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CrowdStar: Mobile, Google Platforms To Drive Social Game Growth

CrowdStar: Mobile, Google Platforms To Drive Social Game Growth

December 14, 2010 | By Eric Caoili

December 14, 2010 | By Eric Caoili
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Independent developer CrowdStar (Happy Aquarium) predicts that mobile and social platforms, such as Google's Android and Chrome, will drive the third phase of industry growth for social games.

In a conference call with analyst firm Lazard Capital Markets, CrowdStar chairman Peter Relan forecasts that mobile platforms will present "an important new distribution channel." He says Google's Android smartphone platform and Chrome browser operating system will be important channels over time.

Relan still believes Facebook offers "meaningful" and "systematic" growth for social game companies, though. He notes the social network has initiated new policies in the past two weeks designed to accelerate growth for games, like promoting viral growth through app "requests" users can send to their friends.

"We believe this move is a major step for Facebook following a year of stifling viral marketing techniques, demonstrating its commitment to games, and should immediately drive faster growth for games, in our view," says Lazard Capital Markets' Colin Sebastian.

The analyst adds that this step is essential considering the social network's implementation of Facebook Credits, its universal virtual currency (the site takes a cut from purchases with the currency): "As Facebook now collects a 30 percent toll on transactions, video games should remain a key monetization tool for the site."

CrowdStar's chairman also mentions that new customer acquisition costs are increasing for social game studios, but the number of players and the time they spend with titles continue to increase. He says conversion rates and "average revenue per user" (ARPU) remain steady, too.

Lazard Capital Markets believes "effective cost per install" (ECPI) for social game studios is still attractive, though it's more expensive than last year due to Facebook's restrictions on notification spam in March.

With these ECPI increases, the analyst group says the likelihood of big Facebook hits like FarmVille, which took advantage of now unavailable viral channels for its growth, is "significantly reduced", while future popular titles will likely have to target a specific niche.

Despite current challenges, CrowdStar, which has the second largest audience of gamers on Facebook with a total of 47 million monthly users, claims required monthly ARPUs of $1 are "easily obtainable" and can even reach $3, compared to monthly ARPUs of $0.30 to $1 a year ago on much lower ECPIs.

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