Activision Slams Social Games

Activision's first foray into social gaming has a warm, friendly group-hug kinda logo, doesn't it?

The surprise isn't that someone from Activision is saying something amusing; the surprise is that it's not Bobby Kotick, for once. This time the quote comes from Eric Hirshberg, CEO of Activision Publishing, speaking at Gamescom, when asked about Activision possibly making an acquisition to get into social games:

Valuations of some of the companies in that space are out of whack, so that’s an issue when it comes to acquisitions…But don’t mistake careful, methodical planning for inaction. Any new place where people are playing games, at scale, is something that we’re interested in.


Don't mistake careful, methodical planning for inaction? Is that like when I tell my wife that I was just thinking, and she says I was snoring while I was thinking? Yeah, I think sometimes planning and inaction are difficult to distinguish except in an autopsy.

Investors may be getting a trifle weary of dismissive statements from execs about market segments they're not in; see Nintendo for how that works. Activision has floated along without too much criticism with Blizzard and Call of Duty to buoy their sales. If there's ever a hiccup in one of those, expect the criticism to become a deafening roar.

Amazon And Gaming

Maybe you'll be done looking for social games, too.

As you may have read in my article on IndustyGamers.com last week, Amazon is getting into social gaming. They've hired noted RPG designer Jonathan Tweet to lead a team designing a social game, though they haven't made any public comments on their plans. I was interested to see that many different media outlets picked up the story, from Dean Takahashi at VentureBeat to BusinessInsider. Then there were the Chinese rewrites that got rather strange... and all the sites that scraped the news from other sites... the Internet's echo chamber is interesting to observe. I just wish all those places had kept this blog's address or my byline in the text, but I guess that's too much to ask.

My speculation is that Amazon must intend to do more than one social game, since it's pretty clear from social gaming companies that they derive a huge benefit from having multiple games. (Basically, they get a good chance to keep their audience when they get bored with a game, by switching them to one of their other games.) I further speculated that Amazon may well intend to stuff this social game onto the rumored Android tablet that Amazon is working on, which may be released later this year.

It's interesting to note that Amazon already powers up to 80% of all social games, according to Jeff Barr, the evangelist for their Web Services division. That division handles cloud computing services for a wide variety of clients, from Netflix to NASA. That division is expected to pull in around $750 million this year. Perhaps Amazon looked at the kind of usage numbers and revenue that Zynga is pulling in (since Zynga is one of their clients) and figured, hey, we should be in this business too!

Amazon may find it's not as easy as just throwing a game or two up there. I'm sure Jonathan can come up with a good design, but the implementation is going to take some work. The real challenge will be marketing, as the social game space is already crowded with a wide variety of players and games. If Amazon wants to carve out an audience, they're going to need some serious marketing spending if they want to ramp quickly. Sure, putting a social game on their new tablet will help in a big way, putting the game in front of millions of players in a few months. But they should be planning to reach beyond that audience, which is going to take some doing.

I wonder if they might be planning to attract some of their vast readership on the Kindle to a social game... maybe readers who like some of the genre fiction that's been doing so well on the Kindle. Paranormal romance social gaming? I won't be rushing to sign up, but that could hit big in the teen angst market.

One thing will be interesting to watch for: If Amazon does get into social gaming, will Zynga pull their business and switch to another cloud provider?

Zynga's Facebook Deal Revealed: Exclusivity

Details on the marriage contract are interesting.

One thing about going public that private companies find annoying is the need to reveal more information about their business. Not just the sales figures and profit percentages, but important details about key agreements that can affect the business going forward. Companies generally prefer to keep all that information secret, lest some competitor somehow use it to their advantage. When you're going public and registering your stock with the Securities and Exchange Commission, they have some niggling little rules that force you to disclose all sorts of information. Anything that might materially affect performance needs to be disclosed, which is why we're now finding out some interesting things about Zynga's business as they prepare for their IPO.

One of the key moments in Zynga's history is the epic showdown with Facebook in May 2010 over the implementation of Facebook Credits. That was when, as Bing Gordon put it, they almost went nuclear. Facebook had decided to require all social games on Facebook to use Facebook Credits, and thereby give up 30% of their revenue to Facebook. Quite reasonable, if you're Facebook; not so reasonable from Zynga's point of view. Given that Facebook represented the vast majority of Zynga's business... and that Zynga represented a healthy percentage of Facebook's overall traffic... it was a tense moment. An agreement was signed, the dust settled, and Zynga was accepting Facebook Credits. But we never knew any of the terms of the deal... until now.

The key thing in the agreement is that Zynga has given Facebook a 5 year exclusivity on its current games, as well as new games it introduces that has Facebook integration or use Facebook data. The agreement specifies several other social networks that Zynga cannot release its games on, though the names of those networks have been redacted. Astute observers will note that this agreement predates the existence of Google+, which has already emerged in just a few weeks as the most viable competitor Facebook has seen in years.

There's more detail in this Gamasutra article, but the key thing is the exclusivity. It might have seemed like a no-brainer at the time, for who could challenge mighty Facebook? Now that Google has finally seemed to get some traction, there might actually be another social network worth creating games for, in only a year or two. Zynga will be locked out for a while, though, which gives some other social game companies a chance to grab some market share. Don't forget that Google is also planning something big around games, as various rumors have noted.

Meanwhile, Zynga has some other issues to deal with, like the Vostu lawsuit that seems to be heating up. I suspect it will all be settled out of court, but not before there's some discovery back and forth and a few more legal broadsides.

It doesn't seem to be distracting Zynga from making great inroads with Empires & Allies, its latest game that's zoomed up the charts to become bigger than Farmville. Maybe those farmers will have to beat some plowshares into swords in order to compete.

Meanwhile, Zynga is making inroads into China with a partnership with Tencent, bringing a localized Chinese version of Cityville to the land where millions play online. Hmm, maybe they don't need Facebook after all... since Facebook isn't in China. Zynga stands to do very well in the Chinese market, and Facebook won't be sharing in that revenue.

Facebook Drops The Bomb

Yeah, winning loot is easy... if you're Facebook.

The move was inevitable; the only question was when it would happen. We now have the date for the nuclear event: July 1, 2011. That's when Facebook will require all Facebook Games to implement Facebook Credits, which means a cool 30% rakeoff for Facebook.

Oh, it's not exclusive; developers will be free to use their own credit system as well as Facebook Credits. But all games will have to use Facebook Credits. Facebook will also offer incentives for developers that use Facebook Credits exclusively, such as premium placement on their Games Dashboard and special promotional opportunities.

Rumor has it that Zynga ships Facebook $30 million or so every month for its share of Facebook Credits; I'd have thought it would be somewhat higher. Clearly this will help Facebook reap more revenue. But it also has benefits for developers. A unified currency will benefit smaller developers, because a user will already likely have Facebook Credits handy... so they won't have to pull out their wallet to buy something inside your game. Yeah, it's a bummer for games already on Facebook, as they stand to lose 30% of their revenue stream. But this has been clear for almost a year, so companies have had plenty of time to adapt to it.

Facebook's giving some warning so there's still time to modify the plan based on feedback from game companies. (Feedback: The high-pitched whining noise coming from game developers.) I can't really blame Facebook for wanting to get their cut of the action, and Facebook Credits do offer a useful service. Companies thinking about putting a game on Facebook will just have to decide if giving up 30% of the income is worth the additional exposure; I'd bet it is in most cases. But companies will do well to create their own brand, identity, and gaming possibilities outside of Facebook as well, so they aren't too dependent on what moves Facebook may make in the future.

The largest social game companies have been busy doing just that in the past year or so. Mobile gaming is a major growth area for them. But the Facebook juggernaut is heading in that direction, too... it's a rapidly evolving market, fraught with danger for the unwary or the slow to change.

Social Gaming 2011 Predictions

What's coming up for social gaming in 2011? One word: revenues. This category of games is still growing rapidly, despite Facebook's changes to viral messaging. Major publishers have acquired social gaming companies, and are exploring ways to connect their non-social game content to social gaming. Facebook continues to grow, now becoming the most popular destination on the Internet. So we can expect social gaming to follow along, as it makes use of some of our most powerful urges. It's funny that for decades the game industry was looking for a way to attract a wider audience than just teenage boys of all ages. And when it finally does, it turns out that the larger audience isn't interested in the types of games they know how to build.... it takes a new type of game to attract a new audience. So the hardcore gamers turn up their noses at social games, as they capture more and more of the gameplaying audience and their dollars.

Now for some predictions as to where social gaming is going in 2011.

• Zynga continues to grow, but at a slower pace. One of the big stories this year was the dethroning of Farmville as the biggest social game... by Zynga's Cityville. A company that has mastered the art of eating its own young will go far. Their rocket-driven rise will slow, but they have enough velocity to stay in orbit.
• Social gaming elements continue to be more integrated into old-style game publishers. FIFA, anyone? Expect more connections between social games and other types of games. Many MMO's now have social game "versions" that at least connect you with the branding and some of the style of the MMO. It's a relatively easy way for a game to use social media to connect with fans. The interesting part will be as publishers figure out ways to connect the two types of games more deeply, which I expect we'll see this year.
• Licensed social gaming takes off, with several high-profile licenses announced. It seems inevitable, but the biggest players haven't needed to go this way yet to build market share. Smaller players will discover licensing is a good way to build visibility. What's going to be licensed? Anything from popular culture that has a big audience... movies, books, music, celebrities, TV shows, comics. It's already happening, but it hasn't hit the big-time yet. 2011 will see it happen.
• Social gaming gets gamier, attracting more of the hardcore types. There are a few games out there that are much more based around traditional game elements, and we'll see more of them. Some of them will start to get some visibility, too. We won't see fragfests (OK, maybe we will) but expect to see more variety in game designs.
• Advertisers begin to get social gaming. This year should see more product placements and ads in social games, as advertisers gravitate to millions of monthly users who spend lots of time in social games, and social game companies find a nice source of revenue. Again, it's already happening, but it should accelerate rapidly. The newness is a barrier, and lack of standardized buying and selling. When companies make it easy to buy advertising, and demonstrate results for advertisers, you'll see them pile on.
• Social gaming uses more marketing. As competition intensifies, social gaming companies will get more aggressive with marketing (especially as the easier viral marketing capabilities are hobbled by Facebook). We'll see advertising, branding (NASCAR  racers?), event marketing, and all sorts of fun stuff. Especially as traditional game companies, with more experience in these techniques, attempt to muscle their way into a good market share.

All in all, another year of solid growth in social gaming is ahead. Now if you'll excuse me, I have to go back to another expedition...