As Zynga continues to weather its first weeks of trading on the stock exchange (NASDAQ: ZNGA), investors are cautiously looking for what companies will become the next big names in social gaming. While the dim IPO of the San Francisco startup only reached a high of $11.50 ($1.50 above the debut price) and is now trading in the 9.30-9.50 range, the demand for more social gaming and digital goods providers continues.
Zynga is expected to grow revenues in 2012 due to the 2011 new games such as Adventure World in September, Mafia Wars 2 and CastleVille in November, in addition to the continued expansion on the mobile market — and more gaming companies are looking to be follow this trend.
In 2010, players spent nearly $510 million on virtual goods and by 2012 that number is expected to rise to nearly $780 million according to PopCap Games and TripWire magazine. And while there are a staggering 53 million social media gamers in the U.S., the adoption by other countries has been far greater by percentage — with more than 26% of the UK using social games and nearly 30% in Japan.
So who has what it takes to catapult toward Zynga-like proportions?
There are hundreds of companies that have entered the social gaming and virtual goods market in the last seven years, but few have been able to gain the audience and brand loyalty that it takes to keep the companies at the top of the charts. There are some, however, that have the potential become the new household names in gaming.
Kabam
This explosively-named social gaming company has done a lot to separate itself from what they refer to as the “mass market/casual games,” like Zynga’s, that dominate Facebook and because of it, they have gained a different and loyal following. The titles under Kabam’s cloak include Kingdoms of Camelot, Dragons of Atlantis, Edgeworld, The Godfather: Five Families, Glory of Rome and Global Warfare. Kingdoms of Camelot was even voted Readers’ Choice Facebook Game of 2010 by IGN readers.
Recently, Kabam created two new business units: Kabam Game Studios and Kabam Game Distribution. These distractions have positioned the company and its CEO Kevin Chou to expand the scope and strength of the company to not just developing its own original games, but also distribute content from designers they admire.
Dragons of Atlantis is the company’s biggest game, with 1.1 million monthly active users, according to AppData – overall, Kabam has roughy 3 million users but their users tend to spend more money on the games than the Zynga players. This fact was a large reason why they drew $125 million in venture capital since their launch in 2006 — $85 million of which came in this past May.
In November, Kabam began selling pre-paid branded game cards at GameStop and Best Buy nationwide that can be redeemed through Facebook or on Kabam’s own site.
In December, Kabam launched the Five Families game exclusively with the new Google+ gaming platform as a joint promotion to grow the gaming familiarity on sites outside the Facebook sphere.
RockYou
This social gaming company has been on the Facebook scene since Zynga started and was the first company to develop a Zoo-themed social game that continues to be one of the business’ best performers. Its stable of games includes Gourmet Ranch, Zoo World, Zoo World 2, Cloud Forrest and Galactic Allies.
Zoo World currently has approximately 2.3 million monthly users, which brings the number of RockYou users to almost 7 million per month.
The six-year-old company has garnered capital from Sequoia Capital, Partech International, Lightspeed Venture Partners, DCM and Softbank and is in the works of launching some more male-focused games in the coming year in order to supplement its strong 40-year-old housewife audience.
When I spoke with RockYou’s CEO Lisa Marino earlier this month, she expressed the strength that her company has found in the advertisement returns it can get.
For some of RockYou’s games, the company is collecting $20 CPM on advertising campaigns and have an “extremely high” completion rate (which means most people are taking the poll, watching the video or otherwise interacting with the advertisements.)
Some of the brands that RockYou has been able to work closely with to create integrated marketing campaigns that want to reach moms, and their wallet, include Dawn, Volkswagon, Method, HP and The CW.
Playdom
With approximately 42 million users a month playing its signature games such as Sorority Life, Gardens of Times and Wild Ones, Playdom has created a solid following that could continue to grow with the demand.
Playdom now has more than 15 games available for free on Facebook, MySpace, and other social networks around the globe.
Playdom is bringing the tradition of high-quality entertainment, to the rapidly growing world of social games.
In 2010, Playdom was acquired by Disney and now has more money at its disposal to not only improve the quality and marketing of the company games but could lead to some creation of Disney-themed social games in the very near future.
Having access to the Disney catalog could be the shiniest feather in the Playdom cap and would give the company a competitive edge in become the next big name in gaming.
So, while there is no gearing up for IPO possibilities for this offshoot of Disney, its growth in the social gaming sphere could have a great impact on the landscape.
TV tie-in games
Television and marketing executives have gotten very excited lately by the prospects of creating social games that follow the theme of popular programs on cable.
Premium programming such as Weeds and Dexter have already entered the social gaming world and there is word that Game of Thrones is next on the production line for letting fans play in the alternate world popularized by novels and TV episodes.
While no particular company is responsible for all of these new social gaming focuses, this trend looks to be in the early stages of gearing up and will also affect the player pool and which games will attract more of their time and virtual goods.
