It became apparent in this year's GIGSE conference series how important it is for all three major gaming stakeholders in the iGaming space to work more closely together if any of them are going to reach their full potential in the evolving world of online gambling in the USA. Certainly, iGaming business models that focus on their own particular silo, post legalization of online gaming in the USA, can have successful businesses. However, as time progresses and more operators begin to launch multi-disciplinary gaming models these mash-ups will create a formidable challenge to singularly focused gaming business models.
Each of the three main gaming business sectors have their challenges and advantages when it comes to the gaming eco-system primarily because games as entertainment have evolved to the point where there are a number of options for players causing the marketplace to segment. This is especially for players seeking an online gambling experience. One can argue that social gaming is not gambling for a number of reasons. However, these reasons are irrelevant because so many players are experiencing "gambling" style games in a social gaming context that this form of gaming does and will have have a very significant impact on Internet gambling and land based casinos in the US.
So how should each of the three main gaming silo's move forward as the US opens its doors to regulated Internet gambling?
Internet Gambling Companies – This group is dominated by European operators that in some cases have been in business for 20 years. These operators know their European consumers well, have mature marketing programs, great fraud detection and management systems and a close relationship with European gambling regulators and political proponents of European gambling. However, they do not understand the US consumer gaming market, do not have preferential relationships with US regulators and have not necessarily targeted US social casino players.
One of the big challenges they will face in the US is the acquisition of US players and the "creation" of a brand that online players will know and trust as one they will engage with for Internet gambling. I suspect this is going to be harder then most European Internet gambling operators would like to believe. This is the case because the US businesses that have the best brand awareness for respectable and trustworthy gambling operations are the US land base casinos. Granted these companies have done a less then stellar job in creating "online" brands. However, they are the brands that US gamblers know and trust.
The European Internet gambling companies may also be surprised at how important social gamers will be in the US. Granted there are all kinds of pessimistic numbers about the overall conversion rates of social gamers to "real" money gaming. However, the size of this market and the branding and advertising potential social gaming will provide is significant. When Internet gambling actually becomes legal on a large scale in the US social gaming will become a major source of players and brand awareness for the operators of online gambling properties.
Land Based Casino Operators – Unlike Europe, in America land based casino's are the known "gambling" brands and they do have very close ties with state and federal government legislators. They also have existing gambling licences meaning that they have been vetted making them an easy choice for US officials to grant online gambling licences too. From a branding and consumer perspective they have a reputation for "safe/legal" gambling.
However, they do lack some very essential Internet gambling skills and expertise. Ironically, the success of their land based businesses has made them heavily focused on their land based operations business model making it difficult for them to adopt to a very different Internet gambling business model. Making these two models work together within the casino industry has been historically very difficult.
In addition, there are two very different land based casino models operating in the US. The Vegas and Atlantic City operators represent one group of large well branded gambling companies with national awareness. There is also another category of regional casinos that serve smaller regional markets which include the Indian tribal casinos. These casinos are successful in very well defined smaller regional markets. However, these brands are not know on a national bases. However, they have an extremely loyal local brand awareness. The existence of all these casino brands and the interest of these regionally branded to attempt to acquire their own online players could prove to be difficult.
The net net of this is that the know gambling brands in the US have little online branding presence or expertise in the broad online gaming arena. Granted many of the larger casinos have launched social gaming properties and they are gaining experience in this area. However, there are many casinos that have not engaged in this area and may not be able to because of their size and regional focus. Of course for the most part none of them have significant online gambling experience requiring them to team with companies that understand this model.
Social Gaming/Social Casino - This is certainly an interesting group of companies that also have a very different business model. expertise, etc. then the afore mentioned groups. These companies are accustomed to rapid changes of their games, the introduction of new games and the retirement of others. They exist in a highly competitive, non regulated world where anyone or group from single developer shops to large gaming companies compete head to head in the marketplace. These companies are the kings of micro transactions, virtual currency and virtual goods. Social game companies have and are launching social casino games with essentially the same content as one would see on a casino floor. They are not subject to any regulation or oversight group. They can do whatever they want and change games and games content as the market dictates.
The social casino companies are engaging players in a form of online gambling despite gambling regulators denial about this form of online entertainment. The only difference is that "cash-out" is not possible. Social players are learning how to play casino games in the social freemium context. Also the numbers of players are in the millions of concurrents at this point. Ironically, this form of gambling may in fact be more insidious then "conventional" online gambling.
Although there has been much debate over "conversion" of social gamers to gamblers the shear number of active social gamers requires a very low conversion to make social games a viable source of Internet gamblers. Also, social gaming in and off itself can be used for "branding" only and to generate revenue. Something both the land based casino's and Internet gambling companies need.
On the flip side the social gamers would like to partner with the online gambling and casino companies. They see these other two groups as having the cash reserves necessary to help the social casino companies fund and fuel their social games business and to further leverage the investment they have made in social games.
The notion of all three of these groups collaborating together to take on US Internet gambling has theoretically been contemplated. However, practically speaking executing on this merger will be difficult despite the fact that this mash-up is an obvious winning formula. The reason for this is the operational and cultural differences and bias of the three groups. In many ways they all speak different languages, act differently and interpret the gambling world in different ways.
In conclusion, despite the excuses some organizations will use not to effectively take on the US Internet gambling world holistically there will be organizations that do take this seriously. The ones that are serious first movers in these mash-ups will consolidate the space quickly. Unfortunately, the "wait and see" parties will find themselves in a bit of a predicament wondering what happened and how did this market consolidate so quickly leaving many out for the market resulting in a few really big winners.