Approximately 50 million monthly gamers generate annual revenues of over a billion dollars for the industry, according to Tuck professor and panel moderator Eric Johnson. The social gaming industry is projected to expand 30 percent this year and social gaming companies will need to find ways to convert such growth into increasing profits, according to Johnson, who serves as director of Tuck's Glassmeyer/McNamee Center for Digital Strategies, which hosted the event.
Panelist Chris Mahl, senior vice president and chief brand alchemist for SCVNGR, a gaming company that operates as a "location-based social platform," spoke about his experiences adapting the company to the evolving industry. The key to SCVNGR games is that they bring the gamer into the real world and change the way gamers interact with different locations and other players, Mahl said.
Gamers can travel to various locations, ranging from parks to local restaurants, to complete interactive challenges, according to SCVNGR's website. Users win virtual reward points that translate into real-life rewards like free food or other prizes.
Gamers' ability to win real-world goods helps build brand loyalty, according to Mahl.
The demographics of social gaming are quickly changing, according to Steve Cassavant Tu'05, vice president of strategy and business development at IGN Entertainment. Although adolescent males were traditionally the main social gaming consumers, the consumer base has broadened to include new demographic groups, he said.
"The soccer moms are doing these micro-transactions and the ease of doing it is expanding the base of who is doing it, but the amount they're paying has sharply dropped," Cassavant said. "They are disproportionately contributing to the people who are paying for these micro-transactions, so monetization will be less about engaging the audience to play but finding a platform to make them pay for it."
Users currently often take advantage of free or low-cost applications, according to Cassavant. In the future, companies will try to convert such users into customers willing to pay for more frequent upgrades, he said.
Panelist Teemu Huuhtanen, executive vice president of business development and communications for Sulake, Inc.'s North American branch, discussed his work on a program called Habbo an online social networking and virtual world community for teens via video conference.
Habbo has recently increased its marketing outreach efforts to encourage users to pay for more frequent updates, Huuhtanen said. In 2007, for example, Habbo sent program updates to users only a few times a year. The program currently analyzes player feedback and usage to provide daily updates on its website. Companies must adapt to the constantly morphing nature of the gaming industry in order to maintain consumer loyalty, Huuhtanen said.
Huuhtanen also discussed the complications that accompany international expansion by comparing Habbo's success in South American markets with its shortcomings in Asian markets.
"South American markets and a couple of markets in Turkey which is the number four market in gaming in revenue in Europe monetize very well," he said. "They have large populations and now these people are getting their first broadband connections."
Although Habbo established a short-lived joint-venture with the Chinese government, the Chinese market proved "too complex and hard" after government officials were unable to follow through with their end of the agreement, Huuhtanen said.
"What you have on paper doesn't mean anything because [the Chinese government] will change the agreement," he said. "Let's say you do well in China good luck getting your money out of it because not even Google can make it."
To cement consumer loyalty, Mahl said he expects companies to launch large-scale campaigns that market their games as "broad commercial exercises." Allowing users to construct their own games and their own challenges would allow brands to connect with the consumer in an almost "unimaginable" way, Mahl said.
