Zynga has a number of it’s own pretty successful games and recently opened up it’s API so other game developers could make their games available on the Zynga network. As the Facebook app scene has gotten more and more crowded (up to 17,000 now) and they have been throttling back on invite spam it is getting harder for new apps to get noticed – and Zynga can help. Fred shows charts of how Zynga drives traffic to new apps on the network. And obviously the bigger the network, the more clicks it can drive. Zynga is a network running on another network (Facebook), which is why Fred called his post The Second Order Network Effect.
All this makes sense, and there is clearly real traffic and value creation in the Zynga network, but I can’t help wondering where the big money will end up as the value chain fragments and networks are layered upon network, upon network. In addition to Zynga, Facebook and the other socnets, there are likely ad networks in the mix as well. And we shouldn’t forget the other game networks and the underlying internet as well.
It is early days yet, and we will have to see how it plays out. Here are some slightly contradictory observations on where the value will end up.
- At the end of the day this is all about entertainment – and as distribution becomes more and more open the quality of the games will be the differentiator and value should accrue to the owners of the best IP – serial games entrepreneur Kristian pointed out in an email to me yesterday that “In video games the content owners rather than the distributors have always won in the long run.”
- This assumes that distribution gets commoditised – it has at the physical network level, and maybe socnets are going the same way
- But we may not get to the ‘end of the day’, at least not quickly. In the mean time brand power and distribution (i.e. traffic) will be big drivers of value to network partners and consumers – which implies the networks themselves should do well. How that splits between the different network players is up for grabs, but there is probably quite a lot of value to share around.
- A final factor in all this is how much value the network adds beyond brand and reach. One of the reasons Facebook is so successful is that the social graph is value they have added to the system overall. Zynga are doing something similar when they show you which of your friends are playing Zynga games at the same time as you are. Moving beyond a network to become a community where games are reviewed and rated is another way to add value.