Facebook: Threat or Menace?

It looks like the Facebook Credits are hitting the windmill.  I could see this one coming for a while; once I heard that Facebook was planning to implement Facebook Credits, where Facebook would offer a universal currency for virtual products offered on Facebook games, I could see the trouble brewing. Facebook Credits (or Facebucks, as some have dubbed them) give a sweet 30% rakeoff to Facebook. Of course, they do make it easier for players to spread their virtual spending around to a variety of games, particularly to less well-known games from smaller companies. So they will probably result in some more sales for the obscure games, perhaps enough extra to compensate for the loss of 30% of the profits.
That situation doesn't describe Farmville, however, since it's the most popular game on Facebook (78 million users!). The Facebook Credits represent a straight loss of 30% of Farmville revenue; it's pretty clear that few new users will be attracted to the leading game (by far) just by offering Facebook Credits. Now, when Facebook announced this, they didn't say in so many words that Facebook Credits would be the ONLY way games on Facebook could take your money. But that was pretty obviously the way things were heading.

And now it appears the shoe is dropping, at least from the rumors hitting the intertubes. TechCrunch says Zynga is lawyering up and getting ready for battle as negotiations head south; the scuttlebutt is that Zynga will leave Facebook entirely in a few weeks. Zynga's talking about how they are diversifying away from Facebook (here and here and here).

This follows on the heels of a drop in users because of Facebook's change in the way they handle notifications; Farmville lost 4.4 million users in one month because of it.

It's a difficult transition for Zynga, but a necessary one. Right now they're at the mercy of Facebook; it's hard to deal with a sudden 30% loss of revenue. And who's to say next month Facebook won't decide that, hey, maybe 40% is a better deal? Now, Facebook should be careful about losing 80 million players, too. With Facebook's recent privacy shenanigans, they are certainly causing more negative publicity. Ultimately, I guess that Zynga and other companies will still have games on Facebook, but they'll be sure to have plenty of alternatives... and try to push users towards alternatives where the game company makes more money. Facebook may think "Hey, Apple can take 30% of all app sales, and nobody complains about that, so we can do it too!" But the difference is that Apple sells hardware that makes it possible... if you don't own Apple hardware you don't buy apps. With Facebook, there's no real need to conduct the game through Facebook when with one click you can be on somebody else's web site. One where the game publisher doesn't have to pay a 30% tax.

Which all means Facebook will become more of a marketing vehicle and less of a platform, and by making the platform more annoying they are making competition a little more possible. They may look invincible now, but Myspace looked that way once...

Arrrh! Sell Me That Game, Matey!

An interesting study conducted on Dutch file-sharers, as detailed in this Ars Technica article, shows that "file-sharers" (known to most publishers as "pirates") have pretty much the same buying tendencies as non-file-sharers. Except, when it comes to games, file-sharers tend to buy somewhat more games than non-file-sharers.

This is interesting, if for no other reason than it's hard data in an area usually devoid of data and filled with guesses (disguised as "industry estimates"). We don't know if Dutch file-sharers act the same as file-sharers in other countries, or if they are anomalous. The real interesting part of this study is where they surveyed people on what they felt were reasonable prices. Their perceptions of music and video "reasonable prices" were about equal to what videos and music are priced at, but their view of "reasonable price" for games was quite different from what's actually in stores. Those interviewed thought that a reasonable price for a game was (translating from the Euro) about $10, while games in stores cost about $60 to $70 (game prices are a bit higher in Europe).

Perhaps the most dangerous part of the success of the iPhone/iPod Touch has been its contribution to a perception of games as much lower priced commodities... along with the free-to-play business model that's been so successful. Especially when so many $60 games do not deliver that much entertainment value. We saw how the music industry suffered by maintaining their high CD prices for so long, and choosing to try and battle piracy rather than find new ways to deliver their products to customers. Let's hope the game industry doesn't make the same mistake, or at least not for so long.

As marketers, it's part of our job to see these sorts of shifts coming, and help invent and promote new business models that can revitalize the industry. It's a tough job, but it's vitally important.

E-Books Rising

Looks like the e-book revolution is happening swiftly. Simon & Schuster is reporting that while overall sales are down 6 per cent, digital sales grew 233%. That is, from $3 million to $12 million in the first quarter of 2010. Digital sales now represent 7.9% of total S&S revenue. At that sort of growth rate, it won't take very long before digital sales are the majority of S&S sales. While S&S didn't say, I'd bet that digital sales represent an even greater share of S&S profits.

The interesting part to note is this is occurring before truly widespread acceptance of e-readers, and while e-book pricing is still based on print book prices. And while S&S, along with other old-line publishers, still would like to pull the covers over their heads and hope the nasty e-book monster disappears.

Sorry, while pulling the covers up may have worked when you were a kid, it is not effective against real-world monsters.

Some BioShock 2 Marketing

This interview with Bioshock marketers provides some insight into approaching marketing a sequel to a very successful title. Part of the difficulty they faced was that some of their market were already familiar with the first game, but they also wanted to reach beyond them to new customers. Adding to the difficulty is that it's a difficult sort of game to describe.

They worked with the developers to produce videos and other information that helped explain what the game is, while staying within the fictional context. Videos are a great way to transmit a lot of information in a readily digestible form, and with Youtube and Vimeo and other places, it no longer costs an arm and a leg to get videos in front of consumers.

The key then becomes informing your potential audience of the video, and getting them to watch. A compelling enough video generates its own viral momentum, but you still have to kickstart it with your social media efforts. You can get your friends to watch, but the video has to be interesting enough that they get all of their friends to watch it, too, and then pass it along.

Of course, the underlying assumption here is that you have a game that can create an interesting video, and is worthy of the time and effort. Try to verify that assumption before you put a lot of time and money into making your video.

Apple's Fixing Things

Apple is trying to clean up its act a little bit, apparently. First off, they've fixed the way they screwed up the App Store for iPads. Now you can actually find all the games for the iPad. Though the fundamental difficulties with the App Store still remain. There are too many products for the interface; unless you already know what you're looking for, you won't find it unless you get lucky. And let's not even talk about the categories and how the games in them don't belong there...

Meanwhile, having come under fire for blocking third-party development tools from being used on items for the App Store, Apple is quietly looking into altering their developer agreements. But this may be too late to stave off an anti-trust investigation. Oh, and questions are being asked about iAds and whether that may be an anti-trust violation because of its restrictions on data sharing.

All of this in the shadow of Apple's announcement that they've already sold 1 million iPads in less than half the time it took them to sell 1 million iPhones.

It's a tough market, but a growing one. Having now played with an iPad for a while (my wife got one for work), I do believe it has a bright future. I guess HP and Microsoft agree, since they've canned their slates that were originally looked at for this year. Back to the drawing board... Apple's changed the battlefield.

Three Keys to an Effective Flier

With all of the emphasis these days on social marketing, online this and that, sometimes we forget about the lowly flier. This is vital to help attract new customers at venues like conventions, retail stores, special events, and related events or venues (for instance, at a race track when you have a racing game). It's worthwhile to review some basic elements of an effective flier.

1. The Audience. Who's this flier going after? Is it the same demographic that your game usually hits, or somewhat different? You may need to alter your standard marketing message if you're trying to bring in a different audience. Keep the audience in mind when you write your copy, and then edit the copy trying to think like one of your targets. Does this flier really attract your interest?
2. The Goal. You should have a clear goal in mind for this flier, and a direct call to action in support of that. Perhaps you want to get the reader to your booth... you should put in some mechanism to help with that (see The Hook, below). Maybe you're trying to bring the reader to your web site; make sure the web address is easy to spot, and try to put a specific landing page so you can track how well your flier has done.
3. The Hook. The effective flier has a great hook, or perhaps more than one. It may be a killer piece of art that's also the cover of your game, or maybe it's a perplexing visual that needs to be explained... and the customer will come looking for the answer. It may just be a great headline that makes the reader stop and think about coming to your booth or finding out more. Maybe it's a plain old coupon offer... "FREE Game!" is always a good one, though you can use "Buy One, get One FREE" or "50% OFF With This Coupon".

Finally, make sure the quality of the flier is no more and no less than it needs to be. Don't pay for a 4-color slick flier on glossy paper if there's no artwork and no need for the extra cost. On the other hand, if you're counting on the impact of your fabulous artwork to attract attention, a muddy black& white photocopy won't do it.

Free-to-Play Makes Serious Money

I talked about League of Legends before, as an example of how the free-to-play business model can succeed. Gamasutra has this interview with Riot Games' Marc Merrill about how the game is progressing. In short, it's growing very strongly... they are up to 90 employees now. All of their revenue comes from the sale of virtual goods; they don't charge for subscriptions, or have advertising, or anything else. Just virtual goods.

This model is working well for League of Legends, which is a real-time strategy (RTS) style game. It also seems to be working well for social gaming and MMORPGs (the free-to-play segment is the fastest growing part of the MMO market, and there's no need to talk about just how amazing Zynga's growth curve has been). I'll note here that Blizzard made a couple of million dollars in an hour just by selling a virtual steed for World of Warcraft. So even the classic subscription model is getting a boost from virtual goods.

How far can this model go? Will it replace traditional retail games? Possibly... I suspect that some of the erosion in average sales of retail games is due to customers finding more value in all the free or low-cost content available online. The free-to-play model even has implications for the traditional paper game industry. What if you gave away the rules, but sold downloadable adventures? Well, that already happens to some extent. I think that the adventure game industry would be well-advised to look into new business models... that's where more growth opportunity lies, rather than in game design innovations. I think Magic: The Gathering's most important innovation was really in the business model, rather than the game design... collectability was key, and then the whole idea of regular releases is still going strong.