categories

HOT TOPICS

Subscribe to our Feed

Social Apps vs. Social Games

Posted on Friday, Jul 10th 2009

By Guest Author Saad Fazil

After reviewing social gaming companies, I move on to RockYou and LivingSocial — two very successful companies in the social applications space — to find out more about the similarities and differences between social games and apps.

You can see from the top Facebook apps list here that although they are fundamentally different, apps and games that are popular on Facebook and other social media are generally entertainment-based rather than utility-based. What’s more, on the iPhone, one out of three apps is an entertainment app or a game. Let’s look at some specific similarities and differences.

Revenue Models

While the dominant revenue source in social gaming is micro transactions, social apps rarely rely on such transactions for their revenue. The reason is simple: micro transactions make sense in an environment in which players can be tempted to buy small virtual items (such as clothes for a character in a game) or attain higher levels. By nature of the applications, micro transactions make more sense in games. However, it is important to note that several RockYou applications such as heroworld, superpets, and speedracers can be categorized as social games, and therefore RockYou does make money from micro transactions.

A major source of revenue for social apps is, not surprisingly, advertising. RockYou creates and distributes widgets over several platforms such as Facebook, MySpace and Bebo. It has over 10 million registered users and gets over 150 million widget views from over 200 countries per day. Distributing its widgets across several platforms has allowed RockYou to monetize from creating its own ad network. Moreover, RockYou makes money from performance marketing and premium subscriptions.

LivingSocial’s strength, on the other hand, is building huge databases of books, reviews and other items. It touts more book reviews than Amazon itself, a huge achievement that owes itself to the viral nature of social networks. This allows LivingSocial to monetize referrals: if users click on a “buy book” tag while using LivingSocial, they are forwarded to Amazon, which then gives LivingSocial share of the revenue.

Marketing

Just like social gaming companies, social application companies have little or no marketing spend (this does not mean, however, that there is no opportunity cost). There are four prominent ways to market apps (or games for that matter): news feeds, notifications, friend invites, and cross-application promotions. By creating viral content and using the aforementioned ways of marketing, these companies are able to attract millions of users at a low cost.

My post on social games as well as this one on social apps demonstrate the power of social media as a marketing and distribution tool. Facebook in particular has created a very powerful platform which several companies are leveraging to sell or distribute their content. At the same time, Facebook has done an excellent job of respecting the privacy of its users: there are several privacy controls that prevent applications from spamming users.

Cross-platform development is still an issue as it requires development and even design overhead. What’s popular on Facebook might not be so popular on Bebo or a smartphone. In the social media space, OpenSocial has tried to bring down the cost of some of the cross-platform development overhead, though OpenSocial itself has been much less popular than Facebook.

Both articles also clearly spell out the opportunities for small companies and indie developers. M&A in social apps and games is picking up. If you develop an app or a game that fits well with a particular company’s portfolio, and are able to get certain number of users, selling the app to one of these strong companies would be a viable option. Social media, though attractive for new entrepreneurs, is still evolving fast. It will be interesting to see how the industry shapes up in the next few years.

Hacker News
() Comments

Featured Videos

Comments

Social media’s success can partially be attributed to the fact that social networks are like games themselves. Most of these sites are addictive like games, with goals to reach and strategies to deploy. Take Facebook for example. When you consider it from a gaming perspective, Facebook is more comparable to The Sims rather than to Super Mario. The object of the game is more to guide characters in their daily lives rather than to win at something. There’s no simple goal in sight but it is all about the process of playing. Since the site is all about the experience of keeping in touch, it has maximized customization and features to make doing so more enjoyable. On Facebook, people can poke each other, write on walls, and sent each other messages. Uploading photos, sharing videos, inviting people to events, writing notes, and posting links are all a part of Facebook’s most basic program. With these features, circles are expanded as friends of friends of friends of friends get to know each other. There is a basic entertainment factor in interacting with others, which is also why online multiplayer games such as Halo have become so popular.

Facebook is not just a social network, but a “tool [used] to facilitate the information flow between users and their compatriots, family members and professional connections,” as Steven Levy of Newsweek wrote. Its difference from other networks lays in the customizable newsfeed, which displays everything that your friends are up to—all their actions, not only the ones concerning you, show up on this RSS-like feed. The real time exchange and constant notifications are good reasons for people to check Facebook multiple times a day. This is the addictive factor that is characteristic of video games. Playing once a day is not enough, but instead, some people are compelled to spend every single waking moment on the website. This ability to attract and retain viewers is very important to a site’s success, and the more game-like a website is, the better its chances are.

Of course, game and entertainment applications on Facebook contribute to the site’s addictiveness. The sheer number of apps available is astounding and to get through them all takes a mind-boggling amount of time. Facebook has an enormous and loyal user base, so getting a few people to play your game application and then getting them to share it with a few friends means a chain reaction of success. Maybe this is where social gaming sites need to go next: focus on the community first and expand their games based on the community, rather than trying to build community with games.

Cindy Weng Friday, July 10, 2009 at 11:51 AM PT

Cindy, what are some examples of games and/or applications that leverage the community elements effectively to get themselves popular, and what are the mechanisms for doing so?

Sramana Mitra Saturday, July 11, 2009 at 3:57 PM PT

Lexulous is a Facebook application based on the game Scrabble. Its main attractive feature is that you can challenge friends to matches. Opponents take turns spelling out words and each player is notified when the other player makes his or her move. For frequent Facebook-goers, a match can be finished as quickly as in a few hours. Although it has its strongest fan base in users who already know each other, Lexulous also gives you the opportunity to play with others who you don’t know, thus expanding the community.

The same concept applies to other applications that are not games, but are instead designed to help users in some aspect of their lives.

The Promotions application allows businesses to promote and manage contests, sweepstakes, giveaways, quizzes, coupons, and more. Users are lured by the promise of freebies and while they play games made by other companies, they are being exposed to branded products. This application appeals to the general concept that everyone likes free stuff, and contest-creators make sure that winning a prize does not have impossible odds. Users will then be excited about gaining something from the app and tell their friends. Promotions relies on unintentional peer-to-peer marketing within a community to succeed.

Inside Job is another application that became popular because of its community-based operations. The app lets you search for and contact other users based on where they interviewed, worked, or are currently working. If you are looking for a job, Inside Job networks you with people in your field and gives you information about prospective employers. For those who are looking to hire, it is easy to see where prospective employees are working, where they have worked, and where they have applied. This allows for more targeted searches and better matches.

Cindy Weng Sunday, July 12, 2009 at 9:26 PM PT

Great analysis Cindy.

I am curious – can u elaborate on this further:

“Maybe this is where social gaming sites need to go next: focus on the community first and expand their games based on the community, rather than trying to build community with games.”

Isn’t this what most gaming companies are already doing? As in they are leveraging existing community on Facebook and other platforms to virally market their games. Once they have enough scale, they can then have their “own” community. For example, if you look at Playfish, their games started with Facebook, but now they have significant scale that they have a devoted community on their website. Of course, Facebook still remains the platform to reach out to those who haven’t played their games yet, or event to promote new games to existing playfish community.

Saad Fazil Sunday, July 12, 2009 at 9:40 PM PT

I should have said that this is the direction that all social gaming sites should go because there are certainly exceptional examples already. Playfish is definitely a good model of the next generation of game sites, but it still seems that a lot of other games that are available via Facebook or Twitter applications are not taking full advantage of the community that these social networking giants have to offer. For example, the Tetris Friends application for Facebook allows you to vs. friends as well as people you don’t know by seeing who can clear 40 lines the quickest, or who can get the highest score. However, what it doesn’t do is establish more meaningful communication between Tetris players. Maybe the app should develop a team battle situation where a group needs to collective do well to win. There need to be more challenges, more goals to reach, and new levels of prestigious achievement that involve community and teamwork. This way, it can spread to more users instead of just remaining within a stagnant set of players. Tetris Friends is only one of many online games that fails to reach the next degree of social involvement.

Cindy Weng Monday, July 13, 2009 at 2:41 PM PT

I would love to see more examples and analysis like the Tetris one, Cindy.

Sramana Mitra Monday, July 13, 2009 at 3:48 PM PT

I recently found another example of how people, regardless of age, love playing games. Take a look at this artcile: http://mashable.com/2009/07/13/dumbledore-twitter/

There’s been a lot of fan-based hype about the sixth Harry Potter movie that comes out tonight, but I haven’t seen as much viral advertising as there was for Transformers: Revenge of the Fallen or even the weird movie Cloverfield a couple years ago. Warner Brothers has relied on fans’ loyalty to promote the movie and it has worked for the most part! With a franchise as large as Harry Potter, it becomes self-sustaining and viral due to the sheer number of fans.

Nevertheless, people have taken it upon themselves to create games out of promoting. Like Ben Parr of Mashable writes, the Potter army is plotting to take over Twitter. “Harry Potter” has been one of the most-tweeted phrases in the past week or so, but these hardcore fans want to make their own mark on the social media world by getting everyone to tweet a specific hashtag: #dumbledore. They’ve been blogging, tweeting, and Facebooking about this scheme non-stop to spread the message. While Ben Parr doesn’t particularly care for the lovable headmaster of Hogwarts, he is willing to join in the game just to see it succeed. The Harry Potter community is thus expanding to Twitter users who aren’t as passionate about the adolescent wizard, but are still willing to play the game of taking over Twitter. Everyone wants to be a part of something big, and this is how viral advertising should work.

Cindy Weng Tuesday, July 14, 2009 at 6:25 PM PT

Just a thought: a contest is a game as well and Twitter is very helpful when it comes to promoting something. The free e-book giveaway which happened earlier this week on this site is a perfect example. Using this incentive, sramanamitra.com expanded its audience by getting users to retweet a certain message which results in their advertising of the site to their friends. However, one thing that every blog-owner wants to do is keep new viewers interested. If there’s something more to be gained, people return. The promise of giving away the second volume of a series works to a certain degree, but those who didn’t win the first drawing may be discouraged from trying again. A new tactic such as asking trivia questions or seeing who can offer the best advice on a specific topic (done via Twitter and a specific hashtag) may attract a wider audience by providing more of a challenge. Another way of making something viral is to promise something to contributors if you reach a goal number of followers. This not only gets users to retweet a message, but also encourages them to tell their friends to follow you. This builds the community surrounding a website or person, since users are more likely to look at something their friends recommend. Stronger connections are created with Twitter-to-user-to-friend interaction than just direct website-to-user communication because it becomes more personal.

Cindy Weng Friday, July 17, 2009 at 10:00 AM PT
`