Social Gaming in 2009: Challenges and Opportunities

pet-society-by-playfishStartups associated with social gaming were all the funding rage in 2008. (Think SGN’s $15 million last May, for example, or the $17 million that went to Playfish in October.) And though executives with casual game startups recently told me they’re confident they’ll survive this recession, the challenges and opportunities for social games, which still primarily exist on major social networks, are considerably different. So what about the coming year worries and excites top execs in the social gaming space most?

First, the challenges: Many of the execs I contacted brought up the unpredictability of social games. For example, Charles Edward Hudson III, V-P of business development for Serious Business, noted that the majority of startups in the space are still at the mercy of the top social networks, which have a habit of suddenly changing their policies — to the detriment of third-party applications such as social games.

There’s unpredictability in competition, too. Hudson pointed out that most social network-based games are easy to produce, so established developers often find themselves competing with quickie knock-off versions of their IP. Kristian Segerstrale, CEO and co-founder of Playfish, was also concerned with how dubious fly-by-night social games might hurt the genre as a whole. “Poor quality user experiences or misleading monetization mechanisms like some of the aggressive CPA practices we’ve seen in 2008 could jeopardize the perception of social games and our growth potential as an industry,” he wrote me.

In some cases, uncertainty and opportunity are two sides of the same coin. The largest social games have millions of players, for example, but that’s still a fraction of the total user base of social networks. Mark Pincus, founder and CEO of Zynga, notes that social networks went mass market in 2008. “The biggest challenge for social gaming in the year ahead,” he told me, “will be to become useful and fun to non-gamers and to reach the mass market who have yet to embrace web gaming.”

And there will be plenty of opportunity. “We’ve seen the tip of the iceberg with Spore,” Serious Business’ Hudson told me. He was impressed by the cross-platform features of that Electronic Arts (s erts) title, predicting, “[W]e’ll see more as things like Google (s goog) FriendConnect and Facebook Connect are made available to game developers.” Shervin Pishevar, CEO of Social Gaming Network, described the social gaming space as a three-point axis of mobile, social networks and the wider web; the goal for social game developers, he told me, should be “unifying the user experience across these three axis at scale” so their products are seamlessly and consistently enjoyable from whatever platform they’re played. If they’re successful in this, the audience for social games will expand proportionately.

Serious Business’ Hudson foresees improvements in the way social game companies market for-fee services in the coming year, and with them, increased revenue. Playfish’s Segerstrale thinks the recession will boost the space’s prominence, arguing that unlike the traditional gaming industry, which still charges $60 a game, social games are generally free to play, with optional payment systems. “This will be a compelling proposition when there is a squeeze on overall consumer spending,” he said.

And Nabeel Hyatt, founder of Conduit Labs, thinks social gaming will not only be profitable, but culturally transformative: “What started as simply another name for ‘Facebook Games’ will, if we are lucky, evolve to mean games which provide social value.”

Image credit: