Will social network fees strangle social gaming innovation?
Costikyan drives a parallel between the nascent social gaming space and the now-stagnant casual games space. There, portals that direct players to interesting casual games started by charging participating developers 50% of their revenues, but soon upped those fees to 80% when they realized the king-making power they had over the market. This choke-point on developer revenues led to what Costikyan calls "the steaming pile of poo that is the casual downloadable market today."
And he sees the same thing starting to happen in the social games space, where Facebook is starting to take revenue from game developers via a 30% fee on in-game purchases made with optional Facebook Credits. "It's a small piece, at present," Costikyan points out, but "as social network game revenues continue to soar ... why should FaceBook (and the others) not take a bigger chunk. Why shouldn't the 'Pay with FaceBook' option become mandatory? Why shouldn't that 30% become 40%? 50%? Even 80%?"
The reason, of course, is that such draconian fees strangle the life out of the market by forcing it towards risk-averse, profit-maximizing, lowest-common-denominator dreck. Will Facebook and other social networks learn the lesson in time? Here's hoping.