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Social Gaming - and Virtual Goods Sales - Get Huge Boost from Microsoft

Microsoft has given the social gaming space a huge boost with its introduction of a new gaming hub that connects its three major social gaming portals. The move blurs the line between casual and social gameplay, according Michael Wolf, senior marketing manager for Xbox Product Marketing - effectively allowing anyone who uses MSN Games, Bing Games and Windows Live Messenger to play the same games, see their friends’ status updates, and send each other game challenges.

The new hub lets players sign into their Facebook or Windows Live accounts, scroll through their friends’ status updates, send casual game challenge requests, view game leaderboards, save a game as a favorite to make it easier to find, and track their favorite games, game history and scores.

Virtual Goods

Microsoft’s move is going to lend even greater credence to the virtual goods market - which has become a huge ad niche. Recent analysis by Flurry found that the sale of virtual goods is overtaking traditional advertising revenues, at least on the iOS platform. It found that during 2010 revenue increasingly shifted from advertising to virtual goods sales until reaching a proportion of more than 80% from virtual goods.

Admittedly, the idea that consumers acquiring virtual swords, gold coins and respect points can outperform advertising seems counter-intuitive, Flurry said. But it points to statistics showing virtual goods sales already represent the primary source of revenue for social gaming on Facebook to back its claim.

According to Michael Pachter, Wedbush Morgan Securities video game analyst, social gaming has grown from approximately $600 million in 2008 to $1 billion in 2009. Pachter also forecasts that social gaming will generate nearly $1.6 billion this year, and grow to more than $4 billion by 2013.

With mobile social game critical mass now rivaling TV prime time viewership, Flurry anticipates a stronger ad revenue generation through mobile social networking and games in 2011.

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