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The State of Social Gaming GDC - San Francisco 9 March 2010

The State of Social Gaming GDC - San Francisco 9 March 2010. Justin Smith. justin@insidenetwork.com. Focused on the Facebook platform and social gaming ecosystem. The Social Game Landscape. The Western Market. 2009: $490 million 2010: $835 million Growth on every continent.

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The State of Social Gaming GDC - San Francisco 9 March 2010

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  1. The State of Social GamingGDC - San Francisco9 March 2010 Justin Smith justin@insidenetwork.com

  2. Focused on the Facebook platform and social gaming ecosystem

  3. The Social Game Landscape

  4. The Western Market • 2009: $490 million • 2010: $835 million • Growth on every continent

  5. Virtual Goods in Asia • 2008: $5 billion • 2009: $7 billion Source: +8*

  6. The Big 3 • Zynga • 700+ employees • $200+ million in 2009 • ~3x more DAU than #2 • Playfish • 250+ employees • ~$75 million in 2009 • Acquired by EA 11/2009 • Playdom • 300+ employees • ~$50 million in 2009 • #1 on MySpace

  7. The Contenders CrowdStar • Quick rise to #2 on Facebook by DAU RockYou • Operates the largest ad network on Facebook as well Slide • Was long time #1 by MAU (but not games), transformed business into virtual goods model

  8. The International Players • Rekoo– Animal Paradise, Sunshine Ranch • Elex– Happy Harvest • Five Minutes – Happy Farm • wooga– Brain Buddies • 6waves – Adopting a publisher model

  9. The Developer Opportunity Facebook continues to grow around the world First “truly global” social network Business models converging on virtual goods Can rapidly spend, test, and iterate for revenue Some challenges lie ahead Market getting more crowded, network effects kicking in

  10. Social Gaming Distribution

  11. Facebook • 400 million users and counting – 70% of which are outside the United States • Rapidly evolving Platform – new rules every 6 months • Facebook Connect – bringing Facebook to every website and device • Facebook Credits – coming soon

  12. Facebook

  13. Facebook • Africa: 10M • Asia: 70M • Europe: 130M • North America: 140M • South America: 35M

  14. MySpace • Used to be #1, now declining slowly • Still #2 social gaming platform in the US • Good ARPU, but only the largest developers can afford to build cross-platform games

  15. Global Social Networks • Hi5 • Orkut • Friendster • Vkontakte • QQ/Qzone • Bebo • VZ networks • Maktoob

  16. Twitter • Is this a social gaming platform? • I don’t think so.

  17. Game Portals What is the value of your portal’s social graph vs. Facebook’s social graph?

  18. Game Changers

  19. Facebook Connect • Now, the same social graph is on any website, platform, device (mobile!) • Same identity and “viral channel” access, less Facebook.com constraint • What parts of the Internet never developed because the social graph wasn’t available?

  20. Rise of Virtual Goods in the West • Now the major revenue model for western social game developers • Variety of direct payment methods • Offers still portion of purchases, but declining

  21. Rush of Competitors • “Social media/widget” developers • New startups • Traditional publishers • Casual game developers • Asian developers

  22. Monetization

  23. Direct Payments Inside Social Games PayPal still dominant Mobile increasingly important • Asia with a commanding lead, Europe just behind, US just getting started Other alternative direct methods, like pre-paid cards, growing • Zynga, Playfish, Playdom arriving in US retail Q4 2009

  24. Performance Ads and the Offers Controversy • Represent a minority of social game developer revenues – now smaller % • Some ads were deceptive • Self regulating pretty well, though platforms have most leverage • Ultimately, developers need to get users monetizing directly pretty quickly

  25. Increasing Competition Many new offer providers in the last 12 months • Regional focus • Ad networks bringing relationships As offers become smaller part of the market, becoming payment aggregators

  26. Organizing & Optimizing • Monetization becoming horizontal in some multi-studio companies • Some developers make multi-month content plans before releasing • Virtual economy optimization is now a core competency

  27. The 12-18 Month Horizon

  28. The Big 1: Zynga • From 0 to 10 million in 7 days – rinse and repeat • Tough to defend against… • The increasing value of cross promotion • Smartest ad spenders behind LTV • Will have more staff than Facebook in 2010

  29. Facebook’s Relationship with Developers • The only constant is change • 4 weeks ago: Email sharing • 2 weeks ago: The death of notifications • What’s coming next month?

  30. Changing Monetization Landscape Facebook Credits coming soon – but what will the rules be? • Fees? • Restrictions for other providers? Banner ads hanging around

  31. Who will challenge Facebook? Is Facebook going to keep steam rolling social networks everywhere? • Where will the carve-outs be, even where Facebook is far and away #1? Who is going to challenge Facebook’s social graph? • Other games portals? • Consoles, or device manufacturers?

  32. 2010 and Beyond Facebook grows to 500, 600, 700 million… Virtual goods become “normal” International opportunities grow Who will be the next CrowdStar?

  33. Focused on the Facebook platform and social gaming ecosystem

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