How “free” online games could score a cool $100 million

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Ever wondered how those ‘free’ games on social networks such as Facebook and MySpace make money?
And not just a few bucks, but hundreds of millions of dollars?

We did, too. So we asked Brian Reynolds, chief game designer for Zynga, the San Francisco developer that created Farmville, along with more than a dozen other titles including Mafia Wars. With more than 31 million users playing Farmville a day, it has become the most popular application on Facebook.

Reynolds broke down the math for us, which is significant because many social game companies, including Zynga, are privately held so they don’t talk about their financial performance. Others, such as Playfish with was acquired by Electronic Arts for $275 million in cash, are obscured by the financial statements of a much larger company.

There’s intense interest around social games, partly because they’re said to be highly profitable and a growing business, making them a rare bright spot in an otherwise gloomy business.

To read about how the math for social games add up, check out our post on the Company Town Blog.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.