A BROWSER MANIFESTO – PART 3
Social games are like a Super Bowl party or a trip to Vegas. It’s a party, and most of the people are there for social value and entertainment and are not hardcore about the football game or the gambling. Everyone loves a trip to Vegas! Among the group, however, there’s one hardcore guy who will be up late at the poker tables. He may win or lose $10,000. He’s a wolf among the sheep. This is now happening on a browser near you.
As a colleague told me, wolves go where the sheep are. The sheep are casual gamers that enjoy the fun of playing games for the social connections, but aren’t going to blow a gasket if they aren’t atop the leaderboards. Whales, or wolves in this analogy, want to be king of these worlds. It’s worth $1,000 to be a king. And if the sheep are playing casual games in the browser and on Facebook, then that is where the wolves are going to go to feed and build their kingdom.
The games need to be casual or the sheep can’t play them. But they need to offer depth and potential for mastery, so that the true gamers are challenged to exercise their gaming chops as they enjoy. Doing so allows them to feel superior to the sheep, who don’t mind; they are enjoying the socializing.To paraphrase Sagan, we’re going to have billions and billions of gamers in the browser. The games will be convenient, social and free, to maximize viral spread and trial. Virtual goods will be the best way to monetize games. When you charge a price for a game, you kill trial and viral spread. And when you have a fixed price, you lose additional money for customers that might have paid more, and you lose all the customers that would only have paid a lesser amount. For example, a console game sold in a shop for $60 cannot make more than $60, so it loses the “whale” that would have paid $1,000. It also loses the value shopper that would have paid $20 or $2. Virtual goods allow a game to collect whatever amount of money a customer can afford to spend.
What is best known about Zynga is that they have more than 200 million casual and social players on Facebook. But that enormous number is less important because those are the sheep, playing for free. What matters more is the wolves. Zynga recently divulged that they have about 7 million paying customers. What I believe is that most of their revenue comes from only 1 million of them. And if you can get 1 million players to spend $1,000 per year, you have a $1 billion business. But who is this whale that will pay $1,000 in a free game with virtual goods? He’s a formerly hardcore gamer that has bought console games in the past but has now crossed the divide to the browser because of convenience, and because that is where the sheep are, playing casual social games.
I also like to think of this as the beginning of the migration of the whales. Around the world there are 150 million homes where someone was hardcore enough about games to buy a console. Zynga would appear to have an enormous lead over competitors on Facebook, but when you think about it, they’ve likely only captured about 1% of these console gamers because the migration of the whales has just begun. There is a lot of market growth that remains up for grabs as the migration continues and as the browser moves beyond the PC to tablets, TVs and smartphones where Zynga is not strong. Enough of these core players migrate and we will have that $100 billion social/mobile market that is now forecasted. Many new and small game developers have a wide open shot at this trend.