Where The Grass is Always Greener

It seems like recently there is a constant restlessness among games development companies in both the casual games and the real money gambling arenas. It's interesting to see how each side is viewing the other one as more profitable and is trying to expand into that direction. The reasons for each are different, but the final purpose is the same - making more money.

The Real Money Games Industry

Let's start with the real money games market. This market has been around for much longer than the casual games one. We're talking about over two decades of experience. It's well known that this was a very profitable market up until now. From the other side, it's one of the most competitive markets on all online marketing channels, including SEO, sponsored ads and media buying. But that's not what making people from that industry checking out the casual games one. The main problem that they're facing has only started a couple of years ago and is growing rapidly - regulation changes in the European market which are making this market a lot less stable than it used to be. A friend of mine, which owns the soft games brand Winnings.com, says that as an authorized gaming brand, if you wish to target countries that are now regulated, your costs sky rocket. You have to add, on top of all existing costs, legal expenses, a first time registration fee, a monthly fee, higher taxes etc. And this is for the countries that allow outsiders to operate in their market. There are some countries like France, which limit the number of companies that can operate locally. Each country is different and demand unique considerations and adjustments. This makes all companies, big or small, reconsider the length they're willing to stretch their current expenses while relying on future revenue. Small companies will probably close down and the big ones are forced to find quick solutions with more countries that are expected to go through the same regulation process like the Netherlands or Sweden.

One of the main solutions is moving into the casual games industry. At first glance this move makes sense since they have most of the technology, marketing experience and a brand visibility. However, it's still a risky move, since the casual games industry is very different from the real money one in many aspects. Things like player's value, lifetime revenue, incentives, conversion funnel and the list goes on. So although the two niches seem the same, they actually have a lot more differences than things in common.zing

The Casual Games Industry

For the casual games Industry, there are other challenges to face. The fact that the player's value is relatively low makes most marketing channels return a negative ROI. This is because of two main reasons - lower average of deposit amounts and a shorter life span per player. To be profitable you must have at all time a huge database of active players which you have to communicate with, offer support, incentivize in new creative ways and so on. And this is without even mentioning the initial investment and risk you take when developing a social game and first launching it for mobile and Facebook or both. Another big challenge is the platforms those game developers work on - they have to adjust themselves to changes in code, policies and marketing options for at least the main platforms: iOS, Android and Facebook.

For that last challenge the solution was easy and has already been implemented by different brands out there - launching a web version of the game which detaches it from its platform dependency and allows it to grow independently using the same marketing channels plus new ones that couldn't have been used before like SEO or PPC.

But this still leaves us with the first issue of low player value. Once you've tried all possible means of monetization, you start realizing that there's a limit for how much money you can get out of a player that plays Angry Birds or Candy Crush Saga. Even big brands like Zynga poker are starting to see a drop in revenue. The solution that they came up with is switching to real gaming. It's still not clear what will become of their cooperation with Bwin.party, but the trend is clear - casual games developers want a piece of the real money games action.

This solution is interesting, but brings up many new problems with it. Other than the ones mentioned above regarding marketing issues, user behavior and so on, there are legal issues in hand. Zynga, for instance, is a public company with shares in the US stock market. They can't just decide to turn to gambling without regarding the consequences of such a step. They can turn to the UK market, where real money gaming is legal. However, that market is highly saturated and Zynga will be dealing with veteran that already have a bigger market hold and more experience in this field.

There's no easy answer here. Since the casual games industry is fairly young and, from the other hand, the real money games industry is going through massive changes, there's no telling which strategy is the winning one. However, it's interesting to see how these two industries will look like in the next couple of years.