The Sims Social has been a great performer for EA in the social space, quickly becoming the #2 title on Facebook with over 8 million DAUs, and helping to support EA's second quarter. According to Wedbush Securities' estimates, the game is "generating significant upside" and could produce $20 million - or even as high as $40 million - in revenues for the current third quarter.
According to analyst Michael Pachter, this suggests that "overall social games revenues could exceed $200 million in FY:12."
He added that The Sims Social is becoming an active player base that EA can leverage for its entire social business. "This revenue has high contribution margin, likely at the 50% level after taking into account R&D spending on other social games. More importantly, we think that The Sims Social’s large installed base provides a platform for EA to market its other social games, with players encouraged to invite the same friends to play upcoming games (likely Plants vs. Zombies and Sim City) when they launch. This model has worked well for industry leader Zynga, and we think that it can work for EA now that it has a large installed base playing its games," he said.
"In our view, the company can leverage its 67 million monthly active users (MAU) with each new game it launches, and we expect this figure to grow to in excess of 80 million by this time next year. Competitor Zynga generates approximately $250 million in revenue per quarter with 202 million MAU, suggesting that EA can generate $80 million or more per quarter from social games once the company enhances its ability to monetize players. We think that this kind of revenue growth will command a high multiple, driving EA shares higher."
