Casino operators and investors are now looking into online gaming both as a game saver for stalled operations and as a good potential investment in these times of crisis. So just what is the best option, should you head down the online casino road, or opt for the much hyped option of social casino games? For me, having been in the online industry both as a consultant and owner operator since 2001, it’s a no brainer, I’ll take social casino games every time and this why.
Social Casino Gaming is booming, in 2018 the global social gaming industry generated a whopping $110 Billion in revenues, with the social casino gaming segment generating $5.5 billion in revenues. Not surprisingly China, Japan and Korea generate 90% of the games revenue in the Asia Pacific region. After North America, Asia is the second largest social casino market with revenues of around $900 Million, and that number is growing with an eye popping 250% YoY growth. JP Morgan estimates in the coming year we will see 8% – 10% revenue growth in the Asia pacific region alone.
Over the last couple of years, eager to build out and promote their brands, savvy land based casino companies are spending huge amounts to get into social as they recognize the easy branding opportunities with excellent cross over promotions and the opportunity to build out their data bases. Given the huge costs and licensing restrictions associated with operating an online casino site, working with a good social casino platform makes a lot of sense.
The most popular games are slots, bingo and poker which are easily played on mobile devices. Over the past couple of years there has been a definite and pronounced shift to mobile platforms, this reflects a move away from PC based platforms where social media giant Facebook, which in 2012 and 2013 was estimated to have 59% market share, today has an estimated 23% market share. The mobile technology today means fantastic graphics with great sound quality which make the games all the more addictive, which at the end of the day is what the publishers are looking for. Sticky games with addictive qualities is what it’s all about, and publishers don’t have to reinvent new games to meet these goals.
In terms of game development over the past 5 years there really hasn’t been any new game innovations or additional game upgrades, after all the core basics of a slot, bingo or poker game are already there. Slotomania although being the oldest social slot game on the market is today still the most popular offering with more than 20 million likes on FB. In terms of publishers, Playtika remains the largest social casino publisher and the most popular of the social casino portals with around 29% market share, closely followed by Double Down and Scientific Games at 8%, with Zynga and Madfish coming in with around 7% market share each.
In terms of regulation, there isn’t any as social casino gaming with no prize or payout schedule is not considered to be gambling also very few people understand the difference between gambling and social games. Interestingly only recently we have seen China move to ban all forms of social Texas Holdum Poker, in the U.S. however gambling requires the presence of three elements: consideration, chance and some sort of prize. Players bet on the outcome of an uncertain event to win a larger amount. Social games are not gambling, if they eliminate one of the three elements. And the very positive flow on is that establishing and integrating payment solutions are headache and hassle free.
Because the games are not regulated, operators are free to set the odds at any level they want. In fact, these games are almost never truly random. Game developers don’t want players to get bored, so the game becomes easier if a player is stuck at one level, or on the other hand harder if the player is winning too quickly. This Dynamic Game Balancing (“DGB”) is done automatically, because game designers want players to be hooked and these games are addictive as a result.
So if it’s not gambling how to social casino game providers generate the large revenues we see today?
There are basically three revenue models:
- FREE, WITH IN-APP-PURCHASES (IAPs) – The most common and lucrative model. Distributing a free, entirely open-access game attracts players to download. Once captivated, IAPs offer additional credits, discounts and incentive chances to skip ahead or enhance the playing experience.
- FREEMIUM Apps – Freemium apps involve some form of ‘upgrade’, perhaps to unlock exclusive levels. Non-game apps, particularly media providers, often use this model in the form of a ‘paywall’ protecting premium content.
- PAID / PREMIUM – Pay your money and get your game. The old fashioned way. Parents, many of whom have decried IAPs as honey-traps, rat this model. Minecraft, for example, is a global smash hit, and can be purchased once and played almost infinitely.
Savvy and successful operators optimize trigger activities and focus on micro data detail for example, what prompts a player to purchase an IAP? Trigger activities like getting stuck on a level, or having to wait 30 minutes for some seeds drive IAPs. Understanding how these trigger activities work, and analysing individual or macro-level data is critical for showing the right paid products to the right players at the right time.
For operators today the main challenges are the rise of the user acquisition and ongoing development costs. Compared to running an online casino site these costs are still much lower, but never the less as any operator will tell you having good marketing strategies to fish where the fish are makes all the difference between success and failure. Not only do social casino developers have to compete with their direct competitors, but also with successful online operators, land-based casinos and other social or mobile game developers that are looking to enter the social casino markets. The key is to focus on new markets and opportunities such as Asia. In addition, developing new distribution channels beyond Facebook, iOS and Google Play as well as continually working on product innovation is a must.
So long story short, social casino gaming is a rapidly expanding market segment with new and emerging markets like Asia as the best bet to get in and be successful. Evidence of this fact can be seen from the recent sale of Playtika. Under performing and picked up for $90 million by Caesars Entertainment, after only 3 years it was sold off to a Chinese consortium for a massive $4.5 Billion. As they say a rising tide lifts all boats, and that something we are definitely seeing through the Asia Pacific region. My advice if you’re considering a move into online gaming space particularly with lockdown and social distancing requirements, is to get into social now!