If you've followed the rise of social gaming over the past several years, you might have drawn the conclusion that social gaming companies like Zynga, which is gearing up to go public, and Playfish, which was acquired by EA, represent the future of gaming.
After all, while there's no doubt that hardcore gamers aren't disappearing, the tens of millions of users playing casual games like Farmville on social networks, namely Facebook, vastly outnumber the number who are buying the latest and greatest consoles and gaming rigs.
But it's possible that the social gaming revolution isn't nearly as widespread as is commonly thought, as we now know that the reach of social games may have been overstated by a meaningful margin.
On Friday, Facebook released new authentication tools for developers which had been announced at the company's f8 conference last month.
As part of that release, it changed the way it measures how many people use Facebook apps, the most popular of which are, of course, social games. The impact: AllThingsDigital quotes social gaming startup CEO Peter Relan as stating "Everyone lost about a quarter of their users".
Following Facebook's changes, Relan's company, Crowdstar, went from having 17.8m monthly active users (MAUs) to 12.5m MAUs. Playfish saw its MAU count drop from 98m to 71m, while market leader Zynga's decline was from 262m MAUs to 195m MAUs.
Needless to say, these are still big numbers, so it's not as if social gaming isn't a huge market. It's simply that Facebook's old method for measuring app usage wasn't as accurate as its new method, which looks at how many users actually authenticate with the app.
So is there nothing to see here? Not quite. AllThingsDigital's Tricia Duryee suggests this could actually be good news:
By simply changing the way it measures its figures, Facebook is able to make it appear that the social gaming market has expanded. That’s important because many developers thought the market was saturated and locked up by developers like Zynga, which has hundreds of millions of players.
On the other hand, it's just as easy to suggest that social gaming is not new on Facebook, and that as a result, the portion of the Facebook audience easily converted to social gaming may be largely penetrated.
Already, we know, thanks to Zynga's IPO filing, that a sizable amount of the revenue generated from social games comes from a relatively small portion of the users, so it's not unrealistic to believe that despite social gaming's reach, the easily tapped opportunities for meaningful growth may be behind us.
Whatever the case, Facebook's measurement changes highlight something of importance to all companies operating online: measurement matters, but to get the most from measurement, you need to be measuring the right things.