Magic Mirror on the wall, who’s the fairest one of all? In the world of social gaming, it might be getting easier to tell.
New social games lacking a growing virtual goods economy and unable to easily exceed 100,000 daily players (DAU) on Facebook shouldn’t expect to generate much revenue and will likely struggle to recoup their development costs.
Despite the rising popularity of social games, only 17 new games released in the first half of 2010 have reached these two benchmarks. And, of these 17 games, 15 came from venture-funded companies. Literally hundreds of other companies failed to make this list.
In addition, no single company published more than two of these top-tier games; an achievement shared by Zynga, Playdom, EA, Digital Chocolate and Crowdstar.
One might have expected more out of Zynga than just Treasure Isle and FrontierVille considering their staff size of 760, but Zynga is more focused on building up pre-existing live games like FarmVille and expanding platform coverage beyond Facebook.com. With their enormous cross-promotional funnel, a new hit for Zynga can be bigger than anyone else’s new hit.
Yet another victim of Facebook’s policy changes, Playdom’s Social City is now in decline; but it was the industry moon rocket of Q1 and is still at scale, joined on this list by the brand-new Verdonia.
Social City’s decline, however, hasn’t stopped Playdom from exploring new paths having acquired two additional publishers that also have games on the list: Bola from Three Melons and Fashion World from MetroGames.
Meanwhile, EA and Playfish have stop-gapped a steep decline with the recent releases of My Empire and FIFA Superstars; Digital Chocolate’s new Millionaire City joins with MMA Pro Fighter to give DC a good one-two punch; and Crowdstar’s Hello City and Zoo Paradise both showed declines in June, but made the list from substantial growth earlier in the year.
Among the remaining five games are the notable Nightclub City from Booyah and Watercooler’s Kingdoms of Camelot.
In addition, if we apply similar criteria to older games we find that only another seven virtual economy social games launched prior to 2010 have sustained at least 65% of their peak audience size (Zynga has three of the seven, led by FarmVille and their poker game; and only one of these seven games, Ninja Saga, is from a smaller independent developer). Most of the hits of 2009 have declined precipitously and, despite the fact that most of them are from large, well-funded companies, they are getting scant marketing support because apparently it is unprofitable to do so.
What does all of this mean? A speedy cleanup of the social game sector is underway, rapidly narrowing the industry to an oligopoly. For starters, making a hit social game is obviously not as easy as it looks. Older versions and policies of Facebook provided such a strong tailwind that nearly anything could sail to greatness. But now it is a legitimate “hits business” like every other form of entertainment.
Facebook’s changes have also shortened product lifecycles and triggered a rapid consolidation phase. The bar is now raised on competitive requirements like capitalization, scale and marketing. In steepest decline are the pure developers that never pretended to meet these requirements.
Many small contenders are now being rolled up by larger developers like Playdom and Zynga while others just fade away. A few will make new hits but for each of those more than 100 will fail.
Shallow games and apps that rely too heavily on spamming Facebook members, games that do not monetize well (since they won’t be able to justify additional investment in either new features or marketing campaigns) and smaller companies that either cannot or will not attempt to raise capital have also been shown to be vulnerable.
Conversely, while in 2009 the big story was how small developers like Slashkey established new genres like farming, the big story in 2010 is that the strong will get stronger, as evidenced by the high correlation of venture involvement and established scale with the 17 successful new games of 2010 thus far.
With Zynga’s big lead, the consolidation scenario will look like Snow White and the Seven Dwarves. I think we already have candidates for Grumpy, Happy and Sleepy. At Digital Chocolate, we have been Sneezy at times, but aspire to be Doc and are certainly not Bashful. Industry auditions are now being held for Dopey.