Market Insight

Facebook launches mobile games publishing plans

July 30, 2013

Jack Kent Jack Kent Director, Media and Advertising

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Facebook has officially unveiled its mobile games publishing plans. The social network will provide support for monetisation, advertising, analytics, and cross-platform integration in a pilot scheme aimed at small and medium sized developers.

Initially set to launch with 10 titles, Facebook is actively recruiting more developers from whom it will take an as-yet undisclosed share of revenues in return for its support.

The move follows a positive few months on mobile for Facebook. Its Q2 results showed $656m in mobile advertising revenues, which correspond to 41% of its total advertising revenues. It also reported 819m mobile users, underscoring the size of the opportunity it hopes to offer developers.


Facebook's strategy has always been to build and then monetise its audience.  Mobile gaming has long been the biggest mobile content category and so it makes sense to stake a bigger claim of this market which will be worth around $15bn across smartphones, tablets, and mobile web in 2013.

The vast majority of mobile games revenues come from freemuim titles and so Facebook's ability to drive continued engagement and then drive in-app purchases will be critical.

Facebook's wider strategy should go beyond simply securing a share of revenues from titles distributed through its publishing scheme. The games, social, communications, and messaging markets are among the most competitive segments of the mobile content industry. Facebook's competitors are increasingly looking to games and content to help drive revenues and further engagement with their users.

Most notable are Asia-based services such as Korea's Kakao Talk, which claims 100m users of its messaging app and reported more than $300m games related revenues by H2 2013. Japan's Line claims 200m users and reported $58m Q1 2013 games revenues. Chinese online games giant Tencent is also ramping up its mobile games activity around its 300m user WeChat messaging app and integrating its mobile and PC QQ games platforms.

Western social and communications apps are also looking to games. US-based Tango claims 120m users and has added a games platform with partners including established mobile developers such as Gameloft. Canada-based Kik provides an HTML5-based games platform (within its native apps) for its 60m user base featuring content from companies including Zynga.

For many of Facebook's competitors, gaining revenues from a share of content sales is a key part of their overall monetisation strategy because core communications functionality such as VoiP, video calls, and messaging are becoming commoditised.

Facebook's fast growing mobile advertising business (much of it from games developers promoting their titles) and 819m mobile user scale means it does not face the same challenge; but the potential for other platforms to usurp its role as providing the core social integration for mobile gaming ensures  it has to play a role helping developers monetise mobile content integrated with Facebook.

Revenues may be relatively low compared with the overall market but could still provide a potentially lucrative additional revenue stream should the scheme prove successful.  IHS expects that as most transactions will still be processed via Apple and Google's application stores (from which they keep 30% of revenues), Facebook should only take a 10% revenue share or lower to remain competitive and ensure developers will be willing to offset the overall lower revenue share with the increased potential for monetisation offered by Facebook.

Over the past few years Facebook has scaled back its ambitions to provide its own mobile content distribution and payments platform. But it has not slowed its plans to remain central to users' mobile content experience. Its App Center serves as an important discovery platform for some of the most successful Android and iOS games, has helped drive mobile advertising revenues, and will be the main driver of its mobile games publishing strategy.

For any games publisher, a major challenge is to ensure developers retain the need for a partner once they have seen success and then question the need for a publishing partner. Facebook's ability to drive on-going engagement with a game once it has been downloaded could prove critical here.

The lack of public information about what revenue share developers will get points to this still being an experimental scheme for Facebook, but one which clearly points to its ambition to play a role in different parts of the mobile value chain and the growing importance of mobile games.

IHS will provide further analysis in forthcoming reports investigating the opportunities for content provided by mobile social and messaging apps and analysing publishing, distribution, and monetisation strategies for mobile games companies.


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