Social Economy: Why Facebook games have to charge money for items

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On almost any Facebook game wall, you will see posts from people complaining that the latest and greatest desired item requires real money to purchase. Many players cannot fathom why a Facebook game should ever require them to pay money for digital pixels, and find themselves irate when game developers do not offer a way to obtain all items without requiring real dollars to be spent. For some players, buying items simply isn't an option because they're too young to purchase without parent's permission, they are out of the country, or they simply do not have the extra change laying around to spend on a virtual game. In this column, we'll take a look at the reasons why Facebook game developers have to charge for items in their games despite player's constant objections.
Development Costs

Creating a game costs a huge chunk of money. We're not talking thousands here - for some of the top games that you're playing such as FarmVille or Pet Society, millions of dollars have been spent even before the game launched. Games require staff such as client programmers, server programmers, game designers, producers, project managers, business developers, and executives. That doesn't even include the standard business personnel that most companies require such as a Human Resources department, lawyer consultation, office managers, and more. Social games are easier to develop than console games and standard MMORPG titles, but they still require months of time and generally dozens of employees. That's a lot of salaries, office rent, and expenses that have to be made up.

Startup Costs

Social gaming is a division of gaming that is still in its infancy. Every day, it seems that there are new developers jumping into the pool of contenders trying to make the next blowup hit. Many of these companies are startups, that are funded by venture capitalists or angel investors. This means that these companies often are given millions of dollars to create social games that are profitable for their investors. Without profit, there is not success, and venture capitalists will no longer be interested in providing seed funding to social game developers. In other words, these games have to sell items to turn their company into a success.

Live Operation Costs

Arguably even more expensive than the initial development costs for a social game, is the expense of keeping it running long term. In order to have a live game that continually provides updates, fixes bugs, releases new and exciting content, and remains a successful product for the company - there are many financial resources that have to be dedicated to it. A live game requires hosting - even though the game is on Facebook it isn't actually hosted there. The developer has to pay all operating costs to keep the client and server running smoothly and supporting the thousands (sometimes millions) of players who log in every day. This is very expensive, and without money coming in your favorite game would not even be able to remain live and running.

There are also a number of other costs that are associated with running a live game. Someone needs to be in charge of the game, designing features and choosing what themed items to release. A full Quality Assurance team is required to make sure the game is running smoothly by testing every new release that goes into the game. Customer Support staff is an essential part of making sure the players are getting help for billing and support questions. Community Managers are often used to moderate forums, relate key customer concerns to the developers and executives, and handle the wall posts and engagement with the players. There are tons of artists required to make all of the new items that are for sale. This is just the beginning!

All of these staff members require pay, as making social games is not a hobby for them - it's a full time career. Your favorite social game not only has to be able to simply pay the bills to pay for technical costs, staff salaries, and office space, but they also have to make a profit in order to continue surviving as a viable company.

While it may be frustrating to you to see that you cannot afford to pay for items in the game, remember that most games that require a development staff this large are not free. Console games require an initial purchase fee of anywhere from $40 - $70, and traditional MMO games often have a box price of $50 plus require a monthly subscription fee. Social games are expensive to operate, and it is even more challenging when everyone is allowed to play the games for free for as long as they want without spending a dime. In most Facebook games, somewhere around 1-3% of players ever actually pay - but they make up for all of the other players.

Yup, Zynga is still worth more than EA, recent filing reveals

A few months ago, Zynga's estimated valuation was rumored to be nearly $10 billion. Now, a recent Zynga filing reveals a sale of $490 million in shares slated for March of this year, Inside Social Games reports.

That number could indicate a post-money valuation, or an estimation of how much it's worth, of $9.1 billion. (Dr. Evil is rolling in his space pod right now.) This is all thanks to several big-name investors like Morgan Stanley, Fidelity Investments, T. Rowe Price and Kleiner Perkins.

However, Inside Social Games says that it's more complicated than that, thanks to several sales of Zynga stock in both directions that haven't been officially confirmed. In other words, Mark Pincus and crew have been vigilant of keeping their exact worth under wraps until the company decides to go public at some point. And, according to the New York Times, don't count on that in 2011. (Sorry, small time investors.)

Regardless, a slightly more confirmed valuation of $9.1 billion still has Zynga in the running as the second most valuable gaming company in the world. According to TechCrunch, EA is worth around $6.2 billion while Activision Blizzard sits pretty at $13 billion. So yes, Zynga is just about as loaded as we thought it was, and it's all thanks to our addictions to uniquely-colored Cows and Sheep.

Do you think Zynga could eventually surpass Activision? How will the two publishers respond to both being beaten by Zynga and it encroaching on the number one spot?

Zynga, Playdom, EA and Bioware vets cause a Rumble with new freemium studio

While many a story has come to light recently, detailing high-level game designers jumping ship to Zynga, here's one where a fairly big gun under the big Z's umbrella has left for new pastures. To be specific, John Yoo, lead designer on CityVille, is one of a few industry veterans that have joined with Greg Richardson [pictured], of former BioWare/Pandemic fame, in the creation of a new freemium (free-to-play) game studio by the name of Rumble.

After speaking with Rick Thompson, the founder of another major social games company - Playdom - the two partnered to form Rumble. Rounding out this new package are former EA employees Mark Spenner and David O'Connor. With these big names in their camp, Richardson's goal with Rumble is to create games that are free to play (supported with paid add-ons), but lie somewhere in between the expensive world of high-end PC games and the extremely casual games represented by many Facebook titles.

According to the Wall Street Journal, Richardson has faith that this middle ground holds a lot of merit. "We saw this third hill, and we think it's the biggest of the three hills," he says. This isn't to say, though, that Facebook games are out of the picture, as Richardson confirmed that they will use the social service, but will also focus on mobile devices and PCs through the browser.

In addition to developing its own games, Rumble will publish other developer's titles. While no specific details were announced about any of Rumble's specific games (we can expect the first sometime early next year), Richardson did list many of the company's areas of inspiration, which lie anywhere from Zelda and Super Smash Bros. to Diablo and Civilization. Regardless of the game in question, he says that Rumble looks to avoid overly complex gameplay. With this many areas of inspiration, we're definitely interested in seeing what Rumble comes up with, but for now - the possibilities are endless.

Are you excited in trying out this apparent middle-ground of freemium games that aren't too challenging, but aren't too basic either?

Zynga, Playdom, EA and Bioware vets cause a Rumble with new freemium studio

While many a story has come to light recently, detailing high-level game designers jumping ship to Zynga, here's one where a fairly big gun under the big Z's umbrella has left for new pastures. To be specific, John Yoo, lead designer on CityVille, is one of a few industry veterans that have joined with Greg Richardson [pictured], of former BioWare/Pandemic fame, in the creation of a new freemium (free-to-play) game studio by the name of Rumble.

After speaking with Rick Thompson, the founder of another major social games company - Playdom - the two partnered to form Rumble. Rounding out this new package are former EA employees Mark Spenner and David O'Connor. With these big names in their camp, Richardson's goal with Rumble is to create games that are free to play (supported with paid add-ons), but lie somewhere in between the expensive world of high-end PC games and the extremely casual games represented by many Facebook titles.

According to the Wall Street Journal, Richardson has faith that this middle ground holds a lot of merit. "We saw this third hill, and we think it's the biggest of the three hills," he says. This isn't to say, though, that Facebook games are out of the picture, as Richardson confirmed that they will use the social service, but will also focus on mobile devices and PCs through the browser.

In addition to developing its own games, Rumble will publish other developer's titles. While no specific details were announced about any of Rumble's specific games (we can expect the first sometime early next year), Richardson did list many of the company's areas of inspiration, which lie anywhere from Zelda and Super Smash Bros. to Diablo and Civilization. Regardless of the game in question, he says that Rumble looks to avoid overly complex gameplay. With this many areas of inspiration, we're definitely interested in seeing what Rumble comes up with, but for now - the possibilities are endless.

Are you excited in trying out this apparent middle-ground of freemium games that aren't too challenging, but aren't too basic either? Sound off in the comments.