In recession, social gaming comes of age (Part 1)
Like a new mafia clan in the formative Facebook game Mob Wars, the social gaming industry has carved out its territory, flexed its muscles, earned respect and laid out a map of the turf it will conquer.
The second annual Social Gaming Summit in San Francisco showcased the growing maturity and diversity of the social gaming landscape. One of the bright spots of the recession-pounded Silicon Valley economy, social gaming has seen rapid growth in users, revenues, employee hiring and the creation of a true ecosystem. With more than 500 people attending the summit, the turnout was better than expected and much higher than last year’s event. It reminded us of something out of 1999, when Internet startups were growing at an accelerated rate, or 2007, when venture capitalists were still pumping money into all sorts of consumer-facing “Web 2.0″ startups.
Of course, it would be a mistake to get overly excited about a relatively small segment of the tech economy, which, by itself, is still only a sliver of the $50 billion worldwide video game industry. There is no need to set it up for failure with bubble-like expectations. Indeed, a variety of sources tell us there are a lot of chief executives of other casual game companies who will likely lose their jobs this year because they can’t live up to the promises they made to investors upon raising money in 2007 and 2008. We notably haven’t heard that about social gaming companies. The fact that they use connections between friends on social networks to drive engagement has emerged as the new, key factor in their success.
The summit showed that what is happening in social games is real. There are sustainable, profitable businesses being created on a variety of social platforms, which include Facebook, MySpace, Hi5, Friendster and casual portals on the web. Video game veterans have jumped from their jobs at big companies to join the social gaming startups.
And it is remarkable how fast the growth has been. Zynga was founded in January, 2007, and launched its Facebook poker game in July of that year. Two years later, the company has 13 million poker players and more than 50 million active monthly users across all of its games. It is making money — it doesn’t disclose exact revenues, but we’ve heard it could make more than $50 million this year (others have heard it could be more than twice that). Zynga has 300 employees in four studios, 50 contractors and it has 80 or 90 open positions. On Facebook, there are more than 30 games with more than a million users, according to Justin Smith of Inside Facebook.
“All of the big [gaming] companies are making social games now,” said Gareth Davis, program manager for games at Facebook. “A year ago, it wasn’t even on their radar.”
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