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Social gaming is a hot topic here at SXSW. The industry has been growing at an incredible rate and traditional gaming companies have been caught unaware by a flurry of new market entrants.

Playfish was one of the 2009 success stories. Within two years of starting the company, they are attracting 60 million monthly players and are selling 90million items a day (virtual goods and unlockable gameplay). It’s also been a huge personal success for the founders, who sold the business for £240 million last year.

I noticed that Sebastien de Halleux, one of the co-founders of Playfish, was speaking on a panel this morning so I went along. It has been one of my SXSW highlights so far. Here are a few notes (NB comments are paraphrased).

How are social games different to what’s gone before?

SdH: The design of the games is the main difference. Rather than an immersive story-telling experience designed for gamers it’s a social experience designed for non-gamers.

ET: Story’s have endings so are not as scalable or well suited to social gaming platforms.

OA: It’s like going back to how we used to play board games with friends. From faceless gaming back to connecting with real people. There’s also a massive shift for the gaming industry; the economics of gaming is driving business model changes.

JD: Social has brought gaming to the masses. Facebook has also had a profound effect on what people are prepared to share online. People are open about their identity and that’s helped drive the big shift.

ET: The difference is that games can now transmit themselves through invites and gifting. So the opportunity is for a game to pass through recommendation not through marketing. As a result you don’t have to be a big brand or established business to have success. Just focus on creating good games.

Lessons you have learnt and surprises

ET: It’s useless to predict what will work in the future (social gaming) from the past (traditional gaming). For example, who would have thought a game about farming would be a runaway hit. You have to try a wide variety of things. Find a success and then drive hard into it.

SdH: Speed of the industry has evolved. Don’t even think about a change from time cycle in years to months to weeks. We think in evolutionary cycles – EA has published 17 versions of FIFA in 17 years, and our Pet society game has already been through hundreds of evolutions. It is constantly evolving with continuous feedback into each step.

JD: We’ve learnt that social games are living, breathing services. They are not stand-alone games or products. If you launch one, you are committed to it. The volume  of feedback, and the emotion behind it, is incredible.

ET: We’ve learnt that gameplay is there as a delivery mechanism for the content, or as a facilitator for social interaction. It’s not the reason for being

SdH: Launch early. We launch at a 10% completion milestone. We launch unfinished products and that’s fine as early feedback helps you get the game right.

Monetisation of social games

SdH: In-game micro-transactions are key. The game is free and we create emotional incentives that make people want more of the game. Audiences are ready to pay for good games, but in small chunks. Just don’t get fooled into believing that you need large ticket transactions. Try not to think in terms of a business plan based on: Price x Quantity. Instead, think about Distribution x Engagement x Lifetime User Value.

ET: we’ve found that there are two things that can have a disproportionate impact on profitability:

• Creativity / self-expression – allowing people to be creators makes them care more and increases their life time value.
• Competition – player vs. player conflict drives a willingness to pay for competitive advantage.

What’s the place for gaming brands in social?

There was some disagreement on this one.

OA: brands will take over this space. For an example, look at the success of Dante’s Inferno, an average game that got traction thanks to the brand.

SdH: The value of brands in a retail world was huge. It helped them fight for shelf-space and increased trust at the point-of-purchase. But there is no shelf space in social games [not sure I agree with this as we all look at the “top 25”]

Social gaming is driven by invitations from your friends. Direct emails into your inbox from people you know, alleviate the need for brands as a purveyor of trust.

But brands will be have a role especially in their ability to make you care more about a game by mixing offline with online. E.g. FIFA. There is a huge opportunity to innovate here as we move towards games with 1Bn players.

When it comes to other brands taking part (e.g. Coke) advergames do not work well as people see through them. However it is possible to create engagement models where brands add to the experience.

How will mobile gaming integrate with social gaming?

SdH: mobile is difficult to integrate. There are so many issues to balance if someone starts a game on the web then wants to continue playing on a different platform like iphone.

We are running a service. Running a service on the iphone is hard as they are built for application download. There are workarounds, but microtransactions in games are difficult (iphone does not allow individual item purchase, nor do they allow gifting). The factors that drive success on the web are difficult to replicate on mobile.

ET: The trick of getting social mobile to work will be hitting the union (think Venn diagrams) not the intersection of iphone and Facebook. There needs to be a synergy of multi-platform, not just a replacement.

Mobile is more like a way of making money out of what we already have.

Then it got controversial.

OA: we want Xbox and Facebook fully connected. Games will become fully transferable between the web, mobile and your TV screen.

ET and SdH: this has been forecast for years, but will not happen.

Things to watch

• The frictionless monetisation of Facebook credits is exceptionally powerful
• Location aware games like Gowalla and Foursquare.

Abbreviations:
SdH Sebastien de Halleux – Playfish co-founder
ET – Eric Todd, Playdom
OA – Omar Abdelwahed, Ubisoft
JD – Jon David, PopCap Games
GD – Gareth Davis, Facebook (moderator)

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Another day at SXSW, and a good seminar on crowd sourcing and not-for-profits. The ‘Crowd sourcing innovative social change’ session saw Amy Sample Ward, Beth Kanter and others talking about how to use crowd sourcing in a not-for-profit environment, not for fund raising or marketing, but for service and programme delivery. One interesting distinction was between a ‘crowd’ and a ‘community’ and how this impacts the model you use.

As with other SXSW sessions, rather than reproduce the conversations after the event, here are the hand-drawn notes taken during the session itself.

SXSW: Crowd sourcing innovative social change session notes

You can also see Amy’s presentation from the session here:

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Day Two of SXSW and one of the most interesting sessions we’ve been to so far was ‘Can the Real-Time Web Be Realized?’ including Brett Slatkin from Google, Dare Obasanjo from Microsoft and Scott Raymond from Gowalla among others.

Rather than regurgitate the content of the session, we’ve included our low-tech hand-drawn notes from the session below.

SXSW: Real-time web session notes

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SXSW image by benjamin ellis

This week I’m going to be reporting from the South by South West Interactive (SXSWi) festival in Austin Texas. SXSW is World’s largest digital and interactive festival/trade-show/conference/party/event/get-together. Around 20,000 people will be joining me in Austin to uncover the latest thinking in digital and, I suspect,  to network like nutters.

I’ve been looking for an excuse to make it to SXSW for years. A few months ago my prayers were answered and FreshNetworks was picked by UK Trade & Investment (UKTI) to be one of 40 companies chosen to represent the UK at the festival. The grandly titled Digital Mission aims to help UK digital companies expand internationally and develop overseas business relationships.

The list of events is monsterous. It’s taken me a few hours to get my itinerary in order. I suspect I have fallen into classic SXSW-newbie mistake of trying to plan out a perfect route between each session to ensure a schedule that optimises my time here. I’ll probably find the plan goes in the bin half-way through day1 one.

Some frantic session planning on the plane

Here are just three of the sessions I am looking forward to:

• Time + Social + Location. What’s next in mobile experiences – Foursquare and Gowalla are hot properties inn the social media world at the moment. This session includes Naveen from Foursquare.
• Can the Real Time Web be Realised – a panel debate featuring some great speakers – Scott Raymond, co-founder of Gowalla, Marshall Kirkpatrick of ReadWriteWeb and Bret Slatkin from Google who created PubSubHubBub which you will hear a lot about in 2010.
• Banking 2.0 – financial services driven by people and emerging technologies – as a social media agency, FreshNetworks has always done a lot in the financial services sector, so I am keen to test some ideas we’ve been discussing back at base.

And finally, one of the delights of coming to SXSW as part of the Digital Mission is the opportunity to spend lots of time with other UK entrepreneurs. I have always found that spending time with peers not only gives me new ideas, but also (because I’m rather competitive) it tends to raise the level of my personal ambition.

There are a few companies that I am especially interested in learning more about:

• oneDrum – embedding collaboration in Microsoft Office documents
• Silence Media – cost per engagement ad network for video banner ads
• Slicethepie – crowdsourced band/music funding

Let me know if you want me to bring you anything back from Texas.

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It is a truth universally acknowledged that everybody makes predictions at the end of a year about ‘the big thing for next year’. Sometimes they’re right and sometimes they’re wrong. And sometimes you only really start to notice trends and change when you are in them. In social media it is becoming clearer and clearer that the big thing for 2010 is location-based tools.

We’ve posted before about how businesses can use Foursquare and only yesterday about Fourwhere, the Foursquare and Google Maps mashup. Foursquare is a great tool that lets you share where you are and add tips and reviews of cafes, shops, restaurants, bars, theatres. Anywhere really. From a business perspective it can offer invaluable insight into who visits your business, how often, what they think about it and where else they go. All good stuff. Of course, there is a serious downside to location-based tools (as we saw with Please Rob Me) and people should be aware of and sensible about any information they share in social media.

Why are location-based social media tools growing?

Location based social media tools are possible because more and more people own mobile phones that are GPS enabled. Phones that can tell you where you are and plot this information on a map. This is then data that can be shared with others or used in conjunction with discussions, reviews and other information to build a resource and community that is location-dependent.

There are many instances where location can add significant value to an online community:

• People reviewing cafes and bars in a certain area and recommending places people might like to visit
• People sharing tips of good and safe running routes
• Groups of local activists looking to organise themselves
• Parents wanting to find other parents near them to help organise safe walking to school
• People wantingto identify and report on things that need mending in their neighbourhood
• Friends wanting to share their location and tell others where they are

The utility of location in social media is huge and there are many cases where tying location to reviews, discussions and other content will really help, either for those generating the content or those looking for and benefiting from it. Adding in location could also save us from updates that say “Iam at…” with that information instead being tagged as in the tweet above. You can use the update to say something that has real semantic value rather than just indicating where you are.

What’s happening and what’s coming

Location-based tools are not new but they are growing and new developments are happening all the time as people use them more and in different ways. Some important developments recently discussed are as follows.

• Twitter: Twitter has for some time allowed users to tag their updates with their location details – this has mainly been done through third-party apps, such as Tweetdeck, and to date locations have not been shown on Twitter’s own website. Briefly this week they started showing location on Tweets on their site – with maps overlaying tweets on both the individual tweet page and on the main stream. This update was quickly disabled but adding this back in would certainly add significant value to the Twitter site and pave the way for search for people and issues that are trending ‘near me’ – based on where people are when they share their information and not where they say they are in their location.
• Foursquare: Foursquare is growing in use and in the ways in which people are using it. The most significant recent development is increased analytics for businesses. They have recently introduced a dashboard for businesses to see information about who had ‘checked-in’ at their location. This reports on when people check-in, how they communicate this (do they share it on Twitter, for example), the people who visit them most often and those who visit most recently. This is useful and valuable information for any brand as it lets you start to understand your customers in a way that you haven’t previously been able to do. Brands should be taking advantage of Foursquare and of the ability to control their profiles (adding in ‘Staff’ for example) and should use this dashboard and analytics in a clever way to inform their understanding of their customers and identification of their advocates.
• Facebook: Perhaps the most interesting announcement this week is talk of developments at Facebook to include location features. The speculation is that location will accompany status updates and changes to Facebook’s Terms and Conditions last November appear to have been made in preparation for this (“When you share your location with others or add a location to something you post, we treat that like any other content you post.”) Sharing location in Facebook status updates would highlight both the importance of mobile use of Facebook and of the spread of location-based social media tools. It will also add yet another set of data that Facebook captures, can report on and can be used by other users to find people, information and discussions. It will be interesting to watch both what Facebook release and how users use it, but it is likely to yet again highlight the importance of search to Facebook as the amount of data and content it captures grows.