New reports suggest that Facebook plans to enter the mobile gaming industry. Instead of producing the games themselves, the social media giant will act as the publisher, offering marketing capabilities and other services to independent game developers. In return, Facebook will seek a cut of the revenues.
According to TechCrunch, Facebook will distribute and promote the apps using targeted advertising on mobile devices. Throughout the company’s history, Facebook has proven successful in the mobile ad industry, generating $373 million from this practice in the first quarter alone. In contrast, revenue from online payments, coming predominantly from virtual purchases within social games, was just slightly over $200 million.
Although game publishing can be lucrative, Facebook might encounter several barriers to entry.
Foremost, Facebook will have to compete with established distribution channels such as the Apple App Store and the Google Play marketplace. These two app databases do not have the same role as publishers, but they do take a 30 percent cut on all transactions. With this in mind, most game developers would be hesitant to further lessen their profit margin by partnering with a publisher such as Facebook.
A secondary concern is whether a publisher can actually be of much value to the developer. Unlike commercial video games slated for the Xbox, PlayStation, or PC, mobile apps can be easily self-published and introduced to reputable app stores. If the game does poorly, there is very little money to be made by both the publisher and developer. However, if the game does well, there can be considerable animosity between the two. Often these situations force the developer to create a spin-off, allowing them to collect increased profits and circumvent publishing fees. Regardless of how these situations end, a longstanding legal dispute usually ensues.
If rumors prove accurate, it will be interesting to see how Facebook handles the new role. With the company’s expertise in social media and mobile advertising, game developers might jump at the opportunity to align themselves with such a recognizable brand.