How ‘Ya Gonna Keep ‘Em Down On The Farmville…

Nora Bayes couldn’t have trumpeted the triumph of social gaming any better. Shedding the “really? no, seriously?” doubters over the past five years, venture investors are turning over rocks around the globe to find that even ‘angrier bird’, or the ‘neo-er pet’, and wrapping their no longer sceptical arms around the industry’s addiction to addiction, freemium-ification, and (navy suit forbid) peddling the latest virtual goods. Even better, Canadian companies have pretty-much rocked the space: with Dimerocker, Playerize and Eastside Games anchoring the strong Vancouver scene, and with Toronto’s HitGrab and Massive Damage and Montreal’s Gamerizon repping our east coast contingent. Trends to watch? First off, the industry’s margins may not be quite as significant as you might think as you open up your real purse to buy a digital one – in Zynga’s case, for example, it remains to be seen whether the heady 40-70% margins from the pre-IPO days are sustainable over the long term. Given that, you can expect the continued doses of user acquisition-oriented M&A as social gaming gorillas look to defend and expand their market share posts over the coming few years (think of a Jamdat and Playfish every week or so). Certainly not a bad spot for founders and venture investors to park a great development team. Lastly, many soothsayers predict consumers will become increasingly fussy over time, and less predictably engaged. At some point, suggest companies like San Fran’s Idle Games, the characters and narrative in your off-the-shelf-ville social game may have to acquire some depth (and production investment) to reduce the churn, and that might very well separate the wheat from the chaff among the big players out there. In the meantime, if you need help deciding when to take those virtual muffins out of the virtual oven, feel free to contact any of our (real) partners and we’d happy to lend a hand.