SOURCE: Lolapps


March 23, 2010 13:07 ET

Social Gaming and the Next Five Years

A Look at Trends in Social Gaming and the Future From Lolapps

SAN FRANCISCO, CA--(Marketwire - March 23, 2010) -  Games have always been social. Single player games are only a phenomenon of the last 20 years. Social gaming company, Lolapps, looks ahead to the next five years in social gaming. With social networks permeating our daily lives, entertainment is being redefined and is going back to its roots -- it is getting social again. As people get more entertainment online, interesting questions will arise around virtual currency while traditional and social forms of entertainment continue to meld into one.

In 2010:

1. Social gaming will become a global phenomenon -- and the virtual goods economy, once thought of as an Asia-Pacific market phenomenon, will continue to take hold in the U.S.

  • 2009 was a breakout year for virtual goods in the U.S., but they have been a key driver in the games and entertainment markets outside the U.S. for quite some time (source: "Inside Virtual Goods" market report).
  • The virtual goods industry in Asia generates about $7B a year in revenue, seven times the U.S. This means major valuation differences between Asia and U.S. with China's nine largest public online game companies valued in the $50B range compared to the top four U.S. companies that are valued in the $22B range (source: Ben Joffe).
  • As virtual goods catch on with U.S. gamers, revenue potential is huge -- the annual range is estimated at between $3B and $3.5B (source: Ben Joffe).

2. Copycats will embrace and extend -- just like low-end dressmakers copy Oscar gowns the morning after, expect to see me-too social gaming companies jumping on any topic that shows market traction.

  • In Brazil, a Farmville follow-on, Colheita Feliz had 14 million users on Orkut within the first three months of launch. That's more users than Twitter (the third largest social network in the country) has in Brazil.
  • Many originally successful games were followed up with copies that did something better. Farmville brought improvements over Farm Town and leveraged Zygna's previous titles to grow exponentially.

3. Social gaming will be driven internationally by mobile.

  • On mobile games in Japan, monthly average revenue per user (ARPU) is between $16-20.
  • While the retail value of the global mobile games market is expected to rise from $5.4B in 2008 to more than $10B in 2013 -- the market is being slowed by limited on-portal revenue share for publishers and poor games marketing (source: Juniper Research).
  • Increased mobile adoption, limited penetration of game consoles and fixed Internet has made mobile the way to game across India, Africa/Middle East and South America (source: Juniper Research).

4. Traditional entertainment companies -- from movies and music to console games -- will add social gaming as part of their marketing mix.

  • Lolapps "Dante's Inferno" reached almost 5 million MAUs within a month of release -- letting fans experience the story before buying the console game.
  • Smart entertainment companies will market and test out storylines and themes with a broad audience via social games, saving millions before marketing a big budget game or movie.

5. Social games will get even more social.

  • Users will demand games that are more "fun" and higher quality prompting game creators to build more synchronous interactions like chatting, collaborating and competitive gaming into Facebook games to allow for an in-depth shared experience and increase users desire to bring in real-world friends.
  • Geo, phones and social games will usher in a far more social experience than currently available.
  • Facebook Connect will allow for games not on Facebook to also "socialize" their games. Xbox, PS3 and Wii will continue to deeply integrate with Facebook Connect. The less the friction the faster the game will spread through the network. 

By 2015:

1. Facebook games will emerge as a strong competitor to Xbox and Playstation in the battle to expand user base and share of wallet and find the best game developers.

  • Social gaming companies have talent console game makers want -- Electronic Arts' acquisition of Playfish is an indicator of things to come.
  • Nine out of the 10 top developers and apps on Facebook are in gaming -- game dynamic experts, UI design pros and droves of talented developers are considering social gaming as a new outlet.
  • Social games are quicker, easier and less expensive to build than console games -- developers will jump at the chance to stay agile and develop multiple titles with the potential for fast revenue.

2. Government will regulate virtual currency and attempt to attach its value to real currency.

  • In late 2009, South Korean courts ruled that virtual currency should be hit with the 10 percent VAT tax and, this month, that virtual money can be exchanged for real currency (source: Korean Times).
  • China recently ruled to tax virtual goods and currency (source: CNET).
  • As more money is made, more government regulation will be imposed and those invested in any platform that allows you to take money out will demand market stability through a touch point into real-world currency fluctuations.

3. The tables will turn again with some well-capitalized social gaming companies acquiring cash-strapped traditional console and MMO players.

  • The logical progression of the industry is vertical integration -- players looking to capture a larger portion of a user's wallet and time will take this approach. With the ability to test out themes and design appeals to users, gaming companies will use social platforms to gather data about whether or not an immersive console game will sell. In essence, reducing the financial risk associated with the hit based model of traditional games.

4. Social games will continue to improve in production quality.

  • Browsers like Chrome allow for more robust and engaging applications. Bandwidth speeds and widespread access will allow for social games to continually move up the quality chain. New platforms, like Unity, continue to push what's possible within the browser. All the while, social games will become more complex and harder to clone, bringing more diversity to the space.
  • Consumer adoption of the best games will create a tastemaker's culture online -- driving away bad games quickly. The long tail of social games will continue to flourish as the cost of distribution on a social network is far cheaper -- Good games will surface quickly via viral channels.
  • Expectations will rise and it will be harder for small development teams to compete with established companies. A few games/developers will dominate the majority of users but there will be a vibrant long tail of niche developers that continue to attract rabid fans.
  • Failed attempts to market a brand or product via social games will not stop marketers looking to take advantage of this new format -- and many will miss the mark based on lack of understanding of the Facebook ecosystem and gamer desires.
  • People will experience overload on low-quality, poorly executed corporate-branded social games.

5. The Facebook ecosystem will come into its own -- people won't just play social games because they are on Facebook, they will stay on Facebook to play games -- and as part of this, social gaming companies will try to foray successful titles into traditional entertainment offerings.

  • Social games already alter the way people use Facebook -- they stick around longer, use more of their online time on Facebook and log in more regularly.
  • Facebook Connect will become even more pervasive.
  • Vertical integration between social and console game offerings will allow players to capture a larger chunk of the profit.

Lolapps makes fun and engaging social games that delight users and keep them coming back for more. We build, manage and host partner-branded games through an integrated and evolving distribution platform that let's entertainment companies further their brand and expand their audience via Facebook's massive community. We don't compete with traditional gaming companies or other players in the entertainment space, instead we offer a turn-key solution to taking entertainment properties social. Lolapps was founded in 2008 and is headquartered in San Francisco. For more information, check out

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