According to my Facebook News Feed, we are facing an agricultural crisis: I have more than 20 friends whose FarmVille crops need fertilizer. However, since FarmVille’s debut last June, the popular Facebook application has done more than flood my feed with farm-related requests. It has enabled its creator, Zynga, to reportedly rake in more than $200 million in 2009. But how can such revenues be possible if social gaming is supposed to be free? The answer lies in the sale of virtual goods and the games’ use of compulsion loops.
In social games, users are encouraged to enhance their farms or strengthen their mafias through the purchase of virtual goods. These can include fanciful structures (Ferris wheels), seasonal items (mistletoe-shooters) or tools (tractors) that enrich gameplay. Such goods allow users to customize their profiles, advance more quickly in the game or “keep up” with other players. In short, virtual goods are a graphic extension of common user behaviors such as self-expression or competitiveness.
For users who are patient, some of these goods can be earned after long hours of play and hoarding in-game profits. However, most are only available in exchange for a large quantity of the game’s virtual currency, which the player can buy for real money. For instance, for $5 Zynga will provide a user with 7,500 Farm Coins. Now, if you think it unlikely anyone would pay for such intangibles, you’d be wrong: TechCrunch reports that Americans spent nearly $30 million on virtual goods in November and December of 2009. Again, why would so many players, who would never describe themselves as gamers, make such a purchase? It is because they have fallen into what is known as a compulsion loop.
Venture capitalist Tim Chang described how a compulsion loop works in an interview with GamesBeat in October 2009: “You get your users addicted. You start annoying them with how long it takes to get something done. That triggers impulse buys of [virtual] goods that will save them time.” Virtual goods and compulsion loops are not unique to social gaming on Facebook. For years, gamers have used similar systems to purchase cooler weapons or stronger armor in MMORPGs (massively multiplayer online role-playing games) such as World of Warcraft (WoW). But there’s a difference in scale; thanks to the wide reach of free-to-use social networks, Zynga’s FarmVille reached 11 million daily active users (DAUs) two months after its release, whereas it took WoW four years to reach that many subscribers. Zynga CEO Mark Pincus sees his games as ongoing services that users pay for in small increments: “Our story has been about finding games people could play forever and giving them a reason to do it.”
Zynga is cashing in on what Chang describes as the k factor, or the “inherent virality of the application,” that makes all the micropayments add up to millions of dollars in company revenues. As of this writing, Zynga has reportedly over 66 million daily active users (DAUs), and although it is difficult to determine how many of those users are purchasers, consider this: If 1% of Zynga’s DAUs spent $5 each, the total amount would be $3,300,000. Now, whether such profits are truly sustainable remains to be seen. However, with other game companies such as Electronics Arts (developers of The Sims and Rock Band) investing in social gaming, the virtual goods market is likely to stay open for business.
Megan Jeffrey is a graduate student in the MCDM program at the University of Washington. She has a bachelor’s degree in journalism and public relations from Cal Poly University, San Luis Obispo. She has worked as an account assistant for Verdin Marketing Ink, a community manager for Serra Media and as a HubPages.com columnist. Megan is currently the social media strategist for the UW School of Drama.
This post is categorized in: Social Media