It’s a classic dating story. It’s called trading up. Men and women both do it. In the case of men, it’s usually for a younger, more physically desirable woman. For women, it may be a man who is better looking and/or most often wealthier.
The story is cliché, especially here in Los Angeles. A person arrives on the scene here in L.A. with a significant other from their home town or someone they meet who is in similar circumstances. They date and things are great. Then, something changes. The big break finally arrives and all of sudden they are thrown into new circumstances that present opportunities to date people they previously weren’t able to get the time of day from. Initially, they resist advances from these new desirables, but for many, human nature eventually gets the best of them and they give in and break up with their first mate. Some sociopathic people make trading up a standard practice as they move up the career and social chain. Inevitably left behind is the jilted mate saying things like “I thought we had something special” or “I thought they really loved me.” Luckily for these jilted ex-mates usually a kind friend helps them get closure by explaining to them that the signs were there all along and that he/she was never really that into you.
Such is the case with Facebook and social games. From day one, since they met you, Facebook has been seeking to trade up on you. You’re surprised by this? You’ve spent so much money with Facebook and brought them so many new friends and engagement? How or why would they do this to you?
Well, remember Facebook was already in a serious relationship when they met you: affiliate advertisers. Oh yea, those losers who were pouring tens of millions of dollars into Facebook’s Social Ads platform. Yes, the same guys who were showing teeth whitening, weight loss, triangles and dating ads. When Facebook met you and your deep pockets, they knew they had a chance to trade up and they did. Two years on, those kinds of ads are all but gone. Affiliates can’t afford to buy traffic in the Social Ads platform thanks to your free spending ways. Understandably, from your perspective, you thought your games and Facebook were MFEO!
As you have basked in the glow of your relationship and enjoyed low cost customer acquisition and dizzying game statistics, Facebook’s own profile and business cache has been increasing too. For almost a year now, Facebook has been systematically bettering and making itself attractive to even richer, more desirable suitors. These new suitors are the big brands (Coke, P&G, McDonalds). Sorry, but no matter what your venture valuation, how many monthly average users you have or how much money you have raised, the big brands have more!
Facebook wants to be seen in the same light as these big brands. Facebook wants to be a brand only environment. The easiest way to do this is to do business with them. In this case, unfortunately for you, this means leaving your non-branded farms, quizzes, pets and islands all behind. They no longer want you around. Having you around is awkward and embarrassing with their new, smarter and richer friends. In the real world when a person doesn’t want to see you anymore, they delete you from their phone book and don’t take your calls. Analogously, Facebook has decided to make the site as uncomfortable as possible for you by limiting the viral channels that make customer acquisition costs and your whole model work. The digital version of “Don’t call me, I’ll call you.”
Of course you are going to say, major game houses are just starting to embrace social games as a business model and these changes hurt them too, right? Well, um no, not really. The difference between you and game development companies like EA, Sony, Microsoft etc. is that they have titles that are recognized and have brand equity. Their titles have been made into movies, toys and books and over time have been deemed “brand safe” by the same brand advertisers Facebook is seeking to date. Because of this, these game developers are not a slave to their revenue per MAU or LTV. If they can’t cover their customer acquisition costs with virtual goods or offer walls, it doesn’t matter, they have other revenue sources such as licensing or advertising. Facebook is “a” platform for them, not “the” platform for them.
Wiping tears, “but, but, but I bring them so much site engagement, wont they miss that?” Sniffle. No, sorry they won’t. Facebook doesn’t care about engagement so much. Never has. Facebook is developing products that make it fade into the woodwork and become the plumbing of the web. When was the last time Facebook actually released an innovative feature for users on the site? A long time. Facebook only slow follows other social networking sites like Twitter and Foursquare by adopting key features like retweets and check ins after they see there is significant interest from their user base. Facebook’s big guns on product development are mostly focused on things such as the “like” button or Facebook Credits. Engagement only matters if you are pursuing a property based strategy that involves selling integrations on your homepage and other high value areas of your site. Sorry, I know the truth hurts.
Facebook’s first major break up appears to be with Zynga. It’s a well known industry fact that Zynga spends 10’s of million with Facebook for game distribution. In the account given by @techcrunch http://tcrn.ch/boE8t5 , Facebook has allegedly threatened to shut off certain games while negotiating with Zynga. Do you really believe Facebook would jeopardize this size of customer if they didn’t already have the adequate demand in the form of brand dollars set to come into the platform? No! Of course not. They’ve been meeting and talking with brands for months. The attraction is mutual.
What is Facebook doing with Zynga then? They are trying to milk as much out of the end of the relationship as possible. With the brands already chomping at the bit to come in to the Facebook platform, this is a no lose scenario for them. Luckily for Zynga, it has an incredible base of users, great titles and is full of smart people who get it. While there may be some short term pain, Zynga games will move off of Facebook and onto its own destination site and that party will continue on in earnest and might even be better off for it
“But what about me? I’m no Zynga. I don’t have 10’s of millions of DAU. What do I do?” you ask. It seems you have a couple possible, but not necessarily mutually exclusive possibilities:
- Stay on Facebook, but accept much lower growth trajectories because you will have to live off of mainly organic traffic since customer acquisition via Social Ads will be very expensive. This may be fine for guys developing games from their garage with no overhead, no investors and psyched to make a few $1,000 per day.
- Move to other social networks. Here is a novel idea: go to MySpace and its 65M+ uniques. Yes, MySpace doesn’t have the growth of Facebook, but they want you and will work with you to make your traffic acquisition goals work. The bigger social games guys are going to have to at least try to make MySpace and other social networks work for them. The game is over on Facebook.
- Hope that Zynga creates a platform that allows third party games. Zynga platform will have 10’s of millions of users day one.
Any comforting friend usually gives someone coming off a tough break up this cliché, “Its not all your fault, it just wasn’t meant to be.” And, the cliché applies here. Remember, the Facebook applications platform never really wanted you to begin with. You were convenient and available at the time. Originally, Facebook thought business and personal productivity apps would be the mainstay of the platform, but you showed up and it was good for both of you. Who says relationships have to end in anything?
