Facebook’s changes in notifications and requests, which eliminated a significant amount of free advertising enjoyed by social gaming applications, had a major negative impact on Zynga and most of the other major social gaming companies driving large losses in Monthly Active Users (MAUs) in May: :
The only one of the big four to eke out a gain in May was Playdom, due to the rise of the soccer team application Bola and the village building game Treetopia. Zynga lost more than 10% of their gamer base as every single one of Zynga’s major titles lost players in May:
The MAU loss for Treasure Isle was particularly surprising given the games massive growth in April, during which Treasure Isle added 25 million MAUs. The rapid raise and subsequent decline highlights the compressed life cycle of games on the Facebook platform Where Farmville took about 9.5 months from start to peak, Treasure Isle appeared to peak less than 2 months after its introduction. That trend does not portend well for monetization of social games on Facebook, as game players tend to spend more money on virtual goods after they have established a presence in a game.
The$64,000 question s how long the decline will continue for the social gaming sector on Facebook? If we look at the pace of decline, it accelerated the first few weeks of May, and seems to have leveled off at a 2.4% weekly decline the last few weeks. That number will eventually recede as the loyal gamers who are less dependent on notifications and requests will become larger percentages of the remaining gamers pool. However, the coming summer months are the seasonally slow for gaming of all types. So it appears likely the declines will continue through June.
Given the changes at Facebook, we believe that growth for Zynga and the other social gaming companies will increasingly come from platforms other than Facebook. Zynga’s recent partnership with Yahoo brings a new platform to potentially drive growth. In addition, Zynga’s own sites, including Farmville.com (the 382nd most trafficked site on the net according to Alexa.com) and the stealth, thought much anticipated Zynga Live portal, bring hope for renewed growth.
However, until these new initiatives are able to take root for Zynga and other game developers, we anticipate the dog days of summer will not be kind to social gaming companies.