Ah, social network games. You either love them or hate them. But if you’re American, chances are you love them—we have a staggering number of social network gamers in the 50 states. But as of last month, you may love them less than you did…not all that long ago. According to SuperData Research, there are ten million fewer people playing social media games than there were last month.
In fact, the number of active social network gamers in March dropped below 200 million for the first time in a year. According to Joost van Dreunen, CEO of SuperData Research, social network games “are a contracting market, absolutely.”
Not coincidentally, EA announced two days ago it will be retiring games from Playfish—the studio it had acquired for $300 million in 2009—including The Sims Social, SimCity Social, and Pet Society.
So why the sudden drop-off, a loss of 5% of the industry’s user base in a mere month?
van Dreunen suggests, “The social games industry received a lot of momentum and funding in early 2011 and early 2012, and that essentially led to a very crowded market. And like all industries, the games industry operates between supply and demand economics. If you have a massive amount of supply, the prices drop, and invested money creativity dries up.
“People are switching slowly but surely to mobile platforms. This is something the industry is trying to figure out: where their users are going to go next.”
According to Scott Steinberg, videogame consultant for TechSavvy Global, gamers are likely still playing. But they may no longer be playing games on social networks like Facebook. “There’s been explosive growth in the mobile and tablet arena based around app-based games and other bite-sized titles, and because of this, it’s inevitable there may be some attrition for the social games market. People are obviously strapped for time, so they’re looking to get their gaming fix in wherever they can.”
Then there’s the fact that social network games require an always-on Internet connection. So Angry Birds Friends may not be convenient to play, but once you’ve purchased and downloaded it, Angry Birds is.
Although there are still a little under 200 million U.S. social media gamers—two thirds of country—a 5% loss in one month is a rather dramatic plunge. But van Dreunen doesn’t see this as either doom or gloom. He says there’s a specific advantage to the numbers drop-off: “It removes a lot of the non paying customers from the market.”
van Dreunen explained when players decide to purchase an in-game item in their free-to-play game, they’re “converted” from a non-paying user to a paying user. “The average conversion rate is 2%. If you do the math, you can say that there are 4 to 5 million users who spend money. These 2% of spenders carry the whole industry.”
So although many gamers have left, companies “increasingly speak more to your core market. A core base will continue to play and spend,” van Dreunen said.
However, with 10 million fewer gamers, logically, it stands to reason that some of the converted customers have also left the market.
Steinberg, who noted that Marvel: Avengers Alliance, as well as Candy Crush Saga, are still extremely successful, said, “It’s not as if the bottom has fallen out. We have yet to see a trend. One month is a blip. But if it starts to happen over the course of several months, you’ve got a problem.”
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Via SuperData Research.