In a report by Raptr titled; Zynga Games Rival Core Games In Total Playtime, Franchise Strength.
The report says : Everyone wants to understand how Zynga will continue to grow and engage its massive user base. Our exclusive Raptr Report sheds light on all this.
I’m not so sure it does.
The report provides details about Zynga’s users and their gaming behavior – including stats on playtime, session length and frequency, user conversion from game to game, and much more – helping to shed light on why Zynga remains top dog when it comes to social games.
You can read the Raptr Report here
(* image Source: Raptr)
Raptr report that:
Zynga’s FarmVille to CityVille conversion rate stacks up favorably against that of many core franchises.
That maybe true in percentage terms, but in business terms I don’t think this is a good thing for Zynga. For example: When a call of duty fan purchases the sequel, the chances are that he or she has already stopped playing the previous version. The core franchises don’t rely on fans paying microtransaction fees to support the games. These core franchise games are still largly retail and digital downloads of the full games. If Zynga is “converting” their users at the rate of 80 / 90% they are just transposing “Ville” fans from one title to the next. This isn’t boosting revenue as it does with core games, it is just moving the paying 3% to a new game. There isn’t any growth.
You can also say that the core franchises have a loyal fan base. They come back months even years after the original game was launched to purchase the new version. Whereas the Ville fan plays up to 8 times per day, every day and will jump to a new game as soon as it is launched. I don’t see any loyalty for the product.
To quote the report:
…it’s not just FarmVille players that are loyal; for almost any given Zynga title, between 80% and 95% of players also play another Zynga game. And they play often, like eight sessions a day on average for Ville series gamers – compared to roughly two play sessions a day for Call of Duty and Warcraft series fans. But they don’t play for all that long: 41 minutes per day for Ville gamers compared to 177 and 252 for CoD and Warcraft respectively.
(*Source: Data from Raptr.)
“For its last four games (FrontierVille, Treasure Isle, CityVille, and Empires & Allies) Zynga has pulled 90+% from its existing user base.” I see this as more of a problem for Zynga that it is a plus. If 80 to 90% of a new „Ville“ game were new players then this would be much better for the financials.
The other are that puzzles me are the user numbers and stats that are often quoted around Zynga products. Since the launch of YoVille in 2008, Zynga’s Ville games have almost doubled in average session length: from 4 Sessions to 7 . (as measured one month after launch). This Means that Zynga are now paying double the bandwidth and server time, just to retain the same core „Ville“ fans.
more than 250 million consumers playing Zynga games, 60% market share*. (*Source: HIS Screen Digest May 2011) That’s a lot of growth in service costs, but not in the number of paying players.
The industry conversion rate for a Facebook Social game is around the 3% mark. and the top 2% to 3% of loyal players are what are crucial to Zynga’s success, These are the real money spenders the “whales”.
Zynga and the competitors deliberately keep their game sessions very short. This saves on costs but also acts as a mechanism to monetize their players. The 2% are only able to extend their game play by buying virtual currency via micro transactions and then spending the in-game currency to earn more playtime. The “whales” will spend up to 120 minutes per day in game compared to 40 minutes for the average layer.
So this is the bit that never adds up to me. Zynga revenue is normally quoted as being around $500-800 million in 2010. The company just IPO’d at $900 Million ($10 per share), the company is trading at an $8 Billion valuation. If the market isn’t growing, the size of the Social games audience is around 250 million. no new money is being brought into these games. 3% will pay something. 2% (5 million) will pay a lot more.
Which means 5 million whales are all spending $100 + per month, which is not impossible. But for Zynga to grow it means the whales will either have to increase 20 – 25% a year in numbers, which is something we are not seeing. Or the current whales will have to start spending 25% more year on year for virtual goods that are part of a service. These are goods and products that have no value outside the context of the game, and can be turned off whenever the games service provider wishes. Is there really a big enough untapped market of these people to grow the industry?
Is this even sustainable? and how will these loyal 2% react when Zynga does sunset one of these popular games and they lose that $400 Farm?
Maybe we will get a little bit of insight from how Playdom’s Social City players react to its shutdown this month. Or another report gets published that can shed some new light on all this.
Until then or the end of Zynga’s financial year, I guess I will have to watch the stocks with a quizzical eye, and wonder where the FaceBook Social games industry will be in 6 months time. I will be surprised if it has grown bigger.
Update : 10/1/12 This article asks the question why the stock is dropping?
Zynga’s Stock Nosedives, Falling Nine Percent to Hit New Low
At one point today, the stock dipped as low as $7.97 a share before closing at $8 even.
At that price, it is $2 below it’s initial stock price of $10, and has lost at least 20 percent of its market value in less than a month.
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