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Innovation Economy

Developers head to the drawing board to cash in on ‘social gaming’

By Scott Kirsner
August 29, 2010

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It was the week before Thanksgiving last year, and the executives at Blue Fang Games had a decision to make. The Waltham company had been producing the popular Zoo Tycoon series of video games for more than a decade, to be played on personal computers, Macintoshes, the iPhone, and the Nintendo Wii.

“We’d always prided ourselves on making games for everybody: kids and the whole family,’’ says Blue Fang president Hank Howie. “We saw how many people were suddenly playing games on Facebook. It felt a little bit like watching a forest fire in the distance, and wondering, ‘Is that gonna get us?’ ’’

The strategic shift would mean adopting an entirely new business model, and also making changes to the staff, to bring on people with Web design experience. But Howie felt the company had no other choice. Blue Fang decided to stop developing games for traditional video game consoles, and dedicated most of its employees to creating a game to be played on Facebook. Zoo Kingdom launched in February, and by last month, 1.5 million people were playing it regularly.

If you’ve ever clicked your mouse to man age a virtual zoo, cultivate a farm, or invite Facebook friends to join your mafia clan, you’ve been part of what is the hottest trend in video games. Called “social gaming,’’ these online games tend to be played within Facebook’s site or on a mobile phone, in just a few stolen moments here and there (as opposed to the hours of dedicated play required to master a typical video game). You’re encouraged to invite your friends to play with you, which helps the best games reach vast numbers of people with little money spent on marketing. And while the games are free to play, companies are generating millions of dollars in revenue by charging a few bucks here and there to purchase a virtual tractor that will help you tend your crops, or add a shaggy Himalayan yak to your online menagerie.

Zynga Game Network Inc., a San Francisco company that makes social games like FarmVille and Mafia Wars, could bring in as much as $450 million this year, according to estimates. (The company is three years old, and claims that 215 million people play its games each month.) In July, Walt Disney Co. bought the second-biggest maker of social games, Silicon Valley-based Playdom Inc., in a deal that could be worth as much as $763 million.

The social gaming trend has begun to ripple through Boston’s small pond of game developers. New start-ups are being formed to develop Facebook-based games, and more established gaming companies are considering whether they should create their own social games, typically regarded as cartoonish and simplistic by “serious’’ game makers.

This month, Zynga, the industry’s top dog, acquired Conduit Labs Inc., a Cambridge start-up that had been developing games for Facebook and its own website. While the purchase price wasn’t revealed, the deal will create Zynga Boston, a 17-person development studio that is likely to grow over time. (The entire Cambridge team is now in San Francisco for several weeks helping out with some projects there, and getting to know the new parent company.) The start-up had raised $8.5 million in venture capital funding; Conduit’s founders and investors accepted Zynga stock in the transaction. Since Zynga isn’t yet publicly traded, Conduit’s employees and their backers will be rooting for a spectacular Zynga initial public offering.

Jon Radoff and Angela Bull, a husband-and-wife team behind Disruptor Beam LLC, have been developing games since the early 1990s, and are now working on Gods of Rock, a Facebook game that will debut this fall. You’ll take on the role of an aspiring rock star who needs to write songs, procure instruments, and achieve fame.

“There are no drugs in the game, and not really much sex, but there is rock and roll,’’ says Radoff. “I’d say it’s a PG-13-type game.’’

While many of today’s social games are fairly frivolous, the founders of DPL Health Games Inc. are hoping to create a hybrid of an online game and support group. “You’ve got to have fun with the game, otherwise you’re never going to come back,’’ says Laila Partridge, a former venture capitalist at Intel Capital who is one of the company’s founders. “But we’re trying to add an intimate network of close friends who will support you in a goal you’re trying to achieve, like losing 30 pounds, training for a triathlon, or measuring your blood sugar level consistently.’’

One developer of social games, Boston-based Hangout Industries Inc., had an interesting idea when it launched the game Fashion City last year: working with top apparel brands to sell virtual goods in the game, and dividing the profits. (The game involves dressing models at a fashion show before their stroll down the runway.) But chief executive Pano Anthos says attracting new game players on Facebook, often with ads on the service, has become much more costly. The company was on the block this year, but didn’t find an interested buyer. Anthos says he is now developing a new strategy for Hangout, which was initially founded in 2007 to create 3-D “hangout spaces,’’ or virtual environments, on the Web, and has raised $12 million in venture capital funding.

Other entrepreneurs working on Facebook games acknowledge that there are challenges. Facebook can (and has) changed the rules about how game developers can communicate with a player (and a player’s Facebook friends). That can make it tough for new games to recruit new players efficiently. And Facebook is increasingly insistent that game developers use its own in-house payment system, Facebook Credits, to buy virtual goods within games. Facebook takes 30 percent of those transactions.

Some of the bigger game developers in town, like Harmonix Music Systems Inc., Tencent Boston, and Rockstar New England, aren’t yet working on games that can be played inside the Facebook universe. (With Harmonix’s new Rock Band 3 music game, though, players will be able to automatically transmit their top scores to Facebook or Twitter.)

“You’ve got a lot of teams that have turned their nose up at these kind of games, and called them ‘hamster wheels,’ or said they’re not immersive enough,’’ says Jeff Anderson, chief executive of Quick Hit Inc., a Foxborough company. “Every established game company is at a bit of a crossroads.’’

Anderson says Quick Hit, which makes a Web-based football game, is trying to raise money now to build a version that could be played within Facebook.

At Blue Fang, employment has grown from about 22 people late last year to 35 today. “We’re also getting a lot of phone calls asking us if we can work with other people to develop games around a property that they own,’’ Howie says. About six months after the launch of Zoo Kingdom, he says, the company has almost begun turning a profit on the game, which cost about a half-million dollars in employee time to develop.

The last century, says Radoff at Disruptor Beam, “was largely about passively consumed visual media, like television and film. In this century, games will be the definitive media and art form. They’re something you get involved with, along with your friends, and you share experiences.’’

“If you compare it to the 20th century,’’ Radoff continues, “I think we’re still coming into the talkies era. We’re still figuring out a lot, but I think games will be bigger than TV and film ever were.’’

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.