How Playfish Baits the Hook on Facebook

8/18/2009 9:00 AM | 0 Comments | Page 1 of 3

Social gaming is in its infancy. While console makers are trying to figure out what "social gaming" means beyond playing together with friends in your living room or across a vast worldwide network, other companies are creating powerful products on Facebook and MySpace that cost very little to make and operate, and have the potential of reaching millions of users without spending a single advertising dollar.

If you have a Facebook account, you have probably read an endless stream of status updates from your friends about the things they are doing in Mafia Wars, FarmVille, Pet Society and more. And as overwhelming as that can be, it shows the viral nature of these games -- while not everyone on Facebook may be playing, chances are, at least one person you know is.

Smart companies know the score: Facebook has the potential to be as hot a platform as the iPhone. One such company at the forefront of this is Playfish, founded by four former executives of Glu Mobile. Recently Crispy Gamer had the opportunity to talk at length with John Earner, Vice President of Product Management at Playfish, about the business of social gaming, the company's games and how this company is at the forefront of the social gaming revolution.

Crispy Gamer: In October of 2008, you guys had like 10 million monthly active users playing on Facebook...

John Earner: Yeah, sounds about right.

Crispy Gamer: ...and in July [2009] you hit the 30 million monthly-user mark. So have the numbers changed since July, and how many active users do you hope to have by the end of the year?

Earner: That's a great question. To the first point, we are now a little bit over 40 million active users a month, and we're very proud of that. We are growing faster than we have ever grown before, and this is due to the fact that platforms such as Facebook are growing so quickly. But also due, in part, to our increasing understanding on how to make games that are truly social that people truly want to play with each other.

We've recently launched two games, and they are helping drive our growth: Crazy Planets and Country Story, which is a farm game that we just launched a few weeks ago. I would say that our goal is for gaming to be a mass-market entertainment medium, and we know that there are over 300 million people on Facebook [in the U.S.] and there is a similar number in China. There are 200 million more on other social networks. We are quickly getting to the point where there's going to be well over a billion to a billion and a half on social networks. We think those people are going to enjoy playing games.

So we try to benchmark our success on the big picture: How many of those people can we get to find and enjoy social games? I think a second metric we use is financial: Worldwide, the gaming business, broadly defined, is an over $40-billion-dollar-a-year business. We think it is reasonable to assume that, at some point in the next few years, social gaming comprises a good chunk of that. Certainly not all of it, but certainly much more than the few-hundred-million-dollar business that it is today.

Crispy Gamer: That's a good point, but here's the million-dollar question: How does your company monetize that (besides on iPhone) -- how do you make money on Facebook, MySpace and Bebo?

Earner: Great question. First, some background: We are venture-funded by Accel Partners and Index Ventures, two tier-one venture capital firms. We have $21 million in funding. We don't need to touch that money. We are highly profitable -- although I can't share our exact revenue numbers -- and the way we do it is a combination of advertising, direct transactions from players spending a few dollars at a time on virtual items or perks in each of our games, and the ability for users to complete offers for free coins.

Amongst those three things we've found quite a profitable business. Microtransactions have been getting a lot of press and hype for being the next possible business-model paradigm. Whether or not it can change journalism or the Internet remains to be told, but we know it's a highly successful business model for games, and one that serves us quite well. What's really going on here is that the last generation of online games was predicated on a person playing the game for an hour, and making a quick decision after that hour whether or not they wanted to spend $9.99 and download a casual game. That model doesn't make sense, because people have so many choices and so little time to make an impulsive decision in that hour on whether or not to spend $10.

By making the games free-to-play and virtually distributed -- socially distributed on Facebook and MySpace -- everyone gets a chance to enjoy the game. And some percentage of those people -- a single-digit number, but a good one -- over time realize that they can improve their game experience by increasing their status or leveling up faster, and they choose to spend money. And that model is an effective model with which you can have tens of millions of people playing your game every month.

Crispy Gamer: I notice that you have two or three games on iPhone -- or rather, there's one out and two others are coming to iPhone at a later date. Is connectivity between iPhone and Facebook important to users? Is it a selling point for users, or do they just consider it a nice extra?

Earner: We believe that it's a strong selling point. As an anecdote to support that, the vast majority of people who have downloaded Who Has the Biggest Brain? for iPhone (that's our first iPhone game) are absolutely using Facebook Connect. They have Connect enabled for that particular app. I would say, longer-term, the entire notion of a device is going to go away in gaming. It is going to cease to be about what device you use to play the game -- whether it's your PC or your iPhone -- and it's going to be about the shared experience. We think Who Has the Biggest Brain? is the beginning of that. No matter how you access it, the person is able to compare their scores and see how their friends are doing. We'd really like to move away from a device-centric world and move to an experience-centric world.

Crispy Gamer: You mentioned that you worked for PlayStation Network. Do you think a game like Crazy Planets would work on PlayStation Network or Xbox Live, or the DS or Wii or Steam, or any other platforms?

Earner: Yeah, sure. I think Steam would potentially work. As someone who has worked in that kind of space before, I think those platforms are doing some interesting things to try and get into the social gaming space. I do think there are some things that have fundamentally changed, or are in the process of changing, in gaming; and those platforms will have to adapt.

First of all, there's just a larger volume of people who are logging on to Facebook every day than people who log on to Xbox Live. And I don't think that's going to change, because of the hardware and purchase requirements it takes to get an Xbox 360. Hundreds of millions of people have a PC in their homes already. So that's one thing. The second is the catalogue environment. One of the fundamental things that makes our business and our company tick is a lack of a catalogue environment. What I mean by that is that players don't find games like Crazy Planets by going to a directory -- a miniscule percent of people find Crazy Planets in that manner. The way to find Crazy Planets or any of our other games is by word of mouth. That word-of-mouth attention doesn't exist in any form on Xbox Live or PlayStation Network. They will need to be there to enjoy the kind of success Facebook is enjoying in gaming.