Facebook Ate the PC Download Game Model

Over 16.4 million people played a single game (FarmVille) on Facebook yesterday. That’s 60% more daily users than the top online game portals combined based on information compiled using Quantcast.com:

Portal August Daily People in US Portal August Daily People in US
Pogo.com 5,500,000 Miniclip.com 320,000
Yahoo Games 1,100,000 Shockwave not available
MSN Games 463,000 Wildgames.com 297,000
Games.com 422,000 iWin 237,000
Big Fish Games 410,000 Wordlwinner 231,000
Addicting Games 389,000 Popcap.com 157,000
King.com 323,000 Gamehouse 124,000

Noted exceptions on this list include Oberon Media (listed at 83,000) and RealArcade (66,000) as Oberon Media manages several sites (including parts of MSN, Yahoo and Pogo) that I don’t believe are counted here and Real Arcade relies heavily on a client which quantcast can’t measure thus might understate their size.

Granted, the models for some of these sites are different (some more online play, or more download game focused), but these top portals are generating only 10 million visits per day in the US in August. To do a US-only traffic comparison, only 35.4% of Zynga traffic comes from the US (according to Alexa), which would put FarmVille at 5.6 million players. That’s still bigger than Pogo – and that’s just one game.

OK, so sure Facebook has grown into a huge games platform, with over 300 million users globally (about 95 million in the US), but the portals deliver the higher margins with their traditional $19.95 price point for download games, right?

Downward Price Pressure: From $20 to $0

A glut of games had already set off downward pressure on game prices. Big Fish Games touted a “game a day” as a major distinguishing point and as more portals began to compete, they began to offer lower prices in return for a subscription commitment. At the time, the stats showed that the average users would jump from buying 3 games to 20 games with the subscription, thus the lower prices were justified by the significant increase in volume and a recurring revenue stream.

This year the need for a subscription to get lower priced games was eliminated, first by Amazon jumping into the ring at $9.95, then Big Fish Games in mid-May allowing $6.95 purchases without any commitment, followed by Shockwave matching the $6.95 price and dropping their commitment requirements yesterday.

Even by slashing the prices by 65% to $6.95, it’s still a lot more expensive than free. As Zynga and Playfish continue to delve into more casual fare (FarmVille and Restaurant City are just spins on the popular Virtual Villagers and Fish Tycoon download sim games), users are migrating to playing free with the added benefit of playing with their friends (something few download games can do with scale because of the up-front purchase required).

To illustrate the impact of Facebook and the phenomenal growth of games like FarmVille, take a look at the daily number of users coming to Big Fish Games:

Steady growth over the last couple years, and then it drops starting at the beginning of the year. The argument for lifting the commitments in May (the red dot signifies when Big Fish Games removed the subscription commitment to get games for only $6.95) was that the low prices would open the floodgates and more users would buy. I cannot attest to the level of sales going through Big Fish Games since the change, but the number of daily users has dropped precipitously, especially in August which coincides with the growth of FarmVille and the news that between July and September Facebook grew from 250 million users to 300 million.

Transformation of a Business Model

The model change here is significant. Just as newspapers are struggling because users have shifted from the physical paper to the online version, game developers and publishers reliant on PC download games are going to continue to see users move towards more “freemium” online games that are run on the service model that Zynga and Playfish are doing. Retail stores won’t touch a PC game price of $6.99 and the retail box will go the way of the CDs which are already disappearing out of Best Buy stores. Power is shifting from the old online portals and retail stores to a more open free-for-all on Facebook.

I think anyone who follows the industry has seen this coming, but I think it’s happening faster than we expected.

11 thoughts on “Facebook Ate the PC Download Game Model”

  1. This is completely spot on. The trends in digital trends that affected music will apply. As more people are able to download games, they will push the prices down to zero. I also think the quality and ability to monetize flash games (ads, microtransations) is affecting the downloadable game market.

    Great stuff!
    Laurent Courtines
    Games.com
    http://twitter.com/gamesdotcom/

    1. Thanks! Agree with you that monetizing flash games is contributing, but the traffic at sites like MiniClip and Addicting Games had dropped dramatically over the last year and a half (both were around 1.6 million at one point). While I’m intrigued on micro transaction side, I’m not completely sold on the ad-supported model (there’s too much content, not enough advertisers wanting to take the risk, which leads publishers to take on some brand-killing lower tier ads).

      The real difference here is that social mass market games on Facebook have the ability to continually change and keep users engaged – sort of the mash up of MMOs and casual games. PC Download, Flash and iPhone games can’t really do that.

      Enjoying your

  2. Good points, Eric. In addition to your comment that “games on Facebook have the ability to continually change and keep users engaged”, the other pertinent quality that casual PC downloads don’t have is the “social” aspect. I wonder if more PC download developers integrated social actions & Facebook Connect right into the download – so you could share your scores and achievements and invite others in your Facebook network to join you right from the download – if our traditional model would become more sustainable and people would actually still purchase the games because they are no longer solo experiences. It doesn’t make sense for “social gaming” to have to be totally enclosed within a single network. All the portals would then be in even more heated competition to get the download associated with their brand to be played more/shared more/more visible – kind of like natural search rankings, but within Facebook news feeds.

    I could also see the big portals you mentioned using their fan pages to build their Facebook communities around the download games they offer via their portal. Imagine if the new Women’s Murder Club game, for example, offered ways to not only share your your findings, achievements and actions within the game to your news feed, but MSN Games got an exclusive build where users could post comments about certain mini-games or levels right to their fan page. Then other fans who visit the page see fans interacting not just with ‘MSN Games’ but with other fans playing and sharing information about a specific game in real time that is connected only to the MSN brand. Would that incentivize more downloads, and in turn purchases? What if a full-version purchase enabled you to interact more on Facebook than you can in the trial version?

    I’m sure there are some untapped possibilities in download gaming that could make it more social and developers/portals could still make money from purchases.

  3. I agree with your analysis, but I think it’s worth pointing out that Quantcast’s numbers (like compete, etc.) are thought to be ~1/3rd of the real numbers for most sites, whereas the FB DAU numbers are believe to be pretty accurate. That said, the trend is definitely there, and I think you’ll see Big Fish and others aggressively respond in the next year.

    1. Good point Daniel regarding the data from Quantcast – these are definitely estimates. I also was concerned about using August data — that’s typically the worst season for download sales as the target audience is usually on vacation or dealing with their kids on vacation — but BFG seemed to buck that trend over the last two years which made me feel more comfortable with the comparison. Site traffic also is very dependent on a game release – if a new Mystery Case Files game is launched, they are likely to see a spike.

      I agree BFG and others will move to innovate. Dana’s point above about using Facebook Connect to pass along achievements in download games is a definite short-term possibility. Some of the MMOs like the new Atari Champions Online are already doing this, although I’m seeing users turn it off because it spams the Facebook account too much.

      I think the hard part for developers though is supporting this individually and believe that there is a great market opportunity for someone to provide APIs for developers to integrate in their games, so the devs can focus on building the game (and the marketers on the messaging/content strategy) and not having to build the infrastructure from scratch.

      PS – Thank you for sharing with us all your data from March on your metrics (http://thefloggingwillcontinue.com/); it was great to get another perspective to benchmark how we were doing at Power Challenge.

  4. I wonder what percentage of Big Fish’s declining numbers are the result of increased pressure from social games and how much is from the collapse of the US economy. Not to mention, you are looking at traffic here…Big Fish rolled out two new sites (Faunasphere and Big Sea Games) in the past six months. How many of their users are on those portals rather than Big Fish proper?

    Certainly, there are people choosing to game on Facebook rather than Big Fish / Pogo / whoever. Sounds to me like casual games better start innovating their games or get their butts on Facebook.

    1. Thanks for mentioning the additional sites: BigSeaGames.com is very roughly estimated at 30 to 50K per day by quantcast while Fuanashpere.com hasn’t registered yet (which I assume would be smaller). Someone else mentioned I missed Kongregate on the list above. They came in at 157K US users per day (they have 444K Intl traffic, so a split with a bit less US than Facebook).

      No question the US economy isn’t helping a model where you have to pay to play past the one hour demo, but I would expect to see growth in the free flash game portals and MiniClip and Addicting Games are down while Kongregate is pretty flat.

  5. Great post!

    I recently posted an interesting report on monetizing Freemuim games. You can check it out here:

    http://socialmonetization.blogspot.com/2009/09/free-to-pay.html

    As with everything on the internet, things change. If you have great content, why not port?

    The key is to architect your games for portability – it takes more time up front, but their is a big pay-off in two key directions:

    1) You can build additional games more easily based on your initial “backbone” architecture.

    2) You can more easily port your games to a new platform.

    So if something replaces Facebook next month, you will still have products to sell. If a greater phone than the iphone appears, you’ll be ready.

Leave a Reply

Your email address will not be published. Required fields are marked *