May 6th, 2012
Via Kevin’s Corner, a report on the recent GIGSE conference and the rise and influence of the “social casino” in the context of US legalized Internet gambling. As the article notes:
Muddled Direction On Legalization Of US Internet Gambling – Despite all of the hand waving and breast beating by legislative representatives and proponents of legal US gambling the timing and characteristics of actual enactment of gambling law are still unclear and subject to speculation. Will the states or federal government move first? If so when will businesses be able to launch online gambling sites? If both state and federal governments move to craft Internet gambling legislation how will these two approaches co-exist? Despite this confused state of how the laws will unfold businesses are seriously moving forward with plans to address the eventuality of legal gambling in the United States Of America.
Land Based Casino Operator Strategy (non-Indian) – The big casinos in Vegas and the larger regional casinos are cutting deals with existing European online gambling operators and vendors to be prepared for the day when Internet gambling is legal in the US. Bwin, Playtech, 888, etc are all in play. There was no evidence that the land based operators where in the process of building their own Internet casino platforms. Clearly, the land based casinos realize that they do not have the expertise to build, run and maintain Internet gambling businesses. However, there is a question in the minds of many people as to whether this strategy will ultimately help launch European brands in the US at the expense of the US casinos? Time to market is a great motivator. However, in the end the casinos have to learn how to own and operate online gambling operations to be successful.
Land Based Approach To Marketing Online Gambling Properties – Despite the fact that land based casino operators will largely be using third parties to operator their online business they do believe that their land based player databases are a potentially good source of leads for their online properties. Some people and even the casinos themselves questioned this assumption. This begs the question. Do land based gamblers play online? If so, what is the percentage? If they do not or the percentages are low how will the casinos build an online marketing team to attract players to their properties? Can land based award systems be integrated with Internet gambling operatations to encourage moving traffic to and from land and Internet gambling properties?
American Indian Nation – The American Indian tribes represented at the conference where very honest about the potential opportunity and challenges associated with Internet gambling. Their biggest challenges are their fragmentation and their lack of experience with any online gaming activity. This includes casual, social or Internet gambling games. Their fragmentation is an issue because it will impact liquidity and management of Internet gaming properties. Internet gaming can consolidate quickly around high volume properties. The Indian nation will have to pull together tribes across the country if they want to seriously compete in this space. If California is one of the first states to legalize online poker the California tribes will be forced to host one poker room and hope that they can win this battle. In the end the tribal leaders will have to pull in Internet gaming and general internet application, marketing and hosting expertise very quickly if they expect to be successful in this space.
The Social Casino – It is no secret that some of the big land based casinos and IGT are all in when it comes to the social casino. They believe, even in the absence of any immediate change in Internet gambling law, they have to position themselves as leaders in the online social casino and gaming space. Other members of the GIGSE audience were not as convinced. It was clear from many of the questions asked at the conference that a large percentage of the land based gambling community does not understand the online social gaming space or its potential relationship with the online gambling market. This is surprising given the wholesale adoption by European online gambling operators of social gaming. Many of them have launched properties in Facebook. The critical thing for all operators to understand is the relationship between social gamers and Internet gamblers. What is the overlap(if any) and how do you use both environments in tandem to attract, retain, monetize and up sell players.
It should also be noted that Wynn resorts is rumored to be cutting a deal with Zynga to launch and manage their for money Internet gambling operation. Obviously, the Wynn people get the connection between social and traditional Internet gambling.
Facebook – For the first time in GIGSE history Facebook representatives were at the GIGSE conference. They were very open about it having a cocktail party inviting key individuals from the conference. It is clear that Facebook is not only interesting in hosting social games. It is also interested in getting involved in hosting gambling games within Facebook. It is difficult to determine how they are going to monetize gambling games in Facebook. They were certainly pushing their advertising model. However, they may decide to take a percentage of the gaming transactions, similar to their 30% fee for virtual currency transactions.
Gaming Startups – The Launch Pad event this year featured game and gambling startup companies interested in raising capital for their ventures. The contestants gave excellent presentation with Use It Better winning the audience and judges thumbs up. Use It Better is an interesting company because its focus is on game analytics with the goal of optimizing a game to improve player retention and monetization. Clearly game analytics has emerged as one of the more important sectors in the gaming space due to the extreme competition that exists for social and Internet gamers. The other favorite of the judges was a cross over gaming company called Virtual Gaming Worlds. This company embeds gambling content within its virtual world. It allows people to create their own virtual worlds and add gambling slot machines and other simple gambling games in their properties. This allows the person that created the world to generate revenue from their gambling operation. The idea is clever and fun and very likely to grow large profitable communities.
In conclusion, the light bulb has been turned on as it relates to US Internet gambling. We all know it is coming. We are unsure of what form it will take. Despite the lack of clarity businesses of all kinds need to understand how to run US based Internet gambling operations and either dominate the space or carve out a lucrative segment of the market. First to market will be very important if not the primary factor influencing the success of a US based Internet gambling property.
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