Why Facebook Games Must Get More Creative

In its short life, the social games industry has changed dramatically. When the industry first started taking off, a pre-launch budget of a few hundred thousand dollars was considered large, whereas today larger titles spend several million dollars in pre-launch development. Where acquiring users in developed markets once cost nickels, today they cost dollars. Revenue that used to be a composition of ads, incentive offers, and direct purchases fueled by myriad payment providers is instead now dominated by direct revenue via Facebook Credits. And viral communication channels – once the industry’s growth engine – have completely changed in the last year.

Ultimately, these changes to viral communications haveproven to be a good thing for Facebook as a platform and for social games in the long term. Users were tiring of the high-volume, low-quality, spam many apps were sending out. This fatigue was reflected in dramatically reduced viral message response rates in many apps over just a year ago. Since Facebook’s changes to user communication channels, viral response rates are now trending higher (though fewer messages are being sent out to each user per week).
Alongside all the other changes in the social game ecosystem though, the restrictions on viral communication channels has proven too much for some developers to handle. Some were not able to change their approach to development or philosophy around design, and have since gone the way of the dodo. Others adapted quickly and figured out not just how to survive, but thrive. Ultimately, the changes to user messaging on Facebook forced developers in the ecosystem to mature and begin offering higher quality experiences to users.

This evolution in the marketplace has lead to several changes in the focus and strategies of winning social game developers. Some of the biggest and most impactful changes include:

1) Deep user behavior analysis. Developers were once able to rely on an abundance of free installs from new users acquired via viral channels to offset very low user engagement lifetimes. Indeed, K-Factors exceeded 1.0 for extended periods of time in successful cases, offsetting median user engagement lifetimes that were 6 days or less for some apps. Today, the focus instead is on retention and behavior optimization of existing users. Social game developers were already pushing the envelope on analytics and business intelligence, as companies like Zynga demonstrate powerfully, but the focus has become even more intense in the past year. Each user acquired is dear, and understanding exactly what users are doing in-app, and what factors contribute to them spending more time in game, coming back day after day, sharing the game with friends, and ultimately purchasing more and more frequently is even more important than before.

2) Heavy reliance on and optimization of paid user acquisitions. Acquiring users via advertising and paid cross-promotion has been an important part of the Facebook app ecosystem since nearly day one. However, developers were previously often able to justify very broad “reach” ad buy campaigns. User acquisition costs were very low and viral install rates were quite high, often providing a 40%+ follow-on lift to user acquisition campaigns via viral channels. Today, however, efficient ad buying is often the difference between success and failure, especially for companies that did not have very large existing audiences at the time of the viral channel changes starting last year. Ad buys are now typically highly segmented, with developers and ad agencies precisely optimizing around demographic andinterest data. Bid prices vary tremendously based on the expected or demonstrated value of users from different segments, and accurately measuring the value of users from different segments in near real-time has become vital to success. This segmented, cohorted value calculus and ROI analysis is a required practice in every successful social app business today.

3) Virality deeper in the Engagement Funnel. Games and apps used to encourage users to share messages with their friends almost immediately upon joining, and as much as 3 times in the first five minutes of play thereafter. Now, apps focus much more intently on encouraging viral messaging later in the engagement funnel. Developers have discovered that when players are already loyal users, the messages they send to friends often come across as more sincere statements of interest and requests for help. We have seen a dramatic shift in the distribution of viral message events per user across their time of engagement in a game.

4) Virality as a retention tool. Viral messages used to be thought of primarily as new user acquisition tools. However, as the ecosystem has evolved, viralmessages are now used much more frequently to re-engage players and encourage them to come back to a game more often. Messages and posts from friends who play games now drive a great deal of loyalty andre-use. Indeed, developers now look at retention channels, which are the sources of traffic from returning players. Viral messages between users have increased dramatically in the retention channel mix over the past few months. As such, tools that enable precise tracking of user-to-user interactions have supplemented viral acquisition tracking.

5) Better designs for long-term engagement. Alongside all these other changes, developers have made a pretty amazing, broad transition to focusing on higher “quality” designs (as measured by retention lifetime, and play time). Rather than cranking out small apps and games that are flashes in the pan and grow via viral message spam, developers are designing for long-term app health. They focus on vitality as much as, or more than virality. Developers are paying ever more attention to precise measurements of engagement, such as session time per user per day, cohorted by date and by other factors such as demographic and location parameters. This deep digging to figure out what is and isn’t working for different types of users in an app has become a requisite science for many successful developers. Similarly, developers now precisely measure and pay even more attention to retention, both early on in player lifetimes (e.g., 1-day retention and 7-day retention) and later in player lifetimes. Events which have meaning for players and indicate significant usagethresholds, like level-ups, are measured precisely and their trends are investigated and optimized over time. The best developers not only track and attempt to optimize these metrics over time, they actively conduct experiments that attempt to improve these metrics, and rapidly iterate to drive improved performance across important user segments.

6) Driving higher purchasing per month. Developers have begun mastering the art ofvirtual economy design, by deeply instrumenting their apps with virtual itemevents and seeing how those items are purchased, as well as how they are used or consumed over time. Developers now do multivariate economy optimization. Price point testing is on the rise. The presentation of items is being actively measured and optimized, across dimensions like upsell text, item mixes, item placement and calls to action. Similarly, item ability and look experimentation and optimization ishappening in many apps. When combined, these analyses form a purchasing behavior optimization engine, all driven by robust data from real users.

7) Introduction of new genres. Facebook’s Sean Ryan recently gave a speech at Casual Connect exhorting game developers to innovate around new genres. In the past year, games have become more engaging, and developers have started to focus on introducing genres to Facebook that have been proven with casual gaming audiences in the past, such as hidden object games. While still dominant, the ecosystem is seeing a declining percentage of apps using the fast-follow, clone and own tactics of the past, with greater innovation.

Customizing the experience for different player segments. At the very bleeding edge of the space, some developers have even begun presenting different experiences to different sorts of players. For example, users who are presenting signs of low-engagement in an app might be presented with an extra “harvest” mechanic scheduled event and extra reward promise for completing it, whereas users who are determined to be high-engagement might be offered an (indirect) reward for sharing a message with their friends.

Clearly, the Facebook games ecosystem has undergone tremendous change over the past several months. Despite these shifts, virality is still extremely effective on Facebook. Studies have shown that both active and passive user-to-user communication channels are effective in increasing viral game adoption, and though Facebook has decreased the frequency with which users are presented messages from friends in apps , the relevancy of those messages has increased, increasing efficacy per message. Moreover, developers have learned to use viral messages not just for acquisition, but for precisely influencing engagement patterns, and for retaining users and groups of friends over longer periods.

Perhaps early Facebook app developers were spoiled by the easy pickings available in the early days of Facebook’s platform. Ultimately though, Facebook’s changes have been for the better, and they are even opening and re-opening some viral mechanisms, in a more thoughtful, controlled manner. Taken together, all of this makes it clear that virality is still hugely valuable and vibrant for the most effective Facebook games and apps. And, overall, Facebook as a whole is still vastly more viral than other game platforms – compare the viral effects typically garnered by Facebook games to releasing games on consoles, PC, or even standalone websites and mobile (for now).

Ultimately, Facebook’s interests are aligned with developers – they want and need developers and apps to thrive. A thriving app economy which isn’t dominated by just a handful of companies means more competition and better CPMs/CPCs for Facebook’s ads marketplace. And better games for a larger slice of the Facebook user base means higher quality experience for users and also more purchasing of virtual goods and Facebook credits.

So while the environment has changed and culled some of the weaker or less responsive and savvy developers from the social gaming herd, it has strengthened the survivors. Accordingly, for every Kabam or Kixeye that rises as the next generation social game company, hundreds of smaller studios should want to follow in their footsteps. The landscape may change rapidly, but great social game developers have constant data-driven design and optimization in their DNA at this point, and the savviest amongst them are making the most of Facebook’s unprecedented audience and user communication and monetization tools.

The entire industry is now moving toward a new paradigm: Social Gaming 2.0 is here. Expect more innovation in game mechanics, more intelligent uses of virality, deeper game play, and most importantly, gamesthat are designed and developed to be deeply social from the ground-up, well beyond the limited context of user acquisition.

Guest writer Josh Williams is president of Kontagent.

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