Until recently Facebook gaming was touted as the next big thing. Nick Gibson, Director of Games Investor Consulting, looks at what happened – and what’s next…
It seems remarkable to think that less than two years ago, Facebook gaming was being heralded as the future of gaming, with the hype around the explosive growth of market leader Zynga helping to fuel a virtuous cycle of new start-ups, major VC investment and high profile acquisitions. A glance at today’s headlines and Zynga is still regarded as the bellwether, its precipitous commercial decline seeming to parallel a vicious cycle of market exits for major players such as EA, VC apathy and studio closures. In this article I want to explore what has actually happened to Facebook gaming and what its new future looks like.
Facebook gaming has undoubtedly developed a deeply ingrained image problem. There is a widely and long-held notion that Facebook gaming was all hype and no substance, a bubble that, with EA’s exit and Zynga’s decline, has now burst, with the player base evaporating. Even amongst those that don’t wholly subscribe to this theory, there is a commonly held view in particular amongst hard-core gamers and more traditional games developers that Facebook games are worthless and devoid of any lasting appeal as they don’t conform to traditional gameplay categories or provide sufficient challenge to even merit being called games.
The problem is that these are not actually supported by facts.
First, let’s tackle the bubble prognosis. Unlike the dotcom bubble in which user numbers were treated like revenue because so few companies actually had material revenue to talk of, Facebook gaming’s growth has been built on a solid revenue foundation. This was exemplified by Zynga whose first four years saw it go from zero to $1.1bn in revenues, an astounding feat in any industry let alone an industry as competitive as games. Since then, Zynga’s sales may have slipped into an alarming decline but it is simply no longer the bellwether it once was and other developers have been leaping into the gaps that it and the likes of EA have created. Following its Q1 filings earlier this year, Facebook revealed that despite a 37% decline in bookings for Zynga during the period, other games developers’ bookings increased 60% leading to a highly respectable 15% increase in overall games revenues. So, not only did the Facebook games market grow but, according to Facebook, it also reached record levels with some $700m in gross revenues. Including revenues from other social, particularly mobile social, social games still represents a rapidly growing multi-billion dollar market.
What about the evaporating player base? Despite appearances, Facebook remains one of the most popular games platforms, if not the single most popular platform, in the world with over 250m unique players per month, a number that Facebook indicates has been growing. A glance at the current Facebook games charts reveals that the type of games that these players enjoy most has not really changed for years, with puzzle games, casual sims and social gambling games still the most popular and, at the same time, maligned categories. However, the very features that Facebook games detractors complain about tend to be the very features that most appeal to the majority of Facebook players: their (often challenge-less) simplicity, their comparatively crude graphics, their social features and their gameplay compulsion loops. Many individual games may not have lasting appeal but the variety of titles and the ease with which players can try out and switch to new games clearly does.
It’s clearly not all plain sailing for Facebook’s prospects and its future is entirely reliant on its appeal as a social network rather than simply as a games portal. It is still a platform suffering from incessant tinkering and policy alterations. While confined to Flash and friction-creating plug-ins, it will struggle to attract the core console gamer in any comparable volume. It has yet to work out how to do mobile games besides providing player registrations and logins and providing advertising leads. From the former, it generates no revenue despite the majority of top grossing mobile games using them. With over 260m Facebook to mobile games click-throughs per month, there is, however, genuine value in the latter and this hints at a deeper opportunity.
Despite its recent partnership with Unity to promote mid- and hard-core Facebook games, it is not going to be losing its primary focus on casual gamers any time soon and nor should it. Facebook’s enduring popularity is a reflection of the huge diversity of players that our industry is now capable of attracting. You don’t have to like someone’s tastes to respect their right to have them and the taste preferences of quarter of a billion gamers are difficult to dismiss.