The End of the Facebook Gaming Boom?

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According to a report from IHS Screen Digest Media Research, Facebook gaming is on the decline.

Social gaming giant Zynga disputes this claim, but the research firm has put together a compelling argument none-the-less. According to them, the total number of users is stagnating, new users are more and more expensive to come by, competition is increasing, and social media has shifted focus to other activities.

The number of Facebook gamers grew by leaps and bounds in 2009 and 2010, but in 2011, those numbers went flat. At the end of 2011, only 25 percent of Facebook monthly active users played games on the platform, versus 50 percent only a year ago. Facebook has continued to draw more users, while the total number of gamers have remained about the same.

Facebook game leader Zynga actually lost monthly active users from 275 million at the end of 2010, to 225 million at the end of last year.

“Facebook rocketed to prominence as a gaming platform in 2009 and 2010,” said Steve Bailey, senior analyst for games at IHS. “However, with equal speed, the market then settled into a state of maturity in 2011, with conditions becoming markedly more challenging for game operators. While Facebook remains a worthwhile opportunity for companies able to meet these challenges, the tone of the market in 2012 will be somewhat muted compared to the optimistic outlook of the past few years.”

Bailey expounds on the growing challenge of gaining new users, and the high cost of keeping them:

"With more operators vying for attention and user expectations rising, the cost of acquiring users is growing. Viral channels for finding users aren’t as abundant as they were before, so it has become necessary to engage in cross-promotional networks or direct advertising.

Expenditures for these activities are putting pressure on the lifetime value of users, so there’s now far greater incentive to improve retention and monetization capabilities. Along with the increase in marketing costs for purchasing users, there’s also a development overhead to consider: As with any maturing video game marketplace, production values will also need to step up a notch"

In the long term, this by no means signals the end of social gaming, just the end of boom we've seen in past years. With the capabilities of new smart phones and tablets as a viable platform for alternative gaming, Facebook games are seeing some intense competition. Game companies are launching better and better titles that require greater commitment, and provide deeper engagement. This means gamers are more likely to spend most of their time on a select few titles rather than branch out into new territory.