Chinafotopress

As the first country to officially declare Internet addiction a disease on a par with alcoholism and drug abuse, the adjective "viral" before social games in China takes on a whole new meaning. And the craze for online gaming among young Chinese university students and professionals does, at times, back up this assessment.

The arrival of online social networking sites (SNS) has seen an explosion of online casual gaming, with more and more advanced games hitting the market bringing with them detailed revenue and distribution models for others to follow.

The biggest difference between social networking sites in China and the West is the lack of a monolithic Facebook equivalent in the Chinese market. There are three big players — Kaixin001, TencentQQ's Qzone, and RenRen — but the market is by no means limited to those three. In contrast to Facebook's open API (application programming interface), which has created an independent game developer ecosystem and allowed Facebook to simply take the cost of R&D off of its books, the three major Chinese SNS have varying policies vis-à-vis game development.

"Kaixin001 does all development in-house. Qzone does almost all in-house, but is experimenting with licensing, [while] RenRen and 51.com are open platforms," explains Kai Lukoff, one of the founders of Chinasocialgames.com, a blog that follows the latest trends in Chinese gaming.RenRen, formerly known as Xiaonei, raised revenue shares for independent content providers from 40% to 56% in November 2009 but this is still well below what can be made on Facebook, where application developers can keep 100% of the revenue from their games. Facebook gets its revenue from advertisers, so making their platform attractive to game developers helps them lure more users.

ESCAPE TO A NORMAL REALITY

The ten most popular online social games in China reflect the variety of themes social gamers are interested in. Pieter-Paul Walraven, of US-based social media company Playfish, recently bought by gaming giant EA Games, says the most popular social games in China are still farming-related. In such games players can grow their own crops, steal produce from friends and build a farm.

The leading example of this, Happy Farm, is the most popular online game in China. An international Facebook equivalent, Farmville, was released and developed independently and has sparked an international sensation and leagues of imitators around the world. In fact, these games may be the source of more wasted corporate man-hours than anything else in history.
One of the first popular social games to emerge in the Chinese net space was Parking Wars. The game allows players to maintain a parking lot and make money in order to buy progressively better cars for themselves. While the game was fundamentally a Chinese take on a popular Western game of the same name, its use of innovations such as product placement encouraged players desperate to move up the automotive hierarchy online to be just as desperate to do so in real life.

Both Parking Wars and Happy Farm are incorporated into House Buying, the most popular game on Kaixin001 and the second most popular game in the Chinese social game space. Kaixin001's in-house policy allows them to incorporate and crossover several games, which has led to the success of House Buying, a game that lets users to not only decorate and personalize a particular space but also to use the money they earn from growing crops in Happy Farm or parking cars in Parking Wars to fund decorations for their House Buying home.

Interestingly, House Buying incorporates real locations into the game. Shanghai, for example, is divided into 15 sections within the game and players can choose to buy apartments and houses wherever they want. As Lukoff points out, the realistic geography of the game means that "some players can be living in a digital replica of their real-life home."

Some other games of interest are RenRen's restaurant game, a virtual restaurant where players can order food and interact with other players; Wonder Hospital in which players manage their own hospitals; and Building One, where players interact in a giant high-rise, start their own businesses and explore the surroundings.

MONEY MATTERS

Game revenues have been affected by the impact of advertising on the Internet. New game trends attract substantial page views, which in turn attract developers who are quick to work advertising into their overall model.

This remained true for online social games, at least in the beginning, says Playfish's Walraven. "With social games becoming more sophisticated and their lifecycle growing, a virtual goods business model proved more effective," he says. The virtual goods model has been the driver for spectacular game revenues in China for years. By 2008 the online gaming market in China was estimated to be worth USD 2.8 billion, with about USD 2 billion of that coming from the sale of virtual goods within the games. This model has recently migrated west, becoming the standard revenue model for American developers such as Zynga and Playfish.

While traditional Internet advertising is still a feature of social gaming, it has had to find a way to be more unobtrusive. Product placement, similar to the trend which has pervaded Hollywood movies since the 1990s, is quickly finding a home in Chinese social games, especially due to the types of individuals these games bring in. The first game to introduce product placement models was Parking Wars which, with its focus on China's burgeoning car culture, was a logical space for cooperation with BMW, Toyota, Cadillac and Ford, all of which have been incorporated into Kaixin001's version of the game.

"Other games have product placement as well, though," says Lukoff. Potatoes grown in Happy Farm can be made into Lay's Potato Chips, RenRen restaurants contain advertisements for milk brands, while Wonder Hospital includes a flying blimp with an advertisement for Yu Ting, a Chinese brand of condoms.

When it comes to differences in the social aspects of these games, Lukoff and others point to how much more confrontational games in the Chinese net space are than their Western counterparts. A comparison of the top ten games on Facebook and those in China shows that nine of the top ten games in China have options to negatively affect other players' games — in Happy Farm, for example, players can "pick" other individual's vegetables, and in the QQ version of the game players can even place worms and weeds in other people's gardens — however, only one of the top ten games on Facebook — Mafia Wars — incorporates a slew of competitive and immoral behaviors that can be used against other players.

Slave Manor, one of the top ten games in China, takes this level of competitiveness to a new low with players able to enslave their bosses, make them marry ugly girls and even turn them into sanitation workers. The game also includes less savory options for female slaves.

While it's expected a game with a name like Slave Manor would have a mean-spirited nature, Wonder Hospital, a game in which players manage their own hospital, is also incredibly confrontational. Each player operates their own hospital and players can engage in any number of nefarious activities, from enforcing fines and stealing patients, to blocking access and hitting a mysterious bomb-shaped button which imposes varying punishments on an opposing hospital. The competitive nature of these games, while not everyone's idea of politically correct fun, adds a whole new dimension to the user experience.

A NEGATIVE EFFECT

The perceived ‘nastiness' of online social gaming has led government departments to get involved in what it sees as a potentially harmful activity. A clean-up of SNSs began in the spring of 2009, which led to the closure of Facebook in China — Facebook's active users in China dropped from over a million to 14,000 in the space of 6 months — and the blocking of the highly popular Mafia Wars game.

Government pressure also reportedly led to a semantic shift in Happy Farm, where an activity previously labeled as "stealing" became the "picking" of other people's vegetables instead. These and other efforts to "harmonize" online activities are closely linked to the public perception of Internet bars and the online space as dens of immorality. The idea that gaming and other online activities are addictions just waiting to swallow up bright-faced youngsters is probably not shared by Chinese students, who recent studies have found to be the most overworked on earth, flocking to these games as primary recreational activities. This perception, and the regulatory efforts that are made in response to it, pose a difficulty for developers in this market. Kai Lukoff says that from the developer's perspective, "the challenge is that the rules are still being written." A research report by Niko Partners found that by 2009 there were over 64.9 million Chinese gamers spending an average of USD 52 each per year.

So while a space is opening for social games in China, it remains to be seen how foreign and domestic gaming and SNS companies will interact. Guo Chenggang, a gaming analyst at JLM Pacific Epoch, sees many divisions in the market. "There's a noticeable gap between Western and Chinese SNSs. There are few Western games accepted in Chinese SNS."

Because of the fractured and highly competitive nature of the SNS market in China, many of the biggest players have maintained a closed API, thus retaining control over their domains at the exclusion of external developers. Unable to engage with market leaders like Kaixin001 and Qzone, independent developers can earn only a small share of the total profits from their games.
However, some Chinese SNS have chosen to open up their API (at least partially) thereby creating a space for independent developers. "A lot of smaller developers are popping up on RenRen," says Lukoff, "though I think they're finding it very difficult to monetize, so are trying to get their games on Facebook as well." In fact, Walraven points to the success of Chinese-developed games on Facebook. "This trend is currently picking up speed; an increasing amount of China-based start-ups are [being] established with the goal of bypassing the Chinese social gaming market and developing games distributed only on Facebook."

For the most part, though, the lack of understanding foreign companies have regarding the regulatory bodies and business practices in China is having a negative impact on the opportunities for them in the Chinese market. Playfish is one of the most successful Western social gaming companies, yet according to Walraven they are "currently exploring the Chinese gaming market. We're carefully considering how and when to enter."

One thing is certain, with the Chinese gaming market slated to be worth USD 6 billion in 2010, those who neglect this garden will end up with all their vegetables stolen.