Facebook Inc. (NASDAQ:FB) is now a major player in the games market. This may not be a surprise to avid Facebook gamers, but this new reality carries important implications for investors interested in the space, regardless of their gaming habits on the social network.
Looking beyond FarmVille
Facebook Inc. (NASDAQ:FB)’s vision for its gaming platform goes far deeper than Zynga Inc (NASDAQ:ZNGA)‘s FarmVille. With an increased focus on serious gamers, the company could draw in developers of console-like games, such as Microsoft Corporation (NASDAQ:MSFT), Electronic Arts Inc. (NASDAQ:EA) , and Activision Blizzard, Inc. (NASDAQ:ATVI) and their flocks of core gamers.
“Riveting games with intense graphical fidelity are possible on Facebook,” says Games.com’s Joe Osborne. While most Facebook members are probably familiar with casual games like Candy Crush Saga and FarmVille, Facebook is gearing up to become a competitive destination for action and console-like games.
At the Game Developers Conference yesterday, Facebook’s director of games partnerships, Sean Ryan, named several games of this type that are set to release soon: Tome, Chronoblade, and Imperium.
Apparently the company’s $3 billion share of the $15 billion games market isn’t satisfying Facebook Inc. (NASDAQ:FB)’s ambition. Ryan told AllFacebook (the “unofficial Facebook blog”) in February that one of its biggest goals this year is to be a go-to destination for core and mid-core gamers. He feels that this is inevitably where the social gaming market is headed. “Last year was primarily about casino, hidden object, and casual, and we’ll continue to see those expand. But I think we’ll see a rise in the core games as developers figure out how to make them social.”
It’s no wonder Facebook wants to push further into the games market. It is an area of astounding growth for the company, according to Ryan. Game installs on Facebook are up 75% from this time last year. Furthermore, paying gamers on Facebook have increased 25% over the last 12 months.
Can traditional gaming companies flourish in social gaming?
The trend toward higher-graphic action games on Facebook Inc. (NASDAQ:FB)’s platform is good news for gaming behemoths Microsoft Corporation (NASDAQ:MSFT), EA, and Activision Blizzard, Inc. (NASDAQ:ATVI). As Facebook makes inroads with core games, developers of console games will have to worry less about casual games stealing the attention and time of their serious gamers.
More importantly, as console-like games become possible on Facebook’s platform, companies like Electronic Arts Inc. (NASDAQ:EA) and Activision can use their vast experience and resources to launch successful core games on the platform. In fact, both Electronic Arts Inc. and Activision have already commenced social ventures.
In 2012, Activision Blizzard, Inc. (NASDAQ:ATVI) unveiled a publishing segment devoted to developing third-party games for the social-mobile gaming world. Morningstar analyst Carr Lanphier describes the segment as important but still insignificant to the company’s earnings. For now, “It allows the company to get the lay of the land — no easy task in the volatile world of social and mobile gaming — and figure out the best strategy to grow profitably in the newly emerging market.”
Electronic Arts Inc. (NASDAQ:EA) has taken a more aggressive approach. The company already has popular socially appealing games like FIFA Manager. Plus, the company’s acquisitions of PopCap and Playfish have given Electronic Arts Inc. substantial market share in social gaming.
