Analysis of Zynga’s IPO seems to reveal that they’ve completely saturated the casual gamer market. User growth is flat but revenue is up. Luckily, they’ve been able to squeeze more money out of the their audience of the easily amused to make up for stalling player growth.
These stats aren’t unique to Zynga. A recent presentation from Kontagent validates this. Across the board user retention is down along with virality. However, game session lengths, user lifetime, and ARPUs are all up. You’re getting fewer users staying to play but the ones left are spending more time and money in the games they like. Unfortunately, the cost to acquire these users is rising as everyone is fighting over the same market of bored middle-aged soccer moms.
That’s why many social game developers are moving the war to a new front: the core gamer.
Companies making so-called ‘hardcore’ Facebook games such as Kabam have shown you can extract more money out of a smaller audience of fanatical players. However, the f2p PC RTS League of Legends from Riot Games is a better example of social game economies successfully applied to the core gamer space. After all, League of Legends is a game that requires you to actually play it. Whereas many of Kabam’s offerings appear to be deeper, more complex spam hamster wheels that we’ve already seen before on Facebook. (Interestingly, Kabam has recently entered the social RTS space)
This is where dinopubs such as Activision may have an edge if they can effectively apply their expertise in marketing and developing for the core market to the mobile and social space. Retail game sales have taken a dive, consoles have clearly been disrupted, and a new generation of gamers are emerging in the era of the tablet. Meanwhile, scores of Modern Warfare players are under served by throngs of Silicon Valley game developers cranking out isometric bakery simulators on a weekly basis.
The opportunity is real. Which is why big players from outside the traditional game industry are gearing up for an attack directly on the core gamer segment. There’s a chance that the collective efforts of social game developers addressing the core space may make a serious dent in Activision or THQ’s growth by the time the next generation of consoles stumble out of the gate. Instead of sticking their head in the sand, dinopubs need to scramble to meet this challenge and create new revenue streams from the next generation of core gamers.