Why Is Social Gaming So Important For Online Gambling Companies?

Via Kevin Flood, a very interesting article on the role of social gaming in the context of the potential legalization of online gambling in the US:

“…I indicated that social gaming should be a critical strategic consideration for any company interested in taking advantage of the future prospect of legalized online gambling. I also implied that even if US online gambling is not legalized or takes a long time to happen a serious look at  social networks and social games should be a part of any gaming companies strategy.

I pointed to the success of Zynga as an example of how a social gaming strategy has created perhaps the most successful online gaming company to date.

Despite Zynga’s  impressive numbers many of the people in the audience dismissed Zynga or any other social gaming company as irrelevant and inconsequential relative to online gambling. The reaction I received from many attendees was a bit shocking to me.

The argument’s they used to support their position are as follows.

1.) The majority of social gamers are under the age of 18.

2.) The social gaming experience is different then “real” online gambling.

3.) There is no money in social gaming. Revenue per player is very low.

4.) There are only a  “few” high virtual currency transactors in social gaming.

5.) Zynga’s lead generation to online gambling operators has been very poor.

6.) Social gaming companies do not know how to operate real gambling sites.

Although some of these arguments have merit others do not or are taken out of the context of the intricate online gaming ecosystem.

The following are items online gambling companies should take into consideration before they completely dismiss social gaming.

1.) Average Age Of Facebook Players -Just about everyone has a Facebook ID. The average age of Facebook members is now 35 years old and getting older. The 18 to 25 year old age group is a significant portion of Facebook membership. This is the perfect age group profile for online gambling. If you have every played in Zynga poker you will see (their pictures) that many of these players are the traditional age group for online gamblers.

2.) Social Games Are Different For Online Gambling Games – Yes the social game experience is different from an online gambling experience. Of course it is, because online gambling is not allowed in Facebook. Companies like Zynga have shrewdly decided to offer a game experience that matches the social environment. This is one of the reasons why Zynga has 250 million players and online gambling companies are not even close to these numbers.

3.) Social Games Will Change If Online Gambling Is Legalized – If online gambling becomes legal in the US and Facebook embraces it (which they will in a clever way) online gaming content in Facebook will change making it more gambling like. The gaming companies will not change their current casual offering. Instead they will offer a different game experience and upgrade casual gamers into the gambling operations. Even if the conversion rates is in the single digits the numbers are astounding. Also, Goolge, Apple, Yahoo, Amazon, EA, etc. and other major online companies that have large numbers of online profiled transactors will create online gambling games and seek to convert their current visitors to online gambling.

5.) Making Money In Social Gaming -Many online gambling companies that come to me to help them understand the social gaming world are appalled at the relatively small monetary transactions per player. They become discouraged by these numbers not realizing that if a gaming company can create a gaming application that has a viable social component and a good social network marketing strategy the shear numbers of players will make up for the lower transactions per player. No this is not an easy thing to do. However, if successful, social gaming can begin to pay for itself.

In contrast to online gambling companies, social gaming companies use a variety of game “monetizationr” techniques to make money from social gaming. In gaming advertising, virtual currency, virtual goods, lead generation for other social applications, etc. In aggregate these numbers start to add up. Virtual currency and good sales alone are climbing to rates equal to and exceeding online gambling revenue. It is estimated that the virtual world will be generating 5 billion USD per year in the not too distant future.

6.) Player Profiling And The Online Gaming Ecosystem – Treating  online gambling and social gaming players as distinct and separate individuals is not realistic given the large numbers of players engaged in social gaming. Inevitably there is an intersection between these two groups. In the past two years social gaming companies with the help of third party companies specializing in social network profiling have begun to take a look at all of the Twitter, Facebook, Google search, etc data to decipher the likes and dislikes of people on the web. Evaluating and making sense of this data is not easy. However, some progress is being made to provide hints as to the propensity of an individual to buy a certain product, play a certain game, travel to a specific destination, etc. There is still much work to be done to in this area and privacy issues abound. However, with the increasing amount of information we are all contributing freely to the Internet there will be a time when  profiling will get to a point where we can successfully to move players to and from different environments with a high degree of accuracy and increased moneitization.

7.) Marketing And Player Acquisition On The Social Web – An online gambling company has to learn how to market to players within the social web even if they believe that social gamers are not the target audience. Everyone is in a social network of some kind and online gamblers are no exception. Developing a productive and effective social networking marketing program is non-trivial and requires a very different approach then tradition web, affiliate, e-mail, physical, etc. marketing. Ironically, social games are one of the most effective ways to market products and services because they do have the potential to get close to a truly viral application. This is the holy grail of social marketing and and should be a goal for online gaming companies even if they never launch a social game of their own.

8.) Social Games As A Separate Business Unit – At the ICE conference in London this year I had the opportunity to help organize a special session on social game monetization.  It was revealing because it came to light that traditional gambling companies like 888 and BetWin are creating separate social gaming business units not related to their gambling properties. These companies realize that the future of online gaming is within social networks. This is where the growth and innovation will be. They want to be in it and be just as successful as Zynga and other high profile social gaming companies.

It is clear that  many online gambling companies do not fully understand the importance of  social networks and social games in the context of online gambling and distinct social gaming applications. Some of them do and are taking steps to explore how to be successful within social networks and to launch social games that can stand on their own taking advantage of the social graph. This space is certainly evolving quickly making it more difficult to get into the social space and establishing expertise and brand awareness. Despite this a presence in social networks is becoming mandatory for any company wishing to maintain market share and to grow. The sooner an online gambling companies embraces this reality the better off they will be.”

This entry was posted on Thursday, June 2nd, 2011 at 6:45 pm and is filed under Blog.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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