Next week, I am speaking at the Social Gaming Summit in London about moving Beyond Performance Marketing. I wanted to share the driving principle as I think it is quite important for everyone in the social game industry, from small start-ups to the largest players.
There are several reasons why relying on performance marketing (Facebook ads) is untenable for social game companies. First, the cost of Facebook ads for social games in the US increased 300% in less than two years. In January, 2010, the median CPC for a Facebook ad was about $0.50. In April of this year (the most recent data that I have), that number increased to $1.50, with several spikes where ads cost almost $2.50. This number is almost certain to continue increasing at a rapid rate, as Facebook ad budgets are projected to rise from $2.1 billion today to $8.3 billion by 2015. With budgets increasing at this rate and the cost of Facebook ads based on a bidding system, the increased demand (without an increase in supply) has to increase the cost of ads. Given that ARPDAU (average revenue per daily active user) is not rising at anything close to this rate, it will become impossible for most social games to justify spending significantly more on ads. Finally, for several Facebook games there just is not anyone left on Facebook to advertise to. Some of the major players have spent so much promoting their games through Facebook ads that all potential customers on Facebook are numb to the ads, they have either played the game or never will.
What this situation suggests is that companies need to find other ways of attracting and re-engaging players. The first step is for social game companies to create a robust launch and marketing strategy that encompasses not only performance marketing but a complete marketing mix. Given that almost every other industry – including other parts of the entertainment and gaming space – pursue a comprehensive marketing plan, it is logical that social gaming companies also evolve their customer acquisition strategies. Later this month, I will post some suggestions on ways to build out your marketing strategy.