Two weeks ago I had the pleasure of attending Casual Connect in Hamburg, Germany. I try to attend one or two conferences a year as a way of stimulating thoughts and new ideas. Traditionally, I’ve made a yearly pilgrimage to the O’Reilly ETech conference but as it wasn’t on this year I’ve been forced to look around. Freshly back from Casual Connect I must say that it was great to attend a conference whose focus wasn’t the web and reinforces that the games sector has lots to learn from the web industry and vice versa. Here are some of my top line thoughts:
• The casual games sector is under considerable pressure as a result of the broader structural changes in the games business.
• The largest strategic threat to the casual games sector comes from social games that are eroding both audience and revenues.
• Another threat results from the lower barriers to entry, particularly in the smartphone sector and the resultant pressure on pricing.
• One of the barriers of the casual sector reacting to these changes in the market is problem is casual publishers and developers neither have the expertise or experience to run games as a service.
• Given these problems I expect to see consolidation in the casual games sector with some of the more successful companies merging to take a large slice of a declining sector.
Despite being a conference dedicated to casual games there were many interesting discussions around social games. Here are some thoughts I thought worth mentioning:
• Although Playfish and Zynga dominate the nascent social games sector there is a network of smaller companies operating in their shadow. While not generating the revenues of the big two they are quietly profitable. These smaller companies tend to exploit Playfish and Zynga’s weaknesses in localisation and focus on Facebook publishing games on the less popular social networks.
• There was a general consensus that the social games will concentrate more on engagement (session time) rather than viral hooks in the future. As the numbers of games on social networks increase viral hooks will need to be better targeted and perhaps companies will rely on more traditional online marketing techniques.
• Recommendation has been a cheap and powerful method of user acquisition for early movers in the social games sector. However, there is concern how much recommendation the social graph can handle before users feel it’s becoming ‘spammy’.
As well as discussing social games themselves there was inevitable Facebook discussion. Many of these points have been made on other blogs but I thought the following were pretty unique:
• Facebook credits wallet will become a major digital payment platform in the next 18 months. While developers may lose c.30% to FB there is a hope that increased audiences and conversion will push profits up.
• Facebook should have the benefit of learning from some of Apple’s failings in this sector. There is an underlying developer backlash towards Apple’s App Store with many developers saying that the App store is not viable from a financial perspective.
• If Facebook does introduce its own payment platform the effect will be dramatic on the virtual goods sector. This would be akin to the introduction of a standard virtual currency allowing consumers to make comparisons across titles (e.g $1 here buys you X while $1 there buys you Y). This will inevitably price pressure into the virtual currency economy.
• Just like the App store Facebook credits will lower the barrier to publishing commercial social games. This will see an overall increase in volume of titles, competition and further downward price pressure.
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