Social gaming has become a phenomenon that transcends the run-of-the-mill fad. The term "gamer" previously referred to individuals who would go out of their way to buy the latest console, handheld device or new PC that was specifically designated for playing video games. Now, the term "gamer" has expanded to encompass a growing population of individuals who only need an Internet connection or a phone to play games. The new breed of social and casual gamers have catalyzed many developers and game publishers to shift their development dollars away from hardcore games and towards the creation of new online and portable games. However, the question remains, "How sustainable is this new gaming market and how can developers profit to keep the industry going?"

When you look at typical console games, an actual item is bought and sold through retail distribution. Casual games for the iPhone work much in the same way. Instead of items being bought and sold, however, developers upload their application to the iTunes store and share in sales with Apple. In the world of social games, often times games are available online for free. Without access to traditional sales channels, developers and game publishers must focus on four things: Distribution, Advertising, Currency and Status - or, D.A.C.S. for short. D.A.C.S. is not only important for the developer, but also for the end user. By understanding the economics of social gaming, social gamers can better support this new medium.

Distribution

Traditional game sales utilize a basic supply chain. The game publisher gives their new title to a distributor. Then, that distributor offers the new title to several retail outlets that eventually sell the game to an end consumer (the home gamer).

In social gaming, distribution deals with getting the game in front of as many eyes as possible. The more eyes that are on a game, the better the chances are for selling corresponding add space. Thanks to Zynga, Facebook has become the leading destination channel for social games. Over 25 Million users flock to Mafia Wars alone. That kind of visibility rivals that of a TV show. However, it also puts you at the mercy of Facebook. Developers are forced to abide by Facebook rules and also they don't own their users. A quick example of this is FarmVille. As early as December 2009, gamers would see their Facebook walls light up with messages regarding how well their friends are doing on Facebook. Now, Facebook has begun to suppress those messages from the main news feed. This is fine for Facebook, but developers lose out on the free marketing.

The answer has been to create destination sites - sites that are gaming hubs and keep users engaged. At Engage! Expo, Mike Trigg, VP of Marketing at Hi5, states that social game publishers must develop "compelling alternatives to Facebook." Brian Balfour, VP Production at Viximo, adds, "Distribution is key." Zynga has already begun to shift their applications over to their own site, so that they are not restricted by the confines of Facebook or Myspace.

Advertising

Anyone surfing the Internet has scene advertisements in some shape or form before. Social game publishers have noticed that allowing users to either see a trailer before their game begins or asking them to fill out a survey is the easiest and most painless way to generate advertising dollars and keep users engaged in their games.

Successful advertising is a direct result of successful distribution. The more users who play your game the more impressions that game gets, resulting in more revenue generated from advertising dollars. If social game publishers are able to put their applications on multiple sites, but also have their own site as a user hub, they will have more leverage in directly advertising to that user over the life of the application.

Currency

Most social games have two forms of currency, standard in game currency and some form of premium-branded currency that allows the gamer to get ahead in the game quicker. However, if you buy currency in a game like Farmville you may not have the ability to use it in a game like City of Eternals, which is made by a different publisher. The reason for this is a lack of standardization in online currency. There is nothing more annoying to an individual than buying a $10 card to make a $9 transaction and then getting stuck with $1 they cannot use anywhere else.

Typically, gamers pay anywhere from 10 to 20 dollars to buy premium currency they can use for better products within the game. Offerpal Media has created a form of virtual currency that allows gamers to raise premium capital by completing a set of advertising campaigns or buy purchasing it through direct sales options. In order for this to work more social game publishers and advertisers would have to latch on to Offerpal's solution. However, inevitably competition will arise which would just reinitiate the problem all over again.

Status

Finally, gamers love status. Balfour states that merchandising of items is like a "gateway drug into addiction." Much like ordinary consumers who prefer to buy premium clothes for the sake of saying that they own a Louis Vuitton exclusive, gamers like flirting with the idea of social expression online more so than spending money on functional items that simply effect gameplay mechanics. What this means is that a gamer will be more inclined to buy 20 Christmas trees than buying a machine gun to get ahead in the game. Trigg states that gamers want to think, "I am wealthy. I am affluent." So during key "flirting" holidays like birthdays, Valentine's Day, and Christmas gamers should expect to see more items that specifically target those holidays.

In closing, a better understanding of D.A.C.S. over the next few years will lead to a better gaming experience for social gamers as well as a sustainable gaming economy for social gaming publishers.