few quarters, and the overall strength of the Sims franchise brand. This report will explore key factors behind this revenue forecast in greater detail.

Demographics of Sims Social

Tom Mapham, executive producer for The Sims Social, reports that the game’s largest player demographic is between 25-35, slightly skewed female. Mapham believes a significant percent of these players were PC or console gamers who became familiar with the Sims franchise in their teens.

This demographic pattern contrasts significantly with the bulk of previous Playfish games, such as Restaurant City, which is 65% female and a majority of players 25 and younger. Compared to these and many popular social games, The Sims Social appeals to an older, more gender-balanced playerbase. This has important implications for monetization: According to data collected for our Inside Virtual Goods report series, male gamers between the ages of 18 to 34 tend to monetize in freemium games at higher rates than most other demographics. If Mapham is right, it’s probable this segment will contribute significant revenue to The Sims Social, joining the “Facebook moms” segment who are already prone to monetize at high rates.

Monetization: Revenue Estimates and Virtual Goods in The Sims Social

Our forecast of The Sims Social’s $82 million to $163 million annual run rate is based on two key assumptions:

- That The Sims Social game generates $1 to $2 in revenue per month per daily user, per month. This is a typical revenue pattern for a well-monetized simulation game, according to Inside Virtual Goods.
- That EA Playfish can sustain or exceed the game’s current levels of engagement for a full year.

The Sims Social currently has 6.8 million DAU, and therefore, we estimate it to be earning $6.8-13.6 million in revenue per month, which annualizes to $82-163 million. However, it’s probable that total revenue will be closer to the high end of this forecast, due to the game’s very monetizable user demographics (see above), and EA Playfish’s expansion plans and merchandising (see below).

This estimate is within range of forecasts from two leading video game industry analysts. The first, M2 Research Senior Analyst Billy Pidgeon, estimates that Sims Social will earn $110 million in annual revenue or fall somewhere in a range of $100 million to $120 million. His forecast assumes that 3 to 5% of the playerbase will convert to paying customers, with 3 to 5% of that monetized segment becoming “whales,” (defined here as users that spend in excess of $25 per month on at least one game). Pidgeon’s revenue estimate also takes into account a certain percentage of churn-out after eight months, and relatively strong overall conversion rates. In this, he cites an October analysis by Raptr, a consumer-facing gameplay tracking service, which reports strong conversion of its userbase to EA Playfish’s Facebook game. Pidgeon stressed that $110 million is a conservative estimate, “and it could certainly over-perform,” even taking into account the volatile market of social gaming.

The second analyst, Wedbush Morgan’s Michael Pachter, estimates The Sims Social to be earning $80 million to $160 million in annual revenue. “Electronic Arts said at a recent conference that it expects 2 to 4 cents per DAU,” he tells us. “So roughly 10 million DAUs time 365 days times $.02 equals $73 million at the low end and $146 million at the high end.” For his published estimate, he rounds up to the $80million to $160 million.

Again, the more bullish forecast which approaches or exceeds $163 million in annual revenue is due to the high number of male gamers 25-35 playing The Sims Social, who tend monetize at higher rates than most other age/gender segments. On top of this, recent and upcoming additions to the game will also increase Sims Social’s revenue potential.

What Sells in Sims Social: Categories and Trends

In terms of the particular virtual goods that generate the most revenue in The Sims Social, Playfish’s Tom Mapham reports two categories:

Gameplay or consumable boosts — One-use items that expand or enhance a player’s gameplay, like energy refill items.

Durable virtual goods — Items that are persistent in the game environment beyond a single use. In The Sims Social, this is largely decoration items for the player’s Sim, the Sim’s virtual home, or items with functional benefits that satisfy the Sim’s needs. As the needs mechanic is a core gameplay element to The Sims Social, this provides a unique revenue stream for the game where players are more or less required to purchase items like beds or toilets to achieve winning conditions in the game.

Durable virtual goods that enable new gameplay experiences — Building off of the needs-satisfying items described above, this category of virtual good allows the player to engage in different gameplay activities when purchased. For example, a single-bed allows the player’s Sim to perform sleeping or napping actions while a more expensive double-bed item allows the Sim to engage in sleeping, napping, and sexual intercourse actions (referred to in-game as “WooHoo”). Other items — like a stereo or a gazebo — allow Sims to dance. These item-based interactions also feature a viral component where a player can share the activity on other players’ Facebook Walls, thereby attracting more users to purchase the item.

Near-Future Growth Potential for Sims Social

As our AppData chart below indicates, The Sims Social has recently entered a period of decline across monthly and daily active users as the game transitions into the mature part of its lifespan. (Note that the mid-October sharp drop in MAU reflects a Facebook update to its accounting methods for active users across all apps.)

It is typical for most social games to experience a tapering off effect in their third or fourth month as users with lower lifetime value exit the game and high lifetime value users remain. However, during EA’s Q2 FY2012 earnings call in late October, executives hinted that the company planned to drive second stage user growth in The Sims Social with “expansions.” This term can be applied to small-scale content updates or larger gameplay experience adjustments or additions that run within the app.While declining to detail specifics, EA Playfish’s Mapham indicates that these new features would be similar to the Sims franchise’s popular expansion packs, which tend to offer new gameplay experiences — for example, the recently-released Pets expansion for The Sims 3 PC game. Based on both past performance of Sims expansions and social games currently experimenting with similar content, these additions will likely drive a new growth curve that lasts approximately one to two months.

Additionally, EA is currently exploring merchandising options that could bring new users into the game. For example, in October, the company launched a $15 Facebook Credits gift card branded with The Sims Social that also included a special Sims Social item included in the purchase. Good through Christmas, these gift cards will be sold at Walmart, placing The Sims Social in one of the world’s largest retail chains. Our “Future of Social Gaming 2011” Inside Virtual Goods report estimated the total market opportunity for prepaid cards to be $200-250 million in 2010 revenue, with compound growth rates of 50% to 100% expected for 2011. Much of this revenue will be earned by top Facebook games like The Sims Social. For a rough and conservative estimate, assume 3-5% of The Sims Social’s monthly 36.5 million users purchase one of these Walmart cards (or are given them as gifts). This would translate to $16 to $27 million in revenue on top of revenue earned directly through the game.

In addition to the Walmart prepaid card, the existing brand awareness of The Sims franchise cannot be overstated. The Sims has sold over 140 million copies, including sequels and expansion packs across multiple platforms since the original game launched in early 2000, with the latest expansion, Sims 3: Pets, just released for PC, Mac, PlayStation 3, Xbox 360, Nintendo 3DS, Wii, and Nintendo DS. As awareness and sales of this expansion and other Sims offerings continue over the holidays and beyond, expect some carry over interest to benefit The Sims Social. Whereas most social games rise or fall on the strength of the game experience, EA Playfish’s offering also has over a decade of market awareness and broader franchise strength to draw from.

Final Thoughts on The Sims Social’s Place in Social Gaming History

The Sims Social is unique among social games both in its PC game franchise origins and in the massive growth achieved on the Facebook platform. Given the both the game’s size and the clout of its developer, it’s inevitable that comparisons to Zynga’s CityVille will dominate media discussion as EA continues to release games on Facebook and Zynga moves closer toward its IPO. This discussion lacks context, however, as The Sims Social is a completely different gameplay experience and a much younger product with just 83 days of life on Facebook so far. Rather, we learn more from examining the revenues of The Sims Social, finding that as new game types are adapted to social network platforms, games kind find new — and more profitable — ways to monetize.

“Revenue levels for top games appear to be stable instead of accelerating,” said Peter Farago, vice president of marketing at Flurry, which serves analytics and ads in more than 100,000 iOS and Android apps. “Games on the higher end of revenue generation can certainly earn more than $3 million a month.”

The $3 million-per-month figure is the more or less the same as what we were hearing about four months ago in June.

A developer that reached the #1 top-grossing spot in the U.S. market within the last month told us that one could expect $40,000 in revenues per day after Apple’s platform cut and returns. (Returns refer to when a user buys an app or virtual currency and decides to return the purchase.)

“The dirty little secret is that with returns, Apple takes out the return amount and they still keep their 30 percent. So they hit hard,” the developer told us.

There are a couple reasons why we might be seeing slower revenue growth. First, consumers are likely holding off on purchases of new iPhones in anticipation of the iPhone 5. When consumers buy new iPhones, they tend to stock up on apps, especially if they’re new to iOS. Many will browse the top of the store and download whatever is popular, benefiting apps already at the top of the charts.

> Continue reading on Inside Mobile Apps.

Adobe Hoping Flash 11 Will Fend off HTML 5
Adobe revealed Flash 11 and the Flash-based AIR 3 to the world this week, placing a lot of emphasis on how the new software can be used by game developers, calling Flash 11 and AIR 3 the “game console for the web.” The new tools have been designed to be easier to install, more powerful and compatible with more systems, working with 64-bit on Windows, Mac and Linux. The move comes at a time when Adobe is looking up to shore up Flash as a development platform in the face of growing competition from HTML 5, the still-evolving development platform championed first by Apple, and now Microsoft, who are building their Windows 8 operating system to use HTML 5, blocking Flash entirely.

Has Facebook Added $15 Billion to the Economy?
A study conducted by the University of Maryland claims that Facebook apps have created an entire new segment of the high-tech industry, adding at least 182,000 jobs in the US alone. According to the findings, the so called “app economy” created by Facebook has lead to  53,000 new jobs specifically in companies that develop applications for the social network, and that has lead to job creation in connected sectors, which has pumped an additional $12.19 billion in wages and benefits into the U.S. economy.  While the claim seems to be good news, tech blog Gigaom is raising doubts and criticizing the report for using too many estimates and not enough hard data. For those interested in the numbers, and the methods used to obtain them, the full report can be found here.

American Express Gets into the Virtual Goods Market
American Express is following in the footsteps of rival Visa with the purchase of virtual currency company Sometrics. The deal, worth $30 million, will expand Amex’s Serve digital payments platform, giving it access to Sometrics’ existing customer base. Before the acquisition, Sometrics’ served 250 million customers. In February, Visa bought game monetization service Playspan for $190 million. According our Inside Virtual Goods Report, the virtual goods market will be worth approximately $1.2 billion in 2011.

Zynga Goes on Defensive Domain Buying Spree
While Zynga was announcing Mafia Wars 2, they were going to great lengths to protect that new IP.  Zynga purchased over 75 web addresses on September 20th, according to information uncovered by Fusible. The addresses cover almost every possible iteration of the Mafia Wars name, from insulting – mafiawars2sucks.com, to fawning – ilovemafiawars2.com, to purposely mistyped – wwwmafiawars2.com. While none of the domains seem to go anywhere yet, the complete list can be found here.

Tagged Acquires Startup WeGame to Strengthen Gaming Ties
Social networking service Tagged, which bills itself as the social network for meeting new people, has acquired social gaming service WeGame. While the announcement was short on specifics, the two services essentially serve the same purpose. Tagged allows users to make friends by browsing user profiles, playing games and sharing gifts, and adding WeGame to the mix allows Tagged to offer its user base more gaming focused social discovery tools and more monetization options. In the last year, Tagged has launched a new mobile website and beefed up its in-house game development.

Facebook to Make Big Bank off Credits in 2011
According to a report by eMarketer, Facebook’s revenue from Facebook Credits will top $470 million dollars in 2011, more than three times what it made from credits in 2010. In 2009 credits contributed to 5% of the social network’s revenue; thanks to the growth of social gaming and virtual goods, the currency now makes up 11% of Facebook’s income. According to an eMarketer interview with VentureBeat, one reason for the jump was the July 1st change that made Facebook Credits the mandatory currency for social games, standardizing the Facebook social gaming platform and giving Facebook a 30% cut of every transaction.

Grasshopper Manufacture Partners with DeNA for Social Games
Japanese studio Grasshopper Manufacture, most well known for the surreal titles its CEO Suda51 dreams up, is adding social games to its portfolio. Grasshopper is partnering with DeNA, the Japanese mobile and social gaming juggernaut to bring its games into the smartphone market. In an interview at the Tokyo Game Show, Akira Yamaoka, Grasshopper’s chief creative officer said that Japan’s game industry “absolutely cannot ignore mobile games.” The partnership seems to be a natural move for DeNA, who recently purchased ngmoco:) and Punch Entertainment’s Vietnam studio bolster its Mobage platform.

Sony Unveils a New, Much More Social Home
Sony has unveiled the new look for its integrated social network PlayStation Home. Originally created as a virtual world for hardcore gamers, the new Home, which is currently in closed beta, will have distinct districts that showcase different genres of games, making it easier for Home users to quickly navigate to the kinds of games they want to play. The games will be lighter, more casual and free to play, but supported through virtual goods transactions. Currently 30 developers are creating games for the new version of Home.

EA Aiming to Be the Social Kings in Three Years
According to a speech by CEO John Riccitiello, EA has set a $3 billion goal for online revenue in the next two to three years, with the ultimate goal of surpassing reigning champion Zynga as the biggest social gaming company in the world. Currently the majority of the 100 million people playing EA’s social games are from The Sims Social, which now boasts more than 51 million users. In related news, EA announced that it is creating a spin-off of its NHL franchise for Facebook called NHL Superstars that will launch in October. Meanwhile the gaming giant has signed a distribution agreement with Aeria Games to bring games from its Play4Free division (such as Battlefield Heroes and Need for Speed World) to the 23 million strong gaming network.

MapleStory Adventures Already at Three Million Players
The Facebook version may not be out of beta, but that hasn’t put off fans of the MapleStory franchise. According to Nexon, their first Facebook app MapleStory Adventures has already attracted more than three million users.

Angry Birds + Starbucks = BBFs?
According to report uncovered by Edge, Rovio is in talks to bring Angry Birds to the one of the most ubiquitous franchises in the world, Starbucks. While few details are known, Rovio may be bringing Angry Birds leaderboards into Starbucks as way to encourage people to play the game while they’re getting their daily caffeine fix.

Social Games Can be Hardcore Too
It turns out hardcore social gamers are a lot like regular gamers, according to a study funded by Kabam. In a national research survey, statistics showed that a growing number of young men are “hardcore social gamers” – i.e., they are playing social games from “hardcore” genres like FPS, strategy, RPG or MMO. 82% of hardcore social gamers are also console gamers, and according the study, the lure of the social game experience is siphoning time from consoles. 27% of those surveyed reported a decline in their gameplay on other platforms. The study also showed that the social gaming demographic is growing quickly – 41% of U.S. Internet users reported having played a social game. A full breakdown of the statistics can be found here.

Social Gaming Network Face Up Gaming Goes into Beta
Developer Game Face Gaming is hoping there’s room in the crowded social games landscape for its new online gaming platform, Face Up Gaming. The platform is a non-wagering poker site that combines social networking elements with competitive online gaming. According to CEO Felix Elinson, the goal is to create a global gaming platform that supports cross language play that’s accessible from any internet device. Players will be able to log on, play a game and maintain connections they make with fellow players after the game is over. Face Up Gaming just went into limited beta, with plans to move forward into an expanded beta by October.

GetGlue Adding Social and Game Elements
GetGlue, the check-in based social network for media, has updated its iPhone app and website to incorporate more social elements. Users now have a conversation stream that shows them check ins from their friends and the general user community. GetGlue has also added leaderboards, which show users which of their friends are checking into the service’s most popular content. GetGlue currently has 1.5 million users.

Hanging With Friends Comes to Android
Zynga has brought the latest offering in its With Friends franchise to Android. Hanging With Friends made its Android debut on September 20th as a free download. As a result of the launch, the game is now cross-platform, allowing users on both iOS and Android to challenge one another in the word guessing game.

Capital One Comes to CityVille
On September 20th Capital One launched a major three-game promotion, adding Capital One branded content to CityVille, FarmVille andPioneer Trail.  This is not the first time Zynga has teamed with Capital One, but it is the first time a company has launched a promotion across multiple Zynga games simultaneously.

[Launch] Big Bang Theory Comes to Facebook with Mystic Warlords of Ka’a
The hit CBS show The Big Bang Theory celebrated the debut of its fifth season with the launch of a new Facebook game called The Big Bang Theory: The Mystic Warlords of Ka’a. Based on the character’s favorite game in the show, The Mystic Warlords of Ka’a is a digital collectible card game, where fans can collect and trade cards with one another, play with characters from the series and challenge their friends to matches. The game was developed for Warner Bros. Interactive Entertainment by Dire Wolf Digital.

2011 will be remembered as the year that Zynga filed for its IPO, Google launched Google+, and Facebook executed the Credits transition. With the first potential social gaming IPO, Zynga plans to raise up to $2 billion to fund its continued global expansion. Meanwhile, Google is putting its weight behind what appears to have the potential to be the most serious competitor to Facebook as a social gaming platform in North America since the demise of MySpace. And at the same time, developers are still navigating through the Facebook Credits migration, while many are also expanding substantially onto mobile platforms to increase growth and expand reach.

Inside Network is proud to announce a new original research report by Justin Smith and Charles Hudson that is exclusively focused on the future of the social gaming market, entitled Inside Virtual Goods: The Future of Social Gaming 2012. This is Inside Network’s third annual edition of the Future of Social Gaming report. The big picture? The social gaming market will reach $1.6 billion overall in 2012.

How big is the market, and where will social gaming go in 2012? How will existing players fare as Facebook Credits shifts the social gaming landscape and continued changes to the platform? Inside Virtual Goods: The Future of Social Gaming 2012 provides deeper insight into social game monetization, development, customer acquisition, and the key questions facing the space in 2012 than you’ll find anywhere else.

About the Report

Inside Virtual Goods: The Future of Social Gaming 2012 gives you an inside view of the future at this critical juncture in the intersection of social networking and online games.

We have compiled months of original research from dozens of top executives and entrepreneurs from all parts of the social gaming ecosystem to produce eye-opening source data and analysis that is not available anywhere else. Inside Virtual Goods: The Future of Social Gaming 2010 takes the closest look at the present state of social games and the future of this strong but still rapidly changing industry.

What We Cover

1. Facebook Credits and the New Monetization Landscape: Early Results - Now that the transition to Facebook Credits was completed on July 1, what are the early results that developers are reporting? We take an in depth look at metrics and trends.
2. Will 2012 (Finally) be the Year of Mobile Social Games? – Now that mobile games monetizing through the virtual goods model are becoming a bigger market in the US and around the world, many social game developers have expanded their efforts to tap these new platforms as well.  Will 2012 finally be the year that social games take significant root on mobile?
   
3. Social Game Development and Design – How do small, medium, and large developers organize their teams? What do development cycle times for original titles and “expansion packs” look like? What is the role of testing and metrics in the development process? A few key game genres with proven mechanics and monetization have spawned dozens of fast followers. Understand how publishers are continuing to innovate as we head into 2012.
4. Monetization Data and Payment Trends– Now that developers have proven the virtual goods model, what are ARPUs, ARPPUs, and LTVs really like for different game genres? What is the lifetime value of users, and how long do players stick around? We take an in depth look at monetization methods and rates, and shed light on where payments are headed in the coming quarters.
5. Customer Acquisition and Marketing Trends – As the social gaming landscape has evolved over the past four years, so have the ways that developers acquire and retain new users. How have user acquisition costs changed, and what do Facebook’s changes spell for the future of the marketing funnel? We take an in depth look at data and trends.
6. Facebook’s Platform Changes, and What’s In Store for the Future – Facebook has continued to change Platform communication channels and functionality over the last year, significantly altering the way social games reach users through Facebook. Continued change is likely – what will it be, and how will it impact the industry? Finally, will we see another platform (like Google+) emerge? Our overview covers these developments, their impact on the industry, and what else is in store.

What you get

In addition to our deep dive into key aspects of the social gaming ecosystem, the report also offers extended coverage on:

• A brief history on the evolution and growth of this space in the US, including a description of all key players and how they rose to the top.
• Total social gaming market size estimates for 2012.
• Our take on the key issues facing the growth of social gaming, including our outlook and projections for 2012.

See the full table of contents below:

Table of Contents

More Data, More Actionable Insights

In 2011, social games continued to show what kind of value can be created on top of social networks. 2012 will be an even more important year.

Social gaming, powered by virtual goods, continues to expand. If you’re involved, or are considering jumping in, Inside Virtual Goods will be one of your most important tools.

One year of original data and exclusive in-depth reports delivered on a quarterly basis is $2,495 and contains:

• A detailed overview of the current state of the industry
• Specific estimates on market size by segment
• Diagnosis of key opportunities and issues by segment

The announcement comes roughly five months after MindJolt acquired social mobile game company Social Gaming Network (SGN) and free online game network Hallpass Media. At that time, MindJolt was very clearly activating on DeWolfe’s strategy to expand off of Facebook onto mobile and open web platforms. The acquisitions also helped MindJolt bring much of its game development in-house, effectively educating the company on how monetize games through virtual goods sales as opposed to advertising.

The result, DeWolfe tells us today, is a successful pivot into a new business model with virtual goods now making up one-third of MindJolt’s revenues. Though he declines to give specific numbers, he confirms that annual revenues are in the tens-of-millions and expected to exceed the $20 million figure reported in November 2010. Since April of this year, the company has released or re-launched a handful of games on iOS, including Warp Dash, Master Shot, Dress-up – Fashion, and Mini Cafe.

In the next few months, we can expect to see seven new games out of MindJolt, the first of which DeWolfe says is coming to iOS in as few as a couple of weeks. The upcoming titles include Fluff Friends – Races, Bird’s the Word, and another game inspired by DressUp, which was a web game bought by MindJolt as part of the Hallpass Media acquisition.

The big challenge now will be tackling cross-platform releases, a task many social and mobile game developers struggle with. Currently, MindJolt is building native apps for each platform — web, Facebook, iOS and, eventually, Android — with only very light integration between games of the same franchise via Facebook Connect. The games essentially look and play the same on each platform, however, and DeWolfe says that this is helpful when it comes to promoting games cross-platform.

Another component of the cross-platform challenge is creating a critical mass of users that support the MindJolt brand. As of right now, the company says it has a pool of over 30 million mobile installs, over 70 million social platform installs on social platforms, and over 25 million unique monthly active users on the web. Moving eyeballs between these platforms is crucial in supporting new game launches — as other cross-platform developers like OMGPOP have experienced when shifting audiences between Facebook and iOS.

“We’re getting a trememndous amount of traffic and downloads from web,” DeWolfe says. “It doesn’t usually work to advertise something on the web and then have people go through the friction of the iTunes store, downloading, and then picking up their device and actually using it.” The near-identical appearance of the apps, he says, reduces the friction.

Going forward, MindJolt is also releasing its first in-house developed Facebook game today, titled Bubble Atlantis. Though still integrating the teams at SGN and Hallpass Media, DeWolfe tells us that the company is still “opportunistically” looking for game developer talent acquisitions or second-party partnerships. After successfully beefing up its mobile business, the bar is now higher for what MindJolt can do on social network game platforms and on open web.

2011 will be remembered as the year that Zynga filed for its IPO, Google launched Google+, and Facebook executed the Credits transition. With the first potential social gaming IPO, Zynga plans to raise up to $2 billion to fund its continued global expansion. Meanwhile, Google is putting its weight behind what appears to have the potential to be the most serious competitor to Facebook as a social gaming platform in North America since the demise of MySpace. And at the same time, developers are still navigating through the Facebook Credits migration, while many are also expanding substantially onto mobile platforms to increase growth and expand reach.

Inside Network is proud to announce a new original research report by Justin Smith and Charles Hudson that is exclusively focused on the future of the social gaming market, entitled Inside Virtual Goods: The Future of Social Gaming 2012. This is Inside Network’s third annual edition of the Future of Social Gaming report. It will be released on September 20, but is available for discount pre-order now.

How big is the market, and where will social gaming go in 2012? How will existing players fare as Facebook Credits shifts the social gaming landscape and continued changes to the platform? Inside Virtual Goods: The Future of Social Gaming 2012 provides deeper insight into social game monetization, development, customer acquisition, and the key questions facing the space in 2012 than you’ll find anywhere else.

About the Report

Inside Virtual Goods: The Future of Social Gaming 2012 gives you an inside view of the future at this critical juncture in the intersection of social networking and online games.

We have compiled months of original research from dozens of top executives and entrepreneurs from all parts of the social gaming ecosystem to produce eye-opening source data and analysis that is not available anywhere else. Inside Virtual Goods: The Future of Social Gaming 2010 takes the closest look at the present state of social games and the future of this strong but still rapidly changing industry.

What We Cover

1. Facebook Credits and the New Monetization Landscape: Early Results - Now that the transition to Facebook Credits was completed on July 1, what are the early results that developers are reporting? We take an in depth look at metrics and trends.
2. Will 2012 (Finally) be the Year of Mobile Social Games? – Now that mobile games monetizing through the virtual goods model are becoming a bigger market in the US and around the world, many social game developers have expanded their efforts to tap these new platforms as well.  Will 2012 finally be the year that social games take significant root on mobile?
   
3. Social Game Development and Design – How do small, medium, and large developers organize their teams? What do development cycle times for original titles and “expansion packs” look like? What is the role of testing and metrics in the development process? A few key game genres with proven mechanics and monetization have spawned dozens of fast followers. Understand how publishers are continuing to innovate as we head into 2012.
4. Monetization Data and Payment Trends– Now that developers have proven the virtual goods model, what are ARPUs, ARPPUs, and LTVs really like for different game genres? What is the lifetime value of users, and how long do players stick around? We take an in depth look at monetization methods and rates, and shed light on where payments are headed in the coming quarters.
5. Customer Acquisition and Marketing Trends – As the social gaming landscape has evolved over the past four years, so have the ways that developers acquire and retain new users. How have user acquisition costs changed, and what do Facebook’s changes spell for the future of the marketing funnel? We take an in depth look at data and trends.
6. Facebook’s Platform Changes, and What’s In Store for the Future – Facebook has continued to change Platform communication channels and functionality over the last year, significantly altering the way social games reach users through Facebook. Continued change is likely – what will it be, and how will it impact the industry? Finally, will we see another platform (like Google+) emerge? Our overview covers these developments, their impact on the industry, and what else is in store.

What you get

In addition to our deep dive into key aspects of the social gaming ecosystem, the report also offers extended coverage on:

• A brief history on the evolution and growth of this space in the US, including a description of all key players and how they rose to the top.
• Total social gaming market size estimates for 2012.
• Our take on the key issues facing the growth of social gaming, including our outlook and projections for 2012.

More Data, More Actionable Insights

In 2011, social games continued to show what kind of value can be created on top of social networks. 2012 will be an even more important year.

Social gaming, powered by virtual goods, continues to expand. If you’re involved, or are considering jumping in, Inside Virtual Goods will be one of your most important tools.

One year of original data and exclusive in-depth reports delivered on a quarterly basis is $2,495 and contains:

• A detailed overview of the current state of the industry
• Specific estimates on market size by segment
• Diagnosis of key opportunities and issues by segment

China is fast-becoming the second-largest market in terms of downloads for many developers including companies like Rovio, but it lags behind in terms of monetization. The country came in just behind the U.S. in page views on Google’s AdMob advertising network in July, according to statistics the network shared at an iOS developer conference in China this past weekend.

The promise is there, but how do mobile developers take advantage of it?

Over the past two weeks in Beijing and Shanghai, I’ve had the chance to talk with several mobile developers like High Noon-maker Happylatte, PapayaMobile, PopCap Games and other companies being incubated in former Google China head Kai-Fu Lee’s incubator Innovation Works.

It’s an incredibly complex and different market from the U.S., but here are a few insights into developing and marketing iOS and Android apps there:

1) Android may be the long-term bet, but iOS is showing surprising resilience in spite of lower incomes here: 

iOS has leapt up the ranks of mobile search referrals to Baidu in recent months and sends more queries to the Chinese search engine than Android does, according to a source at the search company familiar with the data. Google’s AdMob also said that close to three-fourths of the pageviews on its network in China are from iOS as compared to Android during the same presentation that the picture at the top is from. Nokia is still the biggest platform in China though.

There aren’t good public estimates available on the actual number of consumers carrying Android and iOS devices considering that there are many “Shanzhai” or knock-off phones that are based on Android but are incompatible with the platform. Plus, many people bring phones into the country through relatives and friends abroad. The country’s largest carrier China Mobile — which doesn’t even sell the iPhone — said it had 7.44 million iPhones on its network in its last quarterly earnings call.

Dianxin, one of the makers of a local variant of Android known as Tapas, estimates there are 12 to 15 million Android devices currently circulating in the country. Many other local mobile-focused companies like PapayaMobile say they’re building products assuming there are at least 10 million iOS and 10 million Android phones circulating in the country.

An unlocked iPhone 4 costs 4,999 renminbi here, or roughly $780, well above its American price and even farther above the discounted price with a two-year plan that most U.S. consumers choose. That is about twice what the average new Android phone from Samsung, Motorola or HTC retails for at 2300 to 2600 renminbi or $360 to $410, according to China-focused research firm ZDC. Most people buy their phones unlocked — and often at full retail price — then pick a carrier afterward.

Apple is an incredibly revered brand in China. Based on observation, it’s hard to say there is a more potent and accessible status symbol for Chinese consumers with newfound discretionary income than the iPhone. There is a reason there are fake Apple stores here. There is a reason why Apple’s newly appointed chief executive Tim Cook said in the company’s last earnings call that China brought in $3.8 billion in revenue in the most recent quarter and $8.8 billion in revenue in the fiscal year to date.

Apple has also gotten away with a lot more than many other Western consumer technology companies which have come here only to fall flat on their faces. Unlike Google, Apple maintains a favorable relationship with the Chinese government. It likely censors sensitive content from the local version of the app store to comply with the Chinese government’s restrictions. Google doesn’t support paid apps in Android Market in China and unless it censors its store (which would require substantial changes to the store’s current review process), it would be hard for it to gain mass adoption here. In that case, alternative Android app stores may thrive.

2) There are many local variants of Android, but none of them are really that big — yet.

Unlike many other Western markets, there are several custom versions of Android here that are tailored to the needs of Chinese consumers (or in less promising cases, the needs of Chinese carriers and OEMs). Because the Android market here is still so new, most Android users still have the standard version of Google’s OS.

“None of them are really big right now,” said Si Shen, the chief executive of Android mobile-social gaming network PapayaMobile.

Don’t worry about them for now. But if you are interested, the handful that come up most often in conversation are:

> Continue reading on Inside Mobile Apps.

Segan Files Patent Lawsuit Against Zynga —

It Girl to Expand to Russia — CrowdStar is expanding its popular social title It Girl to Russia. Partnering with Russian distributor 101XP, It Girl will go live on Odnoklassniki.ru, Vkontakte.ru, and Mail.ru in the next two months. The game is also currently available on Odnoklassniki.

Exit Games to Power King’s Bounty: Legions — Earlier this week, we previewed the upcoming title, of King’s Bounty: Legions for Facebook. Only a few days later, Exit Games announced that its network engine, Photon, has been selected to power the network features of the coming game.

RockYou Makes Aktiv APAC Sales Partner – Asia Media Journal reports that social game developer and publisher RockYou has made online media sales house Aktiv an APAC sales partner. The move gives RockYou’s new ad platform distribution in the Asian market.

AT&T & ngmoco Bring Mobage to Android — Last week, ngmoco and DeNA brought the Mobage social gaming platform to Android Market. This week, AT&T and ngmoco announced a new agreement stating that Mobage will act as a hub for AT&T Android users to discover and play games as well as connect with other global users.

Blizzard to Use Real Currency for Virtual Goods Transactions — Blizzard Entertainment announced earlier this week that its upcoming Diablo III online game will allow the sale of virtual items via both in-game and real world currencies. For real money trades, Blizzard will take a small transaction fee.

[Announcement] MyTown Expands to Japan — Earlier this week, social and mobile apps developer Booyah and YUMEMI announced a partnership that will bring the location-based iOS title of MyTown to Japan as a new product for iOS, Android, and other feature phone platforms this Fall.

[Announcement] RockYou Updates Gourmet Ranch with New Content — RockYou Playdemic released a new content update for its title, Gourmet Ranch. Over the course of the next few weeks, players will gain access to the “Fun Fair,” and with it, new limited edition ingredients, quests, and rewards.

[Announcement] iWin & Sony Pictures to Bring The $100,000 Pyramid to Facebook — Family Feud developer iWin announced a new licensing deal with Sony Pictures Entertainment that will bring TV game show The $100,000 Pyramid to Facebook later this summer.