Opinion: Social gaming - There are more questions than answers

Social gaming has seen a growing number of real money players invest in its potential, but there is no definitive answer to success says Simon Murphy, head of gambling EMEA at FremantleMedia Enterprises.

At the time of writing, everybody I spoke to was fixated by the development of “freemium” business models for slots and bingo as a means to either explore a new business model within Facebook or as a way of generating a meaningful base of otherwise untapped players that, at some point in the future, they hoped to convert to play for real either in the UK or, even more interestingly, in the US.

Between then and now, the frenzy of activity has heightened with the promise of untold riches. Undeniably exciting stories of companies being set-up and sold within a very short space of time have further compelled the industry to embrace convergence and social in particular as their number one priority and answer to all known problems.

And then the inevitable happened as Gamesys announced that it had beaten everybody to the punch and launched the first real-money product on Facebook.

Firstly, let’s ponder the business model for real-money and the associated value chain. Companies such as Gamesys have significant experience, technology and a legal track-record in order to be able to offer these types of player experiences and they understand the cost of doing so.

Unlike Gamesys, however, the majority of licensed operators partner with companies that sit at various positions within the real-money value chain. This includes games developers, platform and payments providers and IP owners. All these entities take a cut of the proceeds generated from games and will continue to do so via Facebook.

Then you have to factor in marketing costs “ which still need to be invested in for games to be successful on Facebook “ and player winnings, including any applicable taxes, and the share payable to Facebook. At this point you start to get a picture of the challenges associated with making the margin work.

Now, let us consider the types of and design of games that work for real-money, compared to within social environments.

Real-money games, and slots in particular, are typically basic products that require good mathematics and gameplay in order to engage users in a journey that is broken up by volatility of wins and losses. Getting the journey right requires significant experience and even the best game developers cannot guarantee to get it right every time for every type of player.

Social games tend to be more experiential in order to drive continued engagement. They also have different elements resulting in games becoming viral with the psychology of sharing common, whereas, within real-money, anonymity

is the comfortable norm. This makes creating a game that converges across multiple channels harder to imagine.

It is also worth mentioning that where RTP can be more than 100% for a freemium game, it needs to be in the nineties and very carefully calibrated in a real-money format.

Then comes the target audience. Facebook users have almost certainly been online longer than Facebook. If they have not gambled online already, what is it about Facebook that will drive them to do so now?

Will players migrate from social to real-money in significant numbers? For those that do, will their spending patterns match what we are used to?

What if a social player benefits more from seeing a non-cash prize over hard cash “ how does this change the game dynamic and maths models? Does the player even perceive this to be gambling or can it be structured to feel like a game? If so, how does that impact regulatory positioning?

Another factor to consider when addressing a new wave of potential players is what type of brand players will gravitate towards. In the early days of online casino and sportsbook, pureplay online brands such as Blue Square, 888, PartyGaming and Betfair were conceptualised to meet the needs of the early internet user. Drawing a parallel, how will existing multi-channel and/or online wagering businesses position themselves to a new social-media enabled group of customers?

Will it be necessary to create new brands that identify with this audience in order to compete with pure-play social gambling entities? In terms of capability sets, it looks as though mergers or acquisitions offer the most likely way of achieving a blend of social and wagering expertise.

There is no definitive answer to success in social gambling; not yet at least. Many companies will spend money in order to be victorious. Some may succeed to varying degrees while others will fail.

Perhaps it will be early entrants who invest up-front that succeed either from a social background or via partnerships. Perhaps those that wait, allowing the market to mature, will be the victors.

The final question for now, but by no means the last, is how long will this take: six months or five years? No one can know for sure, but perhaps those who are doing the most thinking about all of the previous questions will be best placed to know before the rest.

Bingo Facebook FremantleMedia Enterprises Gamesys Opinion Simon Murphy Social gaming

Opinion: Social gaming - There are more questions than answers

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