The New Social Gaming Paradigm

Like many consumer technologies, the gaming industry is in a quagmire, moving both very quickly and much too slowly at the same time. For gamers, which now is as likely to include your Aunt Shirley, as it is your younger brother, the need to interact with friends is bringing about an entirely new real-time, online gaming experience, while simply replicating an age when people actually played together in the same room.

But, the mass appeal of social gaming shouldn’t take us by surprise. If you look at the history of games, you’ll find that gamers have been participating in social games since the early D&D days. Given the popularity of today’s console-based gaming networks, it’s plain to see that gamers are now and have always been social by nature.

Now, enter the social network. One could say the social network was born from the need to find other players. And, no where is the influence of social networks changing the business of games more than in the casual games space. Once dismissed as granny games, like solitaire, chess and bridge, casual games are ushering in a new social gaming paradigm that could quite possibly be the next killer app. the social networks so desperately need to keep their millions of members engaged.

In fact, the casual games publishing industry is about to be turned on its head thanks to the growing influence of social networks. And, the transformation couldn’t have come at a more needed time. The traditional one-hour, try-before-you-buy business model the industry has been clinging to is not working. Game studios, publishers and digital distributors are in the midst of changing their game plan and are already experimenting with in-game advertising, micro transactions, product placement and video interstitials with better-than-expected results.

The newest sign of gaming companies changing the game can be found in a spate of recent funding announcements, licensing deals and start-up activity. First, from Ludia, a Canadian casual games developer, comes word of a worldwide license for American Idol, an online game with social media components. While offering few details, the very fact that America’s most popular reality TV Show is going social in 09′ has me rehearsing my favorite Bruce tunes in front of my Logitek. This combined with the fact that Ludia’s founder, Alex Thabet, has an incredible track record in the casual games space and a unique ability to sense where the market is heading before it gets there (and, happens to be a real nice guy even though he hails from Montreal), and it’s easy to see why the king of TV franchises, Freemantle Media, chose Ludia to lead their AI baby into the brave new world of social gaming.

Next up is BunchBall, the first company to offer cross-social-network compatibility of its multi-player games. Following a $2MM round in 2006, the company has rolled out a library of Flash based casual games that live on social networks via embed code, while allowing a core group of friends to play one another, regardless of their social network affiliation (network agnostic). Bunchball seems to be taking it’s knowledge of social gaming and applying it as a service called Web Catalytics. Or, as they put it, “.. a methodology for driving web site behavior based on game design principles. Simply put, Web Catalytics makes web sites more addictive, fun, and compelling.” Wow, that’s a far cry from “you sunk my battle ship.”

And, just a few days ago, we hear word from Fred Wilson of Union Square Ventures that they have joined forces with several other notable VCs and angel investors, including Reid Hoffman and Peter Theil, in backing social gaming pioneer Zynga, responsible for many a college student’s wasted hours of Texas Hold ‘Em across Facebook, bebo, Friendster and beyond. Zynga’s founder, Mark Pincus, knows a thing-or-two about the power of social networks, having founded Tribe and selling the company’s assets to Cisco (that’s the router company, not the rapper). Oh yeah, he was also an early investor in Facebook and enjoys the annual Burning Man festival, making him one of the coolest guys I’d most like to party and play poker with.

It’s not clear what form of monetization will work across social games, but one thing is clear – games will never again be a solitary experience – not even solitare, where players now compete for high score. And, who knows the fate of today’s gaming sites that have spent time and money building a loyal fan base and recognizable brands. In the world of distributed networks, is there still a place for a hub if the spokes are strong enough to support the frame? As Zynga investor Fred Wilson states, “Zynga is the first investment we’ve made in a company that has no website,” although he goes on to note that Zynga was in the process of posting one that very day.