Rockyou is NOW a Social Games Company! Except It's Not.

Last week, Valleywag, my favorite investigative journalism site, broke the story that Rockyou, the social widget maker, aka creators of super-popular Superwall and Hug Me, was planning on becoming the EA of social games.

Here's the quote Valleywag attributed it to Rockyou CEO, Lance Tokuda: "We want to be like the Electronic Arts of social networks, and build games for social networks.".

In our little world of social games, it's pretty big news when an extremely well-funded company with an expertise in social media declares its intention to become the leading social games company.

There is some compelling evidence, Rockyou acquired the Facebook games Speed Racing and Petrolhead awhile ago, and has a couple of the top games on Myspace.

So naturally, I contacted a friend over Rockyou to get the scoop.

The Scoop

Evidently, Lance's quote was taken out of context. They are not becoming a social games company. Social games are just one part of their portfolio of properties.

In my mind, their entry into social games was entirely opportunistic. When the Myspace platform became viable, they quickly cloned the top games on Facebook and released them on Myspace to great success. (Coincidentally, cloning is the topic of tomorrow's post.)

I'm not judging, I would have done the same thing if I had the resources.

So what's Rockyou's main focus if not social games?

According to Rockyou, it's their ad network. For some time, Rockyou has been building out a ad network that runs on social media properties (i.e. Facebook and Myspace apps). Social media advertising is a crowded space, there's at least eight other companies doing the same thing. None of their competitors have Rockyou's massive userbase. It's a nice advantage, having guaranteed inventory to sell to advertisers.

Some people might question the wisdom of placing a big bet on an ad network when it looks like online ad budgets will be slashed in the near future. Particularly, social media advertising where the clickthrough rate is notoriously bad. At the Ypulse conference a couple months ago, Rockyou claimed a clickthrough rate of .002% which was double the average social media clickthrough rate of .001%, but still very, very low.

500 pageviews and no clicks

A couple days ago, behavioral ad targeting network, Jellycloud shut itself down. In the article on Venturebeat, Matt Marshall cites social network clickthrough rates as a core reason:

Jellycloud were commanding a mere 50 cents per a thousand ads shown (CPM), not enough for Jellycloud to make a business from. There were few click-throughs, with some users on Facebook generating 500 page views or so during a single session, but never clicking on ads.

Jellycloud won't be the last ad network to fail. However, I also think it's inevitable that one (or three) of the social media ad networks gets acquired. Perhaps, that's Rockyou's ultimate plan to get acquired for their ad network. Looking at the last round of ad network acquisitions, it's possible to foresee a $500 million acquistion for the top social media ad network. For Rockyou that'd be a 10x return to investors. Not bad at all.

Meanwhile, I'm 100% certain that we'll see Rockyou acquiring more properties to bolster its traffic numbers. Remember the core truth of advertising, advertisers like to buy in bulk. The more users that you have the more money you get.

So kids, build up you traffic and maybe Uncle Rockyou will come and buy you. And you might want to optimize for pageviews. :)