THE DAU IS DOWN

We are in the middle of a tremendous growth phase in the history of the game business and advancement requires astute analysis and brutal honesty.

While an otherwise good overview of 2010, this recent article from Inside Network missed the bigger picture and elements of cause and effect, which led to invalid conclusions.
They try to explain a shift in market share away from the early 2010 Big 5 as the result of the “rise of the Indies” and their “superior game design”. In fact, the entire shift in share is explained byFacebook moving their focus to adding new, 2nd tier Credits partners and nourishing them with free installs.  Many of the companies that got these installs did indeed rise, but fell later when the free traffic ran out.  I’m not saying it was the Indies fault, it’s just a false conclusion to say the Indies are winning or that game design is the cause. The market declined for everyone, but free installs covered the problem for a period of time. Overall, the “other 175” games in the story’s sample have in fact declined in total DAU audience in the last 3 months, from a peak of 48M DAU back in November. It’s even worse if you dig deeper and look at the Top 1,000 games from the Top 200 publishers, which goes well beyond the article’s sample into true Indie territory.  Frankly, since conventional game design thinking does not apply well to Facebook, the results of the Top 200 game publishers have been both random and disappointing with a disturbingly high failure rate that should be scaring the crud out of everyone. Case in point:  Zynga’s biggest 4 rivals from early 2010, despite spending more money and launching more games that were also, presumably, “better designed”, and made with “more experience”, collectively declined from 26M DAU to 13M DAU. This despite the fact that these companies made several acquisitions. Among these “leaders” the only new game gaining any ground recently is Crowdstar’s It Girl which, again, happens to be getting more free Facebook installs than any game in Facebook history.

It is better if we are objective about what is going on, and honestly, about how challenging it is regardless of size. A healthy industry is one in which the ecosystem is fundamentally growing (outside of marketing and exceptional cases), R&D is easily amortized from revenue, margins are good, and marketing investments are positive ROI. Right now, all of these are major challenges. Do not underestimate any of them. Jus’ sayin’. We all have a ton of opportunity ahead but even a Titanic can find an iceberg if there is not enough humble and vigilant attention to detail.