Is the future of gaming in the Social Media space?

Early this week, Electronic Arts officially announced its takeover of the most popular social media games company, Playfish, for an estimated US$300 million in cash and options.

Electronic Arts has been the dominant electronic gaming company in the world for several years, churning out blockbusters like Spore, The SIMs, and their sports franchised games like FIFA World Cup, NBA, etc….  Their strength has traditionally been in the packaged electronic games domain where their primary method of distribution has been to sell through retailers, packaged games for the PC, Mac, XBox, Playstation, etc…  Recently they have ventured into downloadable games which has reduced their distribution costs significantly.  In spite of their dominance in the industry, they announced substantial losses in 2009 which some analysts attributed to their absence in the traditional massively multi-player online role-playing games (MMPORG) and the growing social media gaming space.

The announcement of their purchase of Playfish, together with an announcement to cut close to 1,400 jobs, mainly in the R&D area, makes a bold statement of their intent.  The message is that their executives see the future of social media gaming….and that their current focus, which has served them well for almost a decade, is stale.

Playfish on the other hand, is at the forefront of gaming.  Titles such as Pet Society and Restaurant City which are primarily played on Facebook have millions of players who spend ten to twenty minutes a day with their online pet or restaurant.  Unlike the Tamagotchis, these pets need daily engagement to collect coins, visit friends and buy new things to decorate their houses.  The weekly addition of new items keep players engaged regularly.  What makes this such an easy game to play is that its essentially free.

But for those who think Playfish are as financially unviable as Twitter, think again.  When I met with their founders last year during a round of funding, they had already started to collect money from small purchases gamers made with real money to shorten the time it would take to establish their pet.  This amount could range in real cash, from $9.99 to $39.99 but allows you to use the virtual coins across all Playfish gaming platforms.  Such has been the success of this model that it is understood that Playfish did not touch the $20 million raised in their previous round of funding, achieving profitability within the 2 years since its founding.

Is this then the future of gaming (and by future, we can only talk about the next five years)?  Playfish is not the only fish in this pond.  Popular Facebook games such as Mafia Wars, Texas Hold’em Poker, Farmville and Yoville from Zynga, make them another attractive takeover target.  It took Farmville two months to get 11 million users.  Compare this to the 11.5 million users of the most popular MMPORG game, World of Warcraft from Blizzard.

So what are the advantages of running games on a social media platform?

1)  Huge base of members to reach out to.  Bear in mind that these members log in regularly to use platforms such as Facebook and MySpace for other things, so are more likely to log into a game to check or update their character’s status.

2)  The platform itself can channel reminders to members through their interface.  Members need not log into the game daily as any updates or notifications are listed on the main page of the platform itself.  The need to log into a game daily can quickly grow stale, but the reminders ensure members stay engaged with the game.

3)  Social media gamers tend to like a mix of games.  Games to distract the mind such as Bejeweled are popular, but do not pull gamers to play frequently through regular changes in their concept.  Playfish’s Word Challenge, Geo Challenge and Who Has the Biggest Brain, fall into this category.  The real winners are those that embed some aspect of MMPORG concepts.  Games such as Pet Society, Mafia Wars, Restaurant City, etc….all encourage interaction with other members, collection of credits, and the redemption of credits to acquire new items and go up levels.

4)  I blogged a few months back about Facebook potentially becoming one of the biggest payment platforms in the world.  Gaming is one of the areas which Facebook could facilitate the conversion of real cash into the online credits.  Few social media gamers (SMGs) are willing to fork out big sums of money to play these games, but are more willing to pay small sums of money to acquire special items or to shortcut the path to the next level.  At this time, Playfish and Zynga need to work out their own payment methodologies with third parties, but if Facebook as an example, can facilitate this for all the applications embedded within their platform, it would make it easier for members to pay.  As it is, these “small” sums have made Playfish profitable.  The idea of making a small amount from many is somewhat akin to Walmart’s concept, and we all know how successful that has been.  $1 from 10 million players is going to make you more than $100 from 1,000 players.

There are however, many challenges before SMG can be considered the future of gaming.  For one, fequent tweaking and upgrading of the concept means daily challenges to come up with new ideas to expand the virtual world created.  There is also the challenge of technological constraints as the number of players increase, most of whom will never generate a dime of income for you.

The one income stream that I haven’t really seen exploited sufficiently in SMGs is the idea of brand placement.  Its done frequently in movies now (Starbucks being the most blatant).  But, I have yet to see a Starbucks Cafe in Pet Society or a McDonalds in Mafia Wars.  These brands could not only sponsor a virtual outlet in some social media game, but also hold competitions, etc…which would effectively reach out to a massive online population at a very low cost per impression.  Whatever it may be, I think SMG is not just the future of gaming, but also the future of advertising.

Tong Hsien-Hui

Questions about Social Media that You Were Afraid to Ask…..1

I have had many interactions with groups of people in the last year on the subject of Social Media Networking.  The number one question I get at nearly EVERY meeting is “How do I/we/my company/they/my dog/my cat/etc…. make money from Social Media”.  Because thats so commonly asked, thats not the topic of this posting.  Instead, I thought to post on questions that people pose to me either when no one else is around or through email or even, in one case, through his dad (I jest not).  There are five common questions that people are afraid to ask (at least in Asia) when in a group.

This post will deal with the most common one….“What Social Media Networking platform should I use?”.  This is not exactly the phrasing, but its the gist of the query.  Its not as obvious as it may seem.  There are several factors to consider:

1)  What are most of my friends using?

2)  How do I interact with them?

3)  How do I know I am doing the best that I can?

The answer is not obvious and is actually dependent on where you operate.  In the US, some will tell you MySpace or Facebook, in Brazil and India, Orkut, in other parts of the world, Hi5 or some localized platform that caters to the language.  So even while Facebook has 175 million users as of end 2008 (I’m betting at least 30% are people adopting multiple personas on Facebook) and MySpace is a close second, the choice is not simply a matter of Facebook or MySpace.  I believe that the biggest consideration is what most of your friends are on.  After all, the main reason for Social Media Networking is to connect with friends.  Language is obviously a show stopper, but that aside, if most of the people you know are using Orkut then it makes little sense to build up to significant a profile in Facebook. 

Secondly, how do you interact with your friends?  If you want to show them pictures of your holiday on your Social Media profile and have them look at it there instead of boring them to death showing them slides over dinner, then you need to choose a platform that supports this (most do).  At a basic level, most platforms provide the basic interaction functions of messaging, picture libraries, comments and basic security functionality that allows limited viewership to specific groups in your contact list.  More sophisticated plugins are available such as games, tests, etc…..on some sites like Facebook.  

The third component is maybe peculiar to Singapore.  I know the sentiment is prevalent globally, but so far, I have only heard the concept taking the form of an adjective in Singapore.  The term is “Kiasu” and is derived from a Chinese dialect Hokkien to denote someone who is afraid to lose out.  You know, those morons who stand in line for opening day tickets to Star Wars, etc…..  The fear is that having invested time and energy to build a profile and network on one platform, they find that another platform offers them so much more but are too “unmotivated” to switch their whole personas over.  Well folks, welcome to the real world.  No one can predict what social media platform will make it or not.  Just two years ago, MySpace was the biggest thing around, now its Facebook, who knows what it’ll be later.  The only way is to stay current on developments within Social Media and keep testing new services that come out.   
In case you were wondering….I use and create content on Facebook, LinkedIn, Twitter, WordPress and Blogspot.  I have accounts with MySpace, Youtube, SlideSorter, Ortuk, Socialtrak, Ning, Flickr, Picasa, etc…..but seldom update my profile there.

The next post will be on the question of “Now I have a Profile on a Social Media Platform….how do I protect myself??”