Facebook's days as a boomtown for game operators appear
to have come to an end, with the total number of users
stagnating amid rising barriers to entry, increasing
competition and an intensifying fight for consumer
mindshare with other social networking activities,
according to a new I
HS Screen Digest Media Research Insight report from
information and analysis provider IHS (NYSE: IHS).
Following fast growth during the previous two years, the
Facebook gamers languished in 2011. At the end of 2010,
about 50 percent of Facebook's monthly active users
(MAUs) were gamers. At the end of 2011, the absolute
quantity of gamers changed little, and the percentage of
Facebook MAUs that were gamers slipped to just 25 percent.
MAUs for perennial Facebook game leader Zynga actually
declined during the fourth quarter of 2011 to 225 million,
down from 266 million at the end of the third quarter, as
presented in the figure below.
"Facebook rocketed to prominence as a gaming platform
in 2009 and 2010," said Steve Bailey, senior analyst
for games at IHS. "However, with equal speed, the
market then settled into a state of maturity in 2011, with
conditions becoming markedly more challenging for game
operators. While Facebook remains a worthwhile opportunity
for companies able to meet these challenges, the tone of
the market in 2012 will be somewhat muted compared to the
optimistic outlook of the past few years."
There are several reasons why Facebook gaming will
encounter challenges this year.
First, the task of acquiring users has become more
With more operators vying for attention and user
expectations rising, the cost of acquiring users is
growing. Viral channels for finding users aren't as
abundant as they were before, so it has become necessary to
engage in cross-promotional networks or direct advertising.
Expenditures for these activities are putting pressure on
the lifetime value of users, so there's now far greater
incentive to improve retention and monetization
capabilities. Along with the increase in marketing costs
for purchasing users, there's also a development
overhead to consider: As with any maturing video game
marketplace, production values will also need to step up a
The second challenge for Facebook gaming is intense
competition, which means that user engagement is under
pressure. As seen in 2011, there's been a trend away
from the most accessible game genres and toward play styles
that require greater player commitment or skill, in return
for deeper senses of engagement.
These have been typified by slow yet steady increases in
the presence and quality of strategy, action and
Such a progression is crucial in order to match the
experience requirements of players.
Not so Special
A final challenge is Facebook's status as a
non-specialist games platform.
As well as competing with other game operators, companies
competing in the Facebook environment must jostle for user
attention across a landscape of non-gaming functionality.
The play styles of social network gaming have evolved in
such a manner as can be best slotted in and out of a wide
spectrum of priorities for Facebook users.
As of December, for instance, about one-quarter of
Facebook's monthly active users were gamers.
That's much less voting power than what audiences and
publishers have been able to command on specialist game
Facebook needs to implement changes to provide enhancements
for its entire user base. Even if the company has to
inhibit its role as a game platform, the ultimate priority
is obvious. This already happened in early 2010, when viral
channels for user acquisition were dampened in order to
silence the flood of near-spam that game apps were
broadcasting into user activity streams.
And the introduction of Facebook Credits as the compulsory
payment platform has placed further pressure on revenues.
Events such as these serve as reminders of the
vulnerabilities that companies are exposed to when
operating under the wider agenda that non-specialist
The Honeymoon's Over
There's copious opportunity in shifting Facebook gaming
to complementary devices or markets.
Smartphones are regarded as a viable conduit for growth,
although this area is already occupied with established
content and competition.
There are also strong prospects for growth in Asia's
online gaming market. However, this territory is crowded
with entrenched competition and game-seasoned consumers. To
gain footholds in this market, game providers must enter
partnerships with major operators.
While opportunity is certainly available in smartphones and
in Asia, social networking game providers will not be able
to recreate the intoxicating ski-ramp growth they enjoyed
during Facebook gaming's heyday.
For companies that stick with the social network, the
challenge will be to create and maintain games that
successfully encourage deeper involvement. If they can do
this, the rewards will translate into improved retention
and rising monetization of users.
Undoubtedly, Facebook will remain a powerful player within
the gaming landscape, but it's now part of an emerging
multichannel, cross-platform approach to connected gaming.
Facebook has implemented multiple minor initiatives to
improve the platform for game operators, along with some
major ones, such as its mobile-app software development kit
(SDK) in late 2011. The social networking site will
continue to make improvements throughout 2012, but the
aforementioned issues are unlikely to be fully dispelled.
Despite these challenges, even small independent game teams
with compelling offerings can still find traction, but
there will be a greater onus on them to find publishing
partners to help overcome the hurdles that have arisen.
Learn more about this topic with a new IHS Screen Digest
report, entitled: "
Facebook Gaming 2011 Market Monitor."
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