What I Expect in 2012

I recently wrote about how little I believe “expert” predictions of the future and how stupid I think it is for people to follow them. So, of course, I felt it was appropriate for me to now give my predictions for 2012  Actually, I still feel predictions are not worth the paper they are written on and if I (or anyone) could predict the future we would go public this week and be worth billions. But by looking just at 2012, I think you can extrapolate some current trends to anticipate how the upcoming year will shake out.

You will see more cross-platform

Regardless of the institutional hurdles to creating social games that work across platforms (Facebook and iOS for example) the huge value it provides to players will drive a solution. By the end of next year, more and more games will be enjoyable wherever they player might be playing.

A new social gaming genre will emerge

This is an argument that Facebook has been making since at least this summer and I totally agree. There are a lot of great gameplay mechanics that are not yet available on social. Just like Playdom created a huge new space in social with Gardens of Time, someone will create a hit by finding a way to bring a proven mechanic to social.

Investment and M&A activity will decrease

I mentioned in several blog posts that post-Zynga IPO, investors and potential acquirers will look differently at social gaming company. Valuations will be based less on a company’s potential and more on how its numbers compare with Zynga (i.e. comparable price-revenue ratios). As a lot of companies do not have the numbers to justify a deal, the type of dumb money deals we have seen the past few years will dry up.

There will be industry consolidation

With less money out there, companies that do not have a strong business model won’t survive. They won’t be able to finance themselves through cash flow and won’t be able to raise new capital. Overall, this will be great for the industry, as the remaining companies will be the ones with strong management, a good business concept and ability to execute.

International will become a key revenue driver

This started as a blog about international opportunities for social game companies and in the past year I have seen that many firms in the space are starting to realize the same thing. While the US social market, both mobile and Facebook, is increasingly saturated, many European and Latin American markets are still wide open. The competition is lower and in some cases the revenue potential per user is higher. With the cost of user acquisition ever increasing in the US, social game companies will also have no choice but to look elsewhere for new players. Also, as companies scramble to maintain their growth, in 2012 they will find Europe and other foreign markets the low hanging fruit.

But Greece and others will default and everyone will feel it

Since this is about predictions, I would bet Mitt Romney $10,000 that Greece defaults; and its affects will be felt by social gaming companies. First, it will further drive down the value of the Euro, depressing current state EU revenue. It will also have a strong effect on the buying power of the countries that default, though most of these (and I predict defaults by Greece, Italy, Spain, Portugal and Ireland all in 2012) do not generate significant revenue for most social game companies.

Windows Mobile will become a viable social platform

Regardless of what happens in the US with Windows Mobile, it will be a winner in Europe. With Nokia’s launch of its line of Windows Mobile phones, the platform will become a viable contender given Nokia’s reach and reputation in Europe. Given the issues with monetizing Android, I actually expect revenue opportunities on Windows Mobile to exceed Android (on the mobile, not tablet, space) next year. Also, if you haven’t played around with a Windows phone, it is actually a great opportunity system. Given MS and Nokia’s muscle, I just can’t see it fail (and Microsoft did not pay me to say that). I think revenue wise Windows Mobile will be more important to social companies than Android.

Kindle Fire will become a key mobile platform

This is not really much of a prediction given the initial sales numbers (over 3 million sold in a few weeks), but Fire is getting a large installed base of people willing to pay for content. And Amazon is as good, or better, than Apple at creating a customer experience that moves people to monetization.

Traditional marketing will become more important

Another topic I have discussed on this blog and at trade shows is how performance marketing will no longer be the only, or preferred, way to acquire users. With the cost of performance marketing increasing and sophisticated entertainment companies entering the social game space, more publishers will see the benefits of a traditional marketing mix to grow games.

Undifferentiated companies will fade away

As I mentioned earlier, it will be increasingly difficult to raise money in 2012. Thus, the companies who are just doing what other social game companies are doing, but not as well, will not survive. They will have no way of acquiring users and even if they get people to their games, they will not be able to retain (or monetize) the players.

Two new companies will break the top-10

One of the things I most strongly believe is that the top-5 and top-10 on Facebook is still very dynamic and that innovative, well-run companies can still make the top-10. Who last year would of predicted that Wooga and King.com would be in the top-5 (okay, probably Jens from Wooga but who else)? While the copycat companies will have trouble getting any traction, a few companies that approach the space from a different angle will see considerable success.

And one non-social gaming prediction that I feel I need to include

A Republican will win the White House

This is a nod to my belief in analytics over gut, not any personal inclinations. If you look at the current US economic metrics and compare that with virtually any previous election, it bodes very, very poorly for the incumbent. While a lot of pundits argue that this year will be different because of the Republican field or the antipathy to Congress, I always feel it is very, very hard to disagree with the numbers. We’ll see.

Happy holidays to everyone!