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Analyst: As Google Amasses Social Gaming Plans, Facebook, Apple In Its Sights

Analyst: As Google Amasses Social Gaming Plans, Facebook, Apple In Its Sights

August 11, 2010 | By Leigh Alexander

August 11, 2010 | By Leigh Alexander
More: Console/PC

Google's recent moves into the social gaming arena have been widely-published and closely watched -- what opportunities does the search giant see in the world of games?

The company recently held a "Think Gaming" summit where it showed analysts its view of Google's future in the space, and while Lazard Capital Markets' Colin Sebastian says some of what he saw is under nondisclosure, he came away with some ideas of what the company hopes to gain.

First, games could drive adoption of its fledgling Google Checkout payment platform on the web and Android phones, in an arena that today is largely dominated by PayPal, the analyst says.

"We would point out that, to date, Google Checkout has seen limited success; however, the combination of Android platform growth (currently the fastest growing smartphone) and the Android Market -- the biggest current rival to the App Store (which has generated $1.3B in gross revenue to date) -- provide a key point of leverage," writes Sebastian in a new note.

"We anticipate that the Android Market could over time eclipse the App Store, as eventually the sheer numbers of the market will pull developers to the platform," he suggests. "As this happens, having the premier spot at the point of 'checkout' could prove to be a key advantage."

Google's Chrome web browser ties in too, says Sebastian. Later this year, the company will launch a Web Store for Chrome, and Sebastian explains it "is going to provide the analog of the iOS App Store (and Android Market) for web browsers."

"We expect that games will be a key component of this strategy, since online casual gaming is one of the fastest-growing sectors online ($800M in revenue in 2009)," the analyst says. "Incorporating Google Checkout in the Chrome Web Store could accelerate online game adoption by improving game discovery; a central part of the App Store's success is attributable to the centralized nature of the store."

Even for a web giant like Google, social gaming is unlikely to be an easy get -- Sebastian calls Facebook "the elephant that remains unnamed," pointing out the explosive social networking site, with its established game platform and Credits system, "looms large as a legitimate threat to Google's leadership position online, and importantly, data suggests that 40 percent of the time spent on Facebook is on gaming."

"Given Facebook's rapid rise as a display ad network (the biggest ad opportunity that Google is targeting), its launch of a search style service (Facebook Answers), and its walled-off content (not crawlable by Google), we are not surprised at the strategic focus on gaming, which could potentially undermine Facebook," Sebastian concludes. "In addition to Facebook we would also note that competitor Bing recently launched several free casual games that can be played directly within the browser."

In recent weeks, unconfirmed reports have suggested Google's made big acquisitions pertinent to social gaming -- there's the recent reported purchase of Jambool and its virtual currency payments product Social Gold for as much as $75 million. Just a bit before that, the company is believed to have paid $182 million to acquire social game and app developer Slide, signaling clear intentions to move into the space, even though the company never backed the widespread reports with official announcements.

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