"Although growth moderated as expected following a muted start to 2010 for Facebook games, market performance in the second half of the year picked up, and revenue and user growth convincingly outperformed expectations. This has resulted in a significant upgrade to our five-year forecasts."
Amid booming consumer spend on PC social networking games in 2010, Zynga managed to pad its market share lead over the other top operators, based on the success of its CityVille and FarmVille offerings, new IHS Screen Digest (NYSE: IHS) research indicates.
Consumer spend on Zynga’s PC social networking games and its revenue from lead generation and advertising activities amounted to $544 million in 2010, giving it 39.1 percent share of the global market, a 4.2 percentage point increase over 2009. This represented the largest increase among the Top 5 operators.
The IHS Screen Digest market ranking of the Top 5 PC social networking game operators is presented in the attached table. The market sizing of PC social network games combines consumer spend on both microtransactions and operator revenues that have been derived from lead generation and advertising.
“During 2010 Zynga played a central role in expanding the size of the PC social networking games market, attracting millions of new users with its popular titles offered through Facebook,” said Piers Harding-Rolls, head of games for IHS. “Near the end of the year, the company offered a new title, CityVille, which broke records for monthly active users (MAUs). The success for CityVille had a positive impact on other Zynga games, particularly FarmVille, which achieved growth in its user base in late 2010 after experiencing steady declines during the rest of the year. Meanwhile, Zynga’s strategy continues to deliver in monetizing its offerings more aggressively through analytics-driven design and to acquire users from within its other games.”
Zynga’s closest competitor, No. 2-ranked Playfish, owned by Electronic Arts Inc., suffered a significant decline in market share of 3.8 percentage points in 2010. Nonetheless, consumer spending on its properties still grew 42 percent during the year.
No. 3-ranked Playdom Inc., which is now owned by Disney, managed a 0.6 percentage point increase in market share during 2010, reflecting a strong start to the year despite a second half that saw its MAUs decline steadily.
Social networking games market continues to climb The global market for PC social networking games, including consumer spend on microtransactions and operator revenue from lead generation and advertising, amounted to $1.4 billion in 2010, up 116.4 percent from $636 million in 2009.
Beyond Zynga’s success with CityVille, market growth was driven by operator acclimatization to changes in Facebook’s user notification policies, which undermined the cheap viral marketing success of the market so rampant in 2009. Operators also concentrated their efforts on improving user engagement and monetization—in effect targeting better lifetime value from existing users, rather than commercial growth delivered purely through market expansion.
Outside Facebook, growth was driven by the continued adoption of games content from other social networks across all regions. These developments helped the market outperform forecasts.
“Overall, 2010 was a year of strong expansion for the market,” Harding-Rolls observed. “Although growth moderated as expected following a muted start to 2010 for Facebook games, market performance in the second half of the year picked up, and revenue and user growth convincingly outperformed expectations. This has resulted in a significant upgrade to our five-year forecasts.”
The market will expand at a compound annual growth rate of 15 percent from 2010 to 2015, although annual growth rates will slow during the coming years compared to the blistering expansion in 2009 and 2010.
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