Is social gaming impacting console game sales?  Youbetcha. Social games have seen a tidal wave of interest over the past few years, and are rising to the top of the charts in popularity and revenue generation.  Screen Digest forecasts that social games will be worth $1.5 billion in 2014. 

While retail sales of console games are starting to feel the pressure.  The NPD Group states that “U.S. retail sales of hardware, software and accessories are down 6 percent from a year earlier, to $1.1 billion.  Game software has taken a hit in sales decreasing 15 percent to $531.3 million, while hardware sales grew 5 percent to $401.7 million in June, 2010.  Another important statistic is that total industry sales for the year through the end of June were down 9 percent to $6.66 billion according to NPD. 

 Let’s be honest, we were playing social games for centuries.  From poker, to billiards to backgammon, to chess, we used games to be more social.  It is just in the last decade that we became infatuated with new online social games.  Many companies are benefiting from the buzz and popularity that these games are generating.  

Edge Magazine states that “Zynga is by far the most profitable social game company thus far and has generated revenue over $100 million.”  It is reported that Zynga earns over $1 million per day with its social game, Farmville.  Farmville has nearly 60 million active monthly users; and Zynga plans on expanding their user base in the next couple years. 

 Social games are less complex compared to console games like Xbox 360 and Playstation.  Users have the ability to socialize with friends in their network while playing the game making the games appeal to a more mainstream audience.    

Disney acquires Playdom, a maker of social games, for $763 million; and the talk in the industry is that Google is developing a new social media platform to give Facebook a run for its money.  This would help developers be less dependent upon Facebook to distribute their social games.  “The common denominator here is that social games have the highest growth rate in the video game industry right now,” Colin Sebastian of Lazard Capital Markets said in an interview.

How do companies make money marketing social games?  Charging for the game, freemium or ad-supported revenue models are common.  But 90% of all revenue generated by the world’s top social game developers is through virtual goods.

 “Comparing information from 1st party sites, Social Networks lead the way with the median spent on digital goods coming in at $50 per year. This was followed by MMO ($40), Casual Games ($40), Free to Play Games ($40), PC Games with Online Play ($37) and Console Games with Online Play ($20). Also worth noting is that overall 32% of respondents made purchases within social networks.” reported by VSC PR for PlaySpan.

Matt Machacek, Marketing Communications, W3i, LLC
Matt is a senior in the Marketing program at SCSU.  Matt is applying his learnings to W3i’s social media outreach.

If you didn’t get a chance to go to San Francisco, here are some of the Ad:Tech 2010  trendy topics that the W3i team picked up on:

Data Collection and Privacy Concerns:

• Data Collection – Nearly every speaker addressed the importance of data in targeting and optimizing.  In The Changing Business Landscape M&A overview, Gus Tai made a strong point that the companies that connect with the audience and know them intimately will win.   Quantcast’s Adam Gerber stated, “there are only two parts of the funnel that matter: the top (audience) and the bottom (conversion).”  Also for social advertising to become more of a brand marketer’s focus, brands need to move from measuring impressions to measuring engagement.   
• Interest Based Advertising  Icon – With 2/3 of online consumers concerned about privacy, IAB is rolling out interest based advertising, a self-regulated program that allows consumers to click on the icon shown with an online display ad and see how the ad was targeted to them.   This is in direct response to calls on the Internet ecosystem by the FTC to develop more robust and effective self-regulation of online behavioral-based advertising practices.

Mobile Marketing:

Advanced Mobile Marketing, Japanese-style:

• Due to 3G penetration and because most users pay for unlimited usage, Japan is a great testing ground for technical advancements in applications, including augmented reality.
• iButterfly, created by Mobile Art Lab,  is an augmented reality application that makes collecting coupons fun.  The app tasks its users with catching virtual butterflies, each representing one or more coupons.
• More social page views in Japan are mobile.  Mixi, Gree, and Mobagetown are the three largest social media sites in Japan.
• Coca-Cola Japan is designing their vending machines so that thirsty customers can use an embedded payment chip found in their cell phones to pay for their purchases, also enabling point-of-sale coupons.

Group Buying

With the success of Groupon.com, other group buying services are popping up.  Homerun.com is combining social, local, simple, and value into their group buying site.  The site encourages you to interface with Facebook and includes a loyalty program that rewards user invites and offer uses to accumulate cash-bonuses.  They are also leverage a psychological tactic of the exclusivity of “Private Reserve,”    a collection of exclusive high-end offers presented to most valued members. 

The W3i team enjoyed meeting with so many partners and networking at Ad:Tech SF.  Marketing with apps is thriving as engagement with the audience skyrockets.   We’d love to talk more about how to make your application business successful.

Rob Weber, Vice President of Business Development and Co-Founder, W3i, LLC
Rob is an Internet marketing pioneer with over ten, profitable years evolving W3i in the consumer application industry.

Ad:Tech San Francisco; a lively conference for online marketers looking to connect, share insights and do business.  I attended this year’s Ad:Tech as a first timer.  Throughout all the hustle and bustle, networking and meetings, I took the opportunity to take a breather and attend one of the expo’s floor presentations, App Exchange.  For me, this happened to be the most compelling hour of the show.  App Exchange gave app developers a platform to promote their mobile applications, showcasing innovation in app development.  While there were quite a few apps showcased, a few were doing some innovative stuff that caught my attention.

CauseWorld

CauseWorld (available for iPhone and Android) is an application that bridges the mobile and physical store worlds.  Users who download the app and participate gain karma points when they check into retail stores.  On top of that, they can use the app to locate and scan product barcodes within the store to gain additional karma.  Accrued karma points are donated to the cause of their choice, such as the LiveStrong Foundation or American Red Cross.  Incentivizing shopping with altruistic effects is nothing new, but the way CauseWorld does it certainly is.  Additionally, CauseWorld rewards users with achievements that can be shared with Facebook friends, creating stickiness to the service much like FourSquare and Gowalla do with their achievement systems.  With CauseWorld, everyone wins: users, causes, and businesses.

Wikitude

Augmented Reality (AR) is another innovation taking shape on mobile devices and Wikitude is leading the way.  Wikitude (available for iPhone, Android and Symbian) overlays reference information through the camera of the phone, allowing users to see points of interest in their surrounding area.  As quoted on the Wikitude site, Augmented Reality is identified as one of the top ten most disruptive new technologies for 2008-2012 by Gartner Research.  In March of this year, Wikitude laid the foundation for further innovation by releasing their iPhone API, allowing developers to build their own AR apps.

textPlus

While sending texts is a staple in nearly every mobile user’s diet, textPlus innovates by improving this experience, providing free, unlimited group texting across iPhone/iPod, iPad, Android, and Blackberry platforms.  This is what innovation is all about: taking an existing service and making it better.  textPlus has the numbers to back up their claims of success — over 6 million app downloads (they state the average app in the iTunes App Store has less than 100,000 downloads) with users averaging one hour of in-app use per day.  These are numbers not to be taken lightly.

Where do you see innovation in the mobile app landscape?  Are you an app developer that’s created something innovative and want to share your story?  Let us know your thoughts in the comments.

Eric Montag, Product Manager, W3i, LLC
Eric is a Pragmatic Marketing Certified Product Manager and uses his experience in internet marketing to lead the charge in product research, planning, and execution from both a consumer and business standpoint.  

Different forms of media engage consumers in different ways. Social media apps can’t engage the audience in the same way a Web site, mobile, or desktop application can.

Marketers, stop trying to force the utility of your Web site into a social application. It won’t work! Unlike a Web site, the goal of a social media app is to get people to share their action with friends, thus creating the viral effect marketers relish.

Social media apps must have a simple interface and an entertainment factor (or other value to the consumer) to start engagement, as well as an easy-to-share interface to create the desired consumer response. Let me explain with several examples:

Trek Me and Tweet in Klingon were created by Friend2Friend, as part of an integrated social media campaign across both Facebook and Twitter to create buzz for Atari’s February 2 release of “Star Trek Online,” a highly anticipated MMO game. The combined applications resulted in more than 20 million social impressions for the brand, and helped build the “Star Trek” Facebook fan base to 40,000 in advance of the game’s release.

In Trek Me, the Facebook application, “Star Trek” devotees can easily morph images of themselves or their friends into exotic and detailed backgrounds and characters developed for “Star Trek Online.” With a simple click, the picture is uploaded and edited; with a couple more clicks, the image is posted and shared with friends. “Star Trek Online” is entertaining and intuitive with an easy-to-share interface.

In addition, Atari includes an easy way to preorder the game to accelerate sales. This is an engaging application for Facebook users, where the branded element actually enhances the consumer’s experience and increases the social appeal.

Atari’s Tweet in Klingon is a social media application for use with Twitter. Twitter is all about tweeting a short message to your followers. So, Tweet in Klingon enables “Star Trek” fans to publish their messages in an easy-to-use text generator and then post it on Twitter – in Klingon.

Again, the interface is simple to use: type your tweet in English and click continue to progress to your Twitter login page, log in, and post. More than 60,000 tweets were sent in Klingon, each one from a branded microsite with information and visuals from the “Star Trek Online” game. The app provided entertainment and spread the “Star Trek Online” message to its target demographic at the same time.

Success factors for winning social media apps:

• Make the social media application “go viral” by making it easy for everyone to participate. Rather than appealing to people with design skills with a promotion for best video or graphic, include all the tools to make it easy for everyone to participate, as in Trek Me, where the consumer can upload an existing Facebook picture or snap one from their Webcam and simply place it in the various backgrounds and characters included in the application. Similarly, the Klingon translator lets anyone tweet in Klingon, not just hardcore Trekkies who know the language.
• The process should be simple, but the visuals should communicate quality. Whenever someone morphs themselves into a Cardassian or tweets in Klingon, they showcase the fantastic visuals which create the great visual experience they will get in “Star Trek Online.”
• The brand theme must be consistent. While these apps enable “user generated content,” the users put their content into a controlled environment that is consistent with the brand. Both Trek Me and Tweet in Klingon appeal to people who are already big “Star Trek” fans, in part because the brand experience in these apps is consistent with what “Star Trek” fans already love. Tweet in Klingon was also monitored to remove profanity.
• Design for sharing. By enabling the consumer to easily create something personal and giving them the interface to share, the outcome is natural – consumers share their creation with friends, increasing the chances that the app goes viral.

Let’s look at one more example. Vitamin Water used a Facebook app to crowd source its next flavor. By having fans vote and collaborate in the FlavorCreator app posted on Vitamin Water’s Facebook fan page, it created excitement and engagement with the brand.

The FlavorCreator made it easy for fans to participate and share the experience while focusing the community on realistic flavors. Adding more allure, it sweetened the promotion with $5,000 cash to the winning flavor creator.

Appropriate interaction with the brand, entertaining, easy sharing, and motivation made for a winning social media application. Vitamin Water’s Facebook fan page now has more than 11,000 fans.

Branded applications are excellent tools for increasing fan engagement and loyalty while providing for the viral spread from advocates to their friends. Winning social media apps create an entertaining, unencumbered consumer experience appropriate to the brand, with a built-in interface to encourage sharing.  So easy to say, but so difficult to execute.

When planning an application, make sure that it engages the audience appropriately for the media. Social apps are covered above. Desktop apps are an excellent way to engage the audience when content provides daily utility – like weather updates or music. Browser add-ons are a great way to extend your brand by providing consumers additional functionality within the browser experience.

Mobile is perfect for location-based information and for an Internet interface when the consumer is away from their computer. Keep this in mind and all your apps will be winners.

Rob Weber, Vice President of Business Development and Co-Founder, W3i, LLC
Rob is an Internet marketing pioneer with over ten, profitable years evolving W3i in the consumer application industry.