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|
|Yahoo Games||1,100,000||Shockwave||not available|
|Big Fish Games||410,000||Wordlwinner||231,000|
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.