Recently, we launched the Inside Network Job Board – dedicated to providing you with the best job opportunities in the Facebook Platform and social gaming ecosystem.
Listings on the Inside Network Job Board are distributed to readers of Inside Facebook and Inside Social Games through regular posts and widgets on the sites. That way, you can be sure that your open positions are being seen by the leading developers, product managers, marketers, designers, and executives in the Facebook Platform and social gaming industry today.
An update to the Facebook for iPhone app was released yesterday which fixes several crashes, clears up problems with the Places interface, and improves the developer login experience. The App Store download page for Facebook for iPhone Version 3.2.3 includes the note “Facebook Places is only available in a limited number of countries. We’re working on making this available in other countries soon.” Facebook for iPhone now has 46.3 million monthly active users, a significant percentage of Facebook’s total 150 million mobile users.
Facebook for iPhone became the only mobile app to include access to Places with its last release on August 18th, 2010. New updates to Android, Blackberry, and Palm Facebook apps don’t include the location feature. This update resolves some bugs that shipped with Places including “a problem where people would appear twice in Here Now on a Place view” and “a problem that could cause the toolbar to not be shown on a Place view.” Crashes occurring when receiving push notifications or navigating Messages have too been fixed.
The update also includes an “Improved, more streamlined login experience for developers using the Facebook SDK.” Last month Facebook updated its iOS (formerly iPhone) SDK to give developers access to the Open Graph API and OAuth 2.0.
The monthly active user counts for Facebook for iPhone was up to 107 million last month until Facebook changed the way in which it calculates application user counts. Since discounting users who merely Liked or commented on stories posted to the news feed which were generated through the app, Facebook for iPhone’s MAU has adjusted to 46.3 million, still almost one third of Facebook’s total active mobile users — and a much larger proportion of users accessing it in Apple’s App Store
Most Facebook for iPhone users won’t notice the changes made in this update, but the steady release schedule ensures the stability of the iPhone’s most popular app. The inclusion of Places on the Facebook app is a symbol of how the iPhone is mobile’s technological front-runner. If Apple can continue to offer a better set of Facebook features than its competitors, Facebook power users will see the iPhone as the clear choice amongst mobile handsets.
Facebook announced last night that ads for applications will now show users “a set of their friends that have engaged with [the] advertised application over the past 30 days”. New and existing application ads will automatically have this social content added when applicable. The addition of social content makes ads more relevant to users and should increase their click-through rates.
This is the latest move by Facebook to help third parties take advantage of user data for advertising purposes.
Earlier this month Facebook added social context metrics to its performance advertising analytics, allowing advertisers to see the number of impressions, clicks, and the click through rate of ads with social context, as well as what percentage of an ad’s total impressions included social context — for that metric, Facebook defines “social context” as “Percentage of impressions where the viewer of the ad also saw that 1 or more friends liked your Page, event, application or ad.”
The new Help Center document on Facebook Ads for Applications says “Our studies have shown that when an ad is paired with social context, users find the ad much more appealing and tend to recall the advertised brand more clearly.” It’s not clear if Facebook will also be incorporating Facebook Ads for Applications data into the metrics dashboard.
Social content about applications will only appear if the ad’s destination URL points to a http;//apps.facebook.com/… URL, meaning ads that point to tracking or redirect URLs which masks the app URL won’t have social content included. If the tracking URL is appended to the end of the app URL, such as http://apps.facebook.com/appnametest/trackingtag=?, social content will appear. Those using the bulk upload tool can use either the app’s Object ID in the “link_object_ID” field, or an appended tracking URL in the “link” field to have social content shown with their ads. We are currently waiting on a response from Facebook regarding how social content ads and metrics will be included in the Ads API.
Users can control how their names are used in ads in Account Settings -> Facebook Ads. There they’ll have the option to “Allow ads on platform pages to show my information to…” “Only my friends” or “No one”. This affects how third-party application ads can use social content. There’s also a toggle switch with the same options for “Show my social actions in Facebook Ads to…” which controls if ads shown by Facebook can include your social actions.
Extending the power of social recommendations to advertisers will strengthen Facebook’s position as a unique advertising channel. Users should see more relevant ads and learn about their friends, and advertisers should enjoy higher CTRs and more conversion-ready leads. Facebook games, which are often heavily advertised, now have a paid social distribution channel and an added incentive to penetrate different social graphs.
We’ve heard that some quiz apps enjoy much of their growth through direct invites between users, which would significantly mitigate the impact. But there are multiple quiz types, each with their own potential problems from Facebook’s changes. Friend Facts™, for instance, relies on wall posts between users to spread, a channel that Facebook said would mostly close. This may be the last week we see it on our top 20 lists.
We’ll have more analysis on the potential impacts later this morning. In the meantime, here’s the list:
Yahoo! has made an appearance this week, although its app is still basically just a set of visual bookmarks to various Yahoo properties. Its DAU is slightly higher than a month ago, but the app’s user numbers have been fairly volatile in between, so it’s hard to tell whether it’s really growing.
Windows Live Messenger, on the other hand, is definitely still growing. By DAU, it’s now the fifth-largest app on Facebook, with over five million DAU. Microsoft has millions more users who could potentially use the Facebook-instant messenger hookup, so it may not stop there.
And looking way down to number 19, it’s worth noting that Samsung Mobile is on its way up, with 2.3 million monthly actives and almost 700,000 DAU. That makes for a lower percentage of daily users than other mobile apps have still seen, but Samsung’s new Android devices are still fairly new to the market, so the numbers could change.
In the latest of Facebook’s ongoing efforts to reshape its developer platform, it is introducing big changes aimed at the most successful category of third-party applications to-date: social games and related applications.
Overall, the changes could hurt virality for many developers, even if they see increased engagement; Facebook also says that there is more help on the way to social game developers in the coming months, including a revamped infrastructure and new APIs.
Most importantly out of all the of the changes today, the company is altering how the news feed will work.
After the changes take effect, people who do not play games will no longer see news feed application stories from friends who do play games — same goes for any other third-party app. Because news feed stories were a main way that people found games in the first place, we expect app virality to decrease as a result of this change. Facebook is clear about its rationale behind this: “Tens of millions of app wall posts are deleted every day by people who find them irrelevant. By surfacing relevant stories based on usage and discovery stories based on friends, we believe we’re providing the best user experience and building lasting and long term value.”
Facebook no doubt knows about this, and it has a couple other news feed changes rolling out designed to increase user engagement with apps. A change earlier this year grouped all stories from an application into a collapsed, aggregated view — a move that many developers have complained hurt their ability to reach their users. Now, Facebook is making it so that no gaming apps have collapsed stories. Note that this benefit only applies to apps that are self-designated as “games” on the platform. So the company is policing these identifications and booting out developers who abuse the setting.
Also, Facebook is going to be introducing some new kinds of stories about games. So if at least a handful of your friends start playing a game but you don’t, you’ll see a story saying exactly that. This is intended to help maintain some virality despite the overall app story reduction. We’ll have more details on how and when this happens exactly as it becomes available.
Invites and other application requests, which Facebook said it was going to remove current access to during its developer roadmap presentation last October, are now gone from the right-hand column of the home page. Instead, they’re appearing as a line within the left-hand navigation column. This less obvious real estate should also hurt growth. Facebook is also adding a Retraction API, so that developers can present all of the requests for a user within the game UI, instead of driving users back to the requests list to accept more gifts, etc. Facebook is also loosening its policies around the copy that developers can place on action item buttons, like “Reply” or “Send Gift” – something that should make for more natural user experiences.
Finally, there are other changes coming to the left-hand side of the home page. Facebook is automatically bookmarking apps that you use, sorting them based on your usage in the last 30 days. Apps in the “More” list (not shown by default) will get a summed counter as well. It is also making the Games Dashboard somewhat more prominent in the left-hand column, showing it to all users automatically, including any new user. It is adding a new look for counters as well.
Facebook has told us that is wants to foster more social gaming growth on its platform, following its removal of third party notifications and other significant changes earlier this year. Nevertheless, today’s changes look like another viral pruning, in the eyes of many developers. The company has created an official Games team recently, though and with the infrastructure and API plans in the works, it could introduce changes that help social games grow more virally — even as it tries to make sure that this is not damaging its overall product.
We’re at Facebook headquarters for a special event, focused on changes to games. Mark Zuckerberg is on stage.
Here are our edited live notes:
5:10 We want to have as few people as possible have negative experiences. We’ve developed pretty complex infrastructure for optimizing this.
For example, the last two months we’ve had a team focused on friend requests, making amount that get sent, that don’t get accepted, go down. The number is down now 40 percent. That’s a big number, a lot of people are active with different motives.
People want to connect to who they want, hear from who they want, without having negative experiences. Unfortunately, one of the biggest drivers of negative experiences has been games. All these people who want to play games, and all these people who don’t want to play, who view it as spam. Two hundred million people or more are playing games on the site.
When you poll users, one of the top 5 things they like is games, and one of the top 5 things they don’t like is games. There have been at least 4 really meaningful large companies that have been built on games.
5:15 We have these levers for each type of content, we can see what types are most popular. We tried measuring for games. Whether we turn the feed up or down for games, we get complaints. As we’ve tried to tune, people have questioned Facebook’s commitment to games.
The goal is to give all users high-quality experiences while they’re using the site. We want to make it deeper for people who want it, and nothing for those who don’t.
Jared Morgenstern, head of the new games team on Facebook
There were three things that got me interested in games when I was a young lad. Nintendo Power magazine, the game Who Framed Roger Rabbit, the Zelda game.
Changed what he wanted — nice restaurant meal for the family — to getting more games. It worked. Got more games…. found out about video game colleges from Nintendo Power.
5:20 Shut down video games, study harder, score more goals. Studied computer science, now doing dream job.
Facebook games have a different level of interactivity…. How do you build a team? Various teams are building war rooms, taking over the office, surrounding it with people on the project, in as close a surface area as possible to maximize interaction while minimizing distractions. Lots of people. Hot, sweaty. We want the games team to be bigger than this.
Naturally we looked up, we realized there was more vertical space. Maybe we should build a loft.
5:25 We found carpenters on the team. We came in on Saturday…. we had a vision for it. A gaming-focused loft: Two-level, bi-directional… play people upstairs and downstairs so you can see people’s reactions without seeing their screens and cheating. We didn’t want to stop and eat food until we passed the point of no return. We’d recruited 5 or 6 people by this time. Got a Jack and the Box bill of $120. We had it done by 7am. Hired people.
What it means for the Facebook Games team is to have a product vision that aligns with the core company vision — empowering users to share and make the world more open and connected. Games and how they’ve been used in society are a great fit. Rules outside of every day life, let’s people bond in an environment where they don’t need to worry about things. People going to poker and bingo every week. We call it “Mario Party Happiness.”
Now, for the news.
5:30 Here’s my bookmarks yesterday, versus what you see today. Games is on top, Mafia Wars, Frontierville. Sorted roughly by the number of times you visited in the last 30 days. The way this left navigation will evolve, there will always be a core set of services on top. And the rest optimized. If they’re not serving a purpose, they should float away and die… that was a little aggressive.
Here’s my expanded list. This is what we’re going to enable. Notice that there are several counters that appear here. We think many of our users will notice the new version of bookmarks. Notice there’s on next to games, Mafia Wars. Even if you don’t make it, you still can re-engage users.
The next heading: Simplifying and strengthening behaviors. Red jewels, gray counts, requests — your eye has to do this crazy trace. You look at the red jewels, and you can see all the things that you need to do.
We’ll be removing requests from the bottom right module to the count next to games and applications on the left.
If you have request in the last several days, you’ll get this big call-out. If you get a new request in the next couple months, and you have not seen this call out, you’ll get it.
You’ll get the ability to retract requests.
We’ll let users see that they won’t be spamming all their friends. Message around being only visible to those playing games. We’ll do that automatically. For the set of users already seeing this game, we’re already trying to ensure that we’ll drive discovery.
5:35 What better way than highlighting your closest friends using it. These things have dials. We’ll dial up the stories for you, because we know you’ll care about it. A lot of these things are about what users are actually caring about.
The last: takes advantage of the degrees of freedom. Enabling viral loops. Investing in new counters, new bubbles, stronger treatments. If you want to tell users that there are four things to do in your application, you can make it clear what those things are. If there are action items, let them give a gift back. Before, this was banned by policy. We’re changing to make it possible.
You don’t want to spam users, you want better tools to reach them.
In sum:
Smarter bookmarks
Stronger counters
Requests on Game Dashboard
Targeted stream posts
Simplified policy
Partners leader Dan Rose
5:40 This process has been in the works for the last 4-6 months. We heard from developers that they wanted to know that we were really committed to games, that they were really important to us. We recognized that some of the things that we’ve done in the past that have led to less distribution, traffic, sent a signal that maybe we didn’t care. There was definitely a request that we demonstrate a commitment. No better way to show than the fact that we have an engineering team now.
The other piece was that you wanted to understand our thoughts on the canvas platform versus web. We came around to a point of view that the canvas platform is really the right place to build a games environment for users and developers. Everything about games today and in the future will be on canvas.
You wanted to be treated like a partner, so we built out a team under Ethan Beard dedicated to games and relationships with developers. You’ll have both group of advocates inside of Facebook and a channel of communication for input. This is a great example of that.
The third thing: sustainable business and economics. You want Credits plus ads to let you build a business that can grow profitable and big. You want to be able to build with engagement and virality. Hopefully you can see the commitment on our part. We know that for this to work, we need to give developers the ability to grow businesses, and make it work for users to keep coming and playing.
Shows screenshots for three users showing tons of games stories.
Changes today were an attempt to strike that balance. Tried to do something similar a few months ago — this was the news feed collapsing idea. Maybe we should remove the stories for users who don’t like it, but do include it for those who want to see it.
What we’re doing today is attempting to be more thoughtful, not using blunt instruments.
Questions:
Q: A user of your application will not be able to share a news feed with a user who is not using the application?
A, Morgenstern: Yes. Requests and discovery stories will be the channels.
Q: A number of our players play similar types of games. Will you consider opening up the news feed to show similar types of games?
A, Morgenstern: That’s in line with the overall plan. We’re not working on it now.
Q: Any thought to being able to sort news feed by content?
A, Morgenstern: Changes to the Games Dashboard. We think these changes are more impactful. There will be a wave of innovation around the games dashbaord. One thing we did test was an embedded stream, that filters content around the games you’re playing.
A, Zuckerberg: This is a set of changes that gives us a base for more improvements. The use case that people were doing most of the time is others who were having a similar experience. We may add ways to broadcast more broadly. We do a lot of testing to make sure that this balanced out to where they were before. They’re big for users, but on the net, because so many want to play, at least in terms of our testing, this is pretty neutral. That gives a pretty good base to start from, from a much healthier place.
A, Rose: You saw the mockup of discovery stories. That’s actually much more relevant than any information that they might post. The post about the game has no context, but the fact that they’re playing does. The discovery stories are going to be an important part of the user acquisition channel.
Q: Are discovery stories just the first time that users start playing?
A, Morgenstern: The first set of changes is based on someone installing and playing some amount of time that merits it… also controlled by privacy settings, like “Show this to everybody but my boss.” Surfacing interesting content based on your friends, maybe always if it’s your best friend, but balancing out to make sure news feed is relevant.
Q: Are you working on dashboard for Facebook Credits?
A, Rose: Yes, developers have to do a lot by hand now but we’re improving it.
Q: What’s the strategy on free Credits?
A, Rose: Increase the number of people who are buying virtual goods in games. A big part is growing the percentage who spend money. We’re giving Credits to make sure people can buy even if they don’t have Credits. We’ll get them used to it being fun. Then we’ll work with you to iterate on the right structure, long-term. We’ve only given Credits to those who had never spent money before.
Q: How about costs going up for developers?
A, Rose: Credits are going to help users play, give users a level of trust.
A, Zuckerberg: We’re balancing two curves: cost and ease of getting users, then also retaining them. The platform at first was all virality. Engagement was so weak. Now, people want to play games. All these changes have the effect of increasing engagement. That I think is a really important evolution for the platform. They now have the ability to stick with them for longer.
The whole “ring of fire” approach, where you always need new users — we’re trying to move way from that.
Q: Can you still target feeds to users, even if they’re not users of the app?
A, Morgenstern. If you choose someone who’s not playing, it won’t be visible to them, although I don’t think we’ve handled that error request elegantly yet. New requests redact — remove all requests for particular user based on some identifier you know. You’ll be able to see if users have ignored it.
Here’s the live feed if you’d like to watch the whole thing:
Facebook introduced Community Pages in early April as an alternative to its regular Pages, with the main differences being that Community Pages don’t have owners, and are not able to publish to users’ news feeds, post videos and provide links to other sites, and do not include the discussion tab.
While this product change is months old, the result is understandable but off-base cries of censorship today.
Facebook originally created Pages to be for public figures such as politicians, businesses, nonprofits and other official organizations, but people started using them for everything else, from their favorite TV show lines to funny one-liners, favorite cuisines, and everything else. So it added Community Pages, intending them to be for concepts that nobody owns. And it restricts Community Page functionality in order to prevent random owners of these concept Pages from spamming or otherwise taking advantage of their unwitting fans — people who Liked a Page because they thought the idea was funny, or whatever, but weren’t looking to see massive amounts of updates in their news feeds from the Page owner.
The problem is that legitimate organizations that want to use Pages for promotional purposes, as Facebook intends, sometimes end up getting forcibly converted to Community Pages. Examples of this have been occurring since April — and Facebook fairly quickly introduced a way to appeal this miscategorization, to help rectify incorrect conversions
Yet issues keep coming up, partly because of how Facebook defines “causes.” Grassroots activist Pages “Boycott Target Until They Cease Funding Anti-Gay Politics” and “Boycott BP” both had key functionality turned off recently, according to a post by political site Politico on Saturday. From the article:
As the number of Facebook members signed up for the “Boycott Target Until They Cease Funding Anti-Gay Politics” page neared 78,000 in recent days, Facebook personnel locked down portions of the page — banning new discussion threads, preventing members from posting videos and standard Web links to other sites and barring the page’s administrator from sending updates to those who signed up for the boycott.
The article doesn’t say so, but this is the exact description of a conversion from a Page to a Community Page — something that Facebook does many times on any given day, in an effort to keep the Pages product from turned into a spammer playground.
Facebook has since reconverted Boycott BP back to being a fully official Page, as its administrator noted via an update to its fans; the company explains to Politico that the Page had had its news feed access blocked due to the overly aggressive policing of an automated anti-spam system. However, the Target Page has not been officially re-enabled (although it appears functional now), and fans have created a separate Page to continue their campaign.
The thing is, according to Facebook’s own policies, both of these Pages — and all other cause-based Pages of any political or nonpolitical bent — should be Community Pages. For example, Boycott BP appears to be run by a person in Louisiana, not any celebrity or organization that Pages are intended for, so it’s not clear why the Page has been turned on (at least from a Page policy perspective).
The exact wording on Facebook’s Create a Page page says as much: “Generate support for your favorite cause or topic by creating a Community Page. If it becomes very popular (attracting thousands of fans), it will be adopted and maintained by the Facebook community.” When Facebook says “adopted and maintained by the Facebook community,” the company means that the creator will not be able to control their Page. The text goes on to cite an example of a “cause” appropriate for a Community Page topic — “recycling.”
Meanwhile, if you want to create an official Page, you’ll need to go through a verification process with Facebook.
Here’s what Facebook told us about how it handles Page definitions.
This policy is designed to reduce spam by restricting Pages that represent generic concepts and aren’t affiliated with any official entity (blog, organization, etc.) from publishing stories to people’s News Feeds. An example of the type of Page this policy was designed for is “Pizza.” We’ve found that most people who like these generic Pages do so to express an affinity, not to receive ongoing updates, and we’ve seen these Pages misuse News Feed publishing rights in the past.
We’ve listened to feedback and are evaluating the policy more closely to determine what changes we can make to allow legitimate grassroots movements to communicate effectively with their supporters, while at the same time preventing spam and other unwanted behavior.
That’s the thing. Many causes are well-organized despite not being supported by some sort of official entity. And people who Like a Page about a cause often want to be quite engaged with it: they want the ability to see status updates from the Page, and have the full range of interactions available to them.
Facebook has so far gone with the blanket policy approach of trying to designate all unofficial causes as Community Pages. Sticking with this course will lead to more instances of cause-driven Pages losing access and crying foul. The company could allow any cause-based Page to become an official Page, but there’s no simple way to do this. What is a legitimate cause? Facebook would have to decide that on a case-by-case basis, no doubt leading to more controversy.
The other option is for Facebook to create a new type of official Page, specifically for causes, maybe with an effort at verification (a form to explain your cause, or something), and then a filtering process to try to sort out which causes should be Community Pages. That option has many of the same issues, but it would also ensure the most legitimate participation, and minimize the negative stories.
Like any large company, Facebook is forming an entire ecosystem of merger and acquisition activity. While Facebook itself has been buying an increasing number of small companies, primarily for talent, the market leaders and and venture capitalists operating on or around its platform have continued to make bigger deals.
In our most recent Facebook Quarterly Review, released last week, we listed 24 significant investments and acquisitions that have taken place recently, including among Facebook rivals. Two notable events were the Hi5 funding round by Crosslink Capital and the Slide acquisition by Google, detailed below.
Hi5
In retrospect, Hi5′s $14 million funding round led by Crosslink Capital in December looks even more interesting today. Hi5 has sought to convince game developers that social gaming on Facebook will be a short-lived phenomenon because Facebook is mismanaging how the platform serves users. Yet the whole time it has been trying to turn itself from a social network into more of a social gaming platform.
Other investors also saw opportunities beyond Facebook. In the same month as the Hi5 investment, December 2009, Union Square Ventures, an early investor in Zynga, led a $3 million round into Heyzap, which specializes in cross-platform distribution for games on the web. Meanwhile, existing developers like RockYou and Zynga looked for positioning in Asia, where Facebook isn’t strong.
Despite some MAU decreases among the top five developers on Facebook, there’s no sign of Facebook failing as a gaming platform yet. But there is still room for revenue growth, and expansion to other platforms. Facebook and other sites on the broader web can coexist as social gaming destinations — in fact, Facebook’s growing influence with Connect suggests that it will continue to play a part, wherever gaming goes.
Slide
Bought for $182 million in August by Google, Slide fell far short of the $2 billion exit founder Max Levchin originally said he wanted. But the company will still play a vital role in Google’s plans to take on Facebook, with Levchin becoming a vice president of engineering.
Slide’s specialty is in social sharing and virality, the much needed human-touch that could make Google a viable competitor. With other Google investments, Slide begins to look like part of a team. Google was responsible for five of the 24 deals we counted, spending hundreds of millions of dollars and covering its bases with buys like Jambool (virtual currency) and SocialDeck (cross-platform gaming).
For now, social games companies still look reasonably pricey, due to Disney’s up-to-$750 million July acquisition of Playdom, while investors are wary of the constant changes taking place on Facebook. However, we’re still expecting to see more M&A activity in the coming quarter; Facebook is simply too large, and too fast-growing, to scare away investors for long.
The second and third quarters of 2010 saw dozens of funding and acquisition events, each noted and detailed in the Facebook Quarterly Business Review. The Facebook Quarterly Business Review provides a comprehensive overview of hundreds of individual changes and developments, from in-depth looks at the subjects mentioned to including strategy, investments, important executive appointments, competitors and acquisition activity. The Quarterly Business Review is available through Inside Facebook Gold.
With an up-to-$750 million acquisition of Playdom by Disney, an up-to-$400 million acquisition of Playfish by Electronic Arts, the acquisition of Tapulous by Disney, and hundreds of millions of dollars in venture investments, virtual goods are impacting businesses across the media landscape. Virtual goods, and the companies that create them, may be bringing the largest disruption entertainment, communication, and e-commerce infrastructure businesses have seen in years.
Inside Network is proud to announce a new original research report by Justin Smith and Charles Hudson that presents a comprehensive examination of the size and future of the virtual goods market in the United States, entitled Inside Virtual Goods: The US Virtual Goods Market 2010 – 2011. This is Inside Network’s second annual edition of the US Virtual Good Market report. It will be released on September 28, but is available for discount pre-order now.
Where will the virtual goods market go in 2011 and what are the biggest opportunities left unclaimed? How will existing players fare as Facebook continues to reshape the social gaming landscape, and larger and more sophisticated players enter the market? Inside Virtual Goods: The US Virtual Goods Market 2010 – 2011 provides deeper insight into monetization, development, and the key questions facing the space in 2011 than you’ll find anywhere else.
* Pre-order discount ends September 27, 2010. All pre-ordered reports will be delivered on September 28, 2010.
About the Report
Inside Virtual Goods is a new report researched and created specifically for entrepreneurs, investors, and analysts interested in the growth of this exciting new category of online commerce that is fueling the growth of games-as-a-service businesses. During a research phase spanning the last few months, co-authors Justin Smith and Charles Hudson have spoken with dozens of executives and entrepreneurs from all parts of the ecosystem in order to form what we believe are the most detailed estimates, analyses, and predictions for 2010 and 2011.
We focused and organized the report around the following areas:
Social Networks, Applications, and Games - The explosion of the virtual goods market on social networks is one of the biggest stories of 2010. We delve deeply into the trends, stats, key players, opportunities, and challenges facing the space this year and next.
Mobile Applications and Games – Mobile application developers that have been early adopters of the free-to-play model are now seeing significant growth in 2010. Our study breaks down the key opportunities and challenges facing this emerging space going into 2011.
Casual MMOs and Virtual Worlds - Virtual worlds and casual MMOs continue to grow as a meaningful share of the virtual goods opportunity in the United States. Our study breaks down the key drivers for success in this segment, trends in monetization and engagement, and the prospects for the future.
Hardcore MMOs and Free-to-Play Online Games – Developers in the MMO / MMORPG space have been among the earliest adopters of the free-to-play model. We explore why free-to-play MMOs are succeeding, revenue and user trends, and the key issues facing this space as we head into 2011.
Emerging Areas: Console Games and Subscription MMOs – As the virtual goods business model becomes more well understood, it is beginning to show up in new and interesting areas of the games and entertainment landscape. We highlight a few of the more promising areas where virtual goods are emerging as a promising opportunity.
Each section contains:
A brief history on the evolution and growth of this space in the US, including a description of key players.
Estimates on the size of the US virtual goods market in 2010 in that area.
A diagnosis of the key opportunities and issues facing the growth of that space, including our outlook and projections for 2011.
In addition, prior to delving more deeply into each market segment, we’ve provided an overview of the emerging payments ecosystem that is growing to serve these new businesses. Traditional e-commerce infrastructure providers only offer a partial solution, and the virtual goods payments layer is currently in a major state of flux. In the report, we describe the variety of solutions that have been brought to market to date, and the key challenges facing the industry from a payments perspective as a whole.
For more details, check out the full table of contents below.
The annual membership, which includes the report and three additional quarterly updates, is USD $2,495. Alternatively, you can obtain just this report for USD $995.
The annual subscription brings you a total of four comprehensive reports comprising months of original research. Recent reports have covered:
The Future of Social Gaming. Social games make up over half of the US virtual goods market. This report provided detailed coverage of exactly how this industry has managed to thrive, who its most valuable players are, and deeper insight into monetization, development, and customer acquisition than you’ll find anywhere else..
The Spending and Usage Patterns of the Social Gaming Audience. Who are the millions of users whose time, money, and engagement have made social games into household names and their developers into technology industry celebrities? This report presented the only independent, original research into user profiles, behaviors, and attitudes toward social games and virtual goods.
Although the report will not be released until Tuesday, September 28, we are offering a special pre-order discount for those who purchase now. The pre-order price of US $795 for this report or US $1,995 for a one-year subscription is now available until September 27.
We are looking forward to continuing to cover the evolution of the space over the coming year. We look forward to hearing from you!
Table of Contents
1. Introduction
How We Got Here: A Brief History of Virtual Goods Worldwide
Defining Terms
Registered users
Active users
Average revenue per user (ARPU)
Average revenue per paying user (ARPPU)
How do different developers manage their businesses?
Growing Virtual Goods Markets in the US
Social Networks, Applications, and Games
Casual MMOs and Virtual Worlds
Hardcore MMOs and Free to Play Games
Mobile Applications and Games
Emerging Areas: Consoles, Subscription MMOs
Methodology
2. The Virtual Goods Payments Ecosystem: An Overview
Large Payment Platforms
Mobile Payment Providers
Offer Providers
Direct Payments vs Offers
Pre-paid Cards
The Arrival of Facebook Credits
New Payment Providers
Managing Fraud
Related Companies
3. Social Networks, Applications, and Games
Introduction
The Global Rise of Facebook
The Virtual Currency Payment Ecosystem Explosion – and Migration to Facebook Credits
Increased Optimization for Virtual Goods
Social Networking Platforms Today
Facebook
MySpace
Twitter
Google
Others
Significant Changes to Facebook Platform Dynamics in 2010
Distribution & Engagement
Monetization
Social Application and Game Genres: How Do They Perform?
Role Playing Games and “Hardcore” Mini-MMOs
Simulation and City Building Games
Pet Games
Poker Games
Gifting Apps
Arcade Games
Who’s Buying Virtual Goods?
Gender Breakdown
Age Breakdown
Geographic Breakdown
How Are They Spending Money?
Item Type Breakdown
Payment Method Breakdown
Market Size Estimate
Total Number of Monthly Paying Users
Total ARPPU Per Month
Total US Virtual Goods Revenues from Social Networks in 2010
A Quick Look at Revenues for Top Social Game Developers
2011 Outlook
Growth Rate
Major Risks that Could Hamper Growth
Leading Companies
4. Casual MMOs and Virtual Worlds
Introduction
Demographic Breakdown
Gender
Age
Payments
Analyzing the Market Opportunity
ARPU
ARPPU
Market Size Estimate
2011 Outlook
Growth Rate
Key Challenges
Leading Companies
5. Free to Play MMOs / Hardcore Games
Introduction
History of free to play MMOs
Emergence of the free to play MMO market opportunity in the US
Major genres for free-to-play MMOs and hardcore games
Analyzing the Market Opportunity
Total Player Base
ARPU
ARPPU
Payment methods
2011 Outlook
Leading Companies
6. Mobile Applications and Games
Introduction
History of virtual goods model in US
Major genres for free-to-play iPhone apps and games
Analyzing the Market Opportunity
Total Player Base
ARPU
ARPPU
Payment methods
2011 Outlook
Leading Companies
7. Emerging Areas
Console Games
Subscription MMOs
8. Conclusion
Overview: 2010 Market Estimates
Looking Ahead: 2011
9. Appendix: Company Index
About the Authors
Charles Hudson
Former VP Business Development, Serious Business & Host, Virtual Goods Summit
Charles Hudson is the former VP of Business Development for Serious Business, a leading social games developer on the Facebook platform. In addition to his work at Serious Business, Charles Hudson organizes two of the leading conferences in the social gaming and free-to-play games industries, the Social Gaming Summit and Virtual Goods Summit.
Prior to Serious Business, he was formerly the Sr. Director for Business Development at Gaia Interactive, a leading online hangout for teens. Prior to Gaia, Charles worked in New Business Development at Google and focused on new partnership opportunities for early-stage products in the advertising, mobile, and e-commerce markets. Prior to joining Google, he was a Product Manager for IronPort Systems, a leading provider of anti-spam hardware appliances that was acquired by Cisco Systems for $830 million in 2007. Charles holds an MBA and BA from Stanford University.
Justin Smith
Founder, Inside Network
Justin Smith is the founder of Inside Network, the first company dedicated to providing news and market research to the Facebook platform and social gaming ecosystem. Justin leads Inside Network’s Inside Virtual Goods and AppData research and data services, and serves as co-editor of Inside Facebook and Inside Social Games.
Prior to Inside Network, he was formerly Head of Product at Watercooler, one of the leading application and game developers on the Facebook Platform. Prior to Watercooler, Justin was an early employee at Xfire, the largest social utility for gamers, which was sold to Viacom in 2006. Justin holds a degree in Computer Systems Engineering from Stanford University.
Get the Annual Membership
The annual membership, which includes the report and three additional quarterly updates, is USD $2,495. Alternatively, you can just download this report for USD $995. Although the report will not be released until Tuesday, September 28, we are offering a special pre-order discount for those who purchase now. The pre-order price of US $795 for this report or US $1,995 for a one-year subscription is now available until September 27.
Music, television and big brands ruled our list of Top 20 Facebook Pages this week, as counted by our PageData tool, which keeps track of the number of Likes added to Pages each day. There were huge official Page consolidations this week, where Facebook rolls in unofficial Pages to the official ones, which affected some Pages more than others. All in all, it took from 1.5 million down to 419,400 new Likes to make the list this week.
“The Twilight Saga” came in at number one on our list this week, not in the least because the Page added 661,400 and 648,000 new Likes on two different days, likely due to the aforementioned Page consolidation. The Page added a total of 1.5 million Likes and now counts a total of 14.2 million; nothing really going on there other than promoting the films’ stars and related merchandise.
Musicians made up most of the rest of the list, although there were some choice brands (and Megan Fox) and television shows that made our list this week, too.
In fourth was Facebook’s Page, adding 685,000 new Likes, now coming in at just under 19 million, although nothing new happened except the Rotten Tomatoes movie integration, that we saw. YouTube followed at number 5, adding 669,600 Likes to reach 13.5 million fans; the Page has promoted various YouTube videos. Levi’s came in sixth, adding 588,400 Likes to its 1.3 million total, although most of the Likes were added in a 567,400 batch on Friday. The company has been promoting its new line of jeans for curvy women via Facebook ads and on the Page.
Coca-Cola’s Page took twelfth place, adding 509,200 Likes to pass 12 million by pretty much just promoting its regular products. Megan Fox, arguably her own brand, was sixteenth and added 456,500 Likes, passing 13.5 million, by doing nothing other than posting a YouTube video of an ad she’s doing for Armani underwear. Finally for the brands, Starbucks took nineteenth place, added 422,000 Likes to sneak up on 14 million fans and has been promoting its seasonal pumpkin-flavored drinks.
There were some TV shows on the list, too.
“The Simpsons” came in seventh, adding 539,600 Likes to pass 7.4 million; the show has been promoting the upcoming season premiere on the Page. “South Park” followed at number 8, adding 535,400 Likes to come in just under 13 million total. Then there was “Family Guy” at number 11, which added 511,000 Likes to its 17.4 share of fans without even updating the Page in the past week.
To the musicians.
Eminem took the number 2 spot, adding 790,800 Likes to his 13.6 million fan base and hasn’t updated his Page in the past week. Lady Gaga was third, adding 685,400 Likes to her 18.2 million fans; she’s been promoting her next tour and organizing for the repeal of the U.S. military’s “Don’t Ask, Don’t Tell” policy. Linkin Park was ninth, adding 534,200 Likes to the 12.4 million fans, the band has been promoting appearances, its singles and album on the Page. Justin Bieber followed at number 10, adding 513,000 Likes to his 11.7 million total, mostly by engaging in conversation with his fans this week and promoting his music.
Rihanna’s Page came in at number 13, adding 505,400 Likes after passing 9 million this week; her new single is topping the charts and she’s up for some awards. Katy Perry followed at 14, adding 504,800 Likes to her 8.6 million; she’s been mostly promoting her recent award nominations. Shakira was next at 15, adding 473,200 Likes to her 8.7 million following, she started and has been promoting a world tour.
At number 17 was Michael Jackson, adding 444,500 Likes to pass 20 million followers; the Page admins have been promoting new music-related products. Lil Wayne was next at 18, adding 441,600 Likes to his 11.8 million and has been promoting a single. At 20 was DJ David Guetta, adding 419,400 Likes to his 8.8 million, mostly by promoting himself and installing a pretty cool music app on his Page.
Facebook 
In the latest of Facebook’s ongoing efforts to reshape its developer platform, it is introducing big changes aimed at the most successful category of third-party applications to-date: social games and related applications.
Facebook 
Charles Hudson
Justin Smith
