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Game connection cédric genin 30112012

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Cédric Genin

This document discusses trends in the free-to-play online games industry. It notes that while the industry has seen outstanding growth, there are now too many players competing for market share. As competition increases, user acquisition costs are rising and it is getting harder for developers to stand out. To succeed, games now need top quality, innovation, and a focus on user retention. Over time, industry consolidation is expected as only the largest, best-funded players will be able to meet these challenges.

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This Town Ain't Big Enough for Both of Us – Trend Compendium for the F2P Online Games Industry Cédric GENIN Director Southern Europe, Bigpoint November 2012 Game Connection, Paris
Game connection cédric genin 30112012
With Outstanding Growth • Average growth rate of 8% for the gaming industry in total • The games industry is the fastest growing sector of the entertainment industry with a double-digit growth rate • Online gaming is growing faster than the total gaming market Global Online Gaming Market Growth Rate +15% +20% +20% +32% +37% 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: PricewaterhouseCoopers LLP 3
But there are too many players • Click to edit Master text styles of it fighting for a share • Second level • Third level • Fourth level • Fifth level
The Atari Syndrome – when the platform is not large enough for all the games Original Atari Ad in 1982
We can see this repeating in platforms such as mobile, with thousands of new free games and apps each day
Facebook does not guarantee endless growth either and the lifecycle is getting shorter due to increased competition FarmVille Cityville Sims Social 99 MAU in millions 89 88 83 80 76 76 78 63 64 62 66.5 54 53 47 45 50 35 33 31 30.9 24.6 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Timeline 7
Even Facebook’s largest gaming partner is looking for growth outside of Facebook as the platform finally reaches maturity 8
Traditional console players are also entering the F2P online gaming market with large budgets, while growth in traditional retail gaming slows down
Online F2P will become the norm even for traditional console players 10 Source: Marketwire, TechCrunch
But there is no added value for the user with more competition, just fragmentation “Equivalent value is not the same thing as actual value” (Tadhg Kelly Article: “Zynga Colapse Now”) 11
In a crowded market it’s getting harder and harder to stand out
And competition is increasing even faster than the overall market, which is a problem for everyone Release of F2P online Shooter games
Consumers face too many choices, which reduces loyalty. They don’t need to pay any longer; they can simply move to another game
Therefore, more and more games with an F2P model need a constant flow of new users, which must be acquired
Game searches by users are more or less flat Development of search engine requests for “F2P Game” since 2010 Source: submitted by Google
Game searches by users are more or less flat Development of search engine requests for “Farm Games” since 2010 normalized data in a scale from 0-100. Source: http://www.google.com/insights
But competition for user acquisition is getting harder and harder Source: google.de
Which translates into more expensive user acquisition CPC Evolution (Cost per click) UK USA +74% FR in 12 months CPC DE 2010 | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2011| Q1 2011| Q2 Source: Global Facebook Marketing Report 2011
Which translates into more expensive user acquisition CPL Evolution (Cost per lead) UK USA FR +152% CPL in 12 months DE 2010 | Q2 2010 | Q3 2010 | Q4 2011| Q1 2011| Q2 Source: iQU internal data
Reaching levels that make it hard for some developers to justify the investment Average CPL (for general online marketing campaigns) Additional cost for F2P gaming Source: Pontiex CPL Benchmark Study, own assessment
And in certain genres the impact is even higher Farmerama DE: Development CPL (index 2010) 384% increase 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 2010 2011 2012
How to escape the tight market?!
First, remember that we do entertainment! We need hits: Awesome, fun games that users love to play
Adopting the online F2P model is not enough to be successful
To build a hit nowadays requires 3 fundamental ingredients
Top Quality 1 High-performance games need: • Bug-free play • Great art • Great game design • An understanding of the user-life-cycle • An understanding of the game-life-cycle
Users expect top quality on every platform, including the browser
2 Innovation  Don’t create copycats – games are not commodities!  Create new genres or put a new spin on existing genres  Experiment with new game mechanics  Attract new target audiences  Explore Web 3.0 – user-generated content
Truly innovative games are risky, but it is the only way to stand out in the crowd
User 3 Retention • Extensive user knowledge • Smart cross-promotion • Behavioral targeting • Personalized offers • Real-time pricing
Retain the user in the game as long as possible and once they are about to leave offer them the next product
Long-time users tend to be heavy spenders, who ultimately generate the majority of our revenue 33 Long Tail: 20% of Customers 80% of Revenue
But all of this requires scale and funding, giving the larger players a huge advantage 1. Top quality Bigger budgets 2. Innovation More risk 3. User retention Large user base
Inevitably, only the big, well-funded players will survive in this extremely competitive environment, bringing balance back to the industry
This is absolutely normal while the industry matures; it happened before in other segments and it will happen now in the online F2P space Sector Sector Launch Sector Growth in Sector Sector Consolidation Scale Consolidation Equilibrium High Console/PC Client based MMO Social/Casu al Online Browser based MMO Medium Mobile Middleware Social-Mobile Low Advertising - VC Investment - Growth equity - Leveraged buyouts - Limited M&A/ Expected - Some small M&A investment - Low volume, large- investment Deal - High volume, mid- scale strategic M&A - Cost focus Activity market strategic M&A - Alliances or spinoffs
Investors continue to believe in our industry – investment more than doubled in 2011 Global video game private placements ($M)
But consolidation is starting to pick up already - M&A more than doubled in 2011 Global video game mergers and acquisitions ($M)
With the most activity in social, mobile, MMO & middleware Selected M&A 2011 Full-Year hi
With the most activity in social, mobile, MMO & middleware Selected M&A 2012 Q1/Q2 (14.7 %)
Potential Consolidators Asian Games Online/Mobile Games - International growth platforms - Synergy with core business - IP for strong domestic markets - Diversifying revenue streams
Potential Consolidators Console Games Media/Other - Investments in growth markets - Synergy with core business - Diversifying revenue streams - Leverage distribution platforms
Growth and consolidation opportunities Mobile Social/Casual  Small to mid-market tactical tuck-in or strategic  Small to mid-market tactical tuck-in or strategic roll-up M&A roll-up M&A  Selective large-scale M&A for international  Highly selective, large-scale M&A for international growth platforms or to bring leading IPs into growth platforms or to bring leading IPs into strong strong domestic markets domestic markets  Organic investment in mobile and social-  Organic investment in social, with focus on cross- mobile, with focus on cross-platform platform (iOS, Android, Facebook, Tencent, Renren, Gree,  Leverage IPs from social to cross-platform social- DeNA, other) mobile  Leverage IPs from mobile to cross-platform  Commercial partnerships with brand owners for social-mobile licensed social/casual games  Commercial partnerships with brand owners for licensed-mobile and social-mobile games
So remember! Improve Innovate Quality Retain Secure Users Scale
Contact us Bigpoint France Cédric GENIN Director Southern Europe 54 avenue Hoche 75008 Paris France c.genin@bigpoint.net www.bigpoint.net

More Related Content

Game connection cédric genin 30112012

  • 1. This Town Ain't Big Enough for Both of Us – Trend Compendium for the F2P Online Games Industry Cédric GENIN Director Southern Europe, Bigpoint November 2012 Game Connection, Paris
  • 3. With Outstanding Growth • Average growth rate of 8% for the gaming industry in total • The games industry is the fastest growing sector of the entertainment industry with a double-digit growth rate • Online gaming is growing faster than the total gaming market Global Online Gaming Market Growth Rate +15% +20% +20% +32% +37% 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: PricewaterhouseCoopers LLP 3
  • 4. But there are too many players • Click to edit Master text styles of it fighting for a share • Second level • Third level • Fourth level • Fifth level
  • 5. The Atari Syndrome – when the platform is not large enough for all the games Original Atari Ad in 1982
  • 6. We can see this repeating in platforms such as mobile, with thousands of new free games and apps each day
  • 7. Facebook does not guarantee endless growth either and the lifecycle is getting shorter due to increased competition FarmVille Cityville Sims Social 99 MAU in millions 89 88 83 80 76 76 78 63 64 62 66.5 54 53 47 45 50 35 33 31 30.9 24.6 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Timeline 7
  • 8. Even Facebook’s largest gaming partner is looking for growth outside of Facebook as the platform finally reaches maturity 8
  • 9. Traditional console players are also entering the F2P online gaming market with large budgets, while growth in traditional retail gaming slows down
  • 10. Online F2P will become the norm even for traditional console players 10 Source: Marketwire, TechCrunch
  • 11. But there is no added value for the user with more competition, just fragmentation “Equivalent value is not the same thing as actual value” (Tadhg Kelly Article: “Zynga Colapse Now”) 11
  • 12. In a crowded market it’s getting harder and harder to stand out
  • 13. And competition is increasing even faster than the overall market, which is a problem for everyone Release of F2P online Shooter games
  • 14. Consumers face too many choices, which reduces loyalty. They don’t need to pay any longer; they can simply move to another game
  • 15. Therefore, more and more games with an F2P model need a constant flow of new users, which must be acquired
  • 16. Game searches by users are more or less flat Development of search engine requests for “F2P Game” since 2010 Source: submitted by Google
  • 17. Game searches by users are more or less flat Development of search engine requests for “Farm Games” since 2010 normalized data in a scale from 0-100. Source: http://www.google.com/insights
  • 18. But competition for user acquisition is getting harder and harder Source: google.de
  • 19. Which translates into more expensive user acquisition CPC Evolution (Cost per click) UK USA +74% FR in 12 months CPC DE 2010 | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2011| Q1 2011| Q2 Source: Global Facebook Marketing Report 2011
  • 20. Which translates into more expensive user acquisition CPL Evolution (Cost per lead) UK USA FR +152% CPL in 12 months DE 2010 | Q2 2010 | Q3 2010 | Q4 2011| Q1 2011| Q2 Source: iQU internal data
  • 21. Reaching levels that make it hard for some developers to justify the investment Average CPL (for general online marketing campaigns) Additional cost for F2P gaming Source: Pontiex CPL Benchmark Study, own assessment
  • 22. And in certain genres the impact is even higher Farmerama DE: Development CPL (index 2010) 384% increase 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 2010 2011 2012
  • 23. How to escape the tight market?!
  • 24. First, remember that we do entertainment! We need hits: Awesome, fun games that users love to play
  • 25. Adopting the online F2P model is not enough to be successful
  • 26. To build a hit nowadays requires 3 fundamental ingredients
  • 27. Top Quality 1 High-performance games need: • Bug-free play • Great art • Great game design • An understanding of the user-life-cycle • An understanding of the game-life-cycle
  • 28. Users expect top quality on every platform, including the browser
  • 29. 2 Innovation  Don’t create copycats – games are not commodities!  Create new genres or put a new spin on existing genres  Experiment with new game mechanics  Attract new target audiences  Explore Web 3.0 – user-generated content
  • 30. Truly innovative games are risky, but it is the only way to stand out in the crowd
  • 31. User 3 Retention • Extensive user knowledge • Smart cross-promotion • Behavioral targeting • Personalized offers • Real-time pricing
  • 32. Retain the user in the game as long as possible and once they are about to leave offer them the next product
  • 33. Long-time users tend to be heavy spenders, who ultimately generate the majority of our revenue 33 Long Tail: 20% of Customers 80% of Revenue
  • 34. But all of this requires scale and funding, giving the larger players a huge advantage 1. Top quality Bigger budgets 2. Innovation More risk 3. User retention Large user base
  • 35. Inevitably, only the big, well-funded players will survive in this extremely competitive environment, bringing balance back to the industry
  • 36. This is absolutely normal while the industry matures; it happened before in other segments and it will happen now in the online F2P space Sector Sector Launch Sector Growth in Sector Sector Consolidation Scale Consolidation Equilibrium High Console/PC Client based MMO Social/Casu al Online Browser based MMO Medium Mobile Middleware Social-Mobile Low Advertising - VC Investment - Growth equity - Leveraged buyouts - Limited M&A/ Expected - Some small M&A investment - Low volume, large- investment Deal - High volume, mid- scale strategic M&A - Cost focus Activity market strategic M&A - Alliances or spinoffs
  • 37. Investors continue to believe in our industry – investment more than doubled in 2011 Global video game private placements ($M)
  • 38. But consolidation is starting to pick up already - M&A more than doubled in 2011 Global video game mergers and acquisitions ($M)
  • 39. With the most activity in social, mobile, MMO & middleware Selected M&A 2011 Full-Year hi
  • 40. With the most activity in social, mobile, MMO & middleware Selected M&A 2012 Q1/Q2 (14.7 %)
  • 41. Potential Consolidators Asian Games Online/Mobile Games - International growth platforms - Synergy with core business - IP for strong domestic markets - Diversifying revenue streams
  • 42. Potential Consolidators Console Games Media/Other - Investments in growth markets - Synergy with core business - Diversifying revenue streams - Leverage distribution platforms
  • 43. Growth and consolidation opportunities Mobile Social/Casual  Small to mid-market tactical tuck-in or strategic  Small to mid-market tactical tuck-in or strategic roll-up M&A roll-up M&A  Selective large-scale M&A for international  Highly selective, large-scale M&A for international growth platforms or to bring leading IPs into growth platforms or to bring leading IPs into strong strong domestic markets domestic markets  Organic investment in mobile and social-  Organic investment in social, with focus on cross- mobile, with focus on cross-platform platform (iOS, Android, Facebook, Tencent, Renren, Gree,  Leverage IPs from social to cross-platform social- DeNA, other) mobile  Leverage IPs from mobile to cross-platform  Commercial partnerships with brand owners for social-mobile licensed social/casual games  Commercial partnerships with brand owners for licensed-mobile and social-mobile games
  • 44. So remember! Improve Innovate Quality Retain Secure Users Scale
  • 45. Contact us Bigpoint France Cédric GENIN Director Southern Europe 54 avenue Hoche 75008 Paris France c.genin@bigpoint.net www.bigpoint.net

Editor's Notes

  1. Analysis data on latest studies and forecast of the virtual goods market:http://www.marketwire.com/press-release/study-gamescom-european-market-for-virtual-goods-in-games-is-growing-rapidly-1552148.htmEuropean microtransactions and virtual goods market is set to triple by 2014