Will social gaming market stand on its own?

Though overall prospects for the mega social gaming market are reasonably robust (expected to generate a revenue of over $14 billion by 2015, up from hardly $6 billion last year), the space n is perhaps undergoing early growing pains. Quite a large number of cash-strapped developers jostling for the attention of online gamers have only made things difficult. So is social game market finding it difficult to stand on its own? Here are a few observations for readers to draw own conclusions:

• Although Zynga still enjoys good growth- its revenue up an impressive 80 percent ($306.8 million) in the 3rd quarter, there are concerns over the falling profit margins ($12.5 million) that fell by more than 50 percent, from the corresponding period a year earlier.
• ‘Mafia Wars 2’ Sales have failed to meet the company’s expectations, though its executives refuse to say so publicly on the record. Its officials are only second-guessing each other as what could have gone wrong with the sequel doesn’t work. Not more than 10 to 11 percent are playing it daily, well below the average percentage threshold for most games of the company.
• Electronic Arts may have spent $10 million at least on marketing itself. Though its executive vice-president Barry Cottle claims to be happy with both the financial performance and popularity of ‘Sims Social’, despite aggressive marketing to a vast base of Facebook users it’s still not that profitable, according to sources. Summing up the scenario, an insightful post by eBrandz, explains:
• “In order to stand out, companies like Zynga spend millions of dollars to develop titles and then million dollars more to market them. Rising expenditure and decreasing revenues are increasingly putting a cap on business margins and profit levels. And it is getting tougher for hits to come by. In fact, according to analysts of social game market, the economics are no more what they used to be earlier. This is largely because customer acquisition cost is shooting up, which means further pressure on margins.”

What holds the key to draw people is saturating the highly competitive market with a blitz of ads. The active user base is a very important metric because they’re much more likely to buy virtual goods like shields, machine guns etc. So the more they revisit on daily basis, the higher probability they will pay and the developer will earn decent profits – for now a seemingly remote possibility.