The State of Online Gaming

Here’s the run-down on social games (particularly Facebook games) in 2010.

FarmVille usage is down twenty million monthly players. The top 5 developers and publishers are looking for ways to rely less on Facebook. No one knows if advertising is a good or bad thing, or even how to do it! However, there are ~225 million players worldwide.

Bottom line: Many believe that social gaming is a mess.

While I completely agree that there’s a lot of unfounded hype in the whole market, I disagree on one point. Anyone who says the old school dynamics will return (where downloads and ads were king) is wrong.

Money will write the ending for today’s social games market. And that ending will be the emergence of social gaming as the biggest money-maker in games.

Huh?

Well, the fact is the games market has fundamentally changed. Folks who never played games before now implicitly expect to play with their friends in a passive, non/pseudo-competitive way. They want those social hooks that only linked communities can provide. Who’s best positioned to offer that kind of game?

Facebook.

So once FB gets into the games business, they will be the one to beat. And guess who’s best positioned to be #2? Yahoo, AOL, Google and MS. Why? Because they have the eyeballs and the tools to link people together. If the big players create social titles for their services and treat them with the same priority as they do email, chat and search then they’ll make a mint.

The old-school downloads business will continue to be a tertiary way to monetize, if that. Anyone who depends on it will fade away.

Simply put, skeptics are dead-on GCLUB about how ugly things look for the social genre right now. But the result of this mess will be a market ruled by premium services, microtransactions and ads. The biz that embraces these revenue streams and rotates the largest pool of people around their games experiences will win.

Who will step up first? Google Me likely. But I anticipate they will make fundamental mistakes that only an MSN, AOL or Yahoo would anticipate. Namely, how to offer a service that isn’t siloed, but is rather a persistent presence across the service.

Yes, I’m saying the portals have a chance to own a much larger chunk of the games market because they run traditional homepages. Crazy talk, I know. And, hey, they may not step up, leaving the dollars on the table for someone else. But my guess is that Google’s move into social games will open some eyes and set off a new, segmented social market where at least one social title will exist on every site with enough visitors to convert to players.