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The Coming Facebook Games Price War
by Tadhg Kelly on 01/22/10 10:57:00 am   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

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 

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E Zachary Knight
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I can see this really messing up the marketing plans of a large number of developers for Facebook.

As a Player of Mafia Wars, Zynga already tries their hardest to force you to spam their game all over your wall. If their notifications are only being sent to an area that people can easily ignore, they will have to make some major adjustments. Zynga already had to make serious adjustments when Facebook put limits on what game developers can do with the number of Friends people can have.

I am currently in the early stages of development for a web game that I plan to integrate with Facebook and knowing this now, it will be easy to plan for it.

Kumar Daryanani
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I was talking about this with a co-worker yesterday, and we both found it surprising that Zynga, Playfish, et al don't have "Zynga Cash" (for example) that can be bought and then spent in any of their games. If you play Mafia Wars and Farmville, for example, wouldn't you be interested in having cross-game Zynga currency that you can use in all of their games? It seems like it would be a good idea, and might lead players to try out other games by the same company, since the currency works for all equally. I don't know if this would then cause problems with value incongruencies across games ($1 is 10 energy in Mafia Wars, but 20 energy in Vampire Wars, for example). I have no insight into the inner workings of these companies, but perhaps cross-game currency might be in the horizon for them.

Daniel Mafra
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Price is not necessarilly real currency, as you noted well. Price is just any outcome that can be used to adquire a service. Sea shells, old videogames cartridges, and digital money as well. But the same goes for iphone and other plataforms where being free or really low cost is almost a rule. If the big companies and their recognized titles push down their prices, every game else (and every developer else), should be forced into pushing it down, to compete, or as part of a competition. In this price war, a new good title might worth as possible as nothing or less than a dollar, or two. In free games market, like it seems to be facebook's games market, it will be a whole of sales promotions and discounts. Get more adquiring less. And so on. But things will get more competitive.

Anatoly Ropotov
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There's no such thing as cheaper in social networks.

There's no perception of pricing inside the game unless you spend weeks playing with your friends in social context. Is Restaurant City more or less expensive than Cafe World? What about Mafia Wars versus Gangster City? What about all your friends, achievements and experiences you've already obtained in the game, would they be migrated as well? No.

You could only force one community to migrate to another game if you miserably fail by not rolling out periodic updates and events (making the game boring), and doing some epic fail stuff like losing backups/doing lame backup rollbacks or messing up with security like leaking passwords.

Giving players a present like "plenty of coins" means instantly devaluing his further game play experience. Few hours later he will be frustrated by a slow progression, he will lack sense of achievement and will feel cheated in the end. He could spend all of the coins without actually taking into context their necessity - e.g. buy a lot of non-functional visual items versus perks and think how lame it was.

A similar story: One social regional social network cloned another social network with "cheaper" premise, claiming all of their presents would be twice cheaper and spammed users of competing network to hell to migrate. They've obtained 50% userbase of a bigger social network within few weeks. Presents like roses and perks like invisibility were twice cheaper. End result? Girls thought that guys were cheapskates and went back to a bigger social network as the presents had a higher value. End of story - lower revenues for social network.

Trying to cross-balance pricing with a single currency within multiple apps is really difficult due to perception of in-game cash. How do you achieve convergence across already built games without adjusting pricing and affecting millions of existing players with explanation "we didn't inflate your currency, we've proportionally multiplied it across all the titles for the sake of your convenience."

I'm currently working on balancing economies across a series of games with shared character profile and everything above came into my way, yet I'm almost done.

Daniel Mafra
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There is always price, mr. Ropotov, as there is some kind of cost. Everything has a cost to the consumer, even free games in social networks. What Tadhg Kelly appointed well was the point ahead of "price" that was the emergence of some kind of sales promotions and so quantitative incentive for players obtaining that game instead of others. If the quantitative benefits are higher against other's, so there is a deductive perception of cheaper. But currency itself, like dollars, and paying with dollars for them, doesn't exist, at least, not in this sittuation. Price concept leads to misurdestanding. Anyway, people go exchange something for finding theirselves picking up social game towards other. As Kelly noted well:

“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.”

Isn't it pricing (and sales promotion) strategy to deal with market competition of emerging free social games? Yes, of course.

Anatoly Ropotov
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Your profiles in social games are non-transferable, thus it lacks value in comparison to other MMO games, so the concept of "pricing" invested time, achievements and experience is theoretical due to difference in perception. A value of invested time for a social player is much higher than for a hardcore player that could reasonably weigh his experience.

There's no way to target paying players of other apps, there's no way to know how much they've invested so you don't know the proper price, so the entire discussion is highly hypothetical.

Using trademarks of other games in ads is illegal in certain countries, in other countries it requires a proper comparison landing page to work, and even in that case, it would be at least misleading, and even perhaps scammy, as you are unable to provide "twice as much energy" due to difference in gameplay (leveling, etc) between the games.

Providing cash for nothing in other game devalues gameplay experience of other paying players in a product. Furthermore, it opens a way for scam, such as creating accounts with cash and using it to send presents to your friends, thus devaluing gameplay experience even more.

So basically all of the points here are highly theoretical without practical implementation, and I've listed a number of reasons why it wouldn't work, even if it would be possible to target paying players of other game (which would still probably be illegal or shady), and the offer itself would be misleading.

Daniel Mafra
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The point was about defining the conceptual market structure behind the social games to foresee what could be happening today than to list specific actions toward social games and operations. From that first came the specific points, many of them you and others listed already. The raciocin of pricing and promotion, as part of understanding a marketing mix, is just a base to think it over and helply apply or understand in any other game channel and genres behavior. Anyway, points are: it already begun a competition and the companies behing these games already begun investing into quantitable benefits to the players, that behave like sales promotions, discount and so on, already listed up there. There is no directly paying into this, no real currency, just the behavior. And with that, players will come out with cheating or tricking behavior and buzzing behavior, and so on, with the proper characteristics from the media. But i am repeating myself already and the entire discussion will get into a wasteful loop soon.

What useful thing that may emerge from this whole discussion is that what can happen into Facebook new game channel may be repeated as a similar market pattern in other channels, like Iphone, for example, if not already. Such incentives from the companies to the players are there for a long time, since the consolidation of digital distributions channels.

Returning to Kelly original comment, about supermarket, i shall note that wherever and whenever you get a price war, you get commoditization, then you get your high-value game and make it go back the way: instead of being a brand (and property) that stands for a long time, you get yourselve copyied and soon sharing the mind share with a bunch of the generic games that cames after you. If that happens, then soon you get less and less consumers until being totally forgot. That's a shame, isn't it?

Placing other's ads into your social game might be a solution for acquiring capital, but Ropotov listed well the problems within. Unless the social game itself became branded and sponsored entirely by a company, like Pepsi, so it would became a social advergame. What international laws are against it and local laws, mr. Ropotov?

But the discussion was about price (as concept) war. Let not ourselves lose the focus.

Anatoly Ropotov
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Regarding laws.

In Europe I'm referring to trademark abuse (using trademark that belongs to another company).

In US, as far as I remember, you could legally compare with a competing product only if ad provides feature by feature comparison, but I might be wrong here.

Anyway, back to the point - price war is a speculation, the race is about maximizing revenues, increasing audience, tapping untapped audiences through going global and making bigger variety of products in different themes and settings to appeal broader masses. There's at least half a billion social users out there, yet the games have barely reached third of them. It's not about stealing several percents of paying players from other games, it's about tapping new audiences.

Daniel Mafra
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In the end, all discussions are speculations.

In fast growing market, that price war is what would never had to begin, but if had begun, even a bit and eclipsed by non-pricing look, devs will soon get a problem. Facebook itself has yet to grow even more and expand through globe, third-world countries, like Brazil and Middle-East and Eastern countries. Wherever they get strong competitors. But nobody wants to do such thing (price war). The ocean out there is blue and yet open to everybody and we should not care about the neighbor shark.

Damien King
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As a social games developer we've been considering the idea of an in-house currency which coul be used across any current and future title of ours. It makes sense from a consumer point of view; it would be something that would appeal to me as a player on other games and I think it would improve monetization overall. Its less risk for a consumer, because if you've purchased currency and are bored with the game you're currently on, you can always spend it within another.

I think companies have decided against doing it thus far for three reasons.

Firstly, it would be a ton of work reconfiguring databases and game code, and for publishers with many games such as Zynga that could be a big time investment.

Secondly, theres an inherent risk. It hasn't been done yet (as far as I'm aware), so a lot of the big names are looking at each other to see how it works out when somebody actually goes for it. Publishers won't want to try a different way of operating their currencies unless they know it will certainly work as well as, if not better than, their current implementations.

Finally, Zynga have stated that they like to track the performances of individual titles and reward the respective in-house teams based on those. Its easier to track if say, Mafia Wars made $50k per month and FarmVille made $100k, rather than if MW players spent 500 Zynga Cash per month as opposed to FV players spending 1000. Players may spend more on a particular game, but be more persuaded by a different title to initially buy the currency, making performance tracking difficult.

Tadhg Kelly
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I think Playfish are ahead of you on that one Damien. They have 'Playfish Cash' in all of their games (I think).