Facebook Announces New Mobile Game Publishing Effort

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A few weeks ago, we reported that Facebook was experimenting with becoming a mobile games publisher by offering distribution to studios in exchange for a cut of revenue.

Today, Facebook is formally announcing that effort at the Casual Connect conference in San Francisco, and they’re putting a call out for developers that are looking to participate. They didn’t disclose the revenue share they’re asking for.

The company says its publishing experiment is “a new pilot program to help small and medium-sized developers take their mobile games global.” The thinking is that it’s become prohibitively expensive for new mobile developers to find an audience, as the top grossing charts have become a lot more stable over the last year. With more than 800 million mobile users every month and more than 260 million people playing games on Facebook, the company says it’s in a unique position to help developers target high-quality gamers.

Already, they’ve racked up about 10 developers, including educational game maker Brainbow, Kiwi (which said it just raised $9 million led by Sequoia Capital yesterday) and the U.K.’s Space Ape, which is run by veterans of social game maker Playfish, which sold to EA for at least $275 million in cash.

While sources hinted to us that the program was really for indie developers who have fewer resources to compete with the multi-million-dollar marketing budgets of big studios, there are a few larger ones in the program. Gameloft, which is a publicly traded French gaming company worth $652 million, was also in the program with a game called Kingdom & Lords.

Facebook is embarking on mobile app publishing at a time when it is trying to figure out how much revenue it can wrest from the app ecosystem it supports with access to the social graph and ads. The company said 41 percent of its advertising revenue in the most recent quarter came from mobile platforms — or about $656 million. This is up from virtually nothing in the same quarter a year ago, when Facebook only started to turn on sponsored stories in the mobile news feed. If you annualized that, Facebook’s mobile ad business is now worth at least $2.6 billion per year.

Yet, the company hasn’t been able to tap into the rich in-app purchase revenue that game developers generate on Android and iOS. That’s because Apple and Google both control the world’s two major smartphone app stores and already take a 30 percent cut on digital transactions. So asking for a revenue share up-front in exchange for distribution through ads is a way of indirectly tapping into this.

Facebook’s thinking is that publishing is a very, very old model that goes back to the world of console gaming, so it’s a structure that is already familiar for gaming studios. In the console era, a big gaming company would market, distribute (and often edit) games from smaller studios that lacked the resources to promote their work. Facebook isn’t going to be hands-on with the content of the games, but it will help with ads and analytics.