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The death of the portal
With the news that GameSpot has acquired Kongregate, I thought it was time to put forward my thoughts on why portals are vastly less relevant than they were four years ago.
Traditional games portals have been hit by a perfect storm. They used to offer developers one of the only routes to market and had access to a key revenue streams – advertising – that developers were rarely able to get for themselves.
The global recession hit those revenues hard but it masked a much deeper malaise: developers don’t need portals any more.
- Developers don’t need their distribution, which was very expensive: Kongregate, for example, takes up to 75% of the revenue from a game (see p. 86 – I’ve added this below) whereas Facebook offers free distribution (although this may rise to 30% if Facebook Credits become mandatory, which is looking increasingly likely).
- Developers don’t need their sales force. Advertising is no longer the primary revenue stream for free to play games; virtual goods are. Portals don’t help increase this revenue, unlike with advertising. Worse, they try to take a share of it.
- Developers do need their financing. Unfortunately, portals rarely offer it.
If I were an independent developer, looking to launch a game on the web, I would choose Facebook over a portal every time.
Portals need to do something radical to increase their value to developers or they will go out of business fast.
* * *
Extract on how Kongregate remunerates developers
Flash game portal Kongregate pays developers up to 50% of the advertising revenue as follows:
- 25% of all ad revenue generated from their games as standard
- 15% if the game is exclusive to Kongregate
- 10% if the game includes Kongregate’s API for leaderboards and challenges
Or to put it another way, Kongregate takes up to 75% of the revenue of a developer’s game. Let me show you what that means for an independent developer .
These figures are not particularly attractive. Even a wildly successful game, getting 1 million plays a month, which would be a huge achievement, would only generate £1,500 a month in revenue for the developer. Of course, these assumptions might be flawed:
- There might be than two ads displayed per game play session
- The CPM of £1.00 might be low (although in my experience, they are falling, not rising)
- The portal might offer more than 25% of the advertising revenue to the developer
It is no wonder that many Flash developers seem to just churn out games as quickly as possible. They need volume and a back catalogue to have any chance of paying the bills.
Kongregate also offers monthly contests for its top rated games. But with a top prize of $1,500 and thousands of games on the site, these are unlikely to make a difference to any but the smallest development teams.