Social Wars!!

"When everyone is playing social games with friends, then why play akele?" This is the main tagline of an Indian social networking website for its recently launched social games. Being a Internet freak I feel that these games are just a newer version of the old stand-alone games. With better internet speeds and lots of social networking, the games have spread their wings from just being played on standalone PCs to now being played directly in the cloud. We can name this family of games as Game 2.0.

Game 2.0 is simply an integration of simple games made on some server side scripts, action scripts like JS or ajax, Flash and implemented on Web 2.0 (aka social networking).

For the newbies, let me tell you that social games are web based games which you can play with friends, mostly on social networking sites like Facebook, Orkut, Myspace etc. In this post I will give a brief about the biggest players in development of social games, and compare them in terms of market share, funding, revenue and business model.

We are already familiar with the popularity of the first generation social networking startups like Facebook, Myspace, Orkut etc. Now a new generation of application developers have taken center stage, who are based mostly on these gen1 social networking sites, and are making big money. The top 3 in my list are:

1. Company: Zynga (www.zynga.com)
   Funding: $219M
   Major Apps: Farmville- 61M Players, Mafia Wars- 25.8M , Yoville- 19.8M, Texas Hold Em’ Poker- 18.3M
   Revenue: Estimated $200M
   Zynga is a srong candidate for 2010 IPO.
2. Company: Playfish (www.playfish.com)
   Acquired: by Electronic Arts (EA Sports) for $400M
   Major Apps: Pet Society- 20.5M, Restaurant City-17.3M, Country Story- 8M
   Revenue: Estimated $135M
3. Company: Playdom (www.playdom.com)
   Funding: $47M
   Major Apps: Mobsters -14M, Bumper Stickers-11.7M, Own Your Friends-10.1M, Sorority Life-7.1M, Mobsters 2-3.5M, Poker Palace- 1.5M
   Revenue: Estimated $60M
   

Let me just remind you that these companies are startups and have existed for not more than three years. So, how are they making this much of BIG money? All of them have two revenue models, and these two models are like the necessary practices for companies in this domain.

• The first model is very simple and straight forward. It begins when you start playing any of these games. Initially everything is free in the game. But as you move ahead in the game you will need a lot of virtual stuff - like seeds for your farm or guns for your gang - which you would have to buy from an online store using a credit card, PayPal etc. The idea is very simple here - get addicted to the free version, then start spending real money for virtual stuff. Playdom has gone a step ahead and even opened offline stores for virtual goods.
  
• The second model is the traditional online revenue model using ad clicks, lead generation and toolbar installation, but in an entirely new fashion. If you do not have a credit card or a PayPal account, then you sign up on some other website to get virtual money, which you can use to buy some virtual stuff. The cache here is that when you sign up for that website you are actually generating leads for them. When you signed up on the other website, the gaming company gets real money for the lead generation. You can call this SGL (Social Game Lead), and this lead to companies is a guaranteed lead, as the user needs the virtual stuff, which means he is willing to pay if you can sell him the virtual stuff, i.e. if you can do some SGM (Social Game Marketing).
  
• Toolbar installation revenue model is more interesting. When you install a toolbar, it will make Ask.com (say) the default search engine on your browser. Ask.com makes money from search ads and pays money to gaming company or the toolbar developer for every installation of the toolbar. Ask.com pays about $1-$2 for every installation. Just imagine how the money is flowing back to the game developer. Ask --> Toolbar developer -->Zynga --> Facebook (for ads) --> Zynga. This is an endless circle. Hats off to this revenue model.

In the beginning of this post I had quoted a tagline - ...why play akele (i.e. why play alone)? This tagline is being used by an upcoming Indian social gaming website - Ibibo.com. The tagline suggests how new players are trying to capture the potentially large Indian market. The reason I wrote 'potentially' large market was that though the Indian market is very large, but the revenue models might not work out here that easily. You will find less than 5% of the Indian gamers buying online stuff. So, your game might be a very big hit here, but you might not be making any money out of it.

If you were not able to make money out of this market, then this potentially big market could turn out into a potential risky market. Another reason why I say so is that these game developers are not paying any attention to localization, rather Indian-ization, of the games. The big developers have simply imported their international versions to India, and the local developers are merely copying the international games. They have not even cared to give Indian names. For instance, Ibibo has a game called Teen Patti, which is a card game. They have explained the rules using names like Aces and Jacks, which most of the Indian audience would not understand. Had they cared to mentioned that Ace means 'Ekka' and Jack means 'Gulaam' the public out here would have simply loved it.

Zynga and Playdom have opened up their Indian development centers in Bangalore, and they are planning to develop games purely for the Indian audience. I hope they keep their promise, and also hope that the Indian developers like Ibibo give some genuine thought rather than simply copying ideas. The competition is going to become more fierce as biggies like EA are soon going to join the race.

We still have a few unanswered questions to ponder over - will the potentially big Indian market grow into a real market for the developers, and what new things can be integrated with social networks to make more money out of this seemingly big market?

Your views and comments are welcome.

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