Microsoft’s $300 million initial investment in Barnes & Noble’s Nook unit is arguably the biggest news to hit the social game industry this year. Just last week, I was saying to some colleagues that there have not been any major developments in our sector recently. That changed yesterday. Over the next five years, Microsoft has committed to a total investment of $605 million in Barnes & Noble’s Nook, making it a bigger deal than Disney’s acquisition of Playdom in 2010.
Although this is not a pure social gaming move, it will impact our industry more than any other event in the last few years. With the success of the Kindle Fire, social game developers had a platform other than Facebook or iOS to reach the mass market. The Android market previously was not that attractive to social game companies, given the fragmentation and difficulty with in-app purchases. With the Fire at a competitive price point, it reached a huge segment of the market that could not—or would not—purchase an iPad. Even before the Microsoft investment, the Nook represented a good third option, as it had surprisingly strong sales. Moreover, both Fire and Nook Tablet customers were already accustomed to paying for content and thus monetized at a much higher level than your typical Android user.
With the infusion of Microsoft’s resources, the penetration of the Nook will continue to grow, probably by an order of magnitude. Just last night, I saw several Nook ads on primetime; this may be a coincidence, but I view it as a precursor of where Microsoft’s investment will manifest itself. By the end of 2012, the Nook tablet will probably challenge the Kindle Fire for the number two spot in the tablet market; more importantly, both will sell tens of millions of units. Those customers are not be the people who spend hours daily on Engadget but instead will be the same people who read Mary Higgins Clark or John Grisham novels, watch NCIS or Criminal Minds and go see the Hunger Games. Not coincidentally, these are also the best customers for games like Draw Something, Bejeweled Blitz and Farmville; thus the Nook tablet will become a great platform to reach your best customers.
This may be redundant, but Microsoft’s investment in the Nook makes it the most exciting new platform for social gaming since Apple unveiled the iPad. While Barnes & Noble does not yet support in-app purchases (ironically, something it shares with Microsoft), they are not stupid and I am sure we will see this option by year-end. Having your app optimized for the Nook tablet when it is ready for in-app purchases is probably one of the most important moves you can make this year.