
Originally Published in Inside Social Games April 15, 2010
Open
Social is set of social networking interfaces (API's) created by a group originally
led by Google and MySpace, but supported by a coalition of large sites in
response to the growing power of the Facebook platform standard (FBML).
Launched with great fanfare in late 2007, but adopted primarily by MySpace (and
Orkut in Brazil), the standard languished for the next 2 years, although the
community continued to evolve it until the 1.0 version was recently released in
Q1, 2010. Why did it languish? Primarily because every developer in the
world was focused solely on Facebook as the best publisher platform and because
the other social networks (SNS) didn't fully understand how lucrative online
gaming was, and it too long for Open Social standard to evolve, at least until
the last 6 months. I consult with various
SNS about their gaming strategies, as well as with a variety of game
developers, so I see it from both angles, and what we now see in the
marketplace in 2010 is a growing focus on Open Social, with a massive surge in adoption of the OS platform
coming this year.
Why? The
first reason is that it has become abundantly clear to anyone not living in a
cave that social gaming is the ONLY truly profitable feature of a social
network. And even better, it drives higher user engagement, not just revenue,
since users return repeatedly to the site and often contact friends in order to
get them to participate in games. Since the
Facebook FBML set of APIs is fully owned by Facebook, the top player in social
network services, it is a significant danger for FB competitors to adopt that
standard, especially as FB becomes a tougher place to do business for
everyone. Therefore, social networks
with any IQ points are rapidly throwing away their home-built proprietary
standards in order to adopt Open Social so they can roll out a compelling gaming
solution.
The
second reason is that to everyone's apparent surprise, Facebook has finally become a much tougher place to do
business for game developers - in fact it almost resembles a traditional retail
environment these days. There is an over supply of content, FB is levying a 30%
"tax" with Facebook Credits, and with significantly reduced virality
due to platform changes, most developers are spending at least another 30% of
revenue on advertising on FB, all of which is significantly reducing margins.
This is all obviously great news for FB, but it means the gravy train of
"free traffic and great virality" is over, making the site a much
more difficult place for mid-sized and small developers, even though the core site
features and massive traffic are still the best on the planet. Therefore,
smart developers are again looking for Facebook alternatives.
So
what should FB competitors do? Given that gaming is immensely profitable
and that FB is starting to be less hospitable to many developers, it's becoming
clear that all social networks should launch Open Social-compliant containers, striking
deals with a select set of developers to feature their games in return for a
relatively big revenue share. However, these smaller social sites must
become an attractive destination for content developers, even though they have
less traffic than Facebook. The key is
that the OS container must be fully Open Social compliant so that developers
can easily port their applications to a wide set of smaller sites with almost
no work - if it takes a lot of work for each site, then the ROI won't be worth
it to the developer, and the site will struggle to attract strong enough games.
Now that there is an agreed upon 1.0 OS
standard, all sites should move to adopt it in order to make the developer
experience more consistent. I also don’t
recommend that the SNS offer a big open platform since it's really hard to
manage thousands of games and their developers without a huge staff - instead,
feature a smaller set of games which pay a revenue split in return for the
promotion/placement, and then market the hell out of them – the success of
Tagged and MyYearbook in following this more focused approach are great
examples of this approach and they continue to expand their offerings.
In
addition, I realize everyone loves to hate MySpace, but it has significantly
improved its product and its developer relations, and at Meez, for example, we
now have almost 500,000 active users after 6 weeks on MySpace, which was helped
significantly by our promotional deal with them, as well as having a great app,
so MySpace has again become viable as a good partner. Finally, there are numerous other social
networks which will launch gaming solutions in 2010, all working closely with a
small set of developers, but they are often still looking for more content
partnerships.
What
should social game developers with less than 100 employees do? For
developers outside of the big 5-10, you really need to give up the FB dream - you're not going to be Zynga or Playdom or Crowd
Star. As of today, out of the top 20 games on Facebook, the almost
all of them are from 4 developers, with a few remaining outliers, primarily
veteran games like Farmtown or single games from massive app providers like
Rock You - we're not seeing big breakthrough game start ups anymore because
the easy phase is over. The numbers I'm hearing from many talented,
but smaller developers are simply horrific in many cases, with customer
lifetime values less than $.50 and actual customer lifetimes being less than 30
days - it's especially tough now that the Facebook advertising CPC rate has
gone up in many cases to above $.50, so the customer acquisition versus revenue
calculus just doesn't work anymore.
I'd
strongly recommend producing a great Open Social version of your game and
trying to strike deals with a set of SNS not named Facebook - there are lots of
them around the world with 10M+ monthly unique users, many of whom are going to
adopt the social games that are put in front of them if they're good games and
if they can play them with their core friends on those smaller networks. There
is a theory going around that gaming works best on FB because it uses real
world profiles, but the data from the other social networks shows that tight
relationships can form with only online profiles, so that won’t be an issue
with gaming. The revenue share idea
seems expensive on the surface, but given the resulting increased promotion and
reduced competition from other similar games on these sites, it's absolutely
worth it, especially versus the increased costs and worsening odds on the FB
platform.
Facebook
is still a world class developer and user platform - but no one can pretend
that the landscape hasn't changed in the past 2 years. Smart developers and FB competitors
are moving quickly to launch robust Open Social gaming solutions to drive their
businesses - otherwise they will just continue to be demolished by FB, as we're
seeing in many cases around the world.
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