An introduction to the mobile social gaming market

Mobile Social Games Market Statistics and Trends

The last year has seen a number of big deals and impressive stats emerge from the mobile social gaming space.  Big established games publishers are looking to shift away from desktop online games into the faster growing mobile games market.  Huge new social platforms for playing mobile games have also emerged, with Japanese companies such as Gree  and DeNA, expanding out of their enormous and highly developed domestic markets.  Barely a month goes buy without a plucky young mobile social game developer raising a huge new funding round or cashing out with a 9 figure acquisition.  With freemium business models that combine huge mass market usage with multi-million dollar revenue streams from virtual goods and ‘in-app purchases’ this is a huge new market developing.  In this article we’ll take a closer look at mobile social gaming drilling down into the statistics, key trends and the major players in what is shaping up to be the boom market of the next decade.   For more about the business of mobile social games check out our Guide to the Mobile Social Games Market and our list of the World’s Top Mobile Social Games Developers.
Mobile social gaming, key statistics
When you look at the numbers it’s clear that the mobile social games market is kicking off:

  • 38% of US population currently plays some type of freemium game (NPD)
  • 40% of those who have played a freemium game have made an in-game purchase (IYOGI)
  • Freemium accounts for 55% of all mobile game revenues – compared to 6% of ad revenue (SuperData)
  • 65% of all revenue from the top 100 iOS games comes from freemium transactions (Flurry)
  • Consumers spend an average of $14 per transaction in freemium games (Flurry)
  • 51% of revenue from freemium mobile games comes from transaction over $20 (Flurry)
  • The Gree mobile social gaming platform has 230 million users and the company saw a 186% increase in net income year-on-year to $167 million in Q3 2012
  • Funzio earned over $5 million a month in Q3 sales from its games Crime City, Modern War and Kingdom Age
  • EA bought out social game developer PlayFish in a deal worth up to $400 million
  • Draw Something’s active users dropped from 15 million to 10 million between April 2012 and May 2012, weeks after Zynga acquired the company for $210 million
  • DeNA and Gree shares dropped more than 20% following the banning of controversial Kompu Gacha game mechanic

Business models

The Mobage social mobile platform

There’s now no doubt about it, the ‘freemium’ business revenue model can work, especially when it come to social mobile games.

  • Forty per cent of freemium players pay for virtual goods, according to NPD and 38% of the US population play some type of Freemium game.
  • The average transaction value for iOS or Android in-app purchases is $14, with over 50 per cent of revenue from freemium purchases deriving from transactions over $20.
  • Fifty five percent of all mobile game revenues comes from freemium according to SuperData Research.

Zynga has built a $650 million a year empire out of this model and according to some in the industry and we can expect some pretty impressive figures for freemium games over the next few years – some of the numbers that are coming out of these mobile games businesses are jaw-dropping.  At GDC 2012 Benchmark’s Capital’s Mitch Lasky called freemium “the most important disruption” in the video game market, across mobile, casual and core markets.
However, that doesn’t mean freemium is a guaranteed successful route to monetisation or a magic bullet for developers. For a freemium game to work developers have to approach game design with a different mindset, splitting design intelligence with business intelligence and intertwining gameplay with marketing (Tag Games’ Paul Farley says that data analysts are going to be more important than game designers in the future). This a huge pivot in game design and its taken place over a relatively short period of time. So as freemium matures, and developers get better at designing game mechanics that encourage users to depart with their cash, the revenue model should grow more robust.
The freemium model doesn’t have to be exclusive either. There’s already very successful games, such Infinity Blade, that use a hybrid model, combining premium (i.e. paying upfront for the game) with virtual currency and in-game purchases.

Mobile social gaming platforms

If there’s one word to sum up the buzz around mobile social games in 2012 it’s “platform”.

The big Japanese players such as Gree, DeNA, as well as western publishers such as EA and Zynga are all looking to establish themselves as the dominant consumer-facing mobile social gaming platform across mobile. This has sparked something of a gold rush of platform and developer acquisitions, as companies aim to build game libraries and userbases as quickly as possible. The mobile social gaming space is therefore looking extremely different to how social platforms developed on traditional games consoles.
Unlike on console platforms, gamers are not forced onto the manufacturer’s pre-installed system. Therefore a number of third party social gaming networks have emerged to carry out the features that users have come to expect from closed platforms such as Xbox Live and PSN – such as maintaining friend lists, inviting friends into games, score boards and sharing recommendations. Where mobile social gaming platforms differ the most from home consoles platforms, is in the areas of monetisation and distribution. Mobile platforms provide a vital role in taking the freemium revenue model and expanding it to encompass multiple games – allowing players to spend virtual currency across different titles.
Gree’s Ethan Fassett talks on how platforms sustain social games


Funzio’s Crime City

As we’ve discussed in the past on mobyaffiliates, app discoverability is facing something of a crisis with developers struggling to get noticed amid the thousands of apps rolling out every day. Mobile social games face exactly the same problem when it comes to distribution.  Check out our Guide to Mobile App Promotion for a detailed review of this.
When it comes to social games specifically, developers have a few unique tools that they can leverage. One of the biggest is the social nature of the games themselves, allowing players to invite their friends over other social platforms, like Facebook, or via email. These invitations can then be incentivised by rewarding players with virtual currency or in-game items.
App promotion networks such as ChartBoost and TapJoy, allow developers to cross-promote games between each other. Others networks like Applifier focus entirely on social mobile games, allowing devs to trade users (if the ad on your app generates an install for another dev, they’ll send a user over to your app, for no cost). Although incentivised downloads are now banned from the App Store, they are still permitted on Google Play and some app promotion networks work with this model, offering in-game items or virtual currency, to help incentivse installs. Again, check our list of app promotion companies for more detailed look at these networks.
Social games face a particular problem when it comes to discoverability as the freemium revenue model relies on a small number of high value users– 1% of Zynga players are believed to account for between 25% and 50% of revenues. This is one of the reasons why incentivised downloads are said to be ultimately inefficient – disinterested users simply download the promoted app to get the incentive and don’t become valuable. Many networks say they can overcome this by better targeting (i.e. promoting your game to users who are playing a similar title). Either way, more downloads – regardless of how they’re acquired – will always help with visibility in app store charts (which will result in better value users).
The final key element to the distribution of mobile social games is the social platforms themselves. These platforms will typically offer developers an API suite with built in social tools, sharing features and leader-boards, allowing developers to easily bolt social elements onto their games that will help with distribution. Platforms such as Gree and Mobage can also offer an app store-style UX that have their own charts, ad networks and promotional displays.


As any app developer knows, the problem of fragmentation in the mobile market is getting worse and this issue is particularly pertinent for social gaming, as it potentially prohibits Android users to play with their iPhone-carrying friends. Third party platforms can offer a solution to the issue of fragmentation in the mobile market. For instance, Gree’s platform allows gamers to play with each other across different operating systems and Papaya features a cross-platform web-based app approach.
However, the problem of fragmentation goes beyond the barriers between operating systems and now expands to different versions of the same operating system and the hardware capabilities of various devices. This will probably be more of a problem for Android due to the more fluid nature of its OS updates, the plethora of different Android handsets released each year and the large number of OEMs manufacturing them. In fact, if you take your Android phone onto the Gree platform today (it’s in beta), you’ll already find numerous games that run on Android Gingerbread, but not Android 4.0.
Games are more greatly affected by fragmentation because of their tendency to be more demanding on hardware capabilities, and social games are particularly impacted as handset incompatibilities dampen the inherent benefit of organic social discovery between friends.  The proliferation of third party platforms may simply shift the fragmentation problem into a new space, creating a situation where gamers are forced to maintain multiple accounts across different platforms – on the same OS – in order to play the latest games.
Representatives from OpenFeint, Papaya and ScoreLoop debate social gaming platforms on mobile

Mobile social gaming trends

Japanese expansion
One of the most important trends impacting the mobile social gaming market is the expansion of Japanese platforms into US and European markets. Mobile social gaming is more mature in Japan than in Europe or America, but it’s also reaching saturation, which is why the two biggest players, Gree and DeNA, are opening-up their war chests and acquiring and forming publishing deals with western developers. This influx of Japanese capital has therefore seen the value of fledgling social mobile game devs increase dramatically, with Zynga notably spending over $200 million on OMGPOP and EA shelling out $400 million on Playfish.
Gree’s new social platform went live just last month, but DeNA’s Mobage platform has been operational for slightly longer. In Japan Mobage has managed to create average revenues of $12 per user and boasts over 30 million users, with 10 to 15% monetising (compared to 1-2% common to most western devs). However, there are questions over Gree’s and DeNA’s ability to replicate its Japanese success in the western market. Both companies’ shares plummeted last month after the Japanese government outlawed the ‘Kompu Gacha’ game mechanic (a ‘mystery box’ style lottery gambling feature). ‘Kompu Gacha’, which encouraged users to buy virtual goods, was a key profit generator for Gree, as well as other Japanese social platforms, and it’s ban could result in a 20 to 30 per cent decrease in sales according to some analysts. There’s also some debate over whether or western gamers are culturally inclined to spend as much money on virtual goods as Japanese gamers.
CNN report on Gree following the Kompu Gacha controversy

Western games companies shifting from desktop to mobile
We’ve already seen major publishers EA and Crowdstar reducing activity on Google+ and Facebook (along with Wooga) and Zynga’s Facebook users decline in step with shares. The focus for the expansion of western social game publishers is now mobile and this trend will probably continue. Wooga has released one iOS game this year and is planning to release two more. EA and Zynga have both been active in buying up mobile game companies (Zynga got through more than 10 acquisitions in the last year, including Area/Code, Tokyo-based Unoh Games, Conduit Labs and Frankfurt-based Dextrose AG). Western platforms will have to catch-up with the Japanese platforms in this respect, as Gree and DeNA have been mobile-focused for the last three years.
Freemium refined

Flurry chart showing the shift from mobile advertising revenue to virtual goods between 2009 and 2010

Asa mentioned above, the freemium model has been performing well for developers and platforms and is likely to continue to grow. But it will also have to change and mature in order to keep players interested. The ‘Farmville’-style social freemium games that dominated 2011 will probably start to look crude over the next few years, as developers move onto more sophisticated freemium variants, where the gameplay and revenue model is integrated in a much more cohesive, fun and, ultimately, profitable way.
Will distribution get better?
Integrating your game into a social platform can obviously aid distribution, user engagement and promotion. However, down the road there’s nothing to stop such platforms facing the same distribution problems as app stores. The increasing number of social platforms may also end-up confusing users, who will have to maintain multiple accounts. This winner takes all approach won’t benefit developers tied to an ailing platform. The other problem is that most platforms are owned by publishers that make first party games, which raises questions over how 3rd party titles will be treated when it comes to promotion.
HTML5 lurks in the background with its promises of cross-platform applications and a universal app store. Many developers view it as the holy grail and there’s already a few HTML5 social platforms out there such as Mocospace and Papaya. Issues such as not having access to native APIs and to what extent Apple would tolerate forgoing its 30% cut of app sales, means there’s still questions over the role mobile HTML5 apps will play in social gaming, but we could still see it gain traction over the next year.   For more coverage check out our Guide to Mobile HTML5 Companies and Tools.
So-mobile gaming remains an incredibly dynamic market even at the enormous scale it has already reached. There’s also a lot of questions to be asked amid the flurry of acquisitions and growth projections. How will the freemium model evolve in order to accommdate different game genres and avoid a backlash from more traditional gamers? Will Apple really tolerate multiple social gaming platforms along with its own? How will the traditional big gaming platforms from Nintendo, Sony and Microsoft fit into this mix? Whatever the answers, there’s obviously is plenty more to come in this story and it will be fascinating to what new businesses emerge around this new industry.