Social casino games are attracting more players -- and more dollars -- than any other social gaming genre right now, but is the video game industry ready to dive into the "other" kind of gaming yet?
Casino-style social games are growing faster than any other genre, but are you prepared to take the plunge? We asked Superdata Research CEO Joost van Dreunen to tell us about the current state of social casino games. As perhaps one of the most misunderstood genres, casino-style games are tremendously popular among social gamers. Classics like poker and slots draw large audiences, comparable to that of FarmVille and Candy Crush. And there certainly has been no shortage in headlines. In early 2012, IGT acquired Double Down Interactive for a whopping $500 million. A few months later Caesars Entertainment bought Playtika, the company behind Slotomania, which has 8.9 million monthly active users and an estimated $18.3 million in monthly earnings. And market leader Zynga is rebuilding its share price by expanding its social casino efforts and by hiring executives from the gambling world. With all this activity, it is time to take a closer look and see where we, as an industry, want to take social casino games.
Since 2010 the total number of people playing social casino games has doubled, and today represents roughly one-third of the entire social gaming audience. In terms of revenue, the average social casino game player spends roughly twice as much as the average social gamer. Our most recent numbers show that the average revenue per paying user among casino-style games was $69.13, compared to $35.82 for social gamers (November 2012). Overall, American social casino players spent $698 million in 2012, making the U.S. the biggest earner in the $1.7 billion worldwide market for social casino games. And even in the most conservative scenario, the total market is expected to reach $2.7 billion by 2015. Social casino's success is in its ability to target an older, non-traditional gaming audience. While poker's audience does overlap with the traditional gamer with a 71% male audience with an average age of 27 years old, slots and casino style games reach a much older audience with an average player being in his late 30s. Bringing this demographic into social gaming fold has been the key, because these players typically play more intense games and tend to be loyal to their titles.
Unsurprisingly, a host of companies is actively pursuing this audience. Roughly, there exist two groups. On the one hand, there are the social game companies that see an opportunity to make money off this casino trend. After the explosive growth of social gaming in 2011 and early 2012 started to wane many -- especially small and medium-sized --game companies began looking for new ways to make a living. However, one does not simply walk into Mordor social casino. Developing a slots game algorithm, for instance, is a complex task, and requires a lot of mathematical expertise. Traditional gambling companies employ vast armies of PhD-equipped mathematicians to develop an appealing game experience. Obviously this has not deterred many developers from releasing slots games. But in an already crowded market it is very difficult to compete on product, especially against companies that have decades of experience in building these games. Beyond the math, it's difficult for smaller developers to attract a large audience base. Similar to other game genres on Facebook, success largely depends on the ability to cross-promote effectively (acquisition) and keep people playing (retention). At this point in the game, guaranteed riches can only come by being acquired, and that window is closing rapidly. On the other hand there are the land-based casino operators. This group of companies has long struggled with a public image issue, and online gambling is illegal in the U.S. From their point of view, social casino provides an excellent acquisition tool to draw players to online, real-money destinations. In a recent article in the Wall Street Journal, Greg Enell who oversees Double Down, stated: "The thinking is that social gaming is a mechanism to build a large gambling-oriented audience now, so when elements of online gambling start to be legalized in U.S. we will have a big audience online." Their most important question is: What percentage of social casino players will convert to real-money gamblers? In our December issue we found that social casino players and gamblers are overlapping audiences. Over a third already visits a land-based casino more than twice a year, and two-thirds thinks real money gambling should be allowed. Despite this enthusiasm, the thing to remember is that even if the U.S. starts legalizing online gambling -- and it's a big "if" -- its tax structure will be heavily skewed against the interests of casino operators.
After an explosive rise on social networks, casino games are now also cropping up on the mobile platform. Several of the key earners on iOS are slots-type games, for instance. But social casino is not a quick answer to either declining revenues or an aggressive acquisition strategy. What it needs, however, is innovation. Poker games and bingo cards are easy enough to produce. But it is a real design challenge to innovate on an existing concept and to come up with a new spin on a classic game. Transplanting existing game mechanics into a new platform, as generally happens, is only the first stage of a new genre emerging. One of the key developments to look for in 2013 is who manages to offer a unique take on the classic casino-style games. Finally, beyond the jingle of the online and mobile slot machines, social casino might prove to be the ultimate test of maturity for the industry. The dangers of gambling addiction need no explanation. But similar to the debate on video game violence, to which the industry responded by imposing a system of self-regulation, social casino games require the leadership of key companies in the ecosystem. Will Apple allow gambling on iPhones even if the U.S. government legalizes it? What's Facebook's policy on serving social casino ads to minors? It is unlikely that a red-light district will emerge in the midst of our online social activity, even if incidents like Scamville from only a few years ago suggest that companies will undoubtedly try. The current momentum behind the genre and the growing appetite for rich social game play invite both small and large companies to jump in. Perhaps against the odds, my money says the industry is mature enough and has a strong enough shared interest in developing a sustainable ecosystem. And looking at the industry's history to do the right thing, its self-critical approach and vast armies of creative independent developers, it's a bet I'm willing to take. Are you?
Joost is fascinated by games and human behavior. He has over fifteen years of commercial research experience in interactive entertainment and technology industries, and was also one of the first academics to study video games. After receiving a doctorate from Columbia University on the topic, he founded SuperData to help the games industry better understand online, mobile and digital games. In early 2010 the company secured multi-year seed funding and today SuperData is a leading games industry researcher. Clients include publishers such as Electronic Arts, SEGA, and Pokemon as well as all the major Wall street firms. In addition to his business adventures, Joost also teaches at the NYU Game Center, and and regularly speaks at both academic and industry conferences, including GDC, Casual Connect and Social Game Summit. He lives in the East Village in New York, with his wife Janelle.
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