Social Games Market to Quintuple to $5 Billion by 2015

By James Brightman

Social gaming is one of the fastest growing sectors right now, and there doesn’t appear to be any slowdown in sight. According to a new report from Parks Associates, revenues in the social gaming market will increase fivefold to $5 billion between 2010 and 2015.

Parks attributes this growth in large part to advertising revenues and sales of virtual items. These two elements were mostly responsible for the over $1 billion in revenues seen in 2010.

“Gaming on social networks has quickly become the most visible category of online games,” said Pietro Macchiarella, Research Analyst, Parks Associates. “Right now more than 250 million people play games like Zynga’s CityVille and FarmVille on Facebook every month, and both game developers and marketers have taken notice. Big brands such as McDonald’s and 7-Eleven have carried out cross-promotions with existing social games.”

Macchiarella also commented that there have been big improvements in the way companies are monetizing these social games. Parks notes in its report, “While early entrants often missed revenue opportunities, new gameplay innovations incentivise players to buy virtual items such as virtual tractors, seed, or rare swords to build status, improve the gaming experience, or gain a competitive edge.” Furthermore, “Advertising innovations such as branded games, sponsored items, communities, and ‘advertainment’ that enhance, rather than interrupt, a gamer’s experience will also generate new sources of revenues for game publishers.”

Another huge advantage for social game makers is the ability to tweak design based on metrics,as Zynga’s Brian Reynolds has explained to us.

“The most powerful asset of social game developers is the quantity of behavioural data that they can obtain from their games,” Macchiarella said. “The abilities to measure the efficacy of different gameplay mechanisms, to tweak game design in near-real time, and to test new models are advantages that traditional gaming companies will never have. Zynga’s huge market share is the best proof of the competitive advantage made possible by properly leveraging consumer data.”