“I would estimate that just about 30 percent of social games in the fray whose developers are spending on advertising are actually hitting a positive ROI (return on investment)…” This observation from the CEO of AdParlor, Hussein Fazal sums up the state of the social game industry. A consultant on Facebook ad campaigns, the expert underlines how things are not that rosy for social gaming industry.
As virtual games become a larger piece of business for the companies like Electronic Arts, their investors are going to meticulously scrutinize the viability of even popular titles (‘Sims Social’, a Facebook-compatible version of its highly rated real-world simulator and other such games like CityVille). Same is the case with CrowdStar that began to feel the aftereffects of inflated marketing costs for its Zoo Paradise app.
‘Mafia Wars 2’ probably had all the ingredients of a blockbuster. Its core development team that grew to 80 members, worked for almost a year on it, unveiled in a grandiose October media launch at new headquarters of the company. The much hyped game peaked at over 2.5 million active users each day in the first month. However, the online organized crime-based adventure has shed not less than 900,000 players, since early November, according to estimates of research firm AppData.
The number of active users on daily basis in a game like this is one of the most vital metrics of its sustained profitability. According to Michael Pachter, Wedbush Securities research analyst, it’s so because of the fact that they are that much more likely to spend on virtual items like shields and machine guns. So the more frequently they revisit, the greater probability they will pay.
Not more than 10 percent of players are playing ‘Mafia Wars 2’ every day, well below the company’s average in terms of percentage for most games. The drop-off might stem from members getting bored and unimpressed with the same old formula. All the avid ‘Mafia Wars’ players feel it’s the same thing with different missions, so they are opting to drop off.
And sustaining their interest and keeping the numbers intact obviously means more marketing expenses. The expenditure does not necessarily pay immediate dividends. A perfect example of this is Electronic Arts, a California-based game developer. The company has emerged as the closest rival of Zynga. It tasted its first significant social gaming success thanks to ‘Sims Social. Since its release, it has drawn more than 33 million users, with almost 20 percent of them coming back each day.
Developers are now keen to look beyond virtual goods to traverse the next stage of growth. Zynga is entering in-game promotion deals. This might prop up the margins, but the search is still on for the next FarmVille.
