Tobold's Blog
Sunday, November 20, 2011
A failed business model

Readers of my blog will know that I am neutral towards the Free2Play business model: I don't condemn games outright just because they are Free2Play, and if the system is well done I even pay to play. But what is certainly true is that the Free2Play business model has a wider range of implementations, some good, some bad. The monthly subscription model, while not ideal either, at least is a lot simpler. In this post I want to talk about a special implementation of the Free2Play business model: The Facebook game Free2Play model. And I think that it belongs into the bad subcategory of Free2Play implementations.

What makes the difference between a Facebook Free2Play business model and lets say some MMORPG or browser game with an item shop is the social network component in the Facebook game. Basically the game company is not only interested in your money, they also would like you to get your friends to play. If that works, the game "goes viral" and reaches a lot more players than it would by just using traditional marketing. So far, so good. But does it work?

The problem, like so often in games, is one of balance. Facebook games are balanced around an assumption of how many friends you have and can bring to play with you. If you are outside that assumed range of friends, the model just fails. The problem is usually the use of progress blocks, where you can't advance any further unless you either ask your friends for help, or pay with a game currency you can buy for real money. If you have not enough friends, that makes the game far too expensive: I've been asked to pay up to $25 to complete a single quest. That is just silly, even for somebody who in another game might have paid $25 for a permanent mount. I do like having the option to pay for an advantage, but like most people I tend to react negatively to a paywall which basically tries to extort me with a "pay or stop playing" choice.

By making paying to play so expensive and annoying, Facebook games thus make the "social cost" of pestering your friends more appealing. That very quickly leads to players realizing that the person least likely to be bothered by a constant stream of gift requests is somebody already playing the same game. MMORPGs like Everquest started out with a social model in which guilds were there to play with your friends, and over time that social model degraded to guilds where you play with people who have the same goals and play intensity as you have, even if you don't actually like them. Facebook went through the same development much quicker. Every Facebook game forum has "add me" threads. My new Facebook account already has 67 friends, just by clicking on links in various "add me" threads like that.

Besides thus encouraging you to collect lots of fake friends, Facebook then also offers you to bot your interaction with those friends. I discovered a Facebook app called "Auto Collect Games Bonuses", which automatically searches through the feeds of your friends and clicks on all game requests for you, netting you all the bonuses you get for clicking on that sort of link. The app already has half a million monthly active users, and it is not the only bot doing this sort of activity. Apparently my 67 friends produced 655 of such links in the last 2 days, from 4 Facebook games (2 Zynga, 2 others). That's a lot of bonuses collected. This and the requests I can send them makes paying to play rather unnecessary, I can get around all those blocks by botted interaction with my fake friends.

I believe that this particular business model is not sustainable. Zynga already revealed that only 4% of their players are paying, and that percentage is decreasing. It is a downward spiral, in which players avoid paying by using the help of fake friends, and the developers react by making the game more expensive for the dwindling number of people still spending money, driving more and more people away from paying for the games and into the fake friends alternative. And of course by spreading the spam only to your fake friends and not your real ones, you don't even advertise the game to new customers.

There are a few games on Facebook that do better. For example in Dungeon Overlord you aren't required to have friends at all to advance. Inviting friends gives you a few percent bonus, with no hassle to you or your friend and no continued gift request spam. That is the kind of game which might encourage you to invite your *real* friends instead of searching out other already existing players and fake-friend those. But most Facebook games just copied the business model of the first successful games. And I believe that business model failed, and is going to come crashing down not too far in the future.

It may be failed, but it did make a lot of money in the process.
"I believe that this particular business model is not sustainable. Zynga already revealed that only 4% of their players are paying,"

Tobold the post was a lengthy but cogent analysis.

I have always scratched my head at Facebook. Primarily because I just could not understand the business model. Plenty of people on the internet will show up for something that is "free". But eventually you have to get someone to pay for things like Servers, Routers, Power, Telecom Services etc...

Who will pay for FB's cost overhead? Advertisers are one way to do it but... as opposed to Google, you can't charge for ease of advertising delivery to customer (search).

Google is pretty much the new Phone Book. But what is FB?

Community Board?
Gossip Page?
Amway? (farmville reward pyramid?)

Monetizing all the people who show up for "free services" has been the bane of many dot coms. (GeoCities,, Webvan, - soon to be joined by Netflix and Groupon)

So yes I believe that Zynga has a failing business model and no doubt the FB people are hard at work getting the hype machine busy about some other gimmicky idea to keep FB's mythical book value.

Because after all FB is really just a "platform" and we at FB are all bout delivery of what ever the user wants... for free... where we charge advertisers for something... but if games fail... we are not about games anymore... oh no... we are about "making connections" not about making money just ask Mark Z!
I just had a Eureka moment.

Facebook IS Amway/Avon and Zynga is just the crap product that people use because "their friends" sold it to them.

Any pyramid marketing scheme depends on saps (er "friends") to take goods of substandard quality in exchange for full price. The only way this works is due to the "friends" buying said product from the Amway seller and not Wal Mart.

But... in Amway the seller is paid a commission to get "friends" to buy the crap the seller markets for them. Also there is a pyramid of compensation where the Top or First sellers get some of the profits from those below.

FB and Zynga doesn't have this. There really is no incentive to KEEP pressing your "friends" to play.

THIS is why FB wants to create it's currency. They WANT to reward those facebook friend harlots who friend EVERYBODY because they need to reward their promiscuous ways.

But wait! if the games are crap (remember we need to sell sub quality on FB/Amway - because if we had quality games it would cost too much)
So the harlot shepeople need some new reward.

Oh I know COUPONS!!!!

(btw this article is 3 days old... pretty cool tie in to current thinking if I do say so myself!)

So there you have it folks the "new, new" thing at FB will be Coupons!

All gamers can rest easy! Your future is not as a Facebook Friend!
@Angry Gamer I think you're spot on! I have never "Amwayed" and I will never Facebook. I just despise systems like Facebook that try to get right inside your soul and end up owning you through the information they hold. And it's not just personal information, it's all your network of friends and family, all your likes and dislikes, tons of pictures in which others can be identified with ease and a history of a lot of the things you did in the past. It's a spy agency's wet dream.

Facebook aside, the most successful F2P business model I have encountered is still World of Tanks. Other games have appalling F2P models where you can only experience a small fraction of the game if you don't pay. In WoT you have access to the WHOLE game as a non-paying customer. Paying only gets you there quicker.
I think Echo Bazaar is another FB game that does it right from a player perspective. You don't need any friends playing the game to advance, although they can make some parts easier. Even then, all requests you send them appear only in-game for the specific friend you picked.

You can post FB status updates through the game for a small benefit, but you can write the text yourself, so it can be much more interesting than most spam from other games.

Finally, the cash shop sells some utility items, but mostly content. You can play the rest of the game completely for free, and there is s LOT of free content.
Facebook is infrastructure for advertising. That's all it is. Just like T.V. or magazines. Without advertising there is no business model.

It's not a gaming platform any more than the postal service was a gaming platform because people Played by Mail over it. Any gaming use is incidental. Facebook is one of the smallish number of services that use the internet to offer people who have no interest in the internet something they want, in this case a means to share the kind of material about themselves that they'd otherwise have to meet in person to share.

Having a Facebook page for most people is like having a mobile phone. You just have to have one. It's not optional. Everyone does. If you aren't on Facebook you won't know gossip about your friends and enemies and passing acquaintances until it's already old news. You won't get party invites. You won't be in the loop.

Games on Facebook, on the other hand, could all disappear tomorrow and almost no-one on Facebook would care.
Permit this grumpy old gamer to exhult a little bit. Zynga's abusive business model going down the tubes at the same time as two very non-casual games (MW3 and Skyrim) are both heading for the $1B sales mark.

It not that I am a particularly hard core gamer and to be honest I have no love for Activision but I am just sick to the teeth of hearing that the future of gaming is Farmville and Angry Birds.
Games on Facebook, on the other hand, could all disappear tomorrow and almost no-one on Facebook would care.

Wrong, Bhagpuss, the "almost no-one" are 53% of Facebook users.
Wrong, Bhagpuss, the "almost no-one" are 53% of Facebook users.

Right, but I think his point was that those 53% of Facebook users did not join FB for the games, it just happens to be an incidental activity they do while already wasting their time on Facebook to begin with. I remember using AIM and other instant messaging back in the day, and would have loved if the AIM box had a Bejeweled or whatever off to the side - same thing with people browsing FB and waiting for new updates.

Personally, I never understood the purpose of the F2P model with FB games to begin with. The big draw of F2P games in the MMO sphere is how the F2P model acts as a crutch to draw in enough warm bodies for the community aspect of MMOs to work - without a lot of people, the world is empty and no one feels a desire to look different (i.e. cash shop costumes) from one another. And yet in FB games thus far, the number of simultaneous players is entirely irrelevant. So... why have F2P?

The future of Zynga (etc) is the more along the $0.99 app line, IMO. Or in-game advertising, or buying new maps/levels, and so on.
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