Speaking on a panel at Casual Connect in Seattle, executives from leading social games companies Zynga, Playdom and Playfish discussed the building blocks required to generate major social gaming revenues, and the direction in which they think the market is headed.

Sebastien de Halleux, the chief operating officer for Playfish, opened by estimating the size of social network Facebook. “We think that, in 2009, there are roughly 500 million users.”

Assuming that ten or 20 percent of Facebook users play games in any given month, and the average revenue per user ranges from fifty cents to a dollar, “That’s a market size between $500 million to $1 billion,” said de Halleux.

Over next few years, the average revenue per user could increase to one dollar for just the ultra casual players. With more from active players, “that’s a market north of $5 billion, probably $10 billion,” he said.

John Pleasants, Playdom’s chief executive, believes average revenue per user will rise, and used the example of his own personal cable service. It might cost him $1200 per year for cable, but he doesn’t spend much time on it. Nor do his kids. When playing social games, he might spend $1 per month. But when people start to equate time with value, “they’ll spend much more money on social games.”

”A social game is a game you play with your friends,” said de Halleux by way of definition. “There are many more people who enjoy spending time with their friends, then people who enjoy spending time with their consoles.”

And for a long time, these single-player games have generated emotions around achievement and frustration. But now, a social game offers the chance for emotions between two people. Does deeper emotion mean more money?

“I think it’s an arms race to reach emotion,” said Pleasants. “In this case, emotions between friends.”

Roy Sehgal, the general manager of Zynga, said his company only uses two measurements: daily users and money made off daily users. “We call them games – they’re really games as services,” he offered.

Pleasants said that Playdom doesn’t market its games in the first few weeks, because they want players to try it, give feedback, and then the company will make very rapid changes – by the end of several weeks it’s well tested.

“Don’t forget to make fun games,” said de Halleux. “There’s a finite audience out there – so we’re trying to build fun products that will still be out there in two years.”

As Playdom grows, Pleasants said the firm “will be opening a San Francisco office.”  It’ll also be looking at international opportunities. He said that social games are very much a hit driven business, but that they require less capital investment than traditional games. “It’s a lot les risk… but it moves incredibly quickly.”

The panel agreed on conservative estimates that, in three years, the market will range from $500 million in revenues up to $5 billion.

With growth comes challenge. “Try to play more board games,” said de Halleux.  “Social games have to be designed around social interaction. There are 1.5 billion web users, and three billion mobile users… all of whom would conceivably play a game – if it’s sent by a friend and it’s high quality.”

Which led de Halleux to state: “The next generation console is the social network. We are not displacing the traditional game industry…we are incremental.”

Pleasants also believes that there’s a place for subscriptions in social games, adding that in the next two or three years someone will likely have something to show.

de Halleux closed the discussion by explaining why the three private companies refuse to comment on their own revenues. “It would be sad if we focused on who’s making the most money.”  He declares them all “frenemies” – each innovating in different ways.

Words by N. Evan Van Zelfden