Why The Economics Of Social Gaming Are So Attractive To Investors


Jeremy Liew is a Managing Director at Lightspeed Venture Partners, where he focuses on investments in the internet and mobile sectors, with a particular interest in social media, commerce, gaming, financial and methods for increasing monetization. He blogs on these topics at lsvp.wordpress.com.

In 2009, social gaming exploded onto the scene. EA bought Playfish for more than $300 million just a couple of weeks ago, and Zynga and Playdom (we’re an investor in the latter) both raised large rounds of financing this year. Traditional computer gaming has been showing steady growth for a long time, but not the tremendous growth that the leading social-games companies have shown. What is it about social games that has enabled such a difference in trajectory over the last year, and why has it been startups and not the big established publishers that have led the charge? There are three key factors: development, distribution and discovery.


Making video games is now like making movies. The best video games (


The Magus

ah Jeremy is not is what he claims to be. Arrogant VC gent who has zero experience with real sales and management. The grin says it all. RockYou, his baby, has a major identity crisis. What exactly is its mission statement Jeremy? It has 35 sales people, and only $6mm in brand ad revenue for 2009? Its not a social game developer. Its a hack that copies apps from others.


Meh is right, this “analysis” is obvious, cheap games, faster dev cycle, ability to spam facebook users. This just implies there will quickly be a bubble of capital.


these are same reasons why a bubble is developing, and will pop in the next year or two. when development is so cheap, anyone can develop. sure, it takes $50m to develop a AAA game, but when it's out on the market, there aren't 100 other $50m games to compete with. same with distribution: when it's frictionless, anyone can distribute. this is why i block a game whenever i get a notification about it. as for discovery, this will become much harder once facebook's new policies are enforced. guess what? no more spamming your friends about some wandering cow. as for marketing dollars, zynga is spending a boatload on facebook ads. cheap development + frictionless distribution + vc dollars = bubble. will be interesting to see what this space looks like five years from now. my guess? it will be consolidated by a few large players making *gasp* a few hit games. personally, i'll be thankful: i find the "games" put out by zynga, playdom, playfish, etc. completely useless. i really do hope they get better, but i'm not holding my breath. they're so focused on monetization that they forgot that games have to be fun

Mikko G.

Thanks for the post … very informative.

Perhaps in a follow-up post, you could cover the characteristics of the symbiotic relationship between the social game publishers and major social networks, and what could threaten/disrupt it.

Comments are closed.