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Consolidation Trend Continues In Facebook with Social Gaming Network (SGN) Leading the Way

Social Gaming Network (SGN) Jumps to #3 on the Adonomics 100^™

As noted in the recent TechCrunch article, the consolidation trend that was predicted in this earlier post is continuing on Facebook. The most competitive app category right now is casual gaming with Social Gaming Network (SGN) recently jumping from #20 on the list to #3 just behind Slide and RockYou and just ahead of Zynga (their direct competitor in the game category of killer apps for Facebook). This development points to a future where a series of companies specializing in specific categories of social suite applications will emerge. The ultimate battle in this Facebook app space war will be when one or more of these category-focused companies make a play to control multiple categories of apps in an attempt to become for Facebook what Microsoft Office is for Windows.

SGN Steals a March on Zynga in Casual Gaming

Two months ago, after we launched the Adonomics 100, it became much easier to track the rise (and fall) of specific companies that were either developing a large number of apps or were acquiring exclusive marketing rights (or all rights) to certain standalone apps. This allowed us to write the following on Feb. 22:

“If you investigate The Adonomics 100™ Top App Companies, you will note that some new names are starting to climb the charts. Specifically, #4 Zynga and #20 Social Gaming Network have been adding apps to their companies much faster than they could develop them. Instead of developing the apps, they have been acquiring them outright or acquiring exclusive marketing rights to these apps. My belief is that they are each making a play to be the dominant Casual Gaming App Company on Facebook. Their approach is to offer upfront cash, salaries and options to their participating members. This type of consolidation and safety/strength in numbers is inevitable in a space like Casual Gaming because a person doesn’t just want to play one game with their friends forever. They want to have a little variety and yet not lose track of their leaderboard status as one app shrinks in popularity and another app grows.”

It is now clear that SGN has been busy working behind the scenes over these past two months to stage an assault on the highest levels of the Facebook App eco-system. While Zynga remains in the #4 spot with 38 million installs, SGN now has over 48 million installs. In that same period, Slide and RockYou’s number of installs has stayed flat at 93 and 80 million installs respectively. SGN’s ability to extend their reach so quickly by applying the consolidation strategy that we predicted should make believers out of any skeptics about the potential synergies that exist within the huge number of installs under the control of a fairly small number of small developers.

How SGN Took The Lead In The Casual Gaming Category

The first step in the process for SGN was picking the category they would focus on. For a number of reasons, Shervin Pishevar (SGN’s CEO) chose the casual gaming category. He then focused on the developers.socialgn.com site and created the Gaming Hub using a few housebrand apps to get it working and immediately invited other game developers to join. The motivation of the game developers at this point was simply the chance to cross-promote their game via the SGN GameBar to other Facebook users who enjoyed playing one specific game and who wanted to be introduced to other games that their friends were playing.

The next step was to cultivate relationships with all of the major unaffiliated game developers on the platform. This process took several months of work before it began to pay externally visible dividends when certain shoes started to drop like Zach Allia of FreeGifts joining SGN. It was at this point that the basic outline of Shervin’s battle plan began to come into view. The big surprises were the rapidity at which the plan was executed and the recently announced size of SGN’s app suite. In just a matter of weeks, SGN acquired Oregon Trail and FriendBlock and coaxed the devlopers of Esgut’s apps (Suleman Ali and Jamal Ashraf) and Nicknames (Adam Gries, Wayne Mak) to join Zach Allia in contributing their apps to the consolidation cause and to become co-founders of SGN. By making these app all-stars co-founders of SGN, Shervin showed he knows that when buying golden eggs it is very important to acquire and lock in the geese laying them as well.

Should Slide Be Worried About Their #1 Spot in The Adonomics 100?

Slide, which was recently valued at $550 million by its latest investors, has occupied the #1 spot in the Facebook application eco-system since the platform was launched almost one year ago. For most of that time period, it appeared that RockYou would be its chief rival. However, SGN’s rapid rise up the Adonomics 100 begs the question: “Should Slide Be Worried?” My answer to this question is “Yes!”

The reason Slide should be worried is that most developers view them as competition whereas most developers view SGN and Zynga as partners in the process of building the install base of their apps. Slide also has a history of predatory app acquisition like their Favorite Peeps purchase which only paid the developer $60,000 for an app that was on the verge of catching up with TopFriends. RockYou is less of a threat to independent developers because they have had no such negative press to cloud their reputation as a good partner and that have shown an ability to support the Facebook eco-system via their Cost Per Install ad offering (which many developers have leveraged to grow their apps).

In a race to acquire apps and their developers, the primary assets that the acquiring company can bring to the table are upfront cash, earn-out cash, stock grants, stock options and co-founder status. With the exception of the cash component which Slide has plenty of, SGN is in a better position to attract developers because its stock has not already had a run up in value. As mentioned earlier, SGN also appears to be willing to share the credit for its success with the developers who are making it possible. This attitude reminds me of the plaque on Ronald Reagan’s desk which read, “There is no limit to what a man can accomplish if he doesn’t care who gets the credit.” This humble approach to the roll-up process is key to building a team of independent developers into a cohesive whole.

New Leaderboards for Applications, Companies, Developers and Ad Networks

Given the rise of SGN and its dual nature as both a Company that owns applications and a Network that offers a service to additional app developers who just wish to leverage SGN’s cross-promotion services, it is now time for Adonomics to create a few new leaderboards. Our goal here is to give each different type of entity that we track a chance to measure their success in relation to the best-of-breed in the entire Facebook eco-system. For this reason, we are announcing the development of two new leaderboards, one for Developers and one for Ad Networks. These are in addition to the ones we’ve had for Applications and Companies.

The Developers Leaderboard will be focused on the individuals who write the code that create the great user experiences available on Facebook. Whether these individuals are sole proprietors or employees of the largest app companies, we want to give them a chance to show the world the men and women behind the curtain. To get listed as a developer on the Developers Leaderboard, all that is necessary is that the person be listed as a developer on the app or to send us the information necessary to certify this by signing up on Adonomics as a developer and creating a developer profile. Take a look at the current list here and congratulations to Jia Shen (who is listed as the developer of most of RockYou’s apps), Daniel Silverstein and Bobby Joe (who developed FunWall) and Blake Commagere (who developed the monster apps and Causes).

The Ad Networks Leaderboard will be focused on the companies that have an alliance of apps for whom they are managing ads. The companies listed here will include both major app developers who offer advertising on the side (e.g., RockYou, Slide, etc.), hybrid companies that have apps of their own as well as their own advertising or cross-promotion networks (e.g., Buddy Media, Social Media, SGN, Zynga, etc.), standalone ad networks (e.g., Lookery, VideoEgg, etc.) and meta-ad networks that offer ad-rotation and optimization services to their members via ad slots that can be filled with ads from any of the available ad networks (e.g., TheUADA).

What’s Next?

While several shoes dropped recently related to consolidating the social networking casual gaming category of killer apps, we should all be prepared for many more to come cascading down soon. These might come from Zynga in response to SGN’s move or new categories starting to heat up — such as the dating category. In all cases, it is great news for the individual facebook developer to be in the position of having multiple suitors courting them. It is also great news for facebook users because they will be able to enjoy a more seamless user experience as they shift from one high quality app to another.

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Consolidation Trend Continues In Facebook with Social Gaming Network (SGN) Leading the Way