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Groupon Isn't the Killer App, At Least for OpenFeint and Mobile Gaming

Memo to OpenFeint: Your move to revamp your Game Center may not ramp up sales the way you think.

The mobile gaming networking now has a sale of the moment: Kind of like Amazon's (AMZN) holiday bargains, users get a deep discount on a particular game for a brief period of time. For instance, a $9.99 title may be available for $.99 for a few hours. The limited discount is intended to promote sales, not unlike Groupon.

However, while the Groupon model is hot enough that Google (GOOG) offered several billion to buy the company, the strategy isn't a good fit for modern mobile gaming. Here's why.

It violates the freemium model: Successful titles on the Apple (APPL) App Store usually use the freemium system:

  • Offer a free, limited version of the game
  • Entice players to buy the full version
It is a simple concept, first used in the early '90s by Doom creators id Software and popularized again when mobile apps took off a few years ago. The problem is that mobile gamers are now accustomed to the try-before-you-buy method. A $6.99 game for $.99 may sound cheap, but it's not as cheap as free -- and may not be worth the risk the gamer would have to take to buy the game without testing it out first.

Mobile games are expensive to produce: A decade ago games were cheap, almost disposable, forms of entertainment that had little depth. Like the earliest home computer software, mobile games were primitive and low-cost to develop.

Today, mobile games are a billion-dollar market and titles like Infinity Blade cost several million (and several months) to produce. Now mobile producers face the same dilemma as console game developers: Funding costly productions while keeping the MSRP price reasonable. This will be even more challenging for mobile game developers because, at least for apps, consumers are used to paying $4.99 for a title, not $49.99.

So creating a fire sale on OpenFeint Game Center may not be in a company's best interest. Like the Groupon model shows, selling too aggressively can really hurt a company's bottom line. And when products are already selling for five bucks, there's not much margin for profit or for error.

The OpenFeint Game Center sales may be worthwhile for once-popular games that have fallen out of favor, but most game companies would seem wise to keep their titles away from the bargain bin. Groupon has already shown the dark side of deep discounts.

Photo courtesy of Open Feint

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