Why brands should look to social gaming for new revenues

Looking ahead to the future of the gaming industry, panelists at last week’s CES in the US highlighted a number of key trends to watch for, including increased user interface innovation, a focus on mobile gaming, and the increased use of in-game marketing.

The panelists were generally optimistic about the ability of the major game developers and console makers to capitalise on the rise of social gaming, with several pointing to the expansion of the gaming market beyond the core gaming demographic of 18 to 35 year old males.

Monty Sharma, co-founder and Vice President of Product Management and Marketing at Vivox, specifically pointed to the ability of developers to create console games that interact directly with multi-player online games, as well as with social networking sites such as Facebook.

By utilising such technology would allow game developers to expand the range of people that their games can reach, which could be both accretive financially and emotionally.

Brands that are cashing in include Danish toymaker Lego, which is seeking to build a presence in the world of multiplayer online games with the release of a new videogame called Lego Universe.

“Think World of Warcraft, Second Life and Club Penguin all wrapped into one,” said lead producer Chris Sherland behind the game.

Lego has previously released Star Wars, Indiana Jones and Batman videogames, but they were just for up to two players while with Lego Universe thousands of players can play at once.

Anything created in Lego Universe can also be ordered online from Lego.com and will be sent to the users address with building instructions.

In the past year, the social gaming industry has exploded, according to Adweek. Market leader Zynga, maker of the popular Facebook-centric games FarmVille and Mafia Wars, boasts 100 million players per month. Gaming giant Electronic Arts snapped up Zynga rival Playfish last November for $US300 million. Both companies have shown a knack for hooking consumers on games that tie into their social networks.

Social gaming companies have proved that internet users are willing to pay real money for virtual items. Zynga, for example, reported revenues of $US250 in 2009 alone with just 3% of users playing.

That leaves the door open to a substantial ad business says Adweek, although it is a tougher market to crack. Dubious practices of luring users into unwanted subscriptions by accepting marketing offers in exchange for virtual goods will act to deter consumers.

But virtual goods such as weapons or digital bottles of champagne traded in the US could be worth up to $5bn in the next five years, experts predict. In Asia, sales are already around the $5bn mark and rapidly growing.

For many, virtual goods are one of the hottest trends in technology and are fuelling huge growth in the social gaming sector.

Playfish is another social gaming company that started two years ago., it now boasts 11 online games and more than 61 million people who play those games worldwide.

It believes virtual goods will continue to lead to more riches but says that the sale of virtual goods is crucial to success.

Virtual goods is the whole story in the world of social games. It accounts for 90-95% of revenue for a lot of these social game developers.

Central to the early growth of this virtual goods revolution have been social networks like Facebook, MySpace and Bebo.

Users of these networks can also pay for virtual goods, such as digital birthday cards, champagne or flowers.

The market is clearly one with a lot of life in it, says the BBC, and about two thirds of the top 15 applications on Facebook are games, according to analytics firm AppData. Those ten games are said to draw more than 100 million users a month.

Proof of how successful the virtual goods business has become is evident in moves by Facebook itself to test a payment system to get a cut each time an online-game player buys a digital tractor or pair of flip flops.