Advertisers Attracted by Video Games on Social Networks

Article  by  Cécile BERTRAND  •  Published 17.08.2011  •  Updated 17.08.2011
Social games, or games on social networks, are attracting more and more people. This sector, still in its early stages, is creating a new market that holds major potential for advertising. 
According to Philippe Torres, director of Research and Consulting at L’Atelier BNP Paribas (The BNP Paribas Technology Intelligence Centre, a French consulting company), “with the introduction of casual games, notably on social networks, we are facilitating the emergence of a new generation of games – a type of game that requires no commitment or real investment and which is therefore attractive to all Internet users.”
Casual games, or social games, are defined by their light-heartedness and user-friendliness, as well as by repetition and simplicity, helping user loyalty to develop quickly on a large scale. It is this “public loyalty factor that helps a free game to begin making money, notably through the sale of virtual goods or premium subscriptions,” adds Philippe Torres.
According to a study carried out by Parks Associates[+] NoteA company specialising in market research and consulting on new technology in products and services.X[1], video games are the number one form of entertainment while social networks are number three. Their combination would thus seem to surely spell success. 

The most interesting phenomenon of the past three years is the position of video game developer Zynga on Facebook. According to the recent Parks Associates study, of the 250 million monthly active users (or MAU), there are 184 million Zynga players. The company, which was founded in July 2007 in San Francisco, owns the five most profitable games on Facebook (CityVille, FarmVille, Zynga Poker, FrontierVille, and Café World), and is representative of the immense potential available to investors in this market. An obvious example of this lies in the objects sponsored by McDonald’s and 7-Eleven that can be found in Zynga’s game FarmVille. In October 2010, over a period of 24 hours, the McDonald’s logo appeared in the game to give Zynga players the ability to visit its virtual farm and participate in the harvest. The best players were then rewarded with McCafés, which helped to improve their performance in FarmVille, or hot-air balloons adorned with the company logo, with which they could decorate their own virtual farm.
Alongside advertising partnerships, which represent 20% of the company’s turnover, Zynga also sells virtual objects to its subscribers. This makes up the other 80% of its turnover (which is estimated to be around $400 million[+] NoteTurnover estimated by Inside Network, a Silicon Valley research company specialising in social networks and games.X[2]), although only 3-5% of players actually spend those few euros required to purchase a weapon or fences, for example. 

Other businesses quickly saw the potential of social games. The News Corporation group is currently looking to launch a social network game, and many others have already pre-empted them. For example, French publisher Ubisoft introduced its first Facebook games in 2009: Assassin's Creed: Project Legacy and CSI: Crime City, while Disney bought out Playdom, a company that has produced several successful Facebook games. Electronic Arts, which has just announced its buyout of Firement, the mobile phone-game creator, has also bought out Playfish, the publisher of games such as FIFA Superstars and Monopoly Millionnaires. In April 2011, EA also announced that the virtual currency Playfish Cash would be replaced by Facebook Credits, the social network’s own virtual currency, as, according to the publisher, “Facebook Credits give users a sense of security and a reliable way of buying goods or virtual currency and also mean that they can use one single currency for all games ”.
The social network giant put pressure on games publishers on its platform to start using its virtual currency from 1 July 2011, obliging users to exchange pounds, euros or dollars for Facebook Credits in order to progress through a game more quickly or to buy virtual objects. Another interesting point is that, from July, Facebook will also be taking 30% commission on each transaction.
This partnership is mutually beneficial, according to Bing Gordon, an associate at KPCB[+] NoteKleiner Perkins Caufield & Byers (KPCB), a global capital risk company located in Silicon Valley.X[3]: “Zynga’s games make Facebook even more popular, inciting Internet users to visit the site on a daily basis; Facebook allows Zynga to reach a larger audience and to truly make the most of this thanks to viral marketing”.
The study carried out by Parks Associates shows that income linked to video game usage on social networks will multiply five-fold from 2010 to 2015, which would make the market worth $5 billion. In April, “250 million people were playing Zynga games such as CityVille and FarmVille on Facebook,” highlights Pietro Macchiarella, analyst at Parks Associates, whilst there were only 17.5 million recorded active users in September 2010. This enormous projected growth would affect a large number of different platforms (iPhone, iPad, Facebook, Yahoo! and more), which is of great interest to advertising investors.
Digital games on social networks represent a new market for the latter, who see the potential for introducing the sale of virtual objects as well as advertising spots. “The social game industry has added value to everything it is associated with”, states Pietro Macchiarella. An IFOP study carried out by L’Atelier BNP Paribas reveals the success of advertising on online video games, with 43% of people questioned confirming that they had seen an advert within an Internet game – a figure that rose to 67% for those aged 18 to 24. The same survey also showed that 59% of 18 to 24-year olds have played a video game on the Internet that was sponsored by a big brand name.
Social networks, which are being invested in by more and more video game publishers, thus appear to offer new opportunities for digital advertising. However, is this new market really viable in the current climate, in which “buzz” can fade away just as quickly as it emerges? It is perhaps fair to say that Zynga users, like those of Facebook, tend to lose interest quickly in these fads. This tendency is shown by the fact that in less than six months, Zynga has seen a 20% decrease in monthly active users. However, advertisers have active imaginations and are already testing out other forms of advertainment, advertising through the use of entertaining content, such as large-scale board games where players are invited to participate in a treasure hunt to win discounts and products.

Photo credits: screenshot, FarmVille on Facebook during the McDonald’s advertising campaign
  • 1. A company specialising in market research and consulting on new technology in products and services.
  • 2. Turnover estimated by Inside Network, a Silicon Valley research company specialising in social networks and games.
  • 3. Kleiner Perkins Caufield & Byers (KPCB), a global capital risk company located in Silicon Valley.
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