The Coming Facebook Games Price War

Long anticipated and dreaded, Facebook is essentially going to turn off what has been effectively free banner advertising for game developers like Playfish or Zynga for a little over a year, and it’s absence will be noted. Notifications are dead. (Go here for more on this)

It seems likely (anecdotally) that the major developers are all serving at least one Notification per day to every user who has their app installed. So in Zynga’s case that may mean over 100 million notifications per day. Even with a 0.5% response rate that translates into millions of returning players.

Few remember that before Notifications existed, many Facebook games had engagement rates of perhaps 10%. This year they have been higher than 30% in some cases, and a lot of that is because of Notifications. Some of it is also because of more sophisticated game mechanisms designed to encourage repeat visits. I’d call that a 50/50 split.

So the threat is obvious: If there’s a real chance that these games could drop their engagement by as much as one third then the companies have to do something. It’s a third of their revenues walking out the door after all.

I think the primary response at first will be mass advertising to make up for the shortfall. However the smarter thing is cross promotion. Like the supermarkets, what we might well see is a kind of price war.

My business partner Alan says this is impossible: How do you compete on price for free games? And the answer is this:

“Get twice as much energy for your dollars in Mob Wars than Mafia Wars.”

“Switch from FarmVille to Country Story today and get 250 free Playfish Cash”

“If you buy more than $10 worth of currency in Mafia Wars we’ll reward you with the same in Cafe World.”

And so on.

What do you think?

Twitter: @tadhgk