The Economist has an interesting article about the migration of video games from physical consoles to web-based platforms. While most video game consoles allow users to play online with others, the real growth in online gaming is being fueled by web-based virtual worlds, social and casual gaming platforms.
The article points to several indicators that video games have begun to make the transition from consoles to online and mobile gaming platforms. There are several indicators that social, mobile and casual gaming are the next wave of disruptive technology:
- In America, the industry’s biggest market, sales of games were down 12% in the first nine months of the year compared with the same period in 2008.
- Gameforge, one of the biggest and fastest growing online-gaming firms, offers 15 games and has more than 85m registered players.
- The biggest area of growth for online gaming has been social gaming in social networks like Facebook. These games allow users to "join their friends for an online game of poker or Scrabble, or to create and show off virtual pets, farms and mob families."
- Zynga, the market leader, which had 22m users in January, now has more than 170m.
- Since they don't have to manufacture and distribute physical video game software, online social games are very profitable for game developers.
- The other big advantage for online gaming is that they don't have to spend as much money on traditional marketing, instead relying on "viral" and "word of mouth" among friends on social networks.
- The iPhone App store is also a leading source of mobile social gaming with literally hundreds of games available at the tap of a finger.
- The biggest monetization boon for online gaming companies comes from the sale of "virtual goods." By 2012, the article forecasts, annual revenues of virtual goods will have grown to $1.2 billion.
Despite these gains, there are signs that online gaming is already experiencing some potentially serious growing pains. This month Zynga and Facebook have come under fire for it's advertising practices. A potential class-action lawsuit asserts that "unauthorized charges imposed on Facebook and MySpace users who participate in social games like 'Farmville' and 'Mafia Wars.'"
Whatever the outcome of the Zynga lawsuit, social and casual gaming is here to stay. Electronic Arts (EA), the big dog of the console gaming era, recently snapped up Playfish, the second largest producer of social games for $400 million dollars.