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Facebook reported its best quarter for games, ever
Facebook reported its best quarter for games, ever
May 2, 2013 | By Kris Graft

Facebook's game business seems to be getting along just fine, despite the fact that social game giant Zynga has decreased its reliance on the social network.

Actually, Facebook's getting along better than fine. The company on Thursday recorded the highest quarterly revenues ever from social game payments.

CFO David Ebersman said in an earnings call that game payments revenue was up 12 percent for the quarter ended March 31. (He did say that a 6 percent increase reflects the best apples-to-apples comparison due to a change in revenue recognition timing.)

Total revenue from "payments and other fees" -- which includes game payments -- was $213 million. Ebersman added, "We’re pleased that Q1 represented our largest three months quarter of games revenue to date despite a 37 percent drop in year over year payments volume from our largest developer, as our other developers increased their payments volumes by almost 60 percent and we saw a record number of people playing games on Facebook."

Of course, that "largest developer" would be Zynga, which over the past year has been making moves to decrease its dependence on Facebook. Zynga recently reported a drop in players and a small profit for its most recent financial quarter.

Facebook's continued strength in the game sector lines up with what the company recently told us -- that a significant portion of Facebook's developers recorded record revenues last year. The company told us earlier this year it paid out $2 billion to game developers in 2012 and over 100 developers on Facebook generated over $1 million each.

Facebook's announcement of a record quarter for games comes just after Electronic Arts pulled some of its most popular games from the social network, including The Sims Social, Pet Society and SimCity Social. Meanwhile, Zynga recently canned The Ville, Empires & Allies and Dream Zoo.

The quarterly numbers

Overall quarterly company revenue was up 38 percent to $1.46 billion. Profits were up 7 percent to $219 million.

Daily active users: 665 million on average for March, up 26 percent
Monthly active users: 1.11 billion, up 23 percent
Mobile MAUs: 751 million, up 54 percent

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Ramin Shokrizade
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As I discuss in my 2012 "Death of the MMO" paper, in 2011 57% of all interactive media investment dollars went to social games, and 30% to mobile games (
of-the-mmo-1). I have not yet seen the 2012 numbers but would expect social to drop slightly and mobile to increase significantly. The "leftovers", like AAA development, are going to be minor scraps.

Thus you have to take these numbers with a grain of salt. If the amount of money invested in a sector doubles, and yields a 30% increase in revenues, then you are seeing multiple trends overlapping. In this case you are seeing a tremendous increase in competition in the Facebook space, even as product quality remains low. Thus despite a massive increase in investment in the space, revenues are only increasingly slightly. This still works out well for Facebook since they get first cut, but not so well for those attempting to compete in the social network games arena. This is how Facebook can claim increased revenues even as companies like Zynga and Electronic Arts are getting battered.