I was recently asked to speak later this month at Casual Connect about how east European (including Russian) talent can succeed in social media. The underlying ideas is that teams from Russia, Ukraine, Poland, etc., have come to dominate the casual download gaming space (i.e. hidden object games sold on Big Fish), yet have not had similar success on social media. Upon thinking about the subject, I realized this basic precept itself is a misperception but there are things that these teams can do to succeed on Facebook.
Russians are Succeeding on Social Media
Let’s start with the misperception, that Russian (and other east European developers) have failed to gain traction on social networks. The reality is that these developers are quite successful on many social networks, including the three primary Russian social networks (Mail.ru, Odnaklassnike and vKontakte) and the Polish social network (Nasza Klasa). There success is not limited to their “local” social networks, as you see games that originated in eastern Europe at the top of the charts throughout Europe (Germany, the Netherlands, Spain, etc) and even Latin America. Where these developers have failed to gain significant traction is on Facebook, more specifically English-language games on Facebook. So it is not as if east European companies cannot create compelling social media game content, it is that they have not been able to penetrate the Facebook market (a big distinction in my opinion).
Why the Difficulty on Facebook?
The fact that East European and Russian developers have succeeded on social media does not offset their lack of success on Facebook, in fact it magnifies the problem as it shows they have the skills. So why have these companies had such difficulty on Facebook:
1. By far the greatest impediment they face is marketing. In the casual download market, there are partners open to bearing the marketing risk in exchange for part of the game’s revenue. Big Fish Games, in particular, has tremendous marketing muscle and can deliver millions of potential customers to an east European developer with no marketing expense by the developer. There is no equivalent of Big Fish in the social gaming space. The few publishers focused on Facebook are themselves extremely small compared to the major social game developers. Thus, they cannot even the playing field the way a Big Fish or Real Networks does. This phenomenon plays itself out in two ways. First, the major Facebook companies throw tons of money at their games, often millions of dollars per month to support the launch. Second, the creative is perfectly targeted to the US market, as it is developed locally by marketing experts. Most, if not all, east European developers cannot match this marketing.
2. The cost of developing a AAA Facebook game is orders of magnitude greater than the cost of developing a AAA casual game. The top Facebook game companies (i.e. Zynga, EA, Playdom, etc) regularly spend well over $1 million to create a game, then have huge teams creating new content for the game once it has launched. Conversely, in the casual space, a team can create a competitive game for less than $200,000 (sometimes much less). Even with the differences in costs between San Francisco and Donetsk, the huge investment by the major Facebook game companies translates into a much deeper and more polished product. While the mechanics of the east European games are often sound, and thus the reason they succeed locally, they are just not as deep or polished as their competitors.
3. The top Western developers have embraced analytics more than their Eastern competitors. Most of the Russian and east European social game companies come out of the casual or core gaming spaces, where design, art and creativity largely rule the day. Conversely, at their core, most of the major US companies are built around analytics and testing. Before you say Electronic Arts, even they had to make a major acquisition (Playfish) to build the core competencies needed to thrive in social (The Sims Social has a much greater Playfish influence than Maxis influence). The ability to pivot from a design-centric development strategy to an analytics driven strategy cannot be underestimated, very few companies have been able to make the transition. This is not an East European vs West phenomenon, as the social game graveyard is littered with companies unable to make the transition (look at the top Western casual game developers, Big Fish, Sandlot, Playfirst and tell me how many hit social games they have produced).
What is an East European Team To Do?
Given these issues, what should east European development teams do. First and foremost, decide if they want to be in the space. Yes, a successful Facebook game can generate tens of millions of dollars in revenue but most developers are not going to succeed. Do they want to risk their core business to try to penetrate this market?
If succeeding on Facebook is a priority, then there are several steps a Russian or East European team can take to improve the odds. First, partner with a western company. When I was at Playdom, we worked with multiple east European teams. Partnering with a US based company, if it is the right company, allows a Russian or East European team to leverage their marketing muscle, learn what they have learned on the platform and potentially enter the market without the marketing costs of going it alone. As I mentioned earlier, there are not many pure publishers, so an East European company will need to be creative in finding a partner. These days many of the top Facebook game developers are capacity constrained, so they may be open to partnerhips if structured attractively.
One method I had great success with during my Merscom-years was co-production. In this model we would share development costs with a partner (usually a media company) and then share revenue. This model could easily be extended to the social game world, with a variant being that the East European team takes on a greater share of the development costs in exchange for its western partner taking on a greater share of the marketing costs (which in the Facebook world, can often be much more than the development costs).
Another option is to partner with a US media company to create a social game based on television or movie IP. Again, at Merscom, we had great success partnering with media companies to create content that was differentiated from our competitors, thus reducing our advertising costs. In social, currently, branded content is seeing tremendous momentum (The Smurfs is a surprise hit while Dirty Dancing has been in the top-5 of fastest growing Facebook games since its launch) but there are still many opportunities. By finding a media partner with strong IP, a Russian or East European team can create a game that does not have the same marketing challenges they would face using original IP.
A third option is for a a Russian or East European studio to license its IP to a western team. If it has a game that has done great in the casual or core space, there may be an opportunity to partner with a Western company that already had Facebook expertise. Rather than feeling that it needs to develop the game, it can find a successful Facebook studio that can take the IP and bring it successfully to Facebook.
A fourth option is to raise capital and focus on Facebook development. Nobody can be successful by treating Facebook simply as an additional platform, no matter the company’s size they need to commit to it. Then they need to do it right. They need to create games as good, deep and polished as those coming from the industry leaders. The Russian or East European studio needs to devote as much to marketing the game as they do. To be successful, they probably need to raise at least $10 million, there are no shortcuts, and approach Facebook the same way someone in San Francisco would. This includes taking an analytics-first development strategy and creating a game that is built around monetization, virality and retention.
A Few Warnings
Regardless of the strategy, the Russian or East European team needs to be very careful about who it works with. Any deal needs to be attractive to all parties but makes sure the US partner is honest and looking for a mutually beneficial solution. Just because they are big or based in the US does not mean they are good to work with. There are many companies that do not honor their contracts or structure contracts in such a way that provide them with a huge advantage. Rather than go into all the things to consider, speak to other companies who have dealt with them (or ones who just know them) and see what he reputation is. Learn if they have a history of screwing people or if people work with them again and again. Let me end with a very good rule of thumb: It is a bad sign if they have law suits against them, it is a good thing if they have long-term partners.
2 thoughts on “Difficulties Russian and EE Developers Must Confront on Facebook”
What a great article! Great job, Lloyd!
Thanks Natalia. Hope to see you next week in Kyiv.