Online group buying has taken the business world by storm with the number of group buying sites growing every day. Previously we discussed the possibility of Facebook entering the group buying business to create a Facebook versus Groupon scenario. Facebook has yet to adopt collective buying but its largest client, Zynga, has already implemented the group buying business model with great success. Zynga’s popular social game, YoVille, is now offering 50% off regularly priced game items for players that sign-up for the deal.
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The YoVille group buying offer required that at least 100,000 people sign up for the discount within 48 hours or no one gets it. So far, over 300,000 have taken advantage of the YoVille group buying deal. While there’s no obligation to purchase the YoVille items, Zynga’s collective buying promotion is a clear success. Not only, did the deal offering create a new stream of revenue for Zynga but it has been an incredibly successful self-promotional tool. That is, it has generated over 25,000 Like’s on Facebook and it’s allowed Zynga to quickly grow its email list of YoVille gamers.
Group Buying To Dominate Facebook’s Social Games
Zynga will most likely begin rolling out group bargain discounts for all its games in the near future and its inevitable the other Facebook game developers like CrowdStar, Playdom, Playfish, and Electronic Arts will soon follow. This could be the shot in the arm that game creators need in lieu of Facebook’s past decision to push notifications to email. The previous system delivered messages to Facebook users through the notifications window on Facebook creating a sense of urgency to act. The newer email based notification system isn’t as helpful to game developers as most people are overwhelmed by the number of email messages they receive. Email notifications are easily overlooked, lost in the recipients’ inboxes, and their commonly marked as spam. Zynga’s group buying feature should help reduce many of these issues by creating a greater sense of value for its email notifications within the minds of subscribers.
Zynga’s Group Buying Platform
Zynga’s move to create and manage their own group buying platform is a wise strategy that will save them tons of cash. Generally, B2B collective buying sites take a 50% fee of all voucher sales that they generate for participating merchants. That’s on top of a typical 50% off discount which leaves the business owner earning only 25% of what they normally would. By running their own collective buying deals, Zynga will save the additional 25%. Moreover, since the creation virtual goods incurs minimal expenses, Zynga’s group buying costs should be much less than traditional collective bargain sales.
How Much Will Zynga Earn From YoVille Group Buying?
Using our group buying calculator, we can estimate the potential earnings that Zynga may obtain from its group bargaining experiment on YoVille. According to the promotion, players can buy 50% off YoCash items with YoCoins. The average price of the actual items displayed on the promotion page is 490 YoCoins. The cost for purchasing YoCoins varies depending on which package the buyer chooses. The average cost for the all YoCoin packages is $0.001592 per YoCoin ($215/135,000 YoCoins). If we assume that a group buyer purchases at least one item that’s offered, it will cost him/her roughly $0.78 ($0.001592 x 490 YoCoins). With 300,000 potential buyers already signed up for this daily deal, Zynga could to make over $234,111 ($0.78 x 300,000). Of course some players may have already earned the YoCoins and therefore won’t have to buy them. However, even if only 50% of those that participate purchase just one item, Zynga stands to earn an additional $117,056. That’s a considerable chunk of change given that their only offering the promotion for 48 hours. If you calculate it using our modest estimates above, Zynga’s earning exactly $2439 per hour extra by offering this group buying deal.
Total Revenue Zynga May Earn From Group Buying Deals
The additional earnings that Zynga will generate from a single collective buying deal is quite impressive let alone the potential additional earnings it may generate from all its games. What if Zynga offered one group buying promotion per game each month and each promotion attained similar results? Zynga developers are responsible for creating over thirty different social games that are available on Facebook. Many of them are the most popular games on the Facebook platform. If ten of Zynga’s most popular games offer a group buying deal every month, that amounts to $1,170,560 per month or $14,046,720 per year in additional revenue. With such an impressive additional revenue stream at its disposal, Zynga’s valuation should rise considerably.
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