Social Gaming Market Worth Upwards of $5 Billion in 3 Years, says Playdom

As we commented in our 2009 Persons of the Year feature in which we name Zynga boss Mark Pincus our top Person of the Year, we feel that social gaming is the biggest trend to change the games landscape this year. The growth is absolutely incredible, and Zynga rival Playdom underscored this fact in a recent interview with ThinkEquity's Atul Bagga.

Playdom CEO John Pleasants, who joined Playdom from EA earlier this year, told Bagga that the Western market for social gaming could be incredibly large in a few years. "I think the western market is somewhere between $0.5-1.0 billion today and it can be $3-5 billion over the next three years. It's growing more than 100 percent a year and all the metrics are moving in the right way," he said. "That starts with Internet penetration worldwide, followed by social networking penetration, followed by percent of users of social networks that play games, followed by percent of people who pay inside of these games, followed by how many games they play per month, followed by ARPU per paying user. Add it all up; they're all growing and if each of those things goes up you know 20 or 30 percent or whatever the respective numbers are, it adds to 5-10x of the category over a three to four-year period of time."

While Zynga dominates the space and reportedly generates annual revenues estimated around $200 million, Playdom is indeed profitable and is growing nicely too. "We have about 28 million users a month right now. We have about 220 full-time people, rapidly growing. We have north of $50 million in revenue this year. We are profitable," noted Pleasants, who also commented on the biggest challenge for his company: "Our company has tripled in size in the last three months and when you're growing like that, just staying high quality and high efficiency while driving absolute volume and throughput is a challenge. We are on a path to increase the size of our company by 5-10x in one year from a not-so-insignificant base. And in doing that you can create chaos or you can create a beautiful piece of art, that is the challenge."

Pleasants noted that Playdom generates 90% of its revenue by selling virtual goods, leaving only 10% to advertising, and he fully expects the virtual goods market to remain the dominant force in the revenue mix. Playdom has been making big moves as the company recently raised $43 million, bought more developers with that money, and then hired Thomas Weisel Partners' Christa Quarles as the new CFO.