Gamers on Social Networks... a Whole Goddamn Lot, Too

I recently touched on the idea of the "give it away free" business model when it comes to video games in a post about World of Goo's temporary offer of "pay what you can." While it's quite rare for traditional videogames (PC or console alike) to adopt this strategy, there is actually quite a large precedent for "play for free" videogames, especially online games.

And I'm not just talking about Text Twist or some dodgy online pool game. I'm talking about games that people play, often without even associating them with videogames. Even the most stereotypically anti-geek, mainstream, Gossip-Girl loving individual might spend hours a day fiddling around with these games.

But enough with the cheesy suspense: I'm talking about Facebook. On Thursday USA Today reported that Farmville, a game which will celebrate it's four month anniversary this October, has 56 million unique players monthly, and something like 20 million unique players daily.

Atul Bagga, a gaming analyst at market researcher Think Equity, expects the $500 million to $600 million social-gaming slice of the online market to at least double, to $1 billion, in 2010.

And where, oh where, does that money come from? After all, downloading the application and running it -- playing the game itself -- is free. The answer comes from two main streams of revenue. The first is micro-transactions. While you aren't paying a monthly subscription fee (like you would pay to play World of Warcraft, or what you pay to access Xbox Live's full services), you might, from time to time, spend a dollar here or there (on particular farming tools in Farmville, for example). The games don't necessarily nickle-and-dime you to death, because most of the experience is free. However, all that pocket change certainly adds up.

The other revenue stream comes from advertisers.

Meanwhile, advertisers are gravitating to the popular social-gaming sections of social networks to reach tens of millions of consumers.

"It's attractive real estate," says Hi5's Trigg. Hewlett-Packard, Verizon and Netflix are among major brand names running banner ads on MySpace's gaming areas.

It's unclear what, if any, portion of this goes directly to the publishers of the specified applications like Farmville (rather than just Facebook itself). However, it is more than clear that this industry is experiencing incredible growth with profit margins that could make anyone salivate.

The cleverest part of the advertising, when it comes to games like Farmville, is that it is so damn cheap. After all, the cost it takes to implement an obnoxious "Invite your Friends!!!" template is obscenely inexpensive in comparison to running something like a TV ad. You don't need a well organized campaign that sprawls across every available window. All you need is to prompt your players to invite a handful of other people, who go on to invite a handful more.

The best trick, of course, is to reward the players for doing your advertising for them. Instead of paying an agency hundreds of thousands of bucks, you pay one dedicated player 100 apples or oranges, or whatever the hell the currency is in Farmville, to get one other player on board. Maybe if they invite two friends they get a cow. Ten friends? A barn.

I'm probably showing that I definitely don't play this game to anyone who does, but the point holds true: you are paying people in fake currency to do what you would otherwise have to pay people in cold hard cash to do.

The downside to social gaming, however, is that they are like viruses. They blossom exponentially for a little while, infecting many of the people they come into contact with, dominating a population. But then people get over them (or, I don't know, die -- time to abandon the metaphor). In the terms of social gaming, they get bored. Then they move on. The same system that makes it so easy to join games like Farmville is what makes them easy to leave: they get swallowed up by the 'next big thing.'

To put it in more proper vocabularly: these games thrive on buzz, which is also the core component to their advertisment.

World of Goo: Pay What You Can

"Pay What You Can," while not exactly a widespread phenomenon (to put it lightly) isn't a completely new concept. Obviously not-for-profit groups have been executing this sort of donation-based system for quite some time: churches are probably the longest running business in the world, and they've been passing around the collection plate for thousands of years.

More recently "Pay What You Can" has come to private, for-profit enterprises. The ease and relatively minimal cost of transferring certain types of goods over the Internet had allowed certain companies and artists to dabble in giving their content away for whatever the customer feels is an appropriate price. Radiohead is probably one of the most well-known examples of this, and the concept seems to apply very readily to music in particular (likely because it's only very slightly less convenient to obtain albums illegally via torrenting clients).

It's a different story to see pay-what-you-will exchanges for videogames. Unlike some free to download or even free to play games, World of Goo isn't based on micro-transactions after you've started playing like most games which follow such a business model.

How exactly does a year-old game releasing its content for as low as $.01 pertain to pre-game advertising? The question becomes: what is 2D Boy (the publisher of World of Goo) playing at here? It could be -- and is likely -- that they've sold all the copies they believe they're going to sell for the going rate of $5-20, and are just trying to eek out the last bit of potential profit by reaching people who might pay $1, but not $5.

While this certainly has to have some benefit, another possibility -- and one that may be more likely, given how notoriously low the averages raked in using "Pay What You Can" systems tend to be -- 2D Boy is now more concerned with building an audience. World of Goo has been a very successful small game for the PC (as well as the Wii, though that version is not part of this promo), and at this point, it may be more important for 2D Boy to increase their brand recognition as a smaller company that releases really solid games, rather than attempting to sell however many more copies at a fixed rate.

If 2D Boy is confident enough that their gameplay will encourage fans to purchase the games they make in the future, the strategy of giving World of Goo away for a penny becomes its own word of mouth advertisement -- without having to spend anything on a hefty campaign, new insights, or even distribution aside from bandwidth costs.