More Indication Of Challenges With The American Approach To Legalized Online Gambling

The poker and gaming blog AgentMarco was first to break the story that the Santa Ysabel Native American Indian tribe in Southern California has decided they are frustrated with  the California legislature and their own tribal compatriots approach to legalizing online gambling in California.   This frustration has lead them to go rogue with the announcement that they are going to launch their own online "real" gambling poker room for California state residents without any confirmed  California legal authority to do so.

They are claiming that the American Indian nation is a sovereign nation within the United States and ,therefore, has the right to offer Internet gambling to California residents.  This is further confirmation that California and other  states in the  United States are struggling in their attempt to offer Americans safe and commercially viable Internet gambling content. Governor Brown's recent decision to  engage outside gaming attorneys is another indication that Sacramento  is pondering  how best to enact legal Internet gambling in California.  This confusion, combined with  historical American Indian rivalries is causing some tribes to become frustrated and impatient with the "process".

    The Sheldon Adelson Federal initiative is creating even more confusion  despite its irrational allegation that Internet gambling will hurt land based casino operations. Clearly there is no evidence that this is the case putting into question what  is Mr. Adelson's point and goal?

So what is going on here? The Europeans have had legal online gambling for decades and there is no indication that it fosters under age gambling or  crime syndicate involvement. Granted, Europe does not have a robust land based casino industry. Therefore, there is no way to determine from their experience if online gambling will steal customers away from land based operations. However,  illegal online gambling has been around for 20 years and has specifically targeted US citizens with great success. The biggest fear for illegal online gambling operators  has been the potential of a "legal" US gambling regime forcing the illegal sites  into oblivion.  Why do respected business owners and politicians want to encourage illegal gambling?  

It is also clear that the expectations for legal online gambling were greatly inflated to encourage the passage of Internet gambling law in the US. The reality of the commercial viability of legal Internet gambling is now being tested in Nevada, New Jersey, Pennsylvania and Delaware.  What will be the outcome of this experiment?  It is already clear that in some of these states reality is far different then the expectations set prior to legalization. 

Another juggernaut for the land based casino advocates is the amazing popularity of "Social Casino" It far dwarfs the player numbers compared to Internet gamblers. Ironically, the typical social casino player fits the exact same land based slot machine player profile. Ironically, it has no regulation and does not appear to need any. The irony of all of this is that social casino has no "cash out" resulting in players contributing but not financially benefiting.  

In the end  de-regulation of  Internet gambling, slowing the state by state proliferation of iGambling  or not legalizing iGambling in the United States is not going to stop Internet gambling in the US.  Also deigning the importance, by land based casinos, of the online channel is a bit nihilistic and potentially  self destructive for their  businesses.   Many land based US casinos and casino suppliers are "all in" with both iGambling and Social Casino. These early adopters are the winners in all of this. This may be the real reason Sheldon Adelson and Steve Wynn are trying to stop or slow down legal iGambling in the US. Their competitors are way ahead of them already and they realize they may not be able to catch them.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin, has developed, launched and operated Internet gambling sites in Europe.   Kevin and Gameinlane   develop "social" casino games for third parties. Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions. Kevin can be reached at kflood@gameinlane.com

   

 

Methods And Challenges Increasing Social Casino RPU(Revenue Per Game)

Understanding the characteristics of a game that contribute to revenue opportunities for a social casino game are always challenging. Many factors influence a game's ability to generate revenue.  In the highly competitive, and in many cases  "me too" world of social casino game content, where much of the content is very similar, game publishers are challenged with ways to differentiate and  increase revenue from a game that result in comparatively higher revenue. The following are general categories to consider with the objective of increasing revenue for an existing or new social casino game.

 Game marketing and game content are the two general areas that game developers and publishers focus on to increase revenue from an existing game.  These general  categories are subjects on their own that require different  skills, expertise and execution strategies to properly move revenue higher. Bringing together teams with both skill sets and objectives, that share  the common goal of increasing revenue, and at the same time manage the cost of acquiring players and controlling development expenditures is challenging yet necessary to blend the two initiatives in a common strategy.

Despite the cultural and operational differences that exist between development and marketing, both organizations should collaborate to agree on product/game changes that impact the game "experience" for the purpose of increasing RPU.

Delivery Platforms - Game delivery platforms can and do influence game design and RPU. A web, Facebook, mobile phone, tablet, Google, Apple, Amazon, etc. implementation  impact how and why a game should be constructed and marketed. It is very unlikely that one shoe fits all and wise game developers and publishers will take platforms into consideration when crafting a game for higher RPU.  Preferably ,a game should be specifically  developed for its environment, audience and format as opposed to being "ported"  to different environments.

Game Differentiation - Social casino audiences are an interesting group of  game content consumers. The demographic is skewed to a relatively older segment of online players when compared to other game audiences and their prejudice for game content can be influenced by "traditional" notions  of land based casino  and online gambling content.  These peculiarities  inevitably narrow the range of what is considered a social "casino" game for many players.  This tendency  has resulted in a crowded "me too" marketplace that requires either some differentiation(not too much) to get noticed or a high marketing spend to attract players.

Traditional Slot Content -  Traditional land based slot game developers have taken advantage of demand for traditional slot content online and have successfully moved   land based content verbatim to the online domain. This in itself confirms consumer preferences and the challenge for studios without an inventory of copyright protected slot content. Assuming traditional gambling content is the preferred game content for social casino players the real objective is differentiation within this constrained universe. This either limits or encourages creative license in the development process. However, extreme divergence from the norm is seldom popular.   

Non-Traditional Slot Content - Many social casino companies produce games that have non-traditional themes. These themes have to be clever, not alienate the core audience and target a very specific demographic that may or may not be the core group of traditional online slot social casino players. For example, we have seen "virtual world" implementations that immerse a player into a simulated casino floor. However, these implementation have struggled because it appears that consumers want quick  access to  game play and many are not familiar the land based casino experience. This indicates that  game model experimentation should be part of the development process suggesting that committing to a particular social casino genre without  some player feedback before committing to a new genre is advised.  This also implies that  iteration on themes may result in finding a niche market that does not require an excessive marketing spend to acquire. If successful the mining of a relatively untapped gaming market segment could be lucrative.

Non- Slot Content - Despite the fact that slots are the most popular online social casino game content other forms of casino game content such as craps, roulette, blackjack, poker, pai gow, etc. are also popular forms of social casino. There are significant differences in how best to monetize this array of games because there is such diversity in the  game mechanics for no-slot games. For example, is there a dealer involved, how many people play at a time, how are games and events started, how do players communicate in a multi player environment?   These factors all require unique and special attention to adequately address optimizing a game for revenue generation. Essentially, each  game category requires  special consideration and a careful examination of the market for the game  to determine the potential audience size and propensity  for revenue.

Cultural and Demographic Sensitivity - Be aware of your target audience and or the audience that is most likely to be attracted to your form of social casino content. This may seem obvious but many social casino publishers do not differentiate content, offers or promotions  based on the sex,  location, religion, culture or language. What encourages players in your target audience to transact and when are they most likely to play?  What game content could be offensive to your audience and what content will encourage them to play? Careful and limited use of text is advised to decrease the possible friction points across language and cultural boundaries.

 Buying And Promoting Chip Purchases - Promoting chip buying is a science  based on an understanding of your player.  Players will be motivated to purchase more chips in a number of ways. A player may be enticed by  a beginner player  offer, an in-game play offer, an exit offer or cascading offers. A player may also be distracted by offers,  and  may not understand why they need more chips at certain points of the game.  One of the common faults of many  social casino games is that they do consider a players "state" and when a player will most likely transaction.  What is the players chip inventory and is the amount used to determine where and how chip offers are generated?  Some  games will constantly encourage a player to buy more chips when in fact they already have a large amount resulting a player ignoring chip offers. Essentially, the game is not player aware ignoring the "state" of the player or the historical chip buying propensities of the player. Investment in programming and analytics to fully understand your "players" and where they are in terms of their wallet will result in a better placement of chip offers during game play.

Coordinating  Marketing Programs And Content Modifications - Frequently game marketing programs to drive traffic and  increase RPU  are not complimented with content and game changes to specifically address a campaign.   In some cases the operation and development staff are not aware of a marketing program, its intended audience or the expected RPU.  Running generic marketing campaigns are OK. However, crafting "informed" campaigns will result in higher yielding efforts. Making a development and operations  staff aware of special marketing campaign goals may generate some creative ideas that could quickly be implemented by the development staff.

Analytics - Initiating   marketing programs or  game content/mechanic changes without a way of measuring there impact on player behavior, game response or RPU is obviously not a wise decision. An analytics system that specifically addresses the game domain and audience that a company is targeting is an investment that any serious game publisher will have to make to determine the efficacy of new product development  and changes to games that are intended to influence RPU. Both marketing and development should have access to the analytics for evaluation. The analytics should be customizable to address the specifics of your game and the way your organization tracks RPU.

Game Development - To be effective at increasing RPU a development organization must be prepared for frequent, short  and rapid development cycles. They must also be prepared for roll backs, quick changes and code redeployment to address market pressures and the achievement of RPU goals.  Game platforms need to support A/B testing  experiments where some traffic is driven to one instance of a game and some traffic to another instance allowing for comparison of different versions of a game. The goal is to allow and encourage experimentation where the staff is comfortable knowing that they have explored a number of options. 

Conclusion - Increasing game RPU is a mix of creative marketing programs, flexible game platforms, detailed understanding of the target audience and development organizations that can respond to frequent changes in game content.   The days when a game could be developed and launched without the ability to frequently change the game, where the game developers or marketing staff exclusively drive game design and changes is long gone. The social casino space is an especially intriguing and competitive  space because it is unregulated and familiar to "high" transacting social gamers.   However, consumers of social casino content have been heavily influenced by what they consider to be "traditional" gambling content constraining the creativity of game developers and increasing the competition to acquire, monetize and retain players. This odd mix of freedom and constraints challenges organizations to think in different ways about game content, marketing and methods for growing RPU.

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.

EiG Internet Gaming 2012 Barcelona Summary

When I entered the 2012 EiG convention hall in Barcelona and attended some of the presentations I thought I was in San Francisco and not in Barcelona. I saw more people from the San Francisco Bay area attending and presenting then the usual European Internet gambling cohort I  interact with at the EiG conferences. There were two primary reasons for such a heavily weighted US professional presence at the conference.

Social/Freemium Internet Gambling -   Yes I am going out on a limb here and actually calling Facebook,  freemium mobile and social web games that are traditional gambling games such as slots, blackjack, poker etc. as true gambling games. I realize that this may be shocking to some. However, the amount of interest on the part of the traditional European Internet gambling clearly indicates that the social/freemium gambling game offerings are having an impact on the traditional iGaming community despite the fact that their is no "payout" of winnings or deposits. 

The San Francisco Bay Area/Silicon Valley was so well represented at the conference because this is the area(outside of China,Japan and Korea) that has fully embarrassed the social/freemium gaming/gambling model based on virtual currency transactions. They have been engaged in this activity since 2007 with the launch of several Facebook gambling style games that leveraged the popularity of casino style games within Facebook. Virtual currency transactions soon followed helping to actually monetize these games and eventually Facebook itself forced all the game operators and publishers to use the Facebook  virtual currency system with a draconian 30% Facebook tax on these transactions.

The conference was populated by several groups with different objectives in terms of social/freemium gambling games.

Is This For Real? The presenters answered that question resoundingly with absolutely especially when it comes to the amount of revenue being generated and the shear popularity of these games.

Competition Is Fierce  There are so many slot type games in Facebook and on mobile that it is becoming harder and harder to break even given the cost of acquiring players and the average transaction per player. Player numbers are still remarkable. However, entering the market now will be difficult unless a company is clever in the way they acquire players or the game itself has unique characteristics that differentiate it from the standard Facebook and mobile gambling style games.  

US Legalization Of Internet Gambling - The other reason for seeing so many Americans in the audience was the prospect of legalized US Internet gambling. The European iGaming industry is desperately hoping for some form or US Internet gambling to help recharge their businesses after the collapse of the European Union as an Internet gambling governing body, the demise of the .com model and the emergence of a country by country regulated model. This change has severely impacted player liquidity, cost of operation and acquisition of players.  

The Europeans want answers from the Americans on how they envisage  regulated US Internet  unfolding in the US. Will it be state by state? What state's will legalize and when?  Will certain states share liquidity? Will their be a federal law if so when? what gaming propositions will be legalized.

Unfortunately the Americans do not not necessarily have answers to these questions either. There are so many political consequences influencing the outcome and form of legalized US Internet gambling that no one person has the magic answer to these questions. We will all have to wait and see what happens.

Social/Freemium and Internet Gambling Crossover -  There was an underlying buzz at the conference about the relationship between social/freemium and traditional Internet  gambling. Generally speaking the social gamers in the US have no experience with Internet gambling and have no real experience with Internet gambling operations so they politely deflected the cross over questions. European Internet gambling operators still remain stead fact on their position that their will be little or no crossover between the two.  It is really difficult to defend or challenge either of these positions until we get concrete evidence of operators that have tried and or are currently moving players between these to domains. We may have to wait for legalized US Internet gambling to answer this question given the fact that the US has such a large social freemium game audience playing casino style games.

Facebook/Gamesys Experiment - Many of the UK people in the  audience have tried the Gamesys bingo gambling game launched in Facebook. Overall, the opinion is a bit muted considering the implementation  less attractive then the the web version of JackPotJoy. No one revealed to me the number of players in the Facebook game. However, the lack of real enthusiasm about this gives me a hint that more work has to done. I impersonally would like to hear more about this from people in the UK playing the Gamesys Facebook gambling  game. 

Overall, the conference focus on social freemium gaming was a wise decision on the part of the organizers. I also commend the organizers for moving the conference back to Barcelona. Not to say that Milan is not a great place. However, I would much rather be in Barcelona in October.

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. 

GIGSE 2012 Summary

This was the second year that GIGSE has been in San Francisco and a very appropriate location for the conference given the rise and influence of the "social casino" in the context of US legalized Internet gambling. With US gambling getting close to being a reality  GIGSE's witnessed its largest audience to date with attendance reaching its maximum venue capacity.

Muddled Direction On Legalization Of US Internet Gambling - Despite all of the hand waving and breast beating by legislative representatives and proponents of legal US gambling the timing and characteristics of actual enactment of gambling law are still unclear and subject to speculation. Will the states or federal government move first? If so when will businesses be able to launch online gambling sites? If both state and federal governments move to craft Internet gambling legislation how will these two approaches co-exist? Despite this confused state of how the laws will unfold  businesses are seriously moving forward with plans to address the eventuality of legal gambling in the United States Of America.

Land Based  Casino Operator Strategy (non-Indian) - The big casinos in Vegas and the larger regional casinos are cutting deals with existing European online gambling operators and vendors to be prepared for the day when Internet gambling is legal in the US. Bwin, Playtech, 888, etc are all in play. There was no evidence that the land based operators where in the process of building their own Internet casino platforms. Clearly, the land based casinos  realize that they do not have the expertise to build, run and maintain Internet gambling businesses. However, there is a question in the minds of many people as to whether this strategy will ultimately help launch European brands in the US at the expense of the US casinos? Time to market is a great motivator. However, in the end the casinos  have to learn how to own and operate  online gambling operations to be successful.  

Land Based Approach To Marketing Online Gambling Properties - Despite the fact that land based casino operators will largely be using third parties to operator their online business they do believe that their land based player databases are a potentially good source of leads for their online properties. Some people and even the casinos themselves questioned this assumption. This begs the question. Do land based gamblers play online? If so, what is the percentage? If they do not or the percentages are low how will the casinos build an online marketing team to attract players to their properties? Can land based award systems be integrated with Internet gambling operatations to encourage moving traffic to and from land and Internet gambling properties?

American Indian Nation - The American Indian tribes  represented at the conference  where very honest about the potential opportunity and challenges associated with Internet gambling. Their biggest challenges are their fragmentation and their lack of experience with any online gaming activity. This includes casual, social or Internet gambling games. Their fragmentation is an issue because it will impact liquidity and management of Internet gaming properties. Internet gaming can consolidate quickly around high volume properties. The Indian nation will have to pull together tribes across the country if they want to seriously compete in this space. If California is one of the first states to legalize online poker the California tribes will be forced to host one poker room and hope that they can win this battle. In the end the tribal leaders will have to pull in Internet gaming and general internet application, marketing and hosting expertise very quickly if they expect to be successful in this space.     

The Social Casino - It is no secret that some of the big land based casinos and IGT are all in when it comes to the social casino. They believe, even in the absence of any immediate change in Internet gambling law, they have to position themselves as leaders in the online social casino and gaming space. Other members of the GIGSE audience were not as convinced. It was clear from many of the questions asked at the conference that a large percentage of the land based gambling community does not understand the online social gaming space or its potential relationship with the online gambling market. This is surprising given the wholesale adoption by European online gambling operators of   social gaming. Many of them have launched properties in Facebook. The critical thing for all operators to understand is the relationship between social gamers and Internet gamblers. What is the overlap(if any) and how do you use both environments in tandem to attract, retain, monetize and up sell players.

It should also be noted that Wynn resorts is rumored  to be cutting a deal with Zynga to launch and manage their for money Internet gambling operation. Obviously, the Wynn people get the connection between social and traditional Internet gambling.

Facebook - For the first time in GIGSE history Facebook representatives were at the GIGSE conference. They were very open about it having a cocktail party inviting key individuals from the conference.  It is clear that Facebook is not only interesting in hosting social games. It is also interested in getting involved in hosting gambling games within Facebook. It is difficult to determine how they are going to monetize gambling games in Facebook. They were certainly pushing their advertising model. However, they may decide to take a percentage of the gaming transactions, similar to their 30% fee for virtual currency transactions.

Gaming Startups - The Launch Pad event this year featured  game and gambling startup companies interested in raising capital for their ventures. The contestants gave excellent presentation with Use It Better winning the audience and judges thumbs up. Use It Better is an interesting company because its focus is on game analytics with the goal of optimizing a game to improve player retention and monetization. Clearly game analytics has emerged as one of the more important sectors in the gaming space due to the extreme competition that exists for social and Internet gamers. The other favorite of the judges was a cross over gaming company called Virtual Gaming Worlds. This company embeds gambling content within its virtual world. It allows people to create their own virtual worlds and add gambling slot machines and other simple gambling games in their properties. This allows the person that created the world to generate revenue from their gambling operation.  The idea is clever and fun and very likely to grow large profitable communities. 

In conclusion, the light bulb has been turned on as it relates to US Internet gambling. We all know it is coming. We are unsure of what form it will take. Despite the lack of clarity businesses of all kinds need to understand how to run US based Internet gambling operations and either dominate the space or carve out a lucrative segment of the market. First to market will be very important if not the primary factor influencing the success of a US based Internet gambling property. 

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively 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.