Has The Social Gaming Bubble Officially Burst?

Facebook gamers got a little slap in the face yesterday when Electronic Arts announced that it would be pulling the plug on The Sims Social, Sim City Social, and Pet Society. EA says that the decision was based on a lack of consumer interest, which is entirely valid, but it does make me wonder if the social gaming bubble has finally burst.

And I'm not the only one.

Zynga, Facebook, and Electronic Arts all saw a dip in stock prices after EA made their announcement, which means that investors are becoming understandably nervous.

"It's just harder to get people to commit to games they don't pay for," said Edward Woo, a senior research analyst for Ascendiant Capital Markets. "Games overall are not as important to Facebook .... EA has their traditional buy the game for $60 and go home and play ... Zynga -- that's their only business."

Social gaming isn't going to disappear from Facebook. It's a model that has a proven track record, but has been stretched further than the market can handle. The casual gaming market is far more profitable than the hardcore market, so it makes sense that companies like EA would experiment a little. But when titles don't attract a large enough audience, no self-respecting company would continue to aimlessly dump money into their maintenance.

The strange part about all of this is that the hardcore market is rapidly shrinking while the casual market continues to expand. So, the fact that social gaming, one of the centerpieces of the casual market, is disintegrating continues to confuse analysts. However, it may mean that developers simply need to refocus their efforts.


With Facebook Home integrating itself into Android phones, we'll probably see a shift in strategy for developers like EA and Zynga. Plus, consoles like the Ouya and the GameStick could make Android-based titles seem a little more legitimate. I don't think many industry analysts would be surprised if we saw a strange relationship between social gaming and Android start to develop over the next few years.

Obviously this is all pretty speculative, and the market is incredibly volatile at the moment. It probably wouldn't take much to convince investors to abandon ship, which would undoubtedly make some Facebook users incredibly happy. Those social gaming notifications are annoying.



Josh Engen
News Director
Date: April 16, 2013


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