The Sims Social siphoning neighbors from Zynga

The Sims Social, which clicked past FarmVille as the second-biggest social game on Facebook back in September, has cemented its No. 2 rank in recent weeks.

How? The Sims managed to lure players away from Zynga, whose games (such as FarmVille) have long dominated the leader boards of Facebook applications, according to a survey released Wednesday by Raptr, a social network for game enthusiasts.

Electronic Arts Inc., the developer of The Sims Social, "has stolen 10% to 25% playtime from Zynga's top games," Raptr reported, based on a survey that tracked online game activity of its 10 million users. "The negative impact to Zynga's game is notable."

FarmVille players, for example, reduced their time on the game by 25% on average when they started to play The Sims Social, Raptr found. In addition, about half of the 66 million people who played The Sims Social in the last 30 days were Zynga players, Raptr estimated.

There's a flip side. The Sims also is cannibalizing EA's other games, including Pet Society and Bejeweled Blitz.

But that's part of the brutal nature of social games, one that Zynga has learned to turn to its advantage. Within weeks of starting a social game, players will get bored and swing to another game. What Zynga has been so adept at is making sure that the next game players defect to is another Zynga title.

Up until recently, Zynga has had the field largely to itself, occupying four out of the top 5 games on Facebook and happily shifting its players from one Zynga game to another.

Now, however, players have a popular alternative in The Sims Social. What's more, EA can now play the same game and begin shuttling Sims Social players to its growing portfolio of social games, including Restaurant City, Zuma Blitz, Dragon Age: Legends, Madden NFL Superstars and FIFA Superstars.

EA, through its acquisition of PopCap Games, also has a number of franchises it can convert to social games and bulk up its portfolio further, including Peggle, Plants vs Zombies and Bookworm Adventures, Raptr noted.

But EA may need to step up the pace. Zynga, whose logo is an outline of a bulldog, on Tuesday promised to "unleash" four new games and a new casino franchise in the coming weeks to increase the odds that whatever people are playing next would be a Zynga game.

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Zynga, looking beyond Facebook, to launch its own game platform

Social games juggernaut Zynga Inc. has announced a slew of new products aimed at diversifying its business beyond Facebook and reaching even more consumers than the 142 million people who currently play its games.

In its first major announcement since declaring in July its intent to go public, the San Francisco company said Tuesday that it plans to launch a site separate from Facebook where players can congregate and play its games.

Dubbed "Project Z," the initiative is significant because it represents a major push by Zynga to divert players away from Facebook, whose 750 million active users have formed a rich pool of customers for Zynga. The new site would import players' Facebook contacts so users won't have to re-invite friends, officials said.

"Project Z is a Facebook Connect-enabled platform, giving you a tailored environment just for games," John Schappert, Zynga's chief operating officer, said at a news conference.

The move to expand beyond Facebook's site appears to have the social network's blessing. Facebook's head of games, Ethan Beard, was in attendance at Zynga's announcement.

Neither company would talk about how Zynga would share revenue from the players who migrate to Zynga's site from Facebook. Zynga currently shares with Facebook 30% of the sales it generates from games played on the popular social network.

Zynga also declined to disclose when it would launch the new site – except to say it would be “soon” -- or which games would be available on it.

The company, which has held off on its initial public offering of stock amid the stock market convulsions, also unveiled four new games -- CastleVille, Hidden Chronicles, Zynga Bingo and Dream Zoo. It also formed an umbrella franchise called Zynga Casino, which will encompass its popular Texas HoldEm poker game, Zynga Bingo and future casino games.

Zynga put the spotlight on CastleVille at the news conference, calling it "Zynga's most beautiful game to date." When launched it will join Zynga's popular suite of "Ville" games, including FarmVille, CityVille and FrontierVille, which attract 114 million players a month, according to AppData.com, a site that measures traffic on Facebook.

With higher production values and more sophisticated game features than those in Zynga’s first, simplistic titles launched four years ago, CastleVille boasts music played by a 75-piece orchestra, according to Bill Jackson, the game's general manager. The story-driven game also will have graphics that look more like Hollywood animated films than the cartoony style prevalent in its current lineup.

Overall, Zynga's lineup of new products is designed to cement the company's current dominance in the rapidly growing market for social games, said company Chief Executive, Mark Pincus.

"We're committed to one vision, one mission that hasn't changed, it won't change," Pincus said. "We want to be the biggest macro bet on social gaming."

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Photo:  CEO Mark Pincus speaks at a Zynga event in San Francisco. Credit: Associated Press



Zynga's 90% drop in second quarter profits unlikely to derail IPO

When Zynga Inc. quietly released its second quarter earnings late Wednesday, some seized on the 90% drop in the social game publisher's second quarter net income.

One news outlet, Reuters, questioned "whether the company can sustain its growth ahead of its much-anticipated" initial public stock offering.

Zynga's profit fell to $1.4 million in the quarter ended June 30, from $14 million a year earlier, according to the San Francisco developer's most recent filings with the Securities and Exchange Commission.

The company did not respond to a message seeking comment.

Analysts, however, say the alarms are unwarranted, pointing to the company's revenue, which grew 115% in the same period to $279.1 million, up from $130.1 million last year.

Rather, Zynga's expenses were partly to blame for the profit dip, said Michael Pachter, analyst with Wedbush Securities.

The company booked development and marketing costs for two major games, Empires & Allies and Adventure World, in the second quarter, with little in the way of revenue from those releases in the period. Empires launched in June, and Adventure World was released earlier this month. Those two titles were among Zynga's most ambitious and costly to build.

Those expenses caused "lumps" in Zynga's second quarter income, Pachter said. 

Zynga's IPO is more likely to be affected by the roiling stock market, analysts said. The company in June declared its intent to publicly sell shares to the public, but has yet to pull the trigger on a date to begin trading. Some market observers speculate that Zynga and others are waiting for the turbulence in the stock markets to abate before diving in.

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Online game subscription revenue declines as sales of virtual goods rise

Revenue from subscriptions to online games such as World of Warcraft fell in 2010 and are expected to continue declining over the next few years as consumers favor games that generate money by selling virtual goods, according to a report released Wednesday by IHS Inc., a market research firm based in El Segundo.

Games that charge players monthly or annual fees to play generated $1.58 billion in North America and Europe, down 5% from $1.66 billion in 2009, the IHS report noted, marking the sector's first decline since the company began tracking the market in 2002. (The acronym MMOG refers to massively multi-player online games, and MOG refers to multi-player online games.)

The decline marks "an inflection point for the industry," said IHS senior analyst Piers Harding-Rolls, as game publishers shift to selling virtual items in amounts as small as $2 to $3. These so-called "microtransactions" have been gaining momentum, which were $1.13 billion in 2010, up 24% from $909 million in 2009.

Eventually, IHS expects revenue from microtransactions to exceed the amount collected from subscriptions (see chart above).

Part of the shift is driven by consumers, who feel more comfortable paying a few dollars at a time rather than commit to monthly subscriptions, especially given the soft economy. Game publishers are also behind the change, believing that selling virtual goods maximizes revenue in the long run as some players end up spending a lot more each month than the amount of a typical monthly fee, which ranges from $10 to $15 a month.

Some players of social games made by up-and-coming developers such as Zynga Inc. and Kabam, for example, spend hundreds of dollars a month.

Zynga alone booked more than $830 million in revenue primarily from microtransactions in 2010, according to the San Francisco company's documents filed with the Securities and Exchange Commission in anticipation of selling its shares on the public stock market later this year.

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Photo: A scene from World of Warcraft. Credit: Blizzard Entertainment

Disney Interactive Media Group executive leaves for rival Zynga

Adam Sussman is headed for the farm.  FarmVille, that is.

Sussman, senior vice president of publishing at the Disney Interactive Media Group, has left the Burbank entertainment giant to join social games rival Zynga.  His departure comes just eight months after he joined Disney. 

In January, his arrival was trumpeted by the division's new executive team. Sussman came to Disney with strong credentials from Electronic Arts Inc., where he helped shape the game publisher's highly profitable mobile business.

"He and his team hold the strategic imperative to maximize both reach and distribution mix in how we communicate and interact with our users and customers," John Pleasants and Jimmy Pitaro, co-presidents of Disney Interactive, wrote in a January email to staff.

On Friday, however, Pleasants sent a more abbreviated email to the group to notify them of Sussman's resignation, according to one person familiar with the matter.

Sussman, contacted by phone, did not dispute reports of him leaving Disney to join San Francisco-based Zynga.  

A spokeswoman for Zynga declined to comment, and a Disney Interactive spokeswoman did not return calls.

Disney's Interactive Media Group, which encompasses video games, online virtual worlds and Disney's Web properties, has struggled to turn a profit. The division reported an operating loss of $86 million in Disney's latest quarter ended July 2. 

Zynga, by contrast, has become a darling of Silicon Valley as the leading social games publisher.  Its initial public offering of stock was highly anticipated on Wall Street but the company has delayed the IPO because of poor market conditions.

Zynga has been successful in developing games on Facebook, but has struggled with other platforms such as the Apple Inc.'s iPhone and Google Inc.'s Android. 

The social games company is beefing up its expertise in mobile, in recognition that investors will want to see Zynga grow its business beyond Facebook.

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The Sims Social bests FarmVille as the second-largest Facebook game

The Sims Social, based on the popular Sims computer game franchise, has supplanted FarmVille as the No. 2 game on Facebook, according to AppData.com, a site that tracks Facebook apps. 

More than 9.3 million people played the Sims Social in the last 24 hours, compared with 8.1 million who played FarmVille.

The single-day milestone is significant because FarmVille is considered to be one of the most successful social games on Facebook. Launched in June 2009 by Zynga Inc., the game zoomed to the top of the charts as hundreds of millions of players rushed to plow virtual fields on FarmVille. At its peak, nearly 32.5 million people played the game in a single day, according to AppData.

But FarmVille has ebbed in popularity as players moved on to other titles, many of them published by Zynga, a San Francisco company that has declared its plans to sell its shares on the public stock market. (Current turbulence in the stock market has put those plans on hold, at least temporarily.) 

The Sims Social, published by Electronic Arts Inc., is among the few games that have been able to touch Zynga's top titles. 

Still, EA's victory may be more symbolic than substantial. Zynga's CityVille, launched in December, is still top dog on the daily chart, with nearly 14 million users. When measured on a monthly basis, Zynga holds four of the top five games on Facebook, including FarmVille with 35.7 million players versus 34.3 million for the Sims Social, which is in fifth place.

The rivalry between Zynga and EA is fierce. Zynga has been recruiting senior EA executives. Many of Zynga's key employees came from EA, including its chief operating officer John Schappert, its president of studios Steven Chiang and many of its top developers, including FarmVille producer Mark Skaggs and Amer Ajami, executive producer of Zynga's Empires & Allies game.

EA, in turn, has been aggressively expanding its social games business, starting with its $400-million acquisition of social game developer Playfish in November 2009. In July, it bought PopCap Games for $750 million. PopCap's Bejeweled Blitz was the 15th most popular game on Facebook in the last 24 hours, with 3 million players.

"With PopCap and the Sims Social, we’re now far and away the No. 2 player in social games," EA spokesman John Reseberg said. "And growing."

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Zynga, lately on a buying spree, takes out $1-billion credit facility

Zynga Inc. has disclosed that it took out a $1-billion credit facility in July, days after it had filed papers with the Securities and Exchange Commission to raise money in an initial public offering of its stock.

The San Francisco-based social games company did not say how it would use the funds, should it decide to draw down the funds. But Zynga has been on a buying binge, acquiring 15 companies in 13 months as of July 8, when it announced its last acquisition, app developer Five Mobile Inc. in Toronto.

Zynga, looking to beef up its portfolio of mobile and tablet games, has also been actively kicking the tires on a number of game start-ups, according to executives at some of these companies. Currently, the bulk of Zynga's revenue comes from its games on Facebook, where it must pay a 30% fee for sales generated on that platform.

With stock markets in turmoil over jitters about the economy, Zynga's move to secure a separate source of cash seems prescient. Until the stock markets stabilize, pending IPOs such as Zynga's should sit things out rather than risk debuting their stocks in a highly volatile market, analysts said.

Zynga also restated its first-quarter financial results to reflect a change in the way it accounts for its revenue. The change involves amortizing the revenue from its customers over the period of time they are expected to play a particular game.

As a result, Zynga increased its sales by $7.5 million in the three months that ended March 31, and decreased its deferred revenue by the same amount, according to documents Zynga filed with the SEC related to its IPO.

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CityVille's new neighborhood: China

Zynga Inc., whose social games already dominate traffic on Facebook, is expanding its reach to China.

The developer of Mafia Wars and other popular online titles on Monday said it has struck an agreement to bring a version of its CityVille game to Tencent, a Chinese Internet portal whose instant messaging service boasted 674.3 million active users as of March 31.

San Francisco-based Zynga, which has filed papers to sell its stock in an initial public offering, needs to show investors it can grow its audience beyond Facebook, where it already commands a significant share of traffic.  

"International and mobile represent two major areas where Zynga would need to go into in order to grow," said Justin Smith, founder of Inside Network, a market research firm in Palo Alto.

The game, renamed Zynga City, retains the major features of CityVille, played by 80.1 million people a month, according to AppData.com. The Chinese version will incorporate local architecture and quests designed to appeal to an Asian audience and is being developed by XPD Media, a Chinese game developer that Zynga acquired in May 2010.

The game will initially appear later this week on Tencent's new social network, called Pengyou, which literally translates to "friend" in Mandarin. The game will debut later this year on Tencent's larger social network, Q Zone, which counted 504.8 million active users as of March. Pengyou had 101.4 million active accounts.

CityVille is already playable in Spanish, French, Italian, German, Portuguese, Indonesian and Turkish.

For Zynga, recruiting players for its games is just the first step because their games can be played for free. Zynga generally makes money when it can persuade those players to pony up actual dollars, or in this case Chinese yuan, to get special virtual items or to advance more quickly in the games. In the U.S., the percentage of players who pay for social games ranges from 2% to 4%, according to Parks Associates, a market research firm.

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Photo: Screen shot of Zynga City, the Chinese version of Zynga's popular CityVille game. Credit: Zynga.

 

 

 

 

 

 

 

Google+ to introduce social game platform

Google, whose recently launched social network Google+ has amassed 20 million users in three weeks, is planning to launch a platform for social games that would compete with the offerings on Facebook.

The search company has approached a number of developers to put their games on Google+, according to people knowledgable with Google's plans and who did not want to be identified because of confidentiality agreements. The plans, reported on Friday by AllThingsD, could come as early as August, they said.

A Google spokesperson declined to confirm, saying only that the company plans "to add a lot of features and functionality to Google+ over time."

Google+ is Google's most credible effort yet to counter the growing reach of Facebook, which is competing with the Internet search giant for eyeballs and advertising dollars. Google appears to be countering with its own efforts to grab a slice of the fast-growing market for social games, which has become an important revenue stream for Facebook.

The market for social games in the U.S., which reached $1 billion last year, is projected to grow five-fold to $5 billion by 2015, said Pietro Macchiarella, a game analyst with market research firm Parks Associates. Much of the revenue comes from games played on Facebook, the largest social network in the world with more than 750 million active users.

Facebook requires applications on its platform to pay 30% of the revenue collected from selling virtual items on the network. One way Google could compete is by offering to take a smaller portion of game publishers' revenue.

Google's success in recruiting publishers, however, will hinge on its ability to continue its momentum in adding users to Google+, Macchiarella said.

About 250 million people play social games, but only about 2% to 3% of those spend money on virtual items or power-ups for those games. That means social games require a large pool of players in order to cull a handful who will pay.

"Most publishers will be happy to extend their offerings to Google+," Macchiarelli said, "but the significance of their business on this social network will be intrinsically connected to the success of Google in migrating people from Facebook."

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Zynga's IPO filing shows dog-eat-dog world of social games

Zynga Inc.'s bid to raise $1 billion through an initial public stock offering provided a lens into the dog-eat-dog world of social games.

Details in documents filed with the Securities and Exchange Commission last week give a glimpse of how the hottest online gaming start-up has become a dominating force on the world's largest social network since its founding in 2007.

Zynga disclosed a half-million-dollar bonus last year to the company's chief counsel, Reginald Davis, for "securing acompany-favorable settlement" in a major lawsuit. While Zynga did not disclose the nature of the suit, it did announce in November that it had privately settled its high-profile dispute with Walt Disney Co.'s Playdom social games unit. At the same time, Zynga itself recorded a loss of $39.3 million from paying out its own legal settlements.

Lawsuits brought by and against Zynga's competitors provide hints of the viciously competitive nature of the burgeoning $7.3-billion social games business, where titles released by one company are freely cloned by others, triggering flurries of copyright infringement disputes that keep attorneys like Zynga's Davis busy.

In June, for example, Zynga filed a lawsuit against Vostu, a Brazilian game developer founded by three Harvard University graduates. The suit alleges, among other things, that Vostu's MegaCity game is identical to Zynga's popular CityVille. In January, it filed suit against BlingVille, saying the company's social games rip off Zynga's suite of "ville" franchises.

"The general response to the lawsuits was that it was the pot calling the teakettle black," said Billy Pidgeon, a game analyst with M2Research. "Zynga itself has been accused of ripping off other games."

A spokesman for Zynga declined to comment, citing regulatory restrictions on speaking about matters related to the company's IPO.