Business Models

Although the development cycle of social games is similar to that of casual games, their business models are more aligned with MMOs. Given their origins, however, social games almost always have a free component. Beyond that, game developers are free to monetize applications as they see fit and they've been doing well with a mixture of the following business models:

• Advertising or Sponsorship
• Microtransactions: virtual currency and/or virtual goods
• Subscriptions or Premium modes

The advantages for developers for using a social network like Facebook are evident. The barriers to entry are low but the potential for profit is high. They're getting wide distribution on a trusted network and moreover, they don't need to share revenue with Facebook.

The approval for Facebook applications is quick -- something like 24 hours from submission. Ali built his first app in two weeks, but nowadays, with better graphics and production values expected, it might take three to six months for an application to go online.

Even after a game goes live, social game developers must maintain the service and answer to customers. Like MMO developers, social game developers are constantly adding content and evolving their games. Compared to MMOs, though, these iterations occur at a blistering pace.

"Facebook time is faster than normal Internet time," says Ali. "Facebook enables rapid feedback in a way that the Web never did before."

As such, clones of games run rampant, but the first mover may not have the advantage as other developers improve upon the design. The friend-trading stock market game, Friends for Sale, for instance, was preceded by Owned! and Owned! in turn was preceded by Human Pets. Mobsters, Mob Wars, and Mafia Wars are all similar takes on a RPG.

Some developers also sweeten their app's sales by appealing to users' charitable natures. (Lil) Green Patch, a top Facebook virtual pet application, purports to help save the rainforest while you tend to your garden and scare off pests.

Numerous other apps of this kind exist, some with ties to charities like the Nature Conservancy. The causes supported range from world hunger to global warming. It's unknown how much of this revenue actually goes to the charities. A few users from the IGDA Women in Games mailing list reported that by playing these games every day or by buying the game's virtual currency, they felt that they were assisting a valuable cause.

(Lil) Green Patch

Because these business models do better when there are more users, some developers had "forced invites" built into the application. If users wanted to progress in the game, then they needed to invite friends to add the application. "The days of Facebook games after the API was introduced were horrible for a lot of people," says Green, "because of the constant spamming by your friends to join some new game."

In February 2008, Facebook banned forced invites, which has led developers down creative routes to incentivize invites in game design or otherwise, use newsfeed notifications to their advantage. Both SGN and Playfish steadfastly avoid spamming, instead relying on word of mouth for their games.

Playfish is experimenting with all three business models and has been successful in monetizing these multiple revenue streams. Overall, Ali estimates that 80% of revenue for games comes from virtual currency whereas 80% of revenue for non-games comes from advertising or sponsorship.

Advertising/Sponsorship

The game developer can place interstitial ads, banner ads, video ads, links, or branded virtual items inside the game. Most advertisers are looking for an application that will integrate their brands into the game. This hasn't happened as much in games, but can with the help of 3rd party ad networks like AppSavvy, SocialMedia.com, and Cubics. Else, the game developer can sell ads or get sponsorship on its own.

Developers can also use networks like Super Rewards and Offerpal Media to receive a referral fee. In exchange for filling out offers to join NetFlix or other services, players receive virtual currency or goods. (Lil) Green Patch, for example, offers more acreage for your garden if you sign up for a number of offers.

Microtransactions

In most cases, developers use a dual currency system. In (fluff)Friends, there's munny and there's gold. Munny is earned while playing the game and can be used to purchase virtual goods to pamper your (fluff)Friend. Gold, however, is used to purchase limited edition characters, merchandise that simply isn't available to those with just munny. To obtain virtual currency like gold, players pay for it with PayPal or credit cards. Across Facebook, virtual items range in price, from $1 to $50.

As in the case with free-to-play MMOs with microtransactions, developers must be careful to keep these special items from unbalancing the game. It's important that non-paying players enjoy the game as much as paying players. For games like (fluff)Friends, it's definitely more fun with more players. Developers need to take care not to alienate non-paying players.

Subscriptions/Premium Modes

In the subscription or premium mode scenarios, players pay a monthly or yearly fee for extra modes or advantages. In Word Challenge, a player can pay for Pro Player Club membership and get more taunts, no ads, and exclusive modes of play, like Word Grid. Again, the issue here is whether or not the premium mode unbalances the game or gives subscribers an unfair advantage. In the case of Word Challenge, it doesn't.

In PackRat, though, the subscription definitely gives an advantage to XL (premium) players by giving XL players access to XL markets, double pack size, and tix, the PackRat equivalent of (fluff)Friends gold.

Although these perks are understandable because XL players want value for their subscription, it has slowed down the game considerably. With the extra pack size, XL players, whether intentionally or unintentionally, hoard cards and remove them from circulation. This was more apparent in PackRat v2.0, which has since been dismantled.

Future of Social Games

While the first generation of social games had simplistic gameplay and simplistic graphics, the second generation has upped the ante. Production values match Web games and game developers are merging the gameplay qualities of casual games, MMOGs, and virtual worlds. With Flash 10's 3D capabilities, 3D games may be coming to social networking sites soon.

"The sky's the limit," says Davis.

One day in the future, players will enjoy immersive strategy games, arcade games, casual games, RPGs, ARGs, and virtual worlds, all on a social networking site. Davis fully expects larger game publishers to join the fray and make this vision a reality.

As for indie developers, Ali, now a partner at Shotput Ventures, says, "Just do it. There are so many stories of people who are building an app for Facebook and it ends up being such a great success that they quit their day job. It's totally possible."