Crowdstar recently announced they are abandoning the Facebook platform to focus on mobile social games. After amazing success on iOS, they have discovered what many of us have known for years: Facebook games are dead.
In the wake of Farmville’s massive success in 2009, investment in social gaming hit a fever pitch. The Facebook audience grew to 500 million with the rising tide floating all boats. We went from “RIP Good Times” to a veritable all-you-can-snort coke buffet in the little over a year.
During this period, Facebook shut down viral channels making it more difficult to acquire ‘free’ customers and instituted a 30% tax on social gaming revenue in the form of Facebook Credits. By 2011, user growth flattened out and user acquisition costs skyrocketed as social gaming companies blew their war chests fighting over the same group of casual social gaming customers.
Apple, on the other hand, introduced In-App-Payments for free apps and created an entirely new genre of tablet games with the introduction of the iPad. News of new social gaming startups declined, but mobile gaming investments became white hot. The mobile social gaming gold rush was on.
Recent filings from Facebook show that Zynga, one of Facebook’s single biggest contributors of revenue, is now responsible for a shrinking portion of Facebook’s income. This may be due to a change of focus. New game releases on Facebook from Zynga have slowed to a trickle. Meanwhile, Zynga has been feverishly acquiring mobile startups and barking up their stock price with social gambling chatter. While some companies stubbornly cling to the Facebook platform, in most cases social gaming companies are evacuating Facebook for mobile.
Facebook can’t earn a dime off of mobile social games despite their usage of the Facebook API because mobile billing is all controlled by Apple or Google (and now Amazon). There is no place for Facebook credits in the mobile ecosystem. If you try to use any alternative payment system in an iOS app, Apple won’t approve it.
This is why Facebook is making carrier billing agreements and beefing up their HTML5 platform. They can’t get a cut of native app revenue, but can position themselves as a premier destination for HTML5 mobile browser games with Facebook Credits as the billing system.
Even if buying Facebook Credits can be made as seamless as iTunes billing, Facebook still has to fix the fact that HTML5 sucks. This is a problem that is somewhat out of their control, as HTML5 performance is affected by features in mobile browsers developed by Apple and Google.
Facebook is desperately trying to figure out mobile–spending $1 billion on Instagram is an example of this. The unstoppable shift to mobile media consumption threatens Facebook’s core revenue streams from all angles. Facebook Credits have no use in native mobile games and Facebook can’t generate much ad revenue as ads are largely non-existent in their own mobile apps. Facebook’s walled garden is under attack from another walled garden of closed mobile devices. I guess it’s karma.