Could gaming be the biggest threat to Facebook?

Remember hi5? It’s one of those sites that you maybe joined when it first came out, and your profile died a slow and silent death. Well, it’s huge in the Latino market and could be about to become even bigger. It is emerging as an entertainment-focused platform, and could be about to go into a head-on battle with Facebook.The site has recently changed focus to specialise in social/casual gaming and you could certainly see this as a being a potential threat to Facebook. If not able to compete with them in the social networking space, then they could be taking them on in one of the site’s most powerful niches.

Earlier this month, Alex St John, the CTO of hi5 came out and derided many of Facebook’s games, describing them as “parasitic spam engines”. He hasn’t held back in his criticism of Facebook, where he claims they have neglected the area of casual gaming. This is also backed up by a recent round of funding for the site of $14 million. In challenging Facebook, they’ve also attacked Zynga, a huge games publisher on Facebook. So is there real value in this challenge to Facebook?

Double Threat

The online gaming community is huge, both on and off-Facebook, so it’s wise to focus on this area online and get really, really good at it. What could potentially also have Facebook worried is the expected announcement from Google that they have partnered with Zynga. If Google really focus on the area of gaming, then that could be the biggest threat to Facebook so far, whatever guise it’s under (probably Google Me). And Google aren’t just stopping at Zynga either. As reported in the Wall Street Journal, they’ve been approaching games developers from the likes of Playdom to syndicate their games through Google’s new social platform. And in typical Google style you can bet they’ll undercut Facebook with the 30% that they currently collect from developers for virtual good purchased in the game.

Google are being smart here. Eric Schmidt has been widely reported as saying that the world doesn’t need another Facebook. They’re focusing right in on an extremely popular area of Facebook and hoping to do it better. Now I’ll admit that I’ve previously brushed off Google Me as yet another service by Google that will likely receive huge buzz at launch and then die away. But let’s not forget that this is Google here. And this has been done before. You would  never have thought anything could have toppled Outlook or Microsoft Office, but Google Apps is now a big business and for many it is the default option for professional services. Google could certainly do worse than focusing on Zynga, which has just raised $150 million in investment from Japan’s Softbank, to form Zynga Japan.

To put into context just how important gaming is to Facebook and social platforms overall, a look at the latest leaderboard from Inside Social Gaming shows the impressive user numbers behind some of Facebook’s most popular games :

And let’s not forget that money talks. Zynga has drawn attention to itself with some pretty high-profile advertising deals (Bing/Farmville) and last year they reported revenues of over $100 million. Hi5 themselves have stated their capabilities in monetising games, even saying that they’re decades ahead of anyone else. The company also isn’t being naive, having invested in support for Facebook Platform APIs, to allow Facebook developers to easily port their games over. Ironic that they have to incorporate the very thing they’re trying to squander, in order to stand a chance!

Is the threat real?

So could social gaming really be a threat to Facebook? It’s certainly an area that they don’t seem to have got quite right, with some of their users embracing it while it simultaneously annoys the hello out of other users (myself included). Spamming newsfeeds is the very thing that hi5′s St John is so vocal about. But just one application on Facebook has more users than the entire hi5 platform, which has approximately 50 million users. This is where the threat from Google really comes into play and we could see rivalries between the two really hotting up. Both are angling to be seen as the real poster-child of the internet. Right now the momentum is certainly with Facebook but this could certainly change. No-one’s going to compete with them in the area of mass social-networking, just like no-one’s going to be with Google for search, but there is real power in the niche, and right now that’s social gaming.