Back in December, I discussed how several social gaming companies were jumping ship from Facebook due to higher revenue cuts from the leading social network. The article "Google makes video game maker Kabam an offer it can't refuse" showcased how Google (GOOG) was using its Google+ platform to lure away game makers. This past week social gamer Crowdstar announced they would be leaving Facebook (FB).
Crowdstar announced they would no longer be developing games for Facebook, instead favoring to create games for mobile phones. The company is behind hit games like "Happy Aquarium" and "Modern Girl". In December, Crowdstar announced that 50% of its revenue was now coming from mobile platforms. Back in December, Crowdstar also launched a game exclusively on the Amazon (AMZN) Fire. A new game, "Social Girl", was launched on the iPhone, iPod, and iPad recently and passed a million downloads in a week. The strong demand by girls and women to use mobile versus Facebook, along with Facebook's large take of revenue, prompted the move by Crowdstar.
Listed below are Crowdstar's games on Facebook:
- Happy Aquarium - 2.6 million monthly users
- Happy Pets - 2.2 million monthly users
- Happy Island 510,000 monthly users
- Mighty Pirates - 300,000 monthly users
- Zoo Paradise - 410,000 monthly users
- It Girl 1.4 million monthly users
- Top Girl - 20,000 monthly users
- Social Girl - 30,000 monthly users
- Modern Girl - 190,000 monthly users
- Wasteland Empires - 250,000 monthly users
At one point, Crowdstar had over 30 million monthly users on Facebook and represented the fourth largest application maker for Facebook. The company turned down a $200 million buyout offer from Microsoft (MSFT) at its height of popularity.
Crowdstar will keep its current profitable games on Facebook, but going further will create games for mobile phones and tablets. Crowdstar Chairman Peter Relan was once the biggest opponent against Facebook credits and then had a change of heart when he saw how much traffic was brought from Facebook. He appears to have gone back to his negative stance on the Credits system.
The Kabam game mentioned above is The Godfather: Five Families. Google gained exclusive rights to the game for forty days and supported the launch of the game with free advertising. The game is now available on Facebook and has 130,000 monthly users. In that article I discussed the increase of rake that Facebook is taking from virtual goods. Facebook makes their own payment process ("Facebook Credits") mandatory for in game purchases. Before the rollout of the new currency, Facebook charged two to ten percent of revenue, but now takes thirty percent of revenue from virtual good sales.
Zynga (ZNGA) is also expanding away from its reliance from Facebook. Zynga recently acquired OMGPOP, the maker of "Draw Something." The popular game is played on mobile phones and Facebook. The game is played by 35 million monthly users on Facebook but has been downloaded on Google's Android platform over 10 million times.
This great article by Dr. Duru breaks down the relationship of Zynga and Facebook. In his article he mentions that 93% of Zynga's revenue came from Facebook in 2011. Likewise, Zynga accounted for 12% of Facebook's revenue.
In my opinion, it is only a matter of time before companies begin to move away from Facebook's gaming platform. It is nice to have access to hundreds of millions of users on Facebook, but giving up thirty percent of in game purchases. Considering the majority of social gamers don't make purchases, social gaming companies need to capture the highest percent of that take. Many gaming creators are making games that work on Facebook and mobile platforms together.
This move is the first of many that I think will happen and comes at a bad time for Facebook before their scheduled initial price offering. When reading through Facebook's revised S-1s, take a look at the amount of revenue represented by social games. While advertisement revenue goes up, companies running away from Facebook could spell doom for their gaming segment. The numerous available options including Google Android, Apple's iPhone, Amazon's Fire, and other social gaming platforms, Facebook may want to rethink its credit system before or shortly after it IPO.