Social gaming market to hit $1 billion this year, eMarketer reports

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Driven by an increase in advertising, the market for social games such as Farmville and Pet Society is projected to top $1 billion this year, according to a report from eMarketer, a New York-based research group.

That’s up 28% from last year, when the market totaled $856 million.

A look at the revenue sources reveals three main contributors: virtual goods, straight-up advertising and something called ‘lead generation.’ That’s when someone fills out a survey, signs up for a newsletter or applies for a credit card in exchange for virtual goods within a game.

While leads are worth gold to advertisers, many users have found them spammy and are now more careful when giving away e-mail addresses or personal information. It’s no surprise, then, that revenue from this category is expected to become a smaller portion of overall income for social games, to 19.6% by 2012 from 26.3% in 2010.

What’s expected to drive the growth is old-fashioned brand advertising, according to eMarketer. Ad spending on social games is projected to double to $271 million in 2012 from $120 million in 2010.

‘Even though fewer than 6% of U.S. social gamers spend money on virtual items, these avid players will produce $653 million in the U.S. alone this year,’ said Paul Verna, an analyst with eMarketer. ‘This is the largest segment of the social gaming economy, and one that marketers are increasingly turning to as a branding vehicle.’

-- Alex Pham