I’ve been blogging a lot about social games over the past couple of years
and have been a big proponent of the space.
However, over the last few
months I’ve started to question whether social gaming is a separate
category at all. I now believe that the true category is free to play
gaming, and that social gaming is simply a tactic (albeit a very
important and differentiating tactic) within this category. Although
I’ve been saying this in private a fair bit recently, I brought it up
at the VC panel at Gamesbeat yesterday, and I hear that it caused a bit of a stir. Rather than being
quoted out of context in 140 characters, I thought it would be helpful
to explain how I came to this view.
At the most basic level, free to play games (with a digital goods or
subscription upsell model) need to focus on only two metrics, Lifetime
Player Value (LPV) and Player Acquisition Cost (PAC). If LPV > PAC
then you’ve got a business. If not, you don’t. This applies to flash
MMOs, virtual worlds, facebook games, asynchronous text based MMOs,
client downloadable games, myspace games and a whole host of other
games, with the key unifying element being the business model, and the
importance of those two statistics, LPV and PAC.
The term “social gaming” has been used in two main, and related,
ways. I think that both of these definitions are potentially limiting.
The first has been to describe games that are played (and spread) on
social networks. The second has been to describe games that spread
virally, with a PAC of zero because current players invite new players
with a K factor above 1.
Let’s start with games played on social networks. This is a terrific distribution tactic as open platforms and distribution are opposite sides of the same coin, and as I’ve said in the past, in the early stages of a new category distribution is the key driver of success.
Free to play gaming is certainly in it’s early stages, with many games
having to create demand versus simply fulfilling demand. But there is
no reason why these games have to be limited to only social networks,
and indeed companies like SGN and Zynga have already started to port
their games to other platforms including the iPhone and the open web.
Social networks offer an easy starting point for new free to play games
because of the large concentration of potential players, but there is
no reason for free to play games to stop at social networks.
Now let’s address viral growth for games. Obviously, this is a
wonderful characteristic. It is the cheapest possible channel for
player acquisition as with a PAC of zero, you can make money at any
level of LPV. However, once again, there is no reason to limit your
player acquisition channels to viral growth. You should acquire new
players through any channel where your PAC < LPV. For some game
developers this is a religious issue; viral is best and nothing else is
acceptable. I disagree with such a fundamentalist approach. If your LPV
is high enough to allow you to buy users through advertising,
distribution deals, search marketing or any other channel, then you
should.
Mark Pincus, the CEO of Zynga, has been preaching this approach
since early 2008. Here is an excerpt from my blog post from the social games panel that I moderated at the Graphing Social Patterns conference in March 2008:
We next talked about how social games can grow. Viral
growth has obviously been the key driver of growth up to this point for
all the panelists. Shervin noted that they had seen a strong positive
correlation between App Rating and rate of viral growth – high quality
games spread faster. Mark talked about the importance of supporting a game with advertising, especially at launch.
One reason that Zynga is the largest social gaming company today is
that they have been able to afford to promote their games on both
Facebook and Myspace, and have done so aggressively.
Obviously, building social factors into games is increasingly
important. Multiplayer is the “user-generated content” of games, and
social interaction is a key part of that. Furthermore, even if your K
factor is less than one, it can be a very important force multiplier on
your player acquisition. Buying one player if your K factor is 0.8
means that you will generate 5 new players, and this can dramatically
average down your PAC, even if it doesn’t take it all the way down to
zero.
In conclusion then, I find the term “social gaming” to be limiting.
The best publishers and developers of free to play games will make
frequent use of social gaming tactics, but they will not refuse to go
beyond social networks and viral channels to grow to their full
potential.
I’d be interested to hear what you think.
(For more from Jeremy, see his blog)
