Saturday, 23 May 2015

Facebook Messenger games could goose its Payments business

Facebook’s core users are going mobile, and they’re taking their money with them. Rumors this week suggest that the company may turn to mobile games inside Facebook Messenger to bring those dollars back.

Revenues from the company’s Payments division are stagnating, because the microtransactions that used to fuel that growth — especially for games — are now taking place more often on mobile platforms. The company’s first-quarter financials indicated a 5 percent year over year drop, which is a lot of money for a $1 billion-revenue division.

“Social gaming audiences have been moving to mobile for a while now,” said Joost van Dreunen, the chief executive of market analyst SuperData Research. “In response, companies throughout the ecosystem — including Facebook, Kabam, Zynga and King — have committed themselves to smartphones and tablets. This creates somewhat of a downward spiral [for desktop social gaming]: with a declining user base, content providers will be reluctant to invest and develop for the platform, thereby making it increasingly less relevant.”

Three-quarters of Facebook’s advertising revenue already comes from mobile, for example.

Enter Facebook Messaging. App Annie’s Top App Charts say this is the top downloaded app for both iOS and Google Play (more than the core Facebook app itself, which was the No. 2 spot). But the top-grossing apps are nearly all games, with Clash of Clans, Game of War, and Candy Crush Saga in the lead. Earlier this week, The Information magazine reported that Facebook is considering games for its Messenger app store.

Facebook representatives wouldn’t confirm that report, offering a prepared statement:

“Currently, we think Messenger Platform is best suited for apps that focus on content creation and curated content. But, one of the reasons we were excited to announce that Messenger Platform is open to all developers is to see what people build. From there, we’ll think about what else might make sense.”

Gaming apps absolutely would make sense for a number of reasons, not the least of which is the built-in audience, larger even than Facebook’s own app base, for social gaming on mobile platforms.

Facebook Payments is experimenting with free one-to-one cash transactions for individuals. That seems like a loss for the company, until you consider all those credit and debit cards stored in profiles that could make it easy for Messenger users to buy games or the microtransactions inside them. (To be fair, the same is true for other Messenger apps, which so far have been largely limited to emojis, video calling, chat alteration, and images.)

So could Facebook Messenger games provide the boost that Payments needs? It definitely seems possible. The successful model is already on the market in the Far East.

“It’s a proven model in Asia to offer games on a messenger platform,” van Dreunen said. “A giant like Tencent makes a mint by both perpetuating viral user acquisition and monetizing this audience. If Facebook can follow this example, it could prove very valuable, especially as social gaming continues to lose momentum to mobile. The question, of course, will be whether or not this model will resonate with Western audiences.”

Hong Kong-based Tencent publishes games, but it also has hosted games as part of its QQ instant messaging platform, selling in-game goods for MMOs using an online currency called Q coins. QQ has 832 million monthly active users.

It’s fairly clear that Facebook is considering precisely that question: Will Western audiences respond the same way?

What is unclear is whether games via Messenger would use the app as a conduit for separate games, or whether you would actually play them inside the app. Apple and Google have some fairly strict rules for in-app transactions, and Facebook will have to tread carefully if Messenger appears to conflict with the giant business on Google Play or Apple’s App Store by being a sales platform competing with those stores.

Facebook Messenger games could goose its Payments business

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