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GamerDNA halves its workforce as games advertising enters terminal decline

By on October 30, 2009

GamerDNA has been through several iterations in its life.

The social network and gaming community started life as Sparkforge Entertainment before changing its name to GuildCafe as it focused on the burgeoning MMO market. It even attracted $3 million in venture capital from Flybridge Capital Partners.

The company is now focused on a sophisticated advertising network that targets ads based on the games that its audience are playing or talking about.

But it’s had to cut 50% of its staff (six out of 13) in the past week to ensure that it is operating at breakeven.

I’m not surprised. And the main reason is not my initial scepticism (which was that a community-business focused on taking a small percentage of the communities from big MMOs was always going to be limited).

It’s that the days of big display ad budgets for games are over.

As the core market shrinks, and publishers shift their attention to MMOs, virtual worlds and Facebook games, the traditional, expensive advertising with large banners, homepage takeovers and pre-roll videos has peaked.

The new advertising (which will be huge) will focus on conversions. It will be about getting users to click on a link, register for a game and play it.

And these users will not be the hardcore audience who count themselves as “gamers”. It will be amongst the vast swathes of the population who play games but don’t really notice.

The Farmville players. The Bejewelled players. The iPhone gamers.

And those people won’t go to a gaming site. Instead, marketers (who will have vast budgets tied to conversion rates and ARPU) will have to find those gamers where they live – on social networking sites, or Mumsnet, or the Daily Mail.

Which means that, much as it pains me to say it, companies who are dependent on the advertising largesse of Electronic Arts, Activision and THQ are going to have to start looking for new business models pretty damn quickly.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: