Who Killed Zynga, Facebook Gaming?

Loading...
Loading...
As Zynga loses players, Facebook is losing gamers. Who's responsible for their decline?
IHS
IHS
has released a new
Screen Digest Media Research Insight report
(via
Forbes
) regarding Facebook's gaming platform. The results are anything but positive; IHS said that after two years of growth, the number of Facebook gamers “languished in 2011.” By December 2010, somewhere around 50% of Facebook's monthly active users (MAUs) were gamers. One year later, IHS said that while the absolute quantity of gamers did not change much, the percentage of Facebook MAUs that were gamers dropped to 25%. At this rate, it won't be long before Facebook doesn't have any gamers left. But before assuming that IHS' data is the end of the world for Zynga
ZNGA
, let's examine these numbers more carefully. According to IHS' data, there was a time when half of Facebook's MAUs came to the site to play FarmVille, Mafia Wars, and other stale games. That number seems awfully high. IHS does not say how that figure was obtained, so there's no way of knowing the margin of error. Unfortunately for both Zynga and Facebook, the two companies lose regardless of the accuracy behind IHS' report. If half of Facebook's MAUs were once gamers, then it means the site lost 50% of those gamers in 12 months. That's horrible. Despite the many problems that Nintendo, Microsoft
MSFT
and Sony
SNE
have endured over the years, they have
not
incurred a 50% loss – not in one year, not in five years, not ever! The only decline that would remotely compare would be the fall of music games, which rose up and died off quickly, as fads always do within the game industry. But I've always said that the current crop of social games would turn out to be a fad as well. It seems
I was right
Loading...
Loading...
. Now if the data is wrong and there weren't that many gamers on Facebook, then that would be great news for the decline percentage, which wouldn't be as significant. But it would also mean that there weren't as many Facebook gamers to begin with, so the industry may not have been as big as we were led to believe. Either way, it's clear that social gaming does not have the brightest future – not in its current form, at least. IHS said that MAUs for Zynga declined during Q4 2011, dropping from 266 million to 225 million. “Facebook rocketed to prominence as a gaming platform in 2009 and 2010,” Steve Bailey, senior analyst for games at HIS, said in a
company release
. “However, with equal speed, the market then settled into a state of maturity in 2011, with conditions becoming markedly more challenging for game operators. While Facebook remains a worthwhile opportunity for companies able to meet these challenges, the tone of the market in 2012 will be somewhat muted compared to the optimistic outlook of the past few years.” In its report, IHS outlined a few reasons why Facebook gaming will encounter challenges in 2012:
  • “There are several reasons why Facebook gaming will encounter challenges this year.”
  • “First, the task of acquiring users has become more difficult.”
  • “With more operators vying for attention and user expectations rising, the cost of acquiring users is growing.”
  • “Expenditures for these activities are putting pressure on the lifetime value of users, so there's now far greater incentive to improve retention and monetization capabilities.”
IHS also made an interesting point that most people within the social game industry want to ignore: “As with any maturing video game marketplace, production values will also need to step up a notch.” IHS believes that Facebook needs to “implement changes to provide enhancements for its entire user base,” and I have to agree. “Even if the company has to inhibit its role as a game platform, the ultimate priority is obvious. This already happened in early 2010, when viral channels for user acquisition were dampened in order to silence the flood of near-spam that game apps were broadcasting into user activity streams.” But while IHS outlines a lot of things that are
wrong
with Facebook gaming and provides a few ways to fix it, the research firm did not dive into the core reasons behind Zynga's inevitable demise. At this time, few could blame the console manufacturers for hurting Zynga. For one thing, they are targeting an entirely different market. Second, Nintendo has been struggling ever since it launched the Nintendo 3DS. Third, no one that wants to play FarmVille is suddenly going to drop the game in favor of Call of Duty, and vice versa. But if they aren't the problem, who is? One could argue that iOS – which provides a stronger (but relatively low-cost) gaming experience – has shifted consumers away from Zynga. However, iOS has grown independently of Zynga. And we aren't seeing a spike in iOS gamers that corresponds with the decline of Zynga players. If the console makers aren't to blame, and if iOS did not have an impact on Zynga, then that could only mean one thing: Zynga is to blame. I know this might come as a shock to you considering how creative and fun Zynga games have become. (Note: that was sarcasm.) But it turns out that social game companies that rehash their content,
rip off other developers
, and offer no entertainment whatsoever are much less likely to be successful than those who produce games that are original and enjoyable.
Follow me @LouisBedigian
Loading...
Loading...
Posted In: NewsTechFacebookiOSMicrosoftNintendoNintendo 3DSSonyZynga
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...