Business Lessons from Facebook Games

Summary: I’ve been spending time on Facebook playing little Flash games. But instead of slaying dragons in Castle Age, pretending I’m a hip dude in YoVille, or bumping off my friends in Mafia Wars, I’ve been getting a basic education in business thinking and profit making. Awesome.[harvest]:http://en.wikipedia.org/wiki/Harvest_Moon_(series) Farmville Several months ago I started checking out some of the Flash-based games on Facebook, largely out of professional interest to see where casual gaming was headed on large-scale social networks. I started out with Zynga’s Farmville (above picture), which is a kind of simple “farming simulator” that is reminiscent of [The Harvest Moon Series of Games][harvest]. For some reason, I like the idea of virtually planting seeds in the ground and watching turnips come up. Harvest Moon, which uses a turn-based structure, is designed to play at one continuous sitting. Farmville and games like it really want you to play a little bit every day, which is habit-forming and useful for driving huge daily traffic numbers. So when you plant a seed in Farmville, you actually have to wait a certain amount of time that ranges from a few minutes to three days. Farmville, which is something of a clone of an older game from PlayFish called FarmTown, is so simple in its play that a “traditional” gamer like myself shouldn’t find it fun at all, but yet I played a bit every day to earn more money, rise in levels, and plant new crops as they became available.

The dark side of these games, though, is how they try to manipulate or influence players to bring their friends into the game as well through posting status messages on “your” behalf, or to partake of fishy cell-phone based charges to unlock special features of the game. It’s rather chilling. I turn off all the notices and skip all the requests to post my progress regarding the game to my Facebook Wall.

That aside, the interesting thing about Farmville is that its simple play has helped me visualize how business growth works. When you start with your handful of plots and starter cash, you’re unable to really make huge amounts of money. As the game progresses, though, the increasing size, volume, and value of the crops you are raising start to create significant daily cash flow. When you increase just the number of units sold, you get a linear increase in revenue. However, when you increase both units sold and unit price, the increase in revenue is exponential. I think I probably knew this from microeconomics class, but until I’d played this game, I hadn’t experienced it.

With this new insight, I started playing other business-oriented games on Facebook.

CafeWorld Cafe World is another Zynga game, which is (as far as I can tell) very similar in concept to PlayFish’s Restaurant City. You start a small restaurant with a limited number of chairs, tables, ovens, and staff. You develop a small menu, and start preparing food. Restaurant City allows you to cook anything you have enough ingredients for; the trick is acquiring them through trades with your other Facebook friends, through the “market”, and through other special in-game events like timed food quizzes. This is a pretty good mechanism, though a little confusing in its presentation. Cafe World is almost a direct lift of the basic GUI and presentation style, but makes a significant gameplay change: you are not required to hunt for ingredients because what you can cook is based on your level. This makes the game much easier to get into and play solo; I gave up on Restaurant City because to acquire ingredients, I had to either luck-out on a quiz or spam my friends with requests. Cafe World, like the other Zynga games, uses a “gifting” system instead, which encourages players to be generous because goods are often received in turn. It’s very interesting what a difference it makes in the day-to-day playability of the game. The emphasis of the game then shifts to optimizing food production and decorating the restaurant, which is far more entertaining.

One makes money by starting small and making sure food is always available to be sold. One learns to optimize their time in the real world so visiting the virtual restaurant occurs at convenient intervals. Different dishes take different amounts of time to cook, from 3 minutes to two days. One thing I always do before going to sleep is make sure that something is cooking overnight; that means I’ll have something to serve in the morning. As with Farmville, as one increases the size of the restaurant, number of tables, and quality of dishes, revenue rises non-linearly. There’s also the added mechanism of reputation, which can be as low as 0 and as high as 105. At 105, a new person comes into the restaurant to eat every second, which means that they need to be able to find a seat, be served, and then checked out efficiently. If they can’t find a seat, wait too long for their food, or sit at a seat with dirty dishes from the last customer, they leave and your reputation goes down. Depending on the configuration of your restaurant in table placement, counter placement, and number of waitstaff you have, your maximum revenue-generating potential per time period depends on your reputation. An equilibrium point is reached until you get everything set up just right, and then the restaurant basically explodes into maximum profitability. As the number of people coming in swells, the daily revenue increases tremendously, which allows you to start doing cool things to the restaurant decor with the extra cash. This doesn’t increase revenue, but it certainly looks nice. After getting over the initial hump, once can create a very smooth running revenue generating machine; I sometimes watch in amazement as my turned table arrangement, with the food counters optimally placed so wait staff can spend as little time in transit as possible, hums along without a hiccup.

Wouldn’t it be nice to create the same machine in real life, with real money? I am very interested in modeling that behavior with my printed ETP pads; I’m basically starting at Level 1 with one product and no advertising and a fixed monthly cost. Currently I’m breaking even at the current level of sales (it looks like I’ll have about 40 orders sold, or 45 pads, after the first month) versus my fixed monthly costs (warehousing costs, monthly fee to maintain the order listing on Amazon). However, with some promotional work and additional products, I will be able to draw additional revenue with approximately the same level of fixed costs, which would be Level 2. Exciting!

My Zoo In a more serious vein, My Zoo is a non-Flash website that is uses ancient Web 1.0 technology. It’s basically an economic zoo simulation that is played by filling in forms. You start with a chunk of money that you can use to buy land and build animal-based exhibits. You start off with a petting zoo, buy a few chickens, and set the price of admission. You need to hire grounds people and zoo keepers to clean the parking lots and man the exhibits in addition to paying for feed. This is all set by typing in numbers into the website and clicking submit. There are images of animals, though, so one does feel compelled to collect them all.

When you first start, you don’t make much money per day. Fortunately, the game’s “day” is about 4 minutes long, so the simulation is vastly sped up. As you make more money, you can buy more exhibits. As the fame of your zoo increases, more people come, and you get more money. The more exhibits you have, the more people want to see. And the more exhibits and people, the more maintenance staff you need. You get the idea. The absolutely fascinating thing about this is as the size of the enterprise grows, the overall costs of running the business starts to become a smaller percentage of daily revenue as economies of scale start to come into play, and the amount of money you are bringing in starts to become very significant. Sure, you are spending $15,000 a day in maintenance costs, but your daily take might be $250,000. The mind boggles. As volumes increase and the unit sale amount increases, revenue becomes significant far more rapidly than I had imagined.

The composition of the exhibits, attractions, restaurants, and stores in My Zoo reminds me a bit of my five goals comprised of some design, some product, and some audience-attracting power. It is not inconceivable that I could write my own simulation along the lines of My Zoo and see what it tells me. I have to do it anyway to put my accounting together, but instead of keeping it in boring old Excel, I could make a nifty turn-based web 1.0 application that allows me to play the what-if game.

It’s an interesting idea. I’ll have to think about this.

I’ve also started to see a business philosophy start to arise. In the case of My Zoo, there’s a point where you can maximize your profit by not trying to please everyone. In other words, if your “satisfaction rating” is between 90 and 95 percent, you’re doing OK. The satisfaction rating is comprised of several factors: parking, number of restrooms, value for the money, shops, and so on. While I could probably make a little more money by cutting costs in parking, restrooms, and landscaping while boosting the ticket price, I would rather try to shoot for 100%. Likewise, I’m finding that there’s a certain point I’ve reached while playing Cafe World and Farmville where my attention turns to improving the overall aesthetics of experience even though it costs money and doesn’t contribute to the bottom line. For example, finding just the right tiles that harmonize with the Italian/Chinese vibe I have going on in Cafe World has been a pre-occupation of mine. I’m also considering moving away from the “cafeteria-style” seating of the restaurant to more of a traditional layout; some of my Facebook friends are also playing, and visiting their restaurants gives me ideas on how I could make a better experience. In Farmville, which has really simple gameplay, aesthetics are completely unnecessary, but I spend time optimizing the layout so it looks like a farm that I would want to visit. I imagine the apple cider stand near the front gate, position the fruit trees enticingly, and imagine where I’d put my farm house where I can chill out and barbecue with my buds. Having the revenue in the game makes this possible. The followup point is this: because I’m experiencing this in these various games, I’m able to visualize this working in the real world. I never would have thought that something this simple would have helped. Behold, the power of play!