Raja Jasti’s Blog - Renaissance Thinking

Over the last 3 years we have seen some amazing life changing innovations. Facebook has reordered the web using the social graph. Apple opened up the mobile flood gates with iphone. These two trends are changing how we live and spend our time.

Just five years ago we all thought Google owned the web and no one can take it away from them. Now they are playing catch up to Facebook and Apple in social web and mobile web respectively. It is funny how quickly things can change.

Entertainment is being reshaped by these two trends. The next frontier in  entertainment is Social Gaming. And it is just getting started.

Facebook has 500M  active users and is still growing strong. Fifty percent of FB users play games. Nearly half the time spent on social networks is spent on playing social games. American spend more time on games than email.

But we are only in the stone ages of social games. For gods sake, farmville is the state of the art in social games today.

NYT recently asked: Is Zynga the new Google? Let me put it this way. Remember Altavista?

We will see tremendous innovation in social gaming both on the web and mobile. We ain’t seen nothin yet!

In a couple years we will look back at farmville, fishville, frontierville etc. and will have a good laugh. There will be some new players making it big in the space.

Facebook now controls the social gaming platform on the web as does Apple on the mobile with its iphone & appstore.

Google has android to counter Apple. How about its counter for facebook? Google is working on a gaming social network competitor to Facebook named Google Me (they need to come up with a better name for starters).

They assigned Vic Gundothra (their former mobile head) to lead Google Me. They bought slide and made Max Levchin, a VP of Engineering. Today Google bought an obscure startup called Angstro, mainly to bring in respected web technologist Rohit Khare.

I think Google should stop messing around and acquire Hi5, a gaming focused social network and use it as a base to build Google Me. Oh, keep the name Hi5 (it is much better than google me).

It should be interesting to watch the social gaming space over the next 2 to 3 years. Strap on your seat belts. It is going to be a wild ride!

Virtual goods/gifts is the primary business model for social games. Advertising and offers are the other two means of monetization for the fast growing social gaming industry. Emarketer estimates the ad spend on social games in 2010 to be $220M.

For most social games, the primary revenue stream has not been advertising. Instead, virtual goods are dominant. However, companies such as Zynga and Playdom are realizing that their games are logical advertising destinations for marketers wanting to get the attention of rabid fans.

eMarketer expects that marketers will spend $220 million worldwide to advertise in social games and social applications in 2010, rising to $293 million in 2011. These figures do not include ads within mobile applications.

eMarketer’s estimates may end up being conservative as the social game business increases its footprint. According to Next Up Research, nearly 80% of Zynga’s revenues come from virtual goods. Even so, the large audience of games such as Zynga’s Farmville is attracting advertiser attention.

For companies such as Zynga, “Advertising will be an important part of the business model,” said Zynga CEO Mark Pincus, speaking at the Fortune Brainstorm Tech conference in July 2010. However, he added that he believed that future social game advertising types would need to be “invented” rather than being the same things advertisers have already seen.