Academic

Yes, we're all addicted to Facebook now, but many Facebookers are not just posting pictures or telling us what they made for dinner -- they are playing games.  And this is the big money-maker now.  So, there are 3 big players, all of which were venture financed:  Playdom, Playfish and Zynga.  (Quick overview:  Zynga is Mafia Wars and FarmVille; Playdom is Tiki Resort; and Playfish is Who Has the Biggest Brain?)  Playfish was recently acquired by Electronic Arts (EA, best known in our house for video games such as "Madden") for at least $300 million, and Disney announced this week that it is acquiring Playdom for $563 million, plus up to $200 million in earnout.  The Disney announcement was huge news not only because Playdom is a two-year-old venture, but also because Disney is about mainstream entertainment.  Are social network games mainstream?

Apparently, yes.  I think this is the brilliance of these games, which are available on Facebook and the like.  They are video games for non-gamers, much in the way that the Wii was a video game console for non-gamers.  Anybody can play, and you don't need to know how to hook up a $200 box to your television.  Or buy multiple $50 controllers.  Yes, there are many people who play their friends over the Internet on their XBox or Wii or who participate in MMORPG (massively multiplayer online role-playing games).  But zillions of people play their friends on these social network games, without even knowing how to use a joystick or nunchuk or whatever.

The amateur aspect also drives the profits.  Yes, they make profits.  Coincidentally, before the Disney-Playdom announcement, the NYT had an article on Zynga on Sunday, called Will Zynga Become the Google of Games?  Zynga makes money, even though its games are free?  Why?  Because it allows gamers to purchase virtual goods with real money if they don't feel like waiting to earn enough virtual currency.  My sense is that real gamers hate this.  I once went to a conference where expert World of Warcraft players were bemoaning the fact that amateurs were buying access to high levels on eBay, ruining their play by letting in these rookies to the high levels.  Well, these rookies are encouraged to buy the pink tractor for $3.50 any time their hearts desire it.

So, Zynga is the last independent social network game.  It's valuation is over $5 billion, making an acquisition unlikely unless by a major player, such as Google.  The Securities Regulation professor in me is chanting "IPO, IPO," but who knows.  Some watchers are worried that Facebook's curtailment of the games' constant bombardment of members' newsfeeds may cut the market way back; this may be the top of the valuation.  We'll see.

Do I play Facebook games?  No.  I tried Typing Maniac, and I was exceptional at it, much better than my friends and family.  But I played so much I think I got carpal tunnel, so I banned myself from it.