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Thursday, May 17, 2012

Step 2 - Preparing For US Internet Gambling - Should You Launch A Freemium Game Site Before The Legalization Of US iGaming?

In the absence of legal Internet gambling in the US many businesses have opted to launch freemium and pseudo freemium(virtual currency, virtual goods, skill and subscription games) gambling style games in Facebook, on the web and on mobile devices. Many of these businesses are pondering launching real money gaming sites when the legislation changes. Others are perfectly happy operating freemium only business model after Internet gambling becomes legal in the US.

 Business that have not launched freemium sites and are most likely to get Internet gambling licenses are wondering if they should launch freemium gaming sites now in anticipation that there is value to having a freemium offering before and after Internet gambling licenses are issued. Other businesses are ignoring freemium all together and are going to wait for legal US gambling and then launch real money gambling properties. Given these different approaches and business philosophies concerning freemium versus real money what are the motivating factors for having, or not having freemium offerings before or after Internet gambling becomes legal in the US?

Building Internet Gaming Expertise - It seems to me that it would be very difficult for a business to be successful in the Internet gambling space if they had no prior experience  operating any consumer oriented Internet properties in the US prior to legalization. Preferably, a business should have some online gaming experience and  US gaming operational acumen underway prior to the legalization of Internet gambling that  can be leveraged when US Internet gambling becomes legal. Freemium games could be a way to develop this operational expertise. Granted "real" gambling and freemium gaming are different with potentially different audiences, cost of acquisition and revenue per player, etc. Real Internet gambling will also  have a host of regulatory constraints that freemium games do not and these regulations will have a significant impact on operations. However, despite these differences there are operational benefits to launching a freemium site in advance of legalized US gambling.

Internet Marketing To Gamers - Learning how to market to online gamers before Internet gambling becomes legal will certainly give businesses a head start when legislation is enacted. There are a host of Internet marketing skill sets that will have to be a staple of an iGaming marketing group prior to legislation.  SEO, affiliate marketing , E-mail marketing, social media marketing(Facebook), Yelp, Groupon, web and mobile platform advertising, etc. are just a few of the marketing skills that will be required upon launch of the first iGaming business in the US.  In addition, to these standard Internet marketing skills games themselves have their own unique marketing programs. One of the more popular ones, especially in Facebook, is advertising a game within another game property as an ad or as a branded piece of content. Sorting out the cost of marketing before iGaming becomes legal will be important for business units of companies preparing budgets and business plans for an iGaming launch. The cost of acquiring gambling players in Europe through affiliate networks will astound most Internet marketing executives in the US. 

Will Freemium Players Crossover to Real Gambling? This might be one of the most hotly contested questions in the minds of land based operators and current freemium game operators in the US. Many European Internet gambling operators have  launched freemium offerings!! There must be a reason for this. Certainly one of the reasons is to develop profiles around freemium players to determine who is most likely  to convert to real gambling. Conversely, what is the player flow back and forth between freemium and real gambling experiences. How do you optimize conversion for these players and how do you keep real gamblers from leaving your property when they no longer have the funds to play for real money? Can freemium stand on its own as a business model?

Payment Processing For Game Sites - Obtaining a payment processor and managing the payment process for a pseudo freemium game site is significantly more challenging compared to an e-commerce site. It is also very close to the challenges that "real" igambling properties face.  Just getting a processor and gateway to handle your pseudo freemium business can be a challenge. Dealing with charge backs and managing the relationship between banks, processors, gateways and customers is something that should not be underestimated and a  skill that should be mastered before taking on igaming in the US. 

Freemium/Gambling Gaming Technology - The game space moves very quickly in regards to game design, tool sets, platforms,skill sets for developers and development processes, etc.  A static enterprise approach to managing a game technology platform and team is probably not the best way to manage an Internet game technology team. A/B testing is common with new version of games or game features being tested regularly. Game sites can experience extreme spikes in traffic especially with social games such as poker or bingo. Learning how to host, expand and contract you platform and still run a profitable business that satisfies player expectation for up time, response time and reaction to system failures before you platform takes a real bet is a good idea. iGaming specific capability such as age and location ID, ssecurity security, intrusion detection, RNG and other forms of external auditing and monitoring all can be vetted in a Freemium environment. 

Customer Support - Customer support for gaming sites is actually very important given the viral nature of information transfer, impact on a persons wallet, a players passion for a game and the overall game experience. The reaction time for an issue with an igaming platform could make or break an igaming business. It is best to sort this out on the freemium side before an organization takes on a full  iGaming player base.

Culture - The culture of an igaming operation is significantly different then the culture of a land based gambling operation. Certainly the existence of regulation in an igaming operation will bring these two cultures closer together. However, the rate of change in the Internet space is not going to slow down just because of regulation. Inevitably, regulators and traditional land based operators  are going to have to adopt to this new and relatively fast moving business sector if they are going to be successful in the space.

Clearly, the freemium gaming space is a good place to start when it comes to the march towards an environment where Internet gambling is legal in the US. In fact, a freemium game business can be profitable in its own right giving operators an opportunity to broaden their overall consumer appeal. Waiting to the last minute to launch any kind of online business could work to the disadvantage of iGaming operators that choice this direction. At the very least, the decision  to launch or not launch a freemium  site before the law changes should be discussed within an organization and a decision made based on the facts and not on bias or conjecture. 

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes  about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.  

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