• by Tameka Kee , March 5, 2008

Properties like Facebook and MySpace don't just have to deal with issues like user attrition from "social network fatigue" or inventory monetization challenges. According to Bobby Kotick, CEO of Activision, they also face a growing threat from an unlikely source -- massively multiplayer online (MMO) games.

Speaking at the Morgan Stanley Technology Conference on Tuesday, Kotick said that MMO games like World of Warcraft are a unique blend of "a social network with an entertainment experience," and they're drawing in users and their wallets by the millions--with advertisers eager to follow.

World of Warcraft recently surpassed the 10 million subscriber mark in January, making it the most popular MMO worldwide. Kotick said that players spend an average of 3.5 hours per day with the game--with particularly rabid fans clocking in 6 hours. "It's replacing TV and other activities for a certain type of audience," Kotick said, even eclipsing time spent congregating on social networks.

The gamers are also willing to spend on products like mission expansion packs. "These extras cost a fraction of what our users pay for cable, for a cell phone or food per month, Kotick said. "And if you ask them to give any one of those up for more time with World of Warcraft, they will." But Kotick added that there's also the possibility of ad-sponsored supplemental content, particularly with games like StarCraft that require shorter sessions.

Still the threat isn't just coming from hardcore MMOs like World of Warcraft. Even Activision's Guitar Hero franchise has the potential to disrupt the social networking landscape. The console-based game lets users rock out, competing against each other while trying to play hits from bands like Aerosmith on a full-size replica guitar. While the franchise has raked in sales of more than $1 billion in North America alone, Kotick said the communal gaming stats are even more promising.

"Fifteen million people have purchased the guitars, but 45 million people are using them," Kotick said. "That three-times pass-along rate speaks to the quality and type of interaction players get from the game. The only thing that's missing right now is that it's not over the Web. Right now it's played in a bar or a living room--with no prize play and no competitions. But that will be the evolution of the medium."

And Guitar Hero's demographics range well beyond the typical 18- to 34-year-old male gamer. "The demographic reach is incredible," Kotick said. "Forty percent of Guitar Hero's audience is female."

Still, the most potent threat that social networks face from MMOs (or soon-to-be MMOs like Guitar Hero) is their current lack of marketing infrastructure. "Last year, we would have deployed a lot of marketing capital to sites like Facebook, MySpace, Yahoo and iLike, but they didn't have the personnel or capacity to take our money," Kotick said. "There are Guitar Hero groups on Facebook--why wouldn't we want to reach our audience there? We're going to continue to shift our dollars away from things like typical or trade marketing to things that are more relevant--but they need monetization strategies first."

And as social networking sites develop those strategies, Activision will adapt them for their own MMO and socially-focused game properties. "We want to build a rate card for advertisers that has validity and credibility," Kotick said. "It's still the early days, but those same marketing principles will be the ones that we get."

World of Warcraft is published by Irvine, Calif.-based Blizzard Entertainment, a division of Vivendi Games that Activision made a deal to merge with in late 2007. Once the acquisition closes, the new company's name will be Activision Blizzard, and will operate as a subsidiary of Paris-based Vivendi SA.