Digital Media Buzz > Mobile Gaming: Profitability Still in Limbo

Mobile Gaming: Profitability Still in Limbo

By Alan Smodic

Although mobile gaming is gaining an audience, the vast majority of gamers still opt for external devices or desktops, says Microsoft’s Larry Hryb. But that’s not to say that mobile isn’t catching up. In fact, today’s more popular games may require the use of a PC or Mac, but are played in the cloud.

The result is a number of games that can be accessed from any number of machines, including a computer, traditional gaming console or mobile device. And it’s this revelation, Hryb says, that will translate to a new gaming market.

If it hasn’t already.

“I play the games because I like to get a feel of everything and it’s obvious a lot of people are playing them,” says Hryb, the director of programming for Xbox Live. “It’s in a different realm than we are in terms of gaming and the audience, but it’s made great strides.

“The iPhone, the [Sony] PSP, the [Nintendo] DS — these could all show major advancements in the next year and beyond.”

Two major driving forces reside within the streamlined development of social gaming and its advancement to a broader audience: 1) games can be developed by any decent programmer or company on the cheap (especially when compared to console games) and 2) games can be marketed to millions of registered people on Facebook and other social networks across the world for free.

These traits provide a process that is beneficial to both ends of the social gaming community, writes Jeremy Liew, a managing director at Lightspeed Venture Partners.

“Social game developers have taken a leaf out of the Web 2.0 page. They launch a game in beta, without completely fleshing out all elements of gameplay,” he wrote. “If the game finds an audience, it will earn further investment in development. But if it does not, then the investment is stopped. This helps mitigate risk.

“Furthermore, developers know quickly if a game is going to work, and are able to iteratively launch new features based on actual data on what players like to do.”

What most Facebook users are vying for now, however, is the ability to play their favorite social networking games on their mobile devices. Zynga, the leading creator of the social games (including titles such as FarmVille, Mafia Wars and Vampires) hears the cry.

The company’s continued success on Facebook and MySpace (with unique monthly users now reaching 230 million) has delivered revenue from the estimated one million players that spend money on virtual goods within the game each month.

“With the popularity of virtual goods today, we are in the early stages of a new economy that could grow and shape the future of the Web,” says Mark Pincus, Zynga’s CEO, in a press release.

But therein lies the greatest problem when making the transition to the smartphone platform. Few, if any, game developers have found ways to be profitable.

For starters, the ability to implement the same in-game virtual purchases is not available for free games (despite the fact that the iPhone 3.0 software did enable it for paid apps). Opening this feature, Pincus says, would allow developers to concentrate on mobile gaming.

“To me, this is Web 3.0,” Pincus says to Venture Beat at this year’s Social Gaming Summit. “If Apple can make these improvements, they should be able to go from a billion apps sold to four billion quickly.”

Zynga has recently pushed a handful of its games to the iPhone platform, most notably Mafia Wars and Vampires Bloodlust. And the company is banking on the hunch that the iPhone and iPod Touch will flesh out the shortcomings limiting the full potential of social gaming.

Earlier this year, Zynga hired Steven Lurie as its general manager of its mobile game group. Lurie worked previously at the venture capital fund MHS Capital and served as CEO of online firm Advice Company. Needless to say, monitoring the iPhone platform will be high on his list.

Meanwhile, as games on this front fine-tune a working Facebook model for mobility, another wave of social gaming activity gains steam close behind, featuring geo-location companies such as Gowalla and Foursquare.

The aim of these two gaming platforms is to allow users to check in at various locations throughout the world, while connecting with socially networked friends and building points along the way.

The games act as a service in connecting friends in real-time situations in addition to serving as fun gameplay. Foursquare has seen its reputation rise suddenly, especially after being dubbed “Next year’s Twitter” by Mashable founder Pete Cashmore.

What all these innovative companies are doing is proving that they are listening to the players. They are breaking new ground, accommodating users on the go and reaching out directly to their pockets wherever they may be at the time.

And no matter who may come out on top of the competition, 2010 will prove to be a pivotal year for the iPhone/iPod Touch platform and the social gaming industry.