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Bet the FarmVille: How Facebook games are like casinos

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FarmVille (Zynga)

Playing a game on Facebook from the comfort of your living room couldn't be any further away from the loud, smoky casinos of Las Vegas or Atlantic City. But scratch that surface a little and you'll find that, aside from the complimentary cocktails, the two are virtually identical.

Both are designed to keep you sitting there playing, unaware of the passing hours. Both attract millions of visitors per year.

And both rely heavily on a small percentage of those visitors to make up the majority of their income.

In casino speak, the big spenders are called 'whales'. It's a term social game developers use internally as well, but certainly not one they ever let their customers hear them utter. A whale, in either circumstance, is a player who spends regularly and happily. And without them, both organizations would drown.

You don't need to look much further than Zynga's recently filed IPO paperwork with the Securities and Exchange Commission for proof.

"We rely on a small percentage of our players for nearly all of our revenue," the company wrote. "A small number of games have generated a majority of our revenue, and we must continue to launch and enhance games that attract and retain a significant number of paying players in order to grow our revenue and sustain our competitive position."

Zynga didn't break out the number of people who regularly pay for virtual goods, but game industry analysts are willing to make a prediction.

"I would guess that 2 percent of their customers generate 80 percent of their revenue," says Michael Pachter of Wedbush Securities. "I would guess that about 8 percent of their customers spend something."

That means a lot of freeloaders -- people who play the game without paying a penny. You might think that social game makers would grumble about those folks, but it turns out they're just as necessary as the whales.

"Both groups are critical to the success of the other," says Zac Brandenberg, CEO of Meteor Games. "Without free players there, you would definitely see less purchasing among those who are spending. It's the same as if you bought a fancy car. You have the tendency to want to park it in your driveway. You want your neighbors to see it."

For some whales, though, the urge to buy has nothing to do with wanting to show off. It's a time-saving move. Rather than spending their day tending a virtual farm only to have their crops destroyed, they buy an upgrade that will prevent that. The in-game purchases are simply tools to let them enjoy the games more thoroughly.

"The games are designed to frustrate the hell out of you," says Pachter. "Think of it in the context of people buying the strategy guide for a console game. If people spend $10 on those, then why wouldn't they cheat on Farmville?"

The definition of a social gaming whale varies from company to company. Brandenberg says for Meteor, it's someone who spends more than $1,000 per year. The rare 'Superwhale' can spend over $10,000 per year.

That sounds like a lot, but to put it in terms of a core gamer, a whale is someone who buys the equivalent of about 17 full-priced console games per year. Superwhales buy 167-- a big number no matter how you justify it.

"We look at what are the motivating factors in a player's behavior -- what's likely to make them purchase," says Brandenberg. "They think of it like this: 'This is a source of entertainment to me. I'm going to spend X amount per month - say $100. That's $25 per week. And that's the same cost of gong to a movie with my spouse.'"

There is one big difference between the social game and casino models, though. While both have whales, there aren't any sharks -- people who walk away with armloads of the house's money -- on Facebook.

-- Play Word Search II on Yahoo! Games --

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