I recently read an article indicating that Zynga was responsible for generating 500,000 USD for Facebook in the last year. $400,000 of this revenue was from the 30% cut Facebook is taking on virtual currency transactions with 100,000 coming from advertising. This means that the social game company generated about 1.5 billion USD from its social games activity. This is a very nice number indeed and indicates how social games can rival and in many cases exceed traditional online gambling game revenue.
These revenue numbers have not gone unnoticed by online gambling companies or other social game companies. However, the assumption that by just having a game in the Facebook social network equals millions of dollars in revenue is not the magic answer. There are many games hosted in Facebook that get little traffic and little revenue. So what is the magic behind the big social game leaders like Kabam and Zynga, what can the online gambling companies learn from them and what do gambling companies have to do to become successful social gambling companies?
Part of the answer to this question can be found in games that have natural social components outside of social networks. Poker is an obvious example and coincidentally the first game Zynga launched in Facebook that led to their dominance in the social gaming space.
The social elements that social games like poker naturally have are the following:
1.) The Game Requires Players To Engage With Each Other - This may seem obvious, however, many games that are released into the Facebook environment do not require anyone else to play the games. Many online casinos believe that they can launch a traditional slot machine into a social network and experience instant success. This is clearly not the case and a false assumption that may cost them dearly if they do not understand the social dynamics underlying the success of social games. Essentially, a social game is just that "a game that requires others to participate in the same game allowing gamers to experience a social dynamic inherent in the game".
2.) Increasing Levels Of Achievement - MMOG and role playing games such as Everquest and World of Warcraft demonstrated ealry that in addition to the requirement to engage others in play their needs to be a way to differentiate oneself from the pack by continuously reaching higher levels. In addition to the personal goal to get better achievement is a way to differentiate oneself from others and brag about ones achievements in the gaming community.
3.) Recognition - This is an important feature in Fantasy Sports where many players are as interested in recognition as they are in winning. In addition to engaging others in play a good social game has to have a mechanism to identify key important players providing them with status and recognition. There is no point in playing with other players unless you can measure each other to determine who is best at any given point. This feature creates a dialogue between players and can result in a player inviting others to play to increase awareness of their achievements.
4.) Winning And Gifting - This is an area that is growing in popularity amongst social e-commerce and social game applications and should be a natural for online gambling companies. This adds another social component to a game that encourages a player to engage another player in the game. Gifting points or buying a virtual good with point and gifting it to another player are common ways to draw players into games and to retain them with the hope of obtaining more gifts. Also, there is a tendancy to re-gift the person that gifted a player forming a bond between players and the currency used in a game.
5.) Social Communication - This is a hotly debated topic in the gambling realm because of the risk of collusion. This is a legitimate concern especially with a game like poker. However, the risks might out weight the dangers if a system can be put in place to closely monitor the interaction. In poker the chat capability is a very simple and powerful tool to encourage dialogue amongst players. In some cases social circles are started in chat rooms and move into the physical world. Adding a skype like function with added video capability could be a very power tool to grow a gaming community.
6.) Private Tournaments, Teams and Invitationals - Players like to play with people they know. Invitations and private tournaments are a great way to encourage others to play with people they know and trust. Each player will have a tendency to invite other players in their network to group privately organized events resulting in new bonds being created and new players added to the gaming platform communtiy.
7.) Number Of Associations(friends) As Status - One of the keys to the Facebook game(yes Facebook and Ebay are games in and of themselves) is the recognition that more associations mean a higher status in the community. This encourages more invites and a growth in the community. A player is compelled to add more friends and associates to to a gaming communtiy to increase their own comfort level, gain support for their choice to participate in the game community and share their experience with other people they know and respect. This should natrually happen in a gambling social network.
8.) Notifications, Invitations and Virality - Facebook and other social networks have shown that exponential growth in Facebook application adoption is fueled by notification and invitation systems. This is the key to the success of Facebook and a system that has to be part of any social game. If Facebook is not the environment you will launch in your then a notification system should be added to mimic traditional social game notification systems.
9.) More Games Means More Players - Zynga and Kabam are always releasing new games within the Facebook environment for a number of reasons. 1.) People get bored and 2.) More content means more players and potentially different demographics and 3.) More revenue. All three of these things have to happen to keep a game community fresh and to continue to increase revenue. MMOG games achieve this new experience by adding increasing complexity to their games and new features essentially resulting in new sub games emerging in the same game environment.
10.) First Mover Popular Social Games Lead To Market Dominance - Sad but true market share dominance can happen very quickly in a social gaming environment. We are all 6 degrees apart and a social game can take over a community of like mined people very quickly. This means that the first online gambling operator that succesfully launches and manages an online gambling social network will be the big winner.
11.) Community Managers And Groups - In order for a social game to work the community surrounding it has to be managed. Although some social interaction happens organically much of it has to produced, managed and stimulated based on player feedback, trends and tendencies. This is a 24 by 7 activity requiring a community leader to address issues the community is having, make suggestions to the community to determine how certain game levels may be received and to draw out special interests of the community that may lead to more social interaction. Group dynamics dictate that a communtiy manager has to be on top of the groups activites to assure that positive trends are supported and negative ones are stifulled.
12.) Multiple Monetization Methods - This may not be as much of an issue with traditional gambling. However, social game sites go a long way to introduce a multitude of monetization methods to increase overall revenue and to experiment with better ways to monetize players. In some cases a monetization method can have a a negative impact on the community. This may be a very important factor in the success(or not) of social gambling in the US. If the price point is too high for a player to get involved or to pay for prolonged periods in an online gambling activity the monetization will most certainly impact the growth of the community. Lower price points as represented by virtual currency transactions in social games have proven that smaller transactions, lead to more play which leads to more overall revenue.
13.) The Power Of Free Play - Having a competitive, low stress and fun environment to learn a game, relax and play is important for the development of new players and for maintaining players that temporarily are out of funds or want to play casually. With the exception of Party Poker, I am not sure that the exisitng gambling companies really understand how to cultivate the free to play community to their advantage. This mindset has to change if online gambling companies want to grow social gaming communites.
14.) Positioning Within Social Networks - Facebook currently does not allow for real gambling within Facebook even though it is legal in many countries. They may do the same in the US when Internet gambling becomes legal. If this is the case it is very important for online gambling companies to learn how to cultivate and communicate within social networks without hosting an online gambling operation within the Facebook environment. The reasoning is that the online gambling companies will still have to market within social networks even if their gambling operation is not allowed to operate within that environment.
15.) Player Profiling - Competition for online gamblers is and will become more intense as online gambling law becomes clearer and the US begins to open up gambling to help pay for state and federal budget deficits. This means that you will have to know your existing and potential future players very well to remain competitive. The good news is that people are providing more and more information about themselves online in the form of Twitter, Linkedin, Facebook, Google searches, mobile app downloads, etc. Leveraging this mountain of information to understand the likes and dislikes of players will be necessary to focus marketing efforts and to acquire consumers most likely to join an online gambling community. This is certainly not easy and requires special search and analysis processing to make sense out of the mountain of information collected on individuals everyday. However, competencey in this area will be key to success on social online gambling.
Clearly the need to understand the social web in the context of online gambling will be critical for the success of any Internet gambling operation. The tendency for the social graph to create monopolies quickly conceding victory to the online operator that pushes all the right social network buttons should not go unnoticed. The first mover advantage is greater now then it ever has been because of the power of the social web to communicatete and consolidate quickly. Online gambling companies should act and think like social game companies if they have an interest in being successful social Internet game operators.
Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.
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