Making Money From Social Games

    Games Developer Conference Europe 2010 (GDCE) took place last week in Cologne, Germany. Social gaming was naturally one of the key topics, covered in many presentations. As most, if not all, of the games on social networks use the freemium business model (i.e. it is free to install and start playing the games), of particular interest for developers is how to generate revenue from the games.

    The revenue, or monetization, model in many of these games, is through sales of virtual goods. These can, depending on the game type and design, give you more playtime, faster recovery of energy/stamina, allow faster progression in the game – or simply provide nicer clothes and decorations. Alternatively, one can play the games for free, and invest time instead of money – typically you also need to get your friends to cooperate with you in the game. Even if not paying directly, the free players are essentially helping to keep the viral loop going on, by directly or indirectly inviting more people from their network over time to play the game.

    In her GDCE presentation Monetizing Social Games, Pauline Reader, Senior Director, International Business at Rockyou, a Facebook developer firm recently moved into social gaming, presented some ballpark figures for estimating good viral user acquisition and user re-engagement reactions on Facebook:

    • Feed posts – Three Facebook users should click on every feed post created by the app
    • Requests – Expect 70% on request (e.g. gift) accept ratio if a friend is already playing the game
    • Bookmarks – Expect 20% of Daily Active Users (DAU) to enter your application through bookmarks

    Typically a few percentages of the total users convert into paying ones, a factor which depends hugely on the game design and target audience (one can expect deeper, time-consuming strategy games to monetize better – while the audience size for those type of games is smaller). Rockyou’s view is that typically 1-3 % of one’s DAUs, or up to 5 % in some cases, pay to play. In addition to ‘real money transactions’, developers can generate revenue via various offer completion models, and potentially in-game advertising.

    Revenue is measured typically by income per daily active user (DAU), or revenue per monthly active user (MAU). Rockyou reveals that their yardstick for good monetization is around $30 USD per 1000 DAUs, or $0,03 per DAU, while best games can generate north of $100 USD / 1000 DAUs, i.e., 10 cents per DAU.

    Incidentally, Reader’s presentation is quite similar to the company’s presentation at San Francisco GDC in the spring, available on SlideShare, so peek below for more details: