The business and dynamics of free-to-play social-casual game apps

Abstract

The rapid growth of social media platforms, specifically Facebook, has caused startup firms to develop new business models based on social technologies. By leveraging the Facebook platform, new entertainment companies making free-to-play social-casual games have created a multi-billion dollar market for virtual goods, a revenue model in which the core product is given away for free and ancillary goods are sold on top of it. Zynga, the most successful firm in this space, held the largest initial public offering for an Internet-based company since Google in 2004. However, concerns about Zynga's longevity (as well as the longevity of other social-oriented firms, including Groupon) persist for a variety of reasons, including the novelty of its business model, the dependence on hit products with short lifecycles, and the stress placed on internal development teams. This thesis analyzes some of the key problems faced by Zynga and its competitors, including how to monetize free products, how to maintain a user base over time (using platform strategy concepts), and how to develop short and long-term product management and new product development policies (using System Dynamics). An additional chapter develops principles for launching social platforms and products by comparing and contrasting key factors that influenced the growth of five major social media websites. The principles are then discussed as they pertain to Zynga and social-casual gaming, in which case there are notable applications and key exceptions based on Zynga's circumstances. The thesis concludes by discussing several future areas of research that pertain to the socialization of products and technology.