The recession has caught up with the video game industry, but it's done little to stop the growth of one sector: social gaming, where tens of millions of users play games such as Mafia Wars, Farm Town and Restaurant City on social networks.
Social gaming is still a small segment -- no more than $500 million at this point. But because of its popularity on sites like Facebook and MySpace, the 2-year-old category has exploded among many mainstream users who have shied away from buying games. That has made it the fastest-growing game market.
As a category, social gaming has its roots in casual gaming, where users played alone and titles cost a fee to download. Social games are designed to share with friends through existing social networks and platforms such as the iPhone.
The games don't necessarily involve real-time competition or interaction. Many are asynchronous, meaning players can check in at various points in the day. But because they tap into existing connections, they heighten the sense of camaraderie, competition and pride found in gaming.
And they're free to play, especially appealing during a recession. Developers make their money back through ads, marketing offers, and sales of virtual goods and in-game currencies.
It's a winning formula for some of the biggest social-gaming companies, most of which are based in California's Bay Area.
San Francisco's Zynga, the largest of the new social-gaming startups, was profitable just two months after launching in July 2007. Mark Pincus, Zynga's CEO, said revenue projections of $100 million for Zynga this year are conservative. His company now averages 19 million daily users and boasts 65 million active monthly users.
Pincus said social games have the potential to reach a third of the estimated 1 billion Internet users in the Western world, giving them unprecedented mainstream appeal.
"When you have low friction, low engagement and real social connections ... and it's really a mass market," Pincus said.
The key is engaging with friends in a frictionless manner, said Sebastien de Halleux, chief operating officer of San Francisco's Playfish, which has almost 40 million monthly users.
He said the social games can't compete on production values with bigger-budget titles on consoles or PCs. But their simple structure and placement on social networks make them inviting.
In many cases, players don't even think of themselves as gamers. "They might spend 30 minutes a day playing, but they'll say they're just spending time with friends on Facebook," de Halleux said.
The social-game companies are helping shape the debate on new business models for the larger video game industry. By ushering in a much larger number of players and then monetizing a fraction of them, companies like Zynga and Playfish can still make plenty of money.
Sean Phinney, vice president of business development at Mountain View's Playdom, the biggest developer on MySpace, said it's not just the "freemium" model that marks social games but also their games-as-a-service approach.
He said a typical game might launch with just 5 percent of its overall content but get daily, if not weekly, updates that enhance the game and incorporate user feedback.
"The games are continuously evolving," said Phinney.
That blend of approaches -- social, freemium, service-oriented -- convinces social-gaming leaders that it will be hard for traditional gaming companies to ramp up quickly in the space.
But some big names are wading into the social-game pool. EA released Scrabble on Facebook a year ago, while PopCap Games brought Bejeweled Blitz to the site in June. Ubisoft launched a new trivia game called TickTock on Facebook in July.
Tim Chang, a principle with Norwest Ventures Partners, said social-gaming developers and traditional game publishers can gain a lot from each other. Social-game manufacturers need to learn how to raise the quality of their titles while existing gaming companies need to understand how to incorporate social features and new business models into their games.
Chang said the nascent industry still faces its share of pitfalls, including a reliance on social-networking platforms, which can suffer a loss in popularity or can change the rules on application developers.
But Chang said the future looks incredibly bright for social gaming because it is based on people's inherent desire to have fun with friends.
"People love games," he said. "And now these mechanics have been formalized in places like Facebook so everyone can participate in the games."
Top 5 social games
Game Company Daily active users Platform
1. Farm Town SlashKey 5,652,516 Facebook
2. FarmVille Zynga 5,258,663 Facebook
3. Mafia Wars Zynga 4,231,715 Facebook
4. Pet Society Playfish 3,887,053 Facebook
5. Texas HoldEm Poker Zynga 3,138,659 Facebook
Source: DeveloperAnalytics
(E-mail Ryan Kim at rkim(at)sfchronicle.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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