Hawkins: Facebook Changes Led To Higher Bar To Entry For Game Creators

Industry veteran and Digital Chocolate CEO Trip Hawkins says Facebook's recent changes to its app notification system has led to consolidation and a higher bar to entry for games. "Facebook’s changes have also shortened product lifecycles and triggered a rapid consolidation phase," says Hawkins, who founded video game publishing giant Electronic Arts. "The bar is now raised on competitive requirements like capitalization, scale and marketing." The social network implemented adjustments to its application notification several months ago designed to limit the amount of "app spam" many users complained about, which also restricted viral options that social games depended on to re-engage fans and attract new players. Many of Facebook's most popular games have lost millions of users as a result of those changes -- Hawkins says that only seven virtual economy hit social games that launched prior to 2010 have managed to keep 65 percent of peak audience size, and three of those titles are from FarmVille developer Zynga. "Only one of these seven games, Ninja Saga, is from a smaller independent developer," he notes in a recent blog post. "Most of the hits of 2009 have declined precipitously and, despite the fact that most of them are from large, well-funded companies, they are getting scant marketing support because apparently it is unprofitable to do so." As for newer titles, the Digital Chocolate CEO points out that only 17 games released in the first half of 2010 have a growing virtual goods economy and exceed 100,000 daily active players, adding that titles that don't hit those goals likely won't generate much revenue or recoup development costs. No single company published more than two of those top-tier games in 2010 -- the studios that produced two include Zynga (Treasure Isle, FrontierVille), Playdom (Social City, Verdonia), EA/Playfish (My Empire, FIFA Superstars), Digital Chocolate (Millionaire City, MMA Pro Fighter) and Crowdstar (Hello City, Zoo Paradise). Hawkins also points out that of those 17 new hits, 15 came from venture-funded companies. He says, "Literally hundreds of other companies failed to make this list... Many small contenders are now being rolled up by larger developers like Playdom and Zynga while others just fade away. A few will make new hits but for each of those, more than 100 will fail." He adds that a speedy cleanup of the social game space is underway, narrowing the sector to an oligopoly. The executive also argues that Facebook games have become a legitimate hits business like every other form of entertainment. "Shallow games and apps that rely too heavily on spamming Facebook members, games that do not monetize well (since they won’t be able to justify additional investment in either new features or marketing campaigns), and smaller companies that either cannot or will not attempt to raise capital have also been shown to be vulnerable," says Hawkins. "Conversely, while in 2009 the big story was how small developers like Slashkey established new genres like farming, the big story in 2010 is that the strong will get stronger, as evidenced by the high correlation of venture involvement and established scale with the 17 successful new games of 2010 thus far."