Amazon's social games push a calculated risk

Web giant setting up of Amazon Game Studios not only allows it to easily tap growing social games market, but also gain further insight into users' online behavior.

Amazon's decision to set up its Amazon Game Studios earlier in August is an "interesting development" representing a divergent strategy it had adhered to with other content types such as music, video, and mobile apps--all of which the Web giant gets from third-party providers to rent and sell to consumers, says one analyst.

Tim Shepherd, senior analyst at Canalys, believes the company's motivation to create its own social games is multidimensional. For one, the social games space is attractive which can be seen by the success of companies such as Zynga which generated US$1.16 billion in revenues in 2011, he noted.

Gartner, too, had indicated that social games is a fast-growing sector , with revenues more than doubling between 2010 and 2011 and is projected to hit US$6.2 billion in 2012. Revenue from subscriptions will amount to US$278 million, it said.

Additionally, social games are relatively cheap to develop and one of the key cost factor--hosting the games--will not be a concern for Amazon as it can utilize spare Amazon Web Services' datacenter capacity to support this initiative, Shepherd pointed out.

"Amazon believes that with its know-how, it can deliver a great, accessible gaming experience for gamers that can potentially capture a share of this multi-billion dollar sector through in-game purchases," he said, citing the statement put up on its Web site.

Gaining consumer insights
Should its social games prove a hit with consumers, the Web company can use this to learn more about the gamer population and perhaps start advertising or cross-promoting other Amazon services and products to them, the analyst suggested.

The viral nature of social games will help it to build its brand presence in markets which it did not previously have a stake in, he added.

"Undoubtedly, Amazon's games will also soon appear beyond Facebook and on its app store for its Kindle Fire users, but the nature of social games means that its own devices cannot be the primary focus for this initiative. Success will be contingent on broad, mass market appeal," Shepherd said.

That said, while he thinks the company has the capability to challenge in this market with future titles, its first effort titled "Living Classics" lacks the flair and originality that usually characterizes success social games. As such, he does not expect it to be a great success among consumers.

It will require sufficient will, coupled with the resources on hand, for Amazon Game Studios to build games that would resonate with online users and help the unit establish market recognition, he stated.