Friday, September 10, 2010

Facebook: Sid the Seer?

Via Tobold, I just saw this article with Popcap executive Jason Kapalka who just confirmed my prediction from March that competition would squeeze the profit out of the Facebook gaming:

Serial Ganker (March 2010) - Facebook: A lesson in Competition
The Laws of Competition are going to require a successful social gaming company to compete by either:
  • creating lots of crappy games (most options)
  • and/or, build better games to distinguish themselves (best option)
This is what happens with market forces in a free market. Big markets with big profits attract lots of competition. Which, in turn, drives profits down because more people are chasing the same pool of dollars.

The point here is that while social gaming is attractive to investors right now, it’s not always going to be this attractive as competition drives down profits.

Those are my words from March above, but enough self-congratulating for being so smart and let's steal some juicy quotes from the article with Jeff at Popcap.

"You're definitely in the stage right now in social games where there's a lot of bandwagon jumping, where everyone sees moneymoneymoney and suddenly all these new companies appear. It happened before in mobile, it happened before in casual – in the past it's tended to signal the beginning of the end."

Kapalka isn't suggesting that social games as a whole are going to die. Instead, he says it's the end of a "golden era," where the possibilities of the genre seemed limitless.

So thus far, the first half of my prediction is coming true. Increased competition is bleeding away the profit in social gaming. Zynga, the largest FB dev, has taken the approach of making LOTS of crappy games with the hopes that will increase their overall exposure to more users.

The next stage, I believe, is that we'll see "better" games on Facebook. That's already becoming true to some degree. Certainly games like Desktop Defender, Kingdoms of Camelot and even (gasp) Frontierville are much better designed games than Mafia Wars and Farmville.

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