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.
