Selling the Farm: Virtual Goods Summit 2009

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Unless you have been living under a social media rock for the past few months, you (or if you are not willing to admit it, “someone you know”) have most likely participated in the latest sensation to hit the games industry – social gaming.  Redefining the market and shifting demographics of those traditionally associated with gaming, companies such as Zynga, Playfish, and Playdom have charged into the space by storm, and as made evident at last week’s Virtual Goods Summit 2009, are here to stay.

Uncertainty looms for the future of social gaming hits such as "FarmVille"

Uncertainty looms for the future of social gaming hits such as FarmVille

There are skeptics who believe social gaming could potentially just be a current trend.  With simple gameplay mechanics and questionable depth, maintaining active users beyond a few months could pose a challenge to even the most successful of social gaming companies currently finding success in the casual market. A potentially more dangerous threat to such companies lies within questionable corporate practices, which has led to some recent backlash as exposed last week by TechCrunch’s Michael Arrington:

“In short, these games try to get people to pay cash for in game currency so they can level up faster and have a better overall experience. Which is fine. But for users who won’t pay cash, a wide variety of “offers” are available where they can get in-game currency in exchange for lead gen-type offers. Most of these offers are bad for consumers because it confusingly gets them to pay far more for in-game currency than if they just paid cash (there are notable exceptions, but the scammy stuff tends to crowd out the legitimate offers). And it’s also bad for legitimate advertisers.”

Despite attempts to clear up this controversy by Zynga CEO Marc Pincus, clearly, the future success of social games in their current state is still somewhat nebulous. If there was one key takeaway from the Virtual Goods Summit, it was that the longevity of social games will rely not so much on monetization schemes, but more importantly, an emphasis on quality gameplay.

Companies such as Zynga have seen massive revenue generation through the sale of in-game items and by encouraging players to level up by spending real world currency to unlock a deeper gaming experience.  This model has clearly worked in the short-term, but across the board, the messaging that came through at the VGS continually emphasized that building a deep and engaging gaming experience first (and focusing on means for monetization second) would be the real driver of success for the future of social games.

When the gameplay experience is engaging enough to keep players hooked, players are more likely to integrate themselves within the universe of a particular social game. In effect, these “consumers” are more willing to spend money on virtual goods. After all, virtual goods offer perhaps the ultimate form of self-expression for players in the virtual gaming space.  Virtual goods offer the player a chance to customize their experience.  In addition, these items allow players to “show-off” in a virtual space, essentially presenting in-game leveling up and achievements to peers.  Players have quickly adapted to the micro-transaction models presented in current hits such as FarmVille.  But to ensure revenue generation in the long-run, social games will need to offer players more and go beyond point and click action and simple, user-friendly interfaces.

Traditional gamers who have been playing videogames for years understand that retaining a user’s attention relies on factors such as quality gameplay mechanics, engrossing narratives, and a vibrant, active community to engage others in.  It is hard to argue that the current leaders in the social gaming space have more than effectively incorporated the viral nature of Facebook, MySpace, and other social networks into current gameplay.  But in order to keep the farms thriving, a deeper, refined gameplay experience might very well be necessary to maintain these social gaming “cash cows.”

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