The Second Order Network Effect

The web is all about building networks on top of networks. The Internet is the base network, a global connection to 825 million people (that’s comscore’s Jan ’08 number and it doesn’t include mobile devices).

We’ve been building networks on top of the Internet network since we first got the Internet, but the creation of social nets in this decade has been transformative. We now have “social” networks like myspace and Facebook which each reach over 100 million people a month. These networks have rich social graph databases that know who we care about most among the >1bn people hanging out on the Internet around the world.

So that’s why Facebook platform was such a big deal. They allowed developers to build apps that can tap into the Facebook social graph. The top three Facebook app developers, Slide, Rock You, and Zynga have built networks of Facebook apps that respectively touch 4mm, 2.2mm, and 1.3mm people each day. And they’ve done that in less than one year. That’s not yet the kind of numbers an event like the Oscars can produce, but these numbers rival many cable networks daily viewers.

What’s happening now is that these app networks are becoming networks themselves. They are allowing app developers to join their networks and tap into the people hanging out in them. Because these app networks were built on top of social graphs (first Facebook, then Bebo, soon myspace), these networks are able to leverage the social graph to provide social network utility to app developers.

I call this a second order network effect. Building networks on top of social networks produces even more utility to app developers.

I am an investor in Zynga and saw some data on their new social game network that I found very interesting. With their permission, I am going to show you how and why this is happening.

But first, a short explanation of what a social game network is. Zynga makes social games. Examples are the word game Scramble, the hugely popular Texas Hold’em, and the war game Triumph. They all are connected via the game bar at the top of the app which shows your friends (from the social graph data they have access to) and what game they are currently playing. The game bar is the “game lobby” of the social game network.

Last week Zynga launched their social game network via the Zynga API.  To date fourteen game apps have joined with another ten on deck to launch this week. This about triples the number of games in the Zynga Game Network.

Here’s a screen shot of one of the games that joined in the first week, called The Dot Game. It’s a fun social game where you connect dots in a race against a friend to cover the board.

Dot_game

You’ll see at the top of the screen shot, right below the Facebook toolbar and above the game itself is a section of screen real estate that shows my friends on Facebook who are playing games in the Zynga network and what games they are playing. If anyone is currently active in a Zynga network game, it will show that and what game they are playing.

In the first week of the Zynga Game Network, almost 75,000 clicks were sent to third party apps that have joined the network. And those third party apps sent back about 32,000 clicks to the Zynga Game Network. It’s important to note that the Zynga Game Network is currently sending more clicks out to its partners than it gets back. More on that in a minute.

Here’s a screen shot of the Zynga Game Network dashboard for game developers. It shows for each third party app in the network how many clicks they are getting and how many clicks they are giving.

Dev_admin

You’ll see that on the first day the network generated a lot more clicks to The Dot Game, about 3,000. The next two days as the network attempted to balance out the clicks a bit, the network got back more than it gave. On Friday, the network started giving more again and has been doing that ever since.

Zynga is initially giving more clicks to its partner game developers than they get back to help jump start other games. Having more successful apps in the network means more clicks for everyone. That’s the second order network effect in action.

How valuable is a click? Well Zynga’s experience has shown that early in the launch of a new game, most clicks result in an install and a game play session. Of course not every game play session turns into a repeat player. That’s where game design and evolution comes into play.

Here’s some data on two of Zynga’s own games, Triumph a Zynga developed war game, and Scramble, a Zynga developed word game.

Triumph

Scramble

These charts show the daily active users for both games.  Zynga has had to take different tacks with each of these games. Triumph is a real time game that they continue to evolve and improve resulting in more repeat usage and growth. Scramble is primarily a “turn based” game like Scrabulous. The secret in a game like that is viral tuning to increase the number of people that you play the game with.

So if you have a social game that you’ve built, getting clicks is not the only secret to success. But it is a big part of it, particularly early on in the life of a game. Joining a game network like Zynga a free way to get clicks. The Facebook directory has over 17,000 apps in it. It’s very hard to get noticed there. You can buy installs and many apps do that. And with Facebook cracking down on invites and notifications, it’s even harder to build an audience for your app. So if you are a game developer you should also join a game network and though I am clearly biased, I think Zynga is by far the best choice.

Wikipedia defines “network effect” as:

a network effect is a characteristic that causes a good or service to have a value to a potential customer which depends on the number of other customers who own the good or are users of the service. In other words, the number of prior adopters is a term in the value available to the next adopter.

That last part is key. The “number of prior adopters” is the value to “the next adopter”. So if you are picking a game network to join, go to the one that has the most game players in it. You’ll get the most clicks that way.

By interconnecting many of the Facebook game apps, Zynga and other open app netwworks are creating an open channel for everyone to participate in, so that companies don’t have to compete to own and control separate networks. Like the Facebook itself, all networks have more value with more nodes.

The biggest winner in all of this is the user. When you play social games that are in an open social game network, you will see and can play with more of your friends. And playing games with your friends is what social gaming is all about.