Social Network Games: Casual Games Sector Report 2012

Social Network Games 2012 C a sual G ame s Sec tor Rep or t

What are social network games?

Social Network Games run on a Social Network.

They typically require the player be online, run embedded in the social network’s pages, and use social features as deeply integrated gameplay elements.

Social Network GAMES

The Players

social network games - average player

Female

40 years old

Social games revolutionized the western games industry.

Solitaire, Bejeweled, and Mystery Case Files attracted millions of players in the last decade. As these games migrate to social networks, mainstream consumer gameplay habits are finally fully visible.

console games - average player

Male

37 years old

U.S. social network gamers audience (in millions)

2010

57.4

2011e

69.2

77.9

2012e

Social Gaming Report 2012  Ca s ua l G a m e s A s s o c i at i o n

The Payers

Top Developers & Publishers

The name of the game is ‘free-toplay’ with most social network games using a ‘freemium’ model of distribution and monetization. A freemium game is free-to-play, but players pay to purchase optional upgrades, extra content, virtual goods, in game currency, power ups, and other premium features.

Only 1% - 5% of a social game’s audience purchase virtual items, but this source dominates most games’ revenue streams.

The top 10 content providers reach more than half of the total gaming audience on Facebook. Social Network Games require careful user research, economic tuning, and technical demands not typically encountered during casual game development.

Successful social network content providers must also deal with the additional complexity of maintaining and evolving a live service.

How Social Games are Monetized social games revenue stream

$ $ 20%

Advertising

$ $ 20% Offers

Social network games rely heavily on their big spenders, or ‘whales’.

Whales spend more than $25 per month, on average. While whales represent less than 15% of a game’s paying users, they account more than 50% of a typical game’s revenue.

Moderate paying players spend $5 - $10 per month, represent 25%-40% of the payers, and generate about 25% of the revenue.

Most payers spend only $1 - $5 a month and generate less than 15% of a game’s revenue, in aggregate.

$ $ $ $ $ $ 60% virtual Goods

Most paying users spend between $1 and $5

When examining this market, you must look beyond Monthly-Active-Users and Daily-Active-Users (MAU, DAU). In the retail market, price points are well known and monetary success is directly proportional to products sold. In the online world, with widely varied Average Revenue per User (ARPU) depending on game type, quality, and monetization technique, the audience size is not always an indication of business health. Furthermore, seemingly identical games may have very different revenue markers and player retention. This makes it very difficult for an external observer to estimate a game’s success.

Social Network GAMES

top content providers for Facebook DAU

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Zynga

46,040,192

Electronic Arts

12,367,782

wooga

7,518,000

6waves Lolapps

5,306,300

King.com

5,270,000

PeakGames

4,580,400

Playdom

3,890,330

Tetris Online

2,100,120

GSN

1,852,292

Happy Elements

1,866,700

Playtika

1,680,000

MindJolt

1,511,252

Digital Chocolate

1,306,202

DoubleDown Interactive

1,300,000

KIXEYE

1,079,000 Source: Appdata 11/16/2011

expected avg daily revenue per daily active user 1¢

5¢

Puzzle, Arcade, Caretaking, Simulations

3¢

7¢

Hidden Object, Adventure, Tournaments

5¢

10¢

RPG, Gambling, Poker For illustration purposes only as revenue varies greatly.

Social Gaming Report 2012 Ca s ua l G a m e s A s s o c i at i o n

Revenue

What the Future Holds for Social Gaming

U.S. Social Gamers Size U.S. Social Audience Gamers Audience Size Millions of Playersof Players Millions 2010 57.4 2010 57.4 2011E 69.2 2011E 69.2 2012E 82.7 2012EWill 82.7Facebook continue to dominate social gaming?

Through 2012e, the portion of social network game revenue associated with Facebook peaks as Facebook continues to push into new markets. Following 2012, Facebook’s portion begins to decrease as niche social networks expand their games offerings and developers seek out less crowded markets.

Social network games are currently experiencing exponential growth that is expected to continue through 2014, helping to fuel audience and revenue growth in the online games segment.

Worldwide (billion) 2010 2011E 2012E 2013E Worldwide (billion) 2010 Facebook Social Gaming Market (billion) 1.31 2011E 1.69 2012E 2.37 2013E 2.79 2013E Worldwide 2010 2011E 2012E Facebook Social Gaming 1.31 Non-Facebook Social Facebook Gaming Market 2.34Market 3.25 1.69 3.83 2.37 4.70 Social Market Gaming 1.31 1.69 Non-Facebook 2.34 3.25 excluding Asia 0.86 Social 1.14 Gaming 1.35 1.65 Non-Facebook Social Market Gaming Market 2.34 Asia 7.49Asia 0.86 1.14 Total 3.65 excluding 4.94 excluding 6.20 0.86 1.35 1.14 1.65 1.35 1.65 Total 3.65 4.94 6.20 7.49 Total 3.65 4.94 6.20 7.49 FB/Non-FB Revenues, worldwide (billions) FacebookFacebook Social Gaming Social Market Gaming Market Non-Facebook Social Gaming Market Non-Facebook Social Gaming Market Facebook Social Non-Facebook Social Gaming Market Gaming Market excluding Asia excluding Asia 2010 2011E 2010

2010 - 2014e

$8.64 $7.49 $6.20 $4.94 $3.65

$1.84

$2.79

2011e

2012e

$4.70 $1.69

$3.25 $3.83

$2.37

Emerging Markets Emerging markets are a key component of revenue growth in the global social network games market. Brazil and Russia are prime examples of current emerging markets for social network gaming.

Use these three attributes to evaluate if a market is ready for social network games:

$0.86

2013e

2014e

$1.14 $1.35

social gaming markets (millions)

Brazil

Russia 2010

2. Attractive social network audience

2010 $56

$100 $171

3. Existing payment systems for processing online purchases

2010 2011e 2012e 2013e

$1.65

1. High speed internet and smartphone penetration

2010

$2.34

$1.31

excluding Asia

worldwide social network gaming market (billions)

2009

Social Social Network GAMES GAMES

2012e

$110 $136

2012e

2011e

$85

2011e

Social Gaming Report 2012  Ca s ua l G a m e s A s s o c i at i o n

CHART/GRAPHIC: Brazil Social Gaming - 2012E b CHART/GRAPHIC: Brazil Social Market Gaming2010 Market 2010($, - 20

Key Terminology Freemium

Virtual Goods

Offering a game, product or service free of charge while charging a premium for advanced features, functionality, or related products and services.

In-game items or game-related services such as power-ups, premium content, or a temporary subscription that enable or enhance gameplay.

Cost per Acquisition (CPA)/ Customer Acquisition Cost

Monthly Active Users (MAU)

Cost of acquiring new customers. Calculated by by dividing the cost of a campaign by the number of new application installs attributable to that campaign.

Lifetime Value (LTV) Total amount that a player will spend with a particular game during his or her lifetime with the game.

The number of unique users that have used an application at least once over the course of a month.

Daily Active Users (DAU) The number of unique users that have used an application at least once over the course of a day.

ARPPU Average Revenue Per Paying User.

ARPU Average Revenue Per User.

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