l Whitepaper
Overview Social casino games have gained considerable attention in the last few years. According to a recent study by SuperData Research [SD2012], the global market for social casino games is currently around 1.6B USD. While this number is still small when compared to the global online gambling market of 35B USD [H2GC2012], the social casino games industry is now a clear presence in the gambling and casino entertainment ecosystem. The social casino games market is particularly interesting because online gambling sites and social/mobile developers are converging on it at the same time. The former group has been around for about 15 years, since the mass adoption of the Internet began; the latter group didn’t appear until after widespread adoption of Facebook a few years ago. These two industries have different business models, customer relationships, regulatory restrictions and player demographics, so they bring different perceptions, motivations and skillsets to the table. As service companies for both of these industries, Clarion and Kontagent are very interested in understanding how each one perceives the new social casino games space. Do they see it as a threat or a new opportunity to grow? What moves are they making to assert dominance or foster collaboration? The research presented in this paper is the result of detailed analysis of several sources. First, we conducted a broad survey that was completed by close to 300 individuals in both industries. The respondents were contacted via both Clarion’s and Kontagent’s customers/partners/industry databases, and consist mostly of management team individuals from online gambling operators and social/mobile game developers. Thirty-one percent of respondents came from online or land-based casinos, and 69 percent came from social/mobile game companies. The respondents were mostly from Europe (45%, a third of those from the UK) and the U.S. (33%), with a smaller percentage coming from Asia (12%), Americas (8%, excluding US) and Australia (2%). Most of the real-money wagering respondents came from online gambling operators in the UK, including sports betting, casino games, bingo and lotteries; only a few of the respondents were land-based only. The social/mobile developers respondents includes publishers of all kinds of games on Facebook, iOS and Android–not only social casino games. We also conducted personal interviews with leaders of both industries, including land and online “Examining the Convergence of Online Gambling and Social Gaming” Clarion-Kontagent Survey, Total Survey Respondents: 293, June 27 2012 - Oct 5 2012.
1
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 2
operators with and without social games and social/mobile casino game developers; we also analyzed public data about the composition, dynamics and growth of the market.
1. Two Industries Come Together: Online Gambling and Social/Mobile Games Survey Respondents: Operators and Developers
Online or land-based casino operator 31% Social/mobile game developers 69%
Source: Clarion-Kontagent Survey
Survey Respondents by Geography Australia 2% Americas 8%
Asia 12%
USA 33%
Europe 45%
Source: Clarion-Kontagent Survey
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 3
Online Gambling. The online gambling industry is currently a 35B USD market with approximately 60M players around the world. It’s expected to grow to 42B USD by the year 2015 [H2GC2012]. It’s worth noting that the size of this market was minimal just 15 years ago. The first online casinos were released in 1994 and started taking off in the late nineties, due to the mass adoption of the Internet. Then, as now, regulation around this new industry tried to catch up with the new technologies available to players in different geographies. Online gambling covers a wide spectrum of entertainment, including slots, poker, bingo, blackjack, sports betting and online lotteries. Some games are played across many geographies, such as online poker, while others are highly localized, such as state lotteries. The regulation for online gambling changes from country to country, and even among jurisdictions within the same country, which makes the array of games available to citizens highly dependent on where they live. As an example, while online sports betting is commonplace in the United Kingdom, it’s availability is very limited in the United States. Social Casino Games. The global market for social casino games is currently at around 1.6B USD, with 40 percent of its revenue generated in the United States, followed by Europe with 27 percent; currently, just in the United States, 35M persons play social casino games [SD2012]. These games are based on some of the same games described above for online gambling, mainly slots, poker, bingo, blackjack, roulette and some sports betting. The term “social casino games” is used for a wide variety of games on social and mobile platforms. However, some of these games do not have any social aspects to them [KF2012]. For example, most slots games on Facebook are individual experiences, with little social activity beyond inviting friends to play or sharing scores. The term social casino games is even used for games in mobile platforms, which usually have little or no social capabilities. A better description for many of these games would be casino freemium games: games that can be played to a certain extent for free, but in which an enhanced experience is available by paying with real money. The player can buy more chips, access new parts of the game and save time or other benefits that are difficult or impossible to acquire for free. The industry around these games consists mostly of social and mobile game developers who’ve found casino-style games to be very successful. In hindsight, it could have been easy to foresee that casino games would be popular on social and mobile platforms, given their tested nature for engaging game mechanics. However, there were many other types of games being developed for these platforms, such as city/farm building games and role-playing games.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 4
The developers of these games come in all shapes and forms, from small startups e.g., Blue Shell Games with Lucky Slots to larger public companies e.g., Zynga with Texas HoldEmPoker. Similarities between Social Casino Games and Online Gambling. Social casino games are very similar to their online gambling counterparts. The most popular games on Facebook, for example, are poker, slots and bingo. Some of these are more inherently social than others e.g., poker and bingo are more social experiences than slots. No matter what the game, however, the goal of the developer is always the same: maximize revenue. This is done through the right combination of entertainment, fun and effective monetization. Differences between Online Gambling and Social Casino Games. The main difference between online gambling and social casino games is the fact that online gamblers can exchange their wins back to regular currency (“cash-out”). This is not possible on social casino games. The virtual currency balance that a player has in a social casino game can only be used within the game, and can’t be exchanged for real goods or services. Virtual currency in social casino games usually has three sources: it may be given for free; earned in the game e.g., a jackpot in slots; or purchased with real money. It may be surprising for online gambling companies to realize that players will buy chips that they can’t cash out, but the social and mobile game industry understands this well: engaged players are willingly paying for an enhanced gaming experience. Another key difference between online gambling and social casino games is regulation. While most countries regulate online wagering, social casino games are thus far not regulated. Regulation around online gambling serves several purposes: protection against fraud, protection against addictive behaviors and providing tax revenue. In the United States, an activity is considered to be gambling and requires regulation when there’s consideration (a price paid to take part), chance (randomness as opposed to skill) and a prize (something of transactable value
It may be surprising for online gambling companies to realize that players will buy chips that they can’t cash out, but the social and mobile game industry understands this well: engaged players are willingly paying for an enhanced gaming experience.
that is earned).
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 5
The fact that social casino games are not regulated allows these games to be designed with more flexibility than online gambling games. For example, while the chances of winning in an online gambling slots game are heavily regulated and thus can’t be adjusted freely by the operator, the chances of winning at a social casino slots game can be adjusted by the game developer. The game developer may want to adjust the winning chances to optimize the game in terms of revenue, engagement or other metrics. For example, if it’s well known that players will purchase virtual currency when having a low balance, it may be convenient to adapt the winning chances so that players spend their virtual chips at a rate that keeps them engaged and wanting to play more. Even though the two industries are based on similar games, their business models are quite different. And it’s important to note that the player acquisition costs for online gambling are much higher than those for social casino games: hundreds of USD per player versus just a few dollars per player. In summary, these are the key differences between social casino games and online gambling: • Social casino games do not offer a “cash-out” option • Social casino games are not regulated • Social casino games reach a broader audience • Online gambling revenue comes from winning chances; social casino game revenue comes from selling virtual chips • Online gambling player acquisition costs are in the hundreds of USD, while they’re only a few dollars in the social casino games space Market Roundup: Recent Acquisitions, Partnerships and Investments. The recent convergence of online gambling and social casino games has generated several key acquisitions, partnerships and investments in recent years. In June 2010, 888 Holdings acquired Mytopia; in January of 2012, IGT acquired Double Down Interactive; in May 2012, Bwin.party announced a 50M USD investment in social games; on August 2012, Facebook started offering an online gambling app from Gamesys on its platform in the UK; the same month, Big Fish Casino started offering real-money wagering on iPhones in the UK. There have been several other moves in this space, but perhaps the two that are most closely being observed at this point are the Facebook/Gamesys and Big Fish launchings, since they represent the first incursions into real-money wagering on Facebook and iOS from a social game developer.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 6
2. The Relevance of Social Casino Games to the Online Gambling Industry The online gambling industry has traditionally viewed social networks like Facebook and Twitter as marketing tools they can use to increase their reach and retention via targeted ads, fan pages and messages. Mobile platforms have been traditionally regarded as another potential channel for wagering; that is, in the same way that bets may be placed through an online site or on the phone, they can be placed through an iOS or Android app. The development of social casino games has expanded the potential uses of social networks and mobile platforms for the online gambling industry. The opportunities for new sources of revenue and a broader audience are obvious, but so is the potential threat that social casino game developers may take away players from online wagering sites.
External Origin
Internal Origin
SWOT Analysis for Online Gambling’s Entry into Social Casino Games Helpful
Harmful
Strengths: • Operating licenses acquired • Deep understanding of regulatory issues • In-depth understanding of casino game dynamics • Online wagering product designs are ready for re-use in social games
Weaknesses: • Little understanding of social and mobile platforms, games and players • Little understanding of freemium business models
Opportunities: • Create new sources of revenue • Lower acquisition costs by converting social players to online gambling sites • Monetize customers in their databases that don’t gamble
Threats: • Competitive space with incumbents that may be more experienced • Cannibalization of online gambling players and revenue • Potential regulatory restrictions on social casino games
The table above summarizes the strengths, weaknesess, opportunities and threats (SWOT) that we found for the online gambling industry’s entry into the social casino gaming space. Our survey reveals that most of the online gambling industry sees an opportunity in social casino games. Twenty-one percent of real-money wagering respondents have already launched a Facebook game, and more than 80 percent of those who haven’t launched one are considering it. This shows that the social casino games space holds a strong attraction for the online gambling industry: most of the respondents have either already entered the space or plan to do so in the future. Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 7
Do you currently have a social casino game on Facebook? Asked only to Online/Land Casino respondents
Yes 21%
No 79%
Source: Clarion-Kontagent Survey, Online/Land Casino Respondents.
Would you consider launching a social casino game in the future? Asked only to those who do not have a game on Facebook. Probably not 6% Not sure 10%
Definitely not 0%
Yes, definitely 43% Possibly 41%
Source: Clarion-Kontagent Survey, Online/Land Casino Respondents that have not launched a game on Facebook.
Among the online gambling industry respondents who’ve already launched a social casino game, the two main reasons for doing so were to develop an entirely new revenue stream; to benefit from the anticipated legalization of cash-out casinos on Facebook. That is, those who have entered this space believe that there is a strong business case to get into it, not that the social space is only a marketing
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 8
tool. When asked about the revenue they expected to generate from social casino games, most respondents expect it to be up to 25 percent of their total revenue. The survey also asked whether the respondents believed Facebook was going to allow real-money gambling to happen on its platform. The survey was launched by the end of June, a few months before the Facebook–Gamesys partnership happened. Interestingly, until then, 25% of respondents believed that Facebook would not allow real-money gambling on their platform. Of course, this small group was proven wrong in August 2012. The market has shown that companies can indeed make strong
When asked about the revenue they expect to generate from social casino games, most respondents estimate it will be up to 25 percent of their total revenue.
profits from social casino games. Zynga’s 10K 2011 Annual Report shows that their revenue from Zynga Poker was 114M USD in 2010 and 160M USD in 2011. The acquisitions and investments described earlier also validate the online gambling industry’s expectations that social casino games will be profitable.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 9
3. The Relevance of Casino Games and Online Gambling to the Social and Mobile Games Industry Social casino games have become wildly successful on Facebook. If we take a look at the amount of monthly active users (MAUs) of social casino games and compare them to the total number of MAUs for games on Facebook, we see the following trend [DG2012a]: Year
Casino Games MAU (Millions)
Total Games MAU (Millions)
Share
2010
41
681
6%
2011
62
754
8%
2012
98
780
13%
Source: Kontagent, processed data from AppData; taken on April each year for games with more than 10,000 MAUs.
Casino MAU / Total Games MAU 20%
15%
10%
5%
0% 2010
2011
2012
Source: Kontagent, processed data from AppData; taken on April each year for games with more than 10,000 MAUs.
Since 2010, the share of social casino games on Facebook has more than doubled from six percent to 13 percent. We’ve previously reported how the growth of social casino games has surpassed the growth of farm/city-building games on Facebook, that they generate a larger Average Revenue Per User (ARPU) than other types of social games [VB2012] and how social casino games are among the top growth apps [OM2012]. It would seem that the natural next step for the industry would be to go into real-money wagering, either via online gambling sites or through the social and mobile platforms. However, in our surveys and interviews, we found different opinions on this: even though some see a clear opportunity for higher revenues, some see a threat from larger, well-funded organizations entering the space. Still others stay on the sidelines of the whole regulation and legalization discussion and believe in the continuity of their current freemium business model, with revenue generated only by the purchase of virtual currency and goods from a select group of engaged players. Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 10
SWOT Analysis for Social and Mobile Game Developers’ Entry into Social Casino Games and Online Gambling
Internal Origin
Helpful
Harmful
Strengths: • Deep understanding of social mechanics • Deep understanding of social and mobile platforms, both technically and in terms of user experience
Weaknesses: • Developers lack understanding of regulation and licensing requirements
Opportunities: Helpful • Online gambling offers a larger market size, from 1.6B USD (Social Casino Games) to 32B USD Strengths: Gambling) • Deep (Online understanding of social mechanics • Online gambling companies are interested in • Deep acquiring, understanding of social and mobile partnering with and investing in social platforms, both technically casino game developers and in terms of user experience • Online gambling companies need expertise as they migrate their sites to a more user-friendly, social experience
Threats: Harmful • Competitive space with incumbents that may be more experienced Weaknesses: regulatory restrictions on social casino •• Potential Developers lack understanding of regulation and games licensing requirements • Possibility of deep-pocketed online gambling organizations to enter the social casino games space
Opportunities:
Threats:
External Origin
Internal Origin
SWOT Analysis for Social and Mobile Game Developers’ Entry into Social Casino Games and Online Gambling
The table•above summarizes the strengths, weaknesess, opportunities and threats (SWOT) that we found Online gambling offers a larger market size, • Competitive space with incumbents that may be External Origin
more experienced from 1.6Bmobile USD (Social Casino Games) to 32B USD for the social game industry entering the social casino and launching online gambling. Doand you currently have a social casino Would youspace consider a social • Potential regulatory restrictions on social casino (Online Gambling) game on Facebook? casino game in the future? games • Online gambling companies are interested in Probably not
Definitely not • Possibility of deep-pocketed online gambling partnering withand and investing in social According acquiring, to our survey, social mobile developers are quite aware of the social casino game space: 8% 0%
organizations to enter the social casino games
casino game developers
40 percent of the socialcompanies and mobile spaceNot sureour survey said that they had already • Online gambling needdevelopers expertise as who answered 15% they migrate their sites to a more user-friendly, launched asocial social casino game, andYes77 percent of those who haven’t launched are considering it experience Yes, definitely 40%
40%
No 60% Possibly 37%
Do you currently have a social casino game on Facebook?
Would you consider launching a social casino game in the future? Probably not
Source: Clarion-Kontagent Survey, Social/Mobile Game Developers.
Definitely not
Source: Clarion-Kontagent Survey, that 8%Social/Mobile Game Developers 0% have not launched a game on Facebook.
Not sure 15%
Yes 40%
Yes, definitely 40%
No 60% Possibly 37%
Source: Clarion-Kontagent Survey, Social/Mobile Game Developers.
Source: Clarion-Kontagent Survey, Social/Mobile Game Developers that have not launched a game on Facebook.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 11
In contrast to online gambling developers that have launched social casino games mostly for revenue and in preparation for legalization, social and mobile developers are motivated mostly by the success of other games, and by the potential acquisition and partnering deals that may come out of it. As we discussed in [DG2012b], the social casino game market has been very dynamic in the last two years. Among the top 20 casino games by MAUs on Facebook, the number of slots games has almost tripled, going from five to thirteen, while poker has consolidated, going from eight to four. Also “portfolio games”, those which offer a variety of games within the game; e.g., Double Down Casino offers Slots, Poker, Bingo, Blackjack, Roulette and Video Poker within the same app, have gone from two to five games among the top 20 by MAUs. These fast changes in the last two years show that consumer preferences and game availability change quickly, and that things are far from settling down in the social casino space.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 12
4. Similarities and Differences between the Online Gambling and Social/ Mobile Game Industries As the two industries enter the social casino gaming space, they bring key similarities and differences to
Differences
Market Opportunity
• Both industries believe there’s still space for more entrants in the social casino game space • Both industries believe social casino games are a long-term business opportunity
• While the online gambling industry enters this space to generate new sources of revenue and gain from new regulated markets, the social/mobile industry is motivated by others’ success and the possibility of partnership or acquisition deals • Real-money wagering is perceived slightly more as an opportunity for social/mobile developers
Platforms
• Both industries are optimistic about entering the mobile space
• The mobile platform is seen as another transaction channel for the online gambling industry, while it’s a key game platform for the social/mobile industry
• Both industries thought that real-money gambling on Facebook would be a reality, and they were right
• The online gambling industry better understands the complexity of gambling regulation
• Both industries prefer slots over other games
• While winning chances in the online gambling industry are regulated, they can be modified for game optimization in the social/mobile industry
• Both industries believe that analytics and game mechanics are very important for a successful casino game
• Analytics for the online gambling industry are very transaction based; in the social/mobile industry they’re behavior oriented
Analytics
Games
Similarities
Regulation
the table. This is a summary of these, based on our survey:
Market Opportunity. When asked about the timing for launching a social casino game now, both the online gambling industry (82 percent) and social/mobile developers (83 percent) believe there’s still room to get into the social casino game space. And both believe (42 and 57 percent, respectively) that
How do you feel about the timing for launching a social casino game now
social casino games are going to be around for a long time, and plan to build a business around it. You gotta be crazy to launch a casino-style game at this point The time has passed, not a lot of room for more players in this space - it’s a gamble It’s a little late as there is lots of competition, but there’s still room for more Timing is perfect - all the stars are
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 13
How do you feel about the timing for launching a social casino game now You gotta be crazy to launch a casino-style game at this point The time has passed, not a lot of room for more players in this space - it’s a gamble It’s a little late as there is lots of competition, but there’s still room for more Timing is perfect - all the stars are aligned 0%
10%
20%
30%
40%
Social/Mobile Developers
50%
60%
70%
Online/Land Casinos
Source: Clarion-Kontagent Survey.
Those who’ve already entered this space had different reasons to do so. Online casinos have created social casino games primarily to develop new revenue streams or to benefit from gambling being allowed on Facebook. Social and mobile developers, on the other hand, have created social casino games because others have been successful, or because of potential partnerships or acquisitions. Gambling on Facebook is perceived slightly more as an opportunity by social/mobile developers (39 percent), than by the online gambling industry (30 percent). Interestingly, the number of respondents opposing gambling on Facebook is the same in both industries (20 percent). Platforms. Both industries are very optimistic about the mobile space. When asked whether they were more optimistic about launching a social casino game on Facebook or a mobile platform, 64 percent of online gambling industry respondents were more optimistic about mobile platforms, as were 50 percent of social/mobile developers. Are you more optimistic about launching a casino game on Facebook or on a mobile platform?
I am more optimistic about Mobile
I am equally as optimistic about both
I am more optimistic about Facebook
0%
10%
20%
30%
Social/Mobile Developers
40%
50%
60%
70%
Online/Land Casinos
Source: Clarion-Kontagent Survey.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 14
How do you feel about Facebook potentially allowing cash-out casinos on their platform?
I am equally as optimistic about both
I am more optimistic about Facebook
10% 20% 30% 40% 50% 60% Regulation. A relatively small percentage0%of respondents in both industries think70% that real-money Social/Mobile Developers Online/Land Casinos and 14 percent gambling will not happen on Facebook (18 percent of online gambling respondents Source: Clarion-Kontagent Survey. of social/mobile developers) and a similar percentage opposed real-money gambling on Facebook (20
percent of online gambling respondents and 21 percent of social/mobile developers).
How do you feel about Facebook potentially allowing cash-out casinos on their platform?
I don’t like it - keep real money gambling off this platform
I am unsure about it - it could be good, but it may also present problems
I love the idea - we’ll all have more opportunity to make more money 0%
10%
20%
30%
40%
Social/Mobile Developers
50%
60%
Online/Land Casinos
Source: Clarion-Kontagent Survey.
Games. There’s a marked preference for slots over other games in both industries: 89 percent of online gambling respondents and 67 percent of social/mobile developers who’ve already launched a social casino game have launched a slots game. Among those who haven’t launched a social casino game yet, 46 percent of online gambling respondents and 42 percent of social/mobile developers would launch a slots game. If you were to plan on launching a social casino game, which type of game would you launch first? Other Sports Book Bingo Slots Blackjack Poker 0%
5%
10%
15%
20%
Social/Mobile Developers
25%
30%
35%
40%
45%
50%
Online/Land Casinos
Source: Clarion-Kontagent Survey.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 15
Other Sports Book Bingo Slots
When respondents were asked whether they agreed with the respondents werePoker asked whether they agreed with the statement, “Analytics are absolutely essential to statement “Analytics are running a successful social casino game,” 65 percent Social/Mobile Developers Online/Land Casinos absolutely essential to running a of them completely agreed. This could be an indication that companies realize the increasing competition in successful social casino game”, 65 this space, and recognize that one of the most effective percent of them completely agreed.
Analytics. Both industries agree on the importance
Blackjack of analytics for a successful social casino game. When
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Source: Clarion-Kontagent Survey.
ways to compete is through the extensive use of
analytics for data-driven development of their games. Analytics are absolutely essential to running a successful social casino game Completely Disagree Somewhat Disagree No Opinion Somewhat Agree Completely Agree 0%
10%
20%
30%
40%
50%
60%
70%
Source: Clarion-Kontagent Survey.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 16
5. Regulatory Aspects Regulation of social casino games. As we discussed before, regulation around gambling exists to protect players from fraud, from falling into addictive behaviors and as a source of tax revenue. There’s currently an ongoing discussion as to whether or not social casino games should be regulated. In the typical freemium social casino game, the player does not necessarily have to make a purchase in order to play. Furthermore, players cannot cash out their earnings. Therefore, social/mobile developers argue that there’s no need to regulate social casino games, and that if such a regulation were to exist, many other types of games would also have to be regulated. Some leaders of the online gambling industry [WH2012] believe that social casino games should be regulated, mostly to protect minors from developing addictive behaviors. It’s interesting to see that while the word “addictive” has a positive connotation among social and mobile game developers, it has a very negative meaning in the online gambling world due to the consequences it may bring to players. The discussion of regulating social casino games is bound to continue for a while. Legalization of online gambling in the U.S. The other key discussion around regulation is the legalization of online gambling in the United States. Last year, the Department of Justice issued an opinion that allows for the regulation and legalization of online gambling on a state-by-state basis [DOJ2011]. Since state regulations may vary, several states have already issued their regulatory framework for online gambling; others are working intensively on it. This regulatory and legalization process will likely open key markets for operators, and both industries are closely watching these developments.
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 17
6. Continued Convergence and Future Growth Based on the survey results, interviews and research conducted for this paper, we believe the following developments will take place in the social casino gaming space. Near-Term Developments. In the near term, it’s clear that the number of new social casino games will continue to increase. Leaders from the online gambling and social/mobile developer worlds have already launched, or are considering launching, more social casino games. Following the trend discussed previously, we expect more games, in terms of both quantity and variety, to be published on social and mobile platforms [DG2012a, DG2012b]. These games will be launched by individual studios, partnerships, acquisitions, or investments by established online gambling and land casino companies. Convergence Learning. As the two industries converge into the social space, it’s clear that the following developments will continue in the medium term: • Both industries will learn from each other’s expertise: The online gambling industry is expert at navigating regulation, customer relationship management and optimizing game mechanics for real-money wagering; social and mobile developers are skilled at launching appealing and engaging games with no cash-out options to a large audience, and at using the freemium business model. • Social casino games will become more social: Social casino games, as we mentioned before, do not always have a strong social component. [KF2012] Game developers can explore player interactions and sharing behaviors to create more engaging and monetizable games, where part of the value for players comes from the social aspects. Online gambling sites will also incorporate social features to make their players’ experience better. The wagering and freemium models can be used creatively to design new combinations of games. Lingering Questions. As these developments proceed, they create new questions that must be addressed by industry leaders: • Will the Facebook/Gamesys partnership in the UK work out well for both parties, and will it be a precursor of many similar deals? • What are the effective conversion rates of players from social casino games to online gambling and vice versa? • Will social casino games be regulated in certain geographies? The answers to these questions will shape the future of the social casino games industry. Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 18
7. Summary We started this research with a question: Are social casino games a threat, an opportunity or just hype? Even though a small part of the two industries sees social casino games as a threat, most of them see them as an opportunity, respondents have either already launched a game or are considering doing so, and believe they can make it a long-term business. This is a common view in both the real-money wagering industry (online and land casinos) and the social/mobile developer community. The market confirms this view. Many key partnerships and acquisitions have occured, and social casino games are becoming very successful both in terms of player acceptance and revenue generation. We expect the coming months to be very dynamic and interesting in this sector, not only because of the new deals and game offerings, but also because of the imminent merging of online gambling and social and mobile platforms.
REFERENCES [SD2012] SuperData Research, “Social Casino Metrics”, August 2012. http://www.superdataresearch.com/social-casino-metrics/ [H2GC2012] H2 Gambling Capital, “2011 H2 eGaming Dataset”, February 2012. [KF2012] Kevin Flood, “Internet Gambling’s Confused Definition of Social Gaming”, June 2012. http://kevinflood.blogspot.com/2012/06/internet-gamblings-confused-definition.html [DG2012a] David Gutierrez, Al Rey, “Casino Games Take Over Social and Mobile Games”, iGaming Business North America, September 2012. [VB2012] Dean Takahashi, “Casino Games Surpass Farm Games as the Darlings of Social Networks”, VentureBeat, April 2012. http://venturebeat.com/2012/04/27/casino-games-surpass-farm-games-as-the-darlings-of-social-networks/ [OM2012] Owen Martin, “Who’s Gaining Market Share in the App Economy?”, Kontagent Kaleidoscope, June 2012. http://kaleidoscope.kontagent.com/2012/06/29/whos-gaining-market-share-in-the-app-economy/ [DG2012b] David Gutierrez, “Data Analysis”, Social Casino Intelligence, September 2012. [WH2012] Ralph Topping, “Social Gaming”, Ralph Topping’s Blog, May 2012. http://www.ralphtopping.com/social-gaming/ [DOJ2011] Virginia A. Seitz, “Whether Proposals by Illinois and New York to Use the Internet and Out-of-State Transaction Processors to Sell Lottery Tickets to In-State Adults Violate the Wire Act”, DOJ, December 2011. http://www.justice.gov/olc/2011/state-lotteries-opinion.pdf [DG2012c] David Gutierrez, “Building Irresistible Social and Mobile Casino Games”, Kontagent Konnect 2012 User Conference, May 2012. http://www.kontagent.com/docs/2012-kontagent-konnect-conference-archive/
Social Gaming & Gambling Convergence – Threat, Opportunity or Just Hype? l 19
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ABOUT US ll Kontagent is the leading enterprise user analytics platform for social and mobile application developers, marketers and producers. Kontagent tracks more than 1,000 applications, over 150 million monthly active users, and in excess of 50 billion events each month for customers around the globe. The company’s proprietary platform, kSuite, has been built from the ground up to harness deep data pattern visualization and analysis that provides customers with 20 Social Gaming & team Gambling Convergence Threat, Opportunity or Just to Hype? valuable, actionable insights. Armed with this data, and combined with Kontagent’s of data scientists,–customers have the power betterl measure and optimize their customer economics and build more profitable enterprises. Founded in 2007, the company is headquartered in San Francisco with additional offices in Toronto and London. For more information, visit www.kontagent.com and @kontagent.
