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 (