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Has Facebook lost the magic for social games?

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Is it game over for Facebook? 

A study from market research firm IHS Inc. seems to suggest that the boom in social games is about to end, if it hasn't already done so. 

The number of people playing games on Facebook remained flat in 2011 compared to 2010, even as the social network itself added hundreds of millions of new users, the report noted. As a result, the ratio of active Facebook users who played games fell from one in two at the end of 2010 to one in four a year later.

Even Zynga Inc., the biggest publisher of games on Facebook, saw a decline in the number of people who played its games at least once a month -- from 266 million at the end of September 2011 to 225 million by the end of December, according to the IHS report.

"Facebook rocketed to prominence as a gaming platform in 2009 and 2010,” said Steve Bailey, senior analyst for games at IHS. “However, with equal speed, the market then settled into a state of maturity in 2011, with conditions becoming markedly more challenging for game operators.”

Bailey noted that with so many games vying for attention on Facebook, it's become more difficult and more costly to lure new players. It's not just games that are crowding the field. As Facebook expands its footprint into other media, music and video are gaining prominence as a source of distraction. 

Finally, game development budgets are steadily growing, upping the ante for companies that want to compete in social games. Games that were whipped up in a couple of weeks for less than $60,000 are being displaced by titles that take months and millions of dollars to produce. 

"Along with the increase in marketing costs for purchasing users, there’s also a development overhead to consider," Bailey wrote. "As with any maturing video game marketplace, production values will also need to step up a notch."

That doesn't mean the party's over. It's just that the drinks cost more and the crowds have become more fickle and discerning.

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-- Alex Pham

Photo: The Facebook sign outside the company's new campus in Menlo Park, Calif. Credit:  David Paul Morris / Bloomberg 

 

 
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