Zynga’s Surging Revenue Shows Online Gaming’s Increasing Clout

6735_110500212090_683847090_2715127_968184_n Recent negative press about FarmVille developer Zynga has done little to rock the financial prospects of the "social gaming" giant, recent reporting by CNN and CNET reveals.

In fact, Zynga is poised to outdo the previous quarter's impressive performance before posting even more impressive financial figures amid a global recession and market turmoil.

Pixels and Policy investigates why Zynga has weathered the publicity storm, and why gaming companies are thriving in one of the largest economic contractions in decades.

Continue reading Zynga’s Surging Revenue Shows Online Gaming’s Increasing Clout

All In The Family: Zynga Sues Playdom for ‘Mafia Wars’ Rip-Off

Just a day after our coverage of how social networking games like Zynga's Mafia Wars are raking in tens of millions of dollars in revenue every year, news broke that Zynga was headed to court. The unlucky defendant? Playdom, author of the eerily familiar-looking Mobsters. Looks like there's some *ahem* bad blood between the families.

From VentureBeat

Zynga filed another suit claiming
that Playdom had hired away four Zynga employees who had helped the
company steal Zynga’s secrets, including a crucial document called the
Zynga Playbook

The Zynga Playbook is literally the recipe book that contains Zynga’s
“secret sauce,” and its contents would be invaluable to a competitor
like Playdom.

The Zynga Playbook constitutes a collection in one
document of many of the most material non-public commercially valuable
concepts, techniques, know-how and best practices for developing
successful and distinctive social games.

So Zynga argues Playdom allegedly pilfered their "secret sauce" by hiring away employees and pumping them for info. As we mentioned yesterday, Zynga has a lot to fight for – its playbook brought in $50 million in revenue at last count, and a recent expansion of their Texas Hold'em app to the iPhone costs anywhere from nothing (for the lite version) to $34.99.

That said, 'Mobsters' does play like 'Mafia Wars,' but I struggle to find a social networking game that doesn't play similarly to every other social networking game. The real trouble here is the litigation. If big developers like Zynga can sue for a game that resembles its own in theme or mechanics, despite the fact that small producers have only limited mechanics to work with, this could create a chilling effect on small game production.

We've repeatedly seen through iPhone Apps and do-it-yourself Facebook coding that small developers can create products that resonate. The appetite for both graphics and non-graphical virtual worlds is growing, especially for worlds like Mafia Wars that can be played without demanding graphics capabilities. These are the virtual worlds for casual gamers, and casual gaming is a lucrative market, willing to drop hundreds through microtransactions and customization features.

It would be a disservice to the emerging social networking game genre if litigious power players scared small developers away from the platform. There's definitely growth potential there.

The Guardian: Virtual Commerce Will Change the World

If today’s
tech article
by England’s The
Guardian is any indication, a veritable virtual world earthquake is
rumbling across the pond. Correspondent Victor Keegan gets the impression all
of this virtual commerce may be more permanent than the Furby:

Unlike the industrial revolution, the virtual one is led by
the East, not the West. Market researcher Plus Eight Star puts the virtual
goods market in Asia at more than $5bn, or 25 times higher than recent estimates for the US, though
they may be a serious underestimate.

Keegan pulls from data harvested by virtual researcher par excellence Edward Castronova of
Indiana University, who took on the heart-pounding feat of reading hundreds
of pages of Everquest 2 player transactions
in an effort to map virtual economic
trends.

It’s refreshing to see the growing virtual-to-real currency
conversion market taken seriously. What’s great about Keegan’s Guardian article is that it brings in an
area of virtual commerce that is exploding while remaining under the radar of
the graphical worlds scholars: Facebook and social networking games.

For those unfamiliar, Facebook is rife with free-to-play
games like Mafia Wars, Farmville (of
which your author is a recent addict), and Roller Coaster Kingdom. While these
games are entirely free to play, any serious player will find themselves
quickly limited unless they opt to invest real money in purchasing in-game
upgrades and currency. Mafia wars pic

Zynga, developer of
Mafia Wars, Farmville, and nearly every other big-name social networking game
on Facebook, draws a pretty penny from these “microtransactions” of anywhere
from one to five dollars, all the way to $40. 

These games aren’t a joke, and Zynga was right to bank on
the spendthrift tendencies of teens driven by immediate gratification. Zynga
recently closed nearly $50 million in revenue
on the backs of these easy-to-produce
browser games, and hauled in nearly 30 million active players. That’s a rough
average of a little over a dollar spent per player.

So what is the future of these virtual transactions? The Guardian shows no lack of hope:

First, the technologies behind virtual spaces are powering
ahead. It is even possible, indeed likely, that products will be constructed in
a virtual world and then "printed" out in the real world as a
tangible product.

While we may not be printing things out on three-dimensional
printers any time soon, Keegan is right to point out that technology shows no
signs of slowing. As the iPhone has shown, engaging games can be produced with
little start-up capital, increasing competition and raising quality. People are
willing to pay for the experience.

The economic world is changing, a dollar at a time.