Highlights of Last Week’s Discussion Panel

If history is truly written by the winners, then last Thursday  will likely  go down in history as a pivotal discussion between a handful of social media giants.  As we mentioned on Monday’s blog, our COO Ali Moiz roped in a panel of of 2009’s biggest “winners” into an engaging  discourse on the future of the social gaming platform for 2010 at the Google headquarters in Mountain View. Included in the panel is the shrewd wisdom of well -seasoned editor Eric Eldon of  Inside Social Games .

If you’re anything like me during the State of the Union address, then you appreciate highlights in a blog to serve as a useful companion to the videotaped event. Look no further. You don’t want to miss out on the insight of these power players.

The backbone of the discussion, of course, rested on the future of monetization in the social gaming space.  Here’s a round-up of some of my favorite dismal, riveting, and sometimes optimistic insight from our panelists.

Daniel James fired up the symposium, immediately reiterating his position about the future of social gaming and monetizaton.  James’ recent post on his blog, The Flogging Will Continue seeded the topic of the discussion. James denotes,  “Customer acquisition is cheaper on Facebook than it is on the Internet …so you look at that and you say, well Facebook isn’t making any money off of this and that is absurd. From their point of view I think it’s perfectly legitimate for them to say, ‘Okay, we’d like to take some of the money here, how can we do that?'”.

He concedes,”Why shouldn’t we as game developers have to pay to access a user base?”

But all is not lost for the little guys tinkering away in their developer garage with minimal VC funding.  James asserts, “Revenue will increase this year.  But I don’t think that that means necessarily that the same gold rush circumstances that have existed previously will continue.”

Jonathan Flesher, VP of Business Development, Zynga softens the blow: “I do think in the end, games will still continue to grow on the Facebook platform and it will be a better user experience overall.”

Lisa Marino, Chief Revenue Officer of RockYou presents an interesting model to help remedy the fear of shark tank economic trends, arguing, “In general…I think the overall trend is— especially with the Facebook changes, this seems much more of a math equation and much more of an advertising game.  And I think what Facebook is doing on the credit side is an interesting alternative that really helps some of the smaller developers stay in the game and it helps to even the playing field. Because unless you’re RockYou or Zynga, where you can throw many millions of dollars at a game launch, it’s very difficult for a smaller developer to get a game off the ground. And by participating, I think, on the payments platform, you’ve got an opportunity as a smaller developer to leverage some of the distribution that Facebook’s bringing to the table as part of that overall program.”

As Daniel James strongly argues on his blog that “there just aren’t many more people left who havn’t made a FB account,”  Mark Rose, Director of Product, Payments and Platform, Playspan, counters ” Facebook has let’s say 300 to 350 million users it’s still at the end of the day it hasn’t gone completely mainstream yet.”  Rose fights with indisputable numbers as much as James sways with gut hunch.

Wilson Kriegel, VP of Business Development and Ad Sales, Outspark shares some of James’ self-dubbed “slightly apocalyptic” outlook when he warns, ” quite frankly, the cost of direct marketing will go up.  The cost of operating a business will go up.  The cost of development per game and game production development needs to increase in quality.  Ultimately it comes to the LTV is going to be the big buzz word of 2010, which is one of my predictions I guess. LTV is how you’re going to run your business…you don’t own your users. So, reality check, Facebook owns the users. You […] are just able to monetize them”.

And the little guys?

“VCs are going to stop funding a lot of the small players because they won’t be able to compete and they won’t see the ROI.”

Kriegel’s prediction isn’t completely dismal, however.  He offers valuable insight and ups the ante on the 2010  social gaming platform.  2007’s enchantment of short-lived “distractions” of super pokes will give way to the longer embrace of deeper connections through social gaming. “Right now … I believe they’re really scratching the surface on what it means to be social. I think we’ll see something that is much, much more social in social games next year that will have a huge effect on the industry.”

Quite possibly, 2010 will see gaming developers concentrate on long-term goals by evolving the quality over quickfire ways to bloat viral growth spurts. Imagine a harmonious marriage between a user-centric approach and stronger long-term relationships with investors.

Eric Eldon predicts, “I think we’re going to see another company, at least, it might not get quite as big as Zynga but it will come out of nowhere and surprise the industry”. All ears perk up in the room.  Sure. Every rep there has been a part of that.  The surprise contender from out of left field is what every developer strives for, is inspired by, or is wary of. Usually all of the above.

Eldon also touches upon the very important topic of mobile apps: “I think, a lot of mobile app developers who are building social cell games on the iPhone, Android, et cetera…I think they’ve been experimenting with virtual goods now that Apple is letting them do that more within their games.. [and] come out with the next generation of mobile games that monetizes much better with virtual goods and social features. ”

And Lisa Marino agrees. She ends this portion of the discussion with what I believe to be the most riveting and perhaps inspiring note: “Brands are now really coming online to embrace, and want to participate in, social gaming in a very big way and they want to sponsor premium experiences inside of games.”

Who’s right? Who’s wrong?

Only history will reveal.

Our very own Ali Moiz shares his own 2010 forecast on Eldon’s blog Inside Social Games.

1. Non-premium apps that generate “viral” traffic and make money largely off display ads will take a big hit as a category. There will be individual apps who figure out how to go viral, but in aggregate this category will decline at least 25% in terms of MAUs.

2. Social games will be affected as well, though not as much as 1 since they can compensate through ad-spending and a higher % of returning users. Competition will heat up since there are less free/viral users to go around. Ad spending and user acquisition rates will increase, rewarding those developers with deeper content that monetizes better.

3. Friend app invites/requests will become largely ineffective. Their proposed placement according to current FB screenshots means they will be checked as frequently by users as “Updates” currently are in the Inbox, i.e. almost never. Expect this viral channel to become ineffective compared to today.

4. Developers will spam email en-masse in desperation, resulting in that channel becoming useless and ignored. Relevant email updates will likely get drowned out by email spam generated by other apps. Already there are email providers offering to “sell” Facebook emails collected from apps. I’ve been pitched rates of $150 per 1 million verified FB emails by 3rd-party vendors. At those rates, there will be massive spam flooding the system next month via email.

5. The newsfeed will be the main viral channel left for most apps. Apps will genuinely have to push out more relevant and highly engaging content to get exposure. Current newsfeed spam methods will become less effective when everyone starts spamming the newsfeed next month.