China Social Games Analyzing Chinese Social Networks and Games


5 Predictions for China Social Games in 2010

The Chinese social game market is still in its infancy, but growing up fast. The first smash hits, Friends for Sale! Parking Wars, and Happy Farm are just over a year old in China. Here are 5 predictions for 2010:

1. Social Games Displace Web Games

Social games have a superior distribution model for reaching unprecedented demographics, including females and middle-aged users. These users are open to casual gaming, but unlikely to seek it out on 3rd party websites, as required by web games. Social games go viral by using existing services (social networks) and trusted references (friends). Social games are more than a fad.
Moreover, in-game social interaction has only scraped the surface. At the moment, it’s very limited: players can visit a friend’s game and leave a footprint (steal crops, play with pets, decorate a room). Once more games offer synchronous gameplay and allow friends to chat, expect social games to become more popular still. Casual web games don't connect friends in the same way.
As a result, social games enjoy unprecedented numbers of users. In China, Happy Farm has an estimated 23m daily active users across all platforms. On Facebook, FarmVille has blasted past 27m daily active users in only 6 months. Explosive growth will continue in 2010 and web games will be left in the dust.

2. Consolidation of Game Developers

The days of a few friends developing a hit from the dorm room are over. The Facebook market has already seen consolidation on a colossal scale, with huge paydays: Playfish (300m USD merger with EA), Zynga (180m USD funding), RockYou! (70m USD funding), and Playdom (43m USD funding). Production values are rising in China too, with RenRen Restaurants (copy of Playfish’s Restaurant City) and Happy Pet (copy of Playfish’s Pet Society). Developers will need more resources, serious teams and finances, to develop the next hit game.
China’s consolidation will be on a miniature scale compared to Facebook though. In fact, it has already begun: Five Minutes, developers of Happy Farm, scored 3.5m USD from Draper Fisher Jurvetson on Dec. 1. And Rekoo, developers of Sunshine Farm, received 1.5m USD from Infinity Venture Partners.  China will follow Facebook developers here: expect more consolidation in 2010.

3. Entry of Western Game Developers

Foreign game developers are knocking on China’s door. Facebook games play well in China, where themes and mechanics are similar (see the farm and fish crazes, example). And Facebook developers are flush with cash and in hunt of users: RockYou! launched a game on RenRen in June, 2009. PopCap Games followed up with with Bejeweled Blitz 2 on RenRen on November, 2009.  China Social Games has spoken to several other players scouting the market.
The challenge for foreign developers is managing relations with a powerful government and social network(s). Government relations are difficult even for game companies in China, as World of Warcraft’s struggles demonstrate. Of China’s big 3 social networks (Qzone, Kaixin001, and RenRen), only RenRen has an open API. RenRen can therefore exploit its leverage vis-à-vis developers. Where Facebook offers 100% revenue share, RenRen offers at most 56%. Foreign game developers will need a shrewd political strategy when coming to China.

4. Chinese Networks Open Up Their API

The games on RenRen (open API) blow away those on Kaixin001 and Qzone (closed APIs). RenRen has seen a proliferation of 3rd party developers whose are games are innovative, sticky, and popular. The other networks, especially Kaixin001, did a decent job of copying games in-house at first. But as social games become more sophisticated and difficult to copy, their offerings look increasingly anemic.
Superior games will slowly drive users to spend more time on RenRen, at the expense of Kaixin001 and Qzone. As these networks realize that they can’t keep up with only in-house developers, they’ll open up their API. Qzone is already experimenting with licensing, starting with Five Minute’s Happy Farm. Even though Kaixin001 is closed, RenRen demands that developers sign an exclusive agreement, “which specifies that their applications may not be placed on Beijing-based rival SNS site within six months.” RenRen clearly fears that its rivals will soon open up.
Open APIs, in turn, will increase the leverage of game developers, who will demand greater than the maximum 56% revenue share RenRen currently offers. Chinese game developers are struggling to monetize, but if Kaixin001 and Qzone open up their API they’ll have more opportunity.

5. Family Friendly!

The rules are still being written, but expect social games to be harmonized in 2010. Mafia games are already gone. Happy Farmers are now picking—not stealing—crops. Since even stealing strawberries is sensitive, expect developers, especially foreign ones, to tread lightly. All social games will be family friendly!

Bonus: What Will NOT Happen In 2010

1. Social Glue for the Chinese Internet!

While Facebook and Google compete to become of the social glue of the internet (via Connect features), Chinese networks are determined to defend their islands. RenRen, the closest copy of Facebook, is the best contender here, but its efforts (links with Dianping, etc.) are all directed at keeping traffic on its site rather than connecting the internet. Chinese networks see the internet as a zerosum competition: user experience takes a backseat to the fear that external sites could steal traffic.

2. Facebook Unblocked!

Dream on. But more and more Facebook games will be ported over to Chinese networks, though its unclear whether it’ll be Western developers or copycats who do it.

About the Author Kai Lukoff is an analyst at BloggerInsight and an editor on China Social Games. Follow Kai on Twitter ().
An earlier entry was originally posted at China Web Radar.

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