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| CrunchBase Profile | Zynga | Playfish | Playdom |
| Location: | San Francisco, CA | London, UK | Mountain View, CA |
| Money Raised: | $39M | $21 Million | $0 |
| Revenue: | Estimated $200M | Estimated $75M | Estimated $60M |
| Rumors: | Strong 2010 IPO candidate | Possible acquisition talks with EA | Raising Venture Capital |
| Key Apps: | Facebook: Farmville-61M Mafia Wars-25.8M Yoville-19.8M Texas Hold Em’ Poker-18.3M |
Facebook: Pet Society- 20.5M Restaurant City-17.3M Country Story- 8M 135 million total installs for all games |
Myspace: Mobsters -14M Bumper Stickers-11.7M Own Your Friends-10.1M; Facebook: Sorority Life-7.1M Mobsters 2-3.5M Poker Palace- 1.5M |
So much for the first generation of big Facebook/MySpace social application startups. Slide and RockYou both got huge valuations in venture rounds. But a new generation of application developers has taken center stage and are racking up big revenues and their own eye popping valuations: Zynga, Playfish and Playdom.
All three own popular social games on Facebook and MySpace. Zynga’s Farmville has 61 million monthly users. Playfish’s Pet Society has 21 million monthly users on Facebook. And Playdom has 16+ million monthly users of Mobsters on MySpace and Facebook Combined.
All three companies are getting a ton of press and investor attention. Zynga wants to go public next year. Playfish probably already got bought by EA for $400 million or more. And Playdom probably raised an unannounced big chunk of venture capital over the summer.
These three companies may be generating as much as $300 million annually on sales of virtual goods. Need a shotgun to do that next job on Mobsters? No problem. Pay with a credit card, paypal, or your mobile phone and it’s all yours. And people are obviously very willing to buy these virtual goods. Nothing new there.
The goal of all of these games is to get to a higher level, and generally have more fun growing things or killing things faster than your friends. Get addicted to the free version, then start spending to move things along more quickly. Once people are committed, it’s easy to get them to pay. You can read all about it on Business Week.
Except Business Week didn’t mention the dark side of the business at all.
All three companies are willing to give game currency in exchange for offers. Sign up for Netflix. Buy a ringtone subscription. Or energy drinks. Sign up for a credit card. Get car insurance. Take an IQ survey that requires a $9.99/month mobile subscription to see the results. We even found one for arthritis medication. Here’s how it all looks. One executive we spoke with says that 70% of total revenue from these applications may come in from lead generation, not direct payments. Netflix alone will pay $30-$40 for a free trial (requires credit card).
Three companies control most of these lead generation offers: TrialPay (appears to have the most legitimate offers), Offerpal and SuperRewards.
There’s nothing wrong with basing a business off of lead generation, although some of the offers are pretty sketchy (long term credit card or mobile subscriptions for little or no value). And the FTC does tend to take a swipe at them periodically. But the bigger problem is that advertisers may not be getting much for their payouts. As the higher quality advertisers bail, pressure to add the scam artists increases.
The cycle of all of these games is pretty standard. Get new users playing for free, give them incentives to message all their friends to signup, hit them hard for cash or lead generation for revenue, and move them up the levels. Rinse. Repeat.
Shouldn’t “But a ringtone subscription.” be “Buy a …” ?
Very low quality CPA model……
will lose its appeal to mainstream advertisers very soon..
Very cool idea.
Uh, I know TrialPay. Very spammy company from a former spyware vendor.
Offers are there for users who cannot afford or don’t own a credit card. and if a user can get some extra credits with their netflix subscription that’s for the benefit of the user. And then there’s companies like peanut labs that conduct legitimate market research and reward users who participate with credits.
None of these is less legitimate than the bulk of CPA advertisements you see virtually everywhere in the web, or even in google adsense.
how’s that any more “Dark”?
Impressive numbers! Multiplayer games on social network is popular and really a good application.
Wow…
Impressive stats
indeed “rinse & repeat”
Given the incentive space already went through a big shakeout a few years ago, I would expect the big players like netflix, etc keep a close watch on their numbers and are quickly dropping payouts if rebills aren’t at the rates they expect
Those revenue numbers fit pretty well with the data I’ve seen for smaller applications [by no means *small* on an absolute scale but those guys are giants].
Which is encouraging because it means Revenue/User scales pretty linearly as you increase in size. Marginal Cost/User should decrease as well.
When will these guys start buying up the small[er] app makers and start pumping money into advertising them? Seems like a win-win.
Yeah, very impressive numbers. But I, too, am not a fan of trialpay.
Kudos to Playdom for having that much revenue and have $0 in funding!
yep someone should mention that. VCs are so busy valuating twitter nowadays …
OT, but anyway. The ‘higher levels’ thing is also known as an RPG-style game. I’ve got 22 billion on the myspace version of Mafia Wars by Zynga, but I can’t sell that money to someone? Hmmmm, sounds like the whole thing is only one-way. Which bothers me a lit.
I think Playdom has taken it to a new level by offering gift cards through retailers such as Target. This gets the younger gamer who doesn’t have a credit card and others who don’t want to do the, possibly shady, offers. An interesting idea, we’ll see if these games are popular enough for these cards to gain traction in the retail market.
Impressive numbers, and make all of us wonder what other kind of applications (like games) could leverage social platforms to explode in terms of adoption.
you failed to mention the even darker side (of zynga anyway) – illegal internet gambling revenues
players play to pay texas hold em poker. the only reason that supposedly isnt illegal online gambling was because the chips players won had no monetary value. except, they do. players cash out chips for real money by third-party exchanges.
illegal internet gambling. maybe 1/3 of zynga’s revenues. at least one state attorney general has contacted the company indicating a desire to investogate. cmon techcrunch, why have you not reported this?
Wake up “Insider”….TC was all over that story months ago.
http://www.tech...orneys-general/
if you wanna see impressive numbers, hit up habbo hotel, gaia online, club penguin, whyville and maplestory.
if i had extra cash, i would start my own virtual world.
i would say its the most lucrative business in the internet space.
Great post, as usual.
Michael, if you or anyone from TC wants to attend the 3rd Annual Virtual Goods Summit (http://www.vgsummit.com) as a press guest on Friday, let me know and we’ll get a pass issued for you.
Charles
Arrington, great post – I feel like you have turned back to writing pieces of substance and that is a welcome change! Cheers.
And the better-known dark side of spamming people to help grow the userbase. I was once told by an employee at a related app company that a poor UI was intentionally used to confuse people into selecting the option that blasted all of their friends. Bleh.
Problem is, I have told everyone NOT to sign up with anything through Zynga. I signed up for Netflix, never got my reward points. Five times I went through customer support only to get emails saying that the problem must have been fixed since I have not contacted them. Funny thing I posted their emails and responses on facebook for all to see.
Kind of curious why you didn’t mention gambit since TC reported on them last week and they have the “Jobs” – or something like that, to complete for virtual currency instead of just offers?
Good catch Michael
Gambit Tasks launched last week, and yes, it’s the first alternative to offers that allows users to complete Tasks (small, 10-15 minute bundles of manual, web-based work) to earn virtual currency.
You can learn more about Gambit Tasks, or see what the Task panel looks like, here:
http://blog.get...o-gambit-tasks/
LOL those are the worst “estimated” revenue numbers I’ve ever seen. Zynga is making about $2m / day just from farmville ALONE.
Good post, Michael. However, you incorrectly assume that the higher quality advertisers are bailing. In fact, we’re adding more and more of them all the time (Netflix, NY Times, Disney, Blockbuster, DirecTV, Discover Card, etc.), and as they begin to understand the channel better, the more volume they request.
For more on how Offerpal is addressing lead quality and building long-term advertiser relationships, see http://bit.ly/WrdLh.
Oh man. Easy way to make $$$. Capitalizing on people’s addictions. Oh well … might as well do something mercenary
I was just having a conversation this weekend about how addictive these games are and how cookie cutter they are to make. A bazooka on one is but a pig on the other. I was looking for some adoption numbers and viola, here they are. Thank you Michael. If only I had bet some friends this past weekend. I think the over under on the bet was 10M users on some of these games and I was going to take the over. Could have made a buck.
Same as it ever was.
These social apps are one of the reasons I deleted my facebook account. If I see one more post about someone reaching a certain level in a web app that I have no interest in, AHHH!
wawawait….you *deleted* your FB account b/c of that?
Do you think all people care about facebook like you
Great snapshot Michael. Funny enough, two of the best articles I’ve read on Social Gaming were posted the same day!
http://digitalp...-social-gaming/
“70% of revenues from lead generation” Sounds very high. Anyone confirms?
It is not amazing to see how much you can generate off of free online games like that.
People everywhere are making money off the social networking buzz this past decade.
I do not think that internet marketing will ever be the same.
Jay’s Saving your Money
Yeah, I found that they are displaying and encouring players to take surveys for their CPA in exchange for the game cash.
Its nothing but amazing how such simple and not so sophisticated games are getting so much attention while games which required millions of dollars to be developed are left aside
It sickens me that all these social games companies are making a shit load of money by applying scammy tactics. The fact that inferior games like the ones created by Playdom can dominate the gaming space makes me cringe. Yikes.
i hope the number are correct that is listed on the top most place of this info…this crazie…eeee
We are developing a new social game to be launched on Facebook. Unlike many of the “copy-cat” attempts that are popping up, this will be an original game which will not only have the most loved traditional game play and features but will also introduce new concepts of game play to the social games industry.
In additional we will not be using “offers” at all to generate revenue and will be taking a completely new approach to gaining advertising revenue.
We are seeking one investor to accelerate our development timeline. We are looking for someone who can invest $25,000 and in return said investor will receive 5% of all revenue generated by the game including revenue generated by advertising.
If you are interested message me on Facebook for more information. Serious inquires only please.