SOCIAL SUCCESS WANT WANTED
Why online operators have only just begun to take social seriously
S O C I A L S U C C E S S WA N T E D F E A T U R E
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t is no secret that social networks and the social games developers and studios that have sprouted as a result of Facebook’s success are making more money and selling their ?edgling ?rms for more cash than they could ever have dreamt of. Since Facebook moved to Palo Alto in California, the San Francisco area has become a hub for social and mobile games and increasingly social gambling developers, however other areas of the US and equally the rest of the world (predominantly Israel) have produced businesses such as Buffalo Studios, Blitzoo, Double Down Interactive and Slotomania with the latter two companies selling for a combined initial fee of close to $400m. And that is without any earn out deals kicking in. These revenues and fees are being paid for a reason. Despite investing more in new products, talent and acquisitions, in 2011-12 Zynga, for example, announced record annual revenues of $1.14bn, up 91% year-on-year, while social gaming analytics firm Kontagent recently reported that so far in 2012 social casino game players account for 13% of all of players on Facebook, compared to just 8% in 2011 and 6% in 2010 – the first time they have overtaken Farmville-style games on the world’s largest social network. Their worth does not end there. According to Jeff Tseng, Kontagent’s chief executive, social casino games now have a higher-than-average revenue per user, 40% higher than a typical social game with around 98 million active players for social casino games out of a pool of global 780 million social game participants.
M.I.A So where have the traditional online gaming operators been while this social activity has been taking place in the past seven years? The majority have been concentrating their efforts on their home markets, attempting to break into other newly regulated and regulating territories and to differentiate their services in one of the most competitive e-sectors. But the success of social games particularly in the last year, their enormous appeal, the gigantic volumes of new social gamblers and potential real-money customers has, in recent times, diverted their attention to what can only be described as nothing short of a phenomenon. As in every industry there were a handful of early adopters who either invested (Betfair) or set the standard (Betclic, Gamesys, Caesars Interactive) for others but with varying degrees of success. Then came those that embraced the Facebook generation – adapting, marketing and generating a free-to-play and/or virtual credits paying audience on the 800 million-strong social network often with strong conversion rates and their eyes on a potential cash offering on Facebook in regulated markets, such as the UK. Finally there are, if politely put, the ones to watch or, in harsher terms, those that have been missing in action and that have only just switched onto the fact social is an area worth exploring. Bwin. party and 888, for example, have recently said they are preparing to re-invest in social gaming with the former suggesting it is looking to acquire a business to compliment the launch of its eventual social strategy, while 888, despite writing off its Mytopia brand last year for around £20m, is known to be re-investing in social after seeing signi?cant revenues generated in the last year. Over the next ?ve pages, eGR examines why so few operators and large suppliers have invested in social up to now, the strategies they have employed and what options are open to them as the race heats up to exploit this growing phenomenon.
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