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Are Facebook's costs driving away developers?
Are Facebook's costs driving away developers?
August 24, 2012 | By Eric Caoili

"Companies with aspirations to be larger publishers -- Kabam, Kixeye, even Zynga -- are moving aggressively off the Facebook platform to mobile and the open Web. Publishers aren't convinced that the costs of being on Facebook are worth it."
- Former EA Mobile head and venture investor Mitch Lasky argues that the high costs of player acquisition on Facebook are driving away some of the biggest publishers and developers from the platform.

Lasky believes Facebook is still a viable platform for independent studios, but he told the Los Angeles Times that major companies like Crowdstar dislike spending so much money on ads to acquire players for their free-to-play titles.

Add those marketing expenses to the 30 percent toll Facebook takes from all in-game sales generated through its platform, and developers can potentially lose half of their revenues to these costs.

Over the last year, many major Facebook developers have sought to diversify their offerings by launching their own platforms separate from the site, or focusing more on bringing their games to mobile devices.

Are these costs really to blame for developers placing more emphasis on non-Facebook platforms? And have Facebook's recent efforts to drive game discovery had any affect on alleviating those player acquisition costs?

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Andrew Grapsas
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Uhh... mobile user acquisition is more expensive than FB user acquisition, isn't it?

Will Hankinson
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Much more than "half" -- generally speaking, if it costs $1.00 to buy a user (it's more) you need a game that can make more than $1.42 per user to have any chance at profit (not including dev costs).

I put together a quick spreadsheet:

Assuming $1 per install, you'd have to be making $5 per user for the revenue to be 50/50.
Assuming $2 per install, you'd have to be making $10 per user for the revenue to be 50/50.

Also, this doesn't factor in the ads that FB shows alongside your game.

Considering they're now also requiring https for all apps, I'd call them decidedly unfriendly to indies.

Nicholas Bellerophon
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Our experimentation does not entirely support this hypothesis. We've been able to get $0.1 per click on Facebook, which rises slightly to get to an install. But if it's costing you $1, it's your game lead-in that's the problem, not Facebook's ad prices.

Luis Blondet
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The $0.01 per click will give you players from countries with poor economies, and thus, not likely to convert.

Michel Desjardins
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For publishers, to start on Facebook when they are small, and then, when they get bigger to partially move off the platform is a logical growth strategy. When the reach the limit of Facebook player acquisition, they need to leverage the cost down to bring additional profit.

At their stage, the overall capex cost of developing their own platform appears lower than the Facebook costs (revenue% + publicity). They will still have to spend equivalent publicity costs to attract people to their platform, but they will be saving the 30%. And reducing cost by ~30%, that would make shareholders happy.

Nicholas Bellerophon
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Not $0.01 / click... $0.10 / click. That's ten cents. And those are US customers.

Joe McGinn
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Maybe it would help if they built games with a higher than 2% monetization rate?

Jeremy Alessi
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That's never going to happen for more than a handful of games, there's too much supply.

Joe McGinn
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Not really true. Traditional game developers - you know, guys like Valve ane, the ones Zynga says don't "get" social games - have payment conversion rates 10x higher. Turns out, when you build real gameplay people pay for it. Who woulda thunk it?