Social Gambling (i.e. Zynga Texas-Holdem Poker, the world’s largest poker site of any kind) has been around for years now with virtual currency, but only recently has the media picked-up this theme and started playing around with it, drawing parallels to social gaming, and suggesting the Zynga might actually switch to real currency.
Investors and corporates, however, have been going back and forth with this for a while now and a few recent acquisitions in this space include Playtika and Double Down Interactive.
Harrah’s, a unit of Caesar’s Entertainment Corporation, acquired 51% of social games developer Playtika Ltd. at a company value of $90 million. This acquisition is astonishing by almost every measure, as it is the largest acquisition of an Israeli online gaming company, and for a company that has been around for less than a year(!). Meanwhile, Double Down Interactive, creator of multi-game app Double Down Casino, was just bought by International Game Technologies in a deal worth up to $500 million.
The potential in Social Gambling should come as no surprise to anyone.
Gambling is inherently social (think about any casino game, other than maybe slot machines), and social gaming (i.e. Farmville) has much in common with gambling.
One very good example of how close social gaming is to gambling, and how it basically triggers the same kind of brain reaction, was recently posted here.
See if this sounds familiar to you: To play, you put currency into the game. You then pull the knob and wait for the result. When the result is presented, you are rewarded with a cacophony of exciting sounds, attention-grabbing images, and some form of currency. You also have the opportunity with each play to win a rare prize of significantly higher value than the value of the currency you contributed to play the game.
That sounds a lot like a slot machine, right? Wrong. It’s the basic action loop in FarmVille.
Here is the same description again, but this time, with FarmVille specific details: To plant a crop, you must first spend resources on the seeds. You then plant the seeds and must wait for them to grow. When you harvest the seeds, you are rewarded with a cacophony of exciting sounds, attention-grabbing images, and some resources. You also have the opportunity with each play to win a rare prize of significantly higher value than the seeds that you purchased.
Couple that with the distribution channels available in Facebook and other Social Networks and here comes “Online Social Gambling”. Many online gambling sites have been dying to leverage the social customer acquisition channels for ages now, but have been barred by Facebook’s reluctance to approve gambling content, to avoid legal complication in the US. Those companies are more than willing to pour billions of dollars into customer acquisition in Facebook, just because they knew that they will optimize those acquisition channels to reach a rock-bottom customer acquisition cost. Social will also help drive stickiness and time spent, increasing the customer’s life-time-value in the game.
With the new Obama administration ruling that opens the door for states to allow some online gambling we are bound to see a slew of companies move aggressively into this space. Some of the more obvious candidates include PartyGaming.com, traded on the London Stock Exchange; Betfair, and other operators, like Bodog, Bet365 and 888.com. After all, there are billion of dollars to be made in this business…