Online Gambling's Intersection With Crypto Currency, Virtual Currency, Bitcoin, Etc.

Virtual currency/crypto currency and its various manifestations(bitcoin, ripple, litecoin, etc.) have become all the rage in the virtual  transaction world.  Individuals and businesses  are buying and selling items using virtual currency as opposed to "traditional" currencies which are backed by governments and their treasury's. The theory behind this hands off nature concerning crypto currency is that the market itself will self regulate resulting in a  democratic establishment of "value".

  Recently, I was exposed to an online gambling property that converted its investor  equity into a virtual currency. In the beginning all was well until the currency they were using "deflated" causing the investor to loss significant value as a result of the conversion of equity into crypto currency. 

This event was a real wakeup call for the investors as this was an unexpected event. Essentially, virtual currency is not created or backed by any particular government organization. Thus, the inability to intercede  if a virtual currency is hyper inflating or hyper deflating.

Organizations that are caught in this type of free fall in value or perhaps a significant boost in value have to engage in financial  engineering of their own. Should they buy more virtual currency and distribute the currency to the investors? Should they sell some shares of their own and distribute to investors, etc. Should they "cash out" entirely even if they could loss a significant amount of money?

Another issue for online gambling is the acceptance of virtual currency for gambling transactions. This has become a growing trend  with several online gambling sites using crypto currency to engage in gambling. If you with to convert your crypto currency into "traditional currency" you  must withdraw your crypto currency from the online gambling site, deposit them in a virtual vault of some kind and them find an  exchange that will take the crypto currency and exchange it for a traditional currency.

The transition from the traditional form of gambling using government backed currency to "virtual" currency is growing rapidly.  This is a natural transition given the movement away from brick and mortar commerce to online commerce.

Gamers that are new  to online gambling using crypto currencies should do their homework before they go "all in" with virtual/crypto currency transactions. Make sure you know how to "deposit" and how to "withdraw".  Also track the inflation and deflation of these currencies for the purpose of avoiding a loss of value or to take advantage of an increase in value as the crypto currency changes in value.

Kevin Flood is the CEO of Gameinlane, Inc.    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 in addition to launching online gambling operations in Europe. Gameinlane is also startup "friendly" understanding the unique value new gaming companies bring to the marketplace. Kevin frequently speaks at gaming conferences around the world providing him with a unique perspective on this very interesting business sector. Kevin can be reached at kflood@gameinlane.com  and or twitter  at @kflow1776.

  

2016 G2E Vegas Gaming Conference Dominated By eSports

 The 2016 G2E Gaming conference   addressed a number of   interesting gaming and casino  topics and  hosted an extensive exhibit venue. However, it was clear from the attendance at various   events  that eSports was the hot topic with eSports events well attended.

For the traditional gambling crowd eSports is an enigma  because it does not involve traditional gaming content such as slots, table games, lottery, etc.  It also crisscrosses  the line between sportsbook wagering, skill gaming, online gaming, console gaming  and on-premise gaming making  it difficult to categorize from a  traditional regulatory perspective.   eSports also attracts a  "younger" demographic relative to what land based casinos currently attract.  The 20 something crowd being the dominant group engaging in the activity. This is a distinctly different demographic from traditional sportsbook punters.   One noted concern is that many eSports players are under the age  of  18. It is not clear how this will all play out from a land based casino perspective. This may also be  reason why some eSports events in Las Vegas are not being held in the casinos.

Games such as Counterstrike, League Of Legends and Dota, to name a few,  are games that are popular eSports games. These games have moved  beyond the  standalone console to a connected  online venue that allows thousands of players to engage in heated competitions.  Game competition culminates in an ultimate showdown between top players.  These showdowns  are well suited for on premise engagement. These are the events that  Vegas wants to tap into. Gaming enthusiasts,  casual spectators and sports wagers/punters want to wager on the outcome of these games and the top players. Vegas is and  wants to take wagers on these competitions. 

It was interesting to see how receptive Vegas regulators are to the idea of hosted eSports tournaments in Vegas. It is also interesting to note that there is not more concern over who is playing these games. Can a 15 year old play a game that has bets being placed on the outcome? The traditional sportsbook operators are also all in on this form of wagering with the likes of William Hill and others already taking bets on out comes.

Clearly, eSports is very attractive to land based gaming operators as it  attracts a younger audience relative to its current customer base.  eSports reverses a trend of aging gamblers in casinos .  It also exposes the  gen x, y and z audience to a land based gaming experience.  Land based gaming operators are demonstrating that they are keen to engage with this audience to  stay relevant and to grow their businesses.

eSports wagering is in the billions already. This is obviously a phenomena that has a life of its own. It has been embarrassed worldwide with Asia, North America and Europe already fully  engaged with 50 million USD paid out in 2015 in association with eSports.

The ultimate questions is this a true "sport" and if so can someone wager on a juvenile's game play.  Certainly eSports is a long time coming and represents a convergence, of machine computing, gaming, sport, on premise events and worldwide web competitions. Overall, it is an exciting phenomena that will be hard for regulators to  fully harness. However, for now they do not seem  to be concerned. The amount of wagering, the demographics, technology and an obvious desire to engage a younger  audience in a traditional wagering context is just too tempting to not  look the other way. Finally, land based gambling operators, and especially the Vegas and Atlantic City operators have a growth strategy and they are "all in".

Kevin Flood is the CEO of Gameinlane and FitCentrix, Inc. Kevin spent time at the Machine/Learning Lab at MIT as a technology transfer fellow engaged in model based reasoning, case based reasoning and rule based systems to enhance diagnostics systems.  He created a company called AI Squared as a result of that research.   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 in addition to launching online gambling operations in Europe. Gameinlane is also startup "friendly" understanding the unique value new gaming companies bring to the marketplace.  Kevin frequently speaks at gaming conferences around the world providing him with a unique perspective on this very interesting business sector. Kevin can be reached at kflood@gameinlane.com  and or twitter  at @kflow1776.

Leveraging Artificial Intelligence(AI)/Machine Learning(MI) In Gambling Games

Artificial Intelligence(AI)/ and Machine Learning(ML) have been in existence for decades with AI applications being used in a number of different domains. Video games, in particular, have leveraged AI to assist and direct gaming characters/avatars to act in a human way and to assist the characters in their interaction with the game or other  players. Gambling style games have not leveraged AI and Machine learning techniques(to my knowledge). However, this may be changing as "traditional" gambling games have to sort out a way to reinvigorate the space and grow the market and attract a younger audience.  Online gambling potentially provides the ideal  environment for AI/ML because game play   generates a significant  amount of data that can be used to profile players, spot trends, increase revenue per player and increase engagement.

The real question is what form of AI is more appropriate for the  gambling space versus the video game space where some AI is already in use? It is common knowledge that video  games use a "form" of AI. However, the AI  approach used in video games  may or may not be appropriate  for traditional gambling games that are simpler, less "role" playing oriented and lack the  massively multi-player characteristics of some video games. Online poker may be the exception to this characterization.

What are the options in terms of AI approaches?

Machine Learning(ML) - Until recently computer programs have been  hard coded anticipating what a problem will be and  reacting  to  a fixed set of scenarios  providing recommendations or executing code that drives a process to conclusion. Traditionally, computer programs have  not been able to react to events, learn from these events and automatically change a program's behavior  based on that interaction. Machine learning changes all of this as it includes  ways to  react to  unexpected events by analyzing data patterns and making recommendations based on that analysis. This approach could be used in gambling games to   solve the problem of a player continually winning or losing a game, skewed payouts, consistent losses with not enough wins, etc.  In an ML driven environment the games math model, bonus structure and payout structure could be modified during play to improve the overall experience and to increase revenue per player.

Case Based Reasoning(CBR) -  CBR is an AI approach that matches the goal of the outcome with specific "cases" that are appropriate for a scenario. This concept could be extended into the gambling environment  for specific game types,  game "states" and player profiles.  Case based reasoning has been used for diagnostic purposes to determine a specific method to address a symptom or issue. In gaming the case could be the "characteristics" of  game play and or the history of game play of a particular player. It could also be applied to the amount of the "wager" and loses to date or in a game. In a multiplayer or head to head game the game play of the players and opponents could be adjusted over time as the game progresses. Players may also chose a "case/category" to be placed in before the start of a game.

Decision Tree   - Decision trees were some of the first AI systems constructed. A decision tree starts at a point where a problem or goal is stated and then guides an individual or program  through a process of questions and answers to help that person or machine to achieve a goal. These systems are relatively static. Consequently if a scenario has not been experienced or anticipated there is no other option. In a gaming environment  it may be difficult to anticipate all possible scenarios . However, once the decision tree becomes robust it can be an effect coaching tool to help a player execute a reasonable gaming strategy or drive a slot experience based on player profiles.

Neural Networks - Neural networks are essentially 'learning" systems that evaluate behavior  and  or activity and develop "advisory" approaches to solve problems. To be effective neural networks need a constant flow of data. Neural networks would appear to be a good approach for massively multiplayer gambling games  such as poker or perhaps blackjack where a a number of players  continually engage and react in a gaming environment create large and ever changing data sets. Slot games are fertile ground for Neural Networks because they accumulate large data sets that can be associated with a single player and groups of players.

Post Play Analysis Learning  -   Although  reacting to game play activity during a game using AI/ML is the ideal scenario, post analysis of game play data is also important. Mining data from a game data depository that contains game play data that has been accumulated over time is an excellent way to determine trends,  player habits, causes of drop off and engagement. MI in particular is a great way to to do this as MI is geared to evaluating large data sets. The analysis of this data could be used to determine better ways to monetize games, improve the "stickiness" of games.    

It may seem odd to think of   gambling games  as a domain that can take advantage of advanced computing approaches.  However, given the amount of data that is generated from gambling games it actually is a perfect forum for AI/ML.  Slot machines are actually  a form of computing device that accumulate large amounts of data making for an excellent source of data for MI/AI.  From an economic perspective  gambling, relative to other gaming domains, has a high revenue per game coefficient.  This coefficient could be improved through the use of ML/AI. The real challenge is to determine what AI approach or approach is or  appropriate for a given "game".



Kevin Flood is the CEO of Gameinlane and FitCentrix, Inc. Kevin spent time at the Machine/Learning Lab at MIT as a technology transfer fellow engaged in model based reasoning, case based reasoning and rule based systems to enhance diagnostics systems.  He created a company called AI Squared as a result of that research.   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 in addition to launching online gambling operations in Europe. Gameinlane is also startup "friendly" understanding the unique value new gaming companies bring to the marketplace.  Kevin frequently speaks at gaming conferences around the world providing him with a unique perspective on this very interesting business sector. Kevin can be reached at kflood@gameinlane.com  and or twitter  at @kflow1776.

Gaming Blog "Kevin's Corner" Achieves Milestone of 130, 000 Visitors!!

Kevin's Corner traffic exceeded 130,000 visits last week marking a significant milestone in the Gaming blog!  Kevin's Corner   started 5 years ago as a "professional" blog targeting individuals and businesses engaged in the "gaming" industry. With over 200 individual  blogs  it provides a wealth of knowledge on a variety of different gaming subjects. It has covered, "real" money iGaming, social casino, freemium gaming, virtual currency transaction and the relationship between land based casino and online gaming operators. The blog continues to attract a global  audience  as  different gaming business models merge and converge creating  acquisition and business partnership  opportunities.

Kevin Flood started the blog  to encourage  an open dialogue on a subject that was becoming increasingly complicated as new forms of online gaming began to emerge and merge into a complex interwoven environment of land based gaming, online gambling, social casino, virtual currency transactions and real money transactions. The international nature of gaming and the various laws  and preferences impacting gaming made for an interesting and, perhaps, confusing mix of laws, player populations and revenue models. Kevin's own experience as a game developer, game publisher  and executive for  US  based land based casinos exposed him to many of the influences that guided gaming behavior and business models. His experience launching  online gaming operations in different countries and in different environments made him realize that there are also similarities across borders that could be shared and discussed in a public forum.

The following  blogs are the top 5 blogs in terms of volume. Although volume is a good indicator of popularity it is not necessarily  an indicator of  "value". Kevin's Corner has attempted to address many aspects of gaming for  a variety of different business  sectors. In some cases a blog that has not hit the top five in terms of volume has been very useful for its  targeted audience and the information it provided.

Number 1 -Game Analytics - Big  Data and Business Intelligence  -  With over 2500 views this blog has received the  most attention and still continues to get   high traffic views based on how important making sense out of all of the data that games and game businesses produce.  Games are unique based on the amount of data that games can produce. It is a lot harder to understand the significance of, and patterns within data, then to collect it. Planning ahead for what you really need to know and being flexible in how to add new data and new data types into the mix is the key to good gaming business intelligence. Understanding player behavior and player (state) is challenging.  Where a player is(state) in terms of the lifetime value of the player is critical for the success of a gaming business. Having comprehensive analytical systems that  individuals or even a staff of analysts pealing through the data is not uncommon as a slight difference in game content and marketing strategy can make a meaningful difference in revenue, player retention  and player acquisition.

Number 2 -What Is the Better Gaming Business Model? - With the advent of social networks, social casino, freemium play, virtual currency and various new notions of what constitutes a game of chance , skill or for fun it is easy to become confused as to what is the right gaming model for a business. The source of revenue for the models, consumers of the content , marketing approach and revenue per player differ widely across gaming business models.   This makes the choice of a gaming model difficult. In the end, the gaming business model of chose has to fit the knowledge, skills, investment capital and legal framework that fits the organization.

Number 3 - Will Social Casino Games Be Subject To Regulated Gambling Laws?  - In the early days of social casino there was much speculation that social casino would be categorized as "real" gambling. Facebook credits(virtual currency) where at the heart of the controversy. Gambling is traditionally characterized as an activity that includes chance, consideration and "prize".   Government entities and traditional online gambling regulators where skeptical about the use of virtual currency in social casino games as a prize.  After a lengthy debate on the subject of virtual currency, regulators concluded that virtual currency that could not be converted or "cashed out" into a traditional currency obviated the "prize" definition of gambling. Therefore, avoiding the need to "regulate" social casino.

The regulator's decision not to regulate social casino may also have been influenced by the  realization that the social casino and "real" money gambling populations had different characteristics. Traditional gambling attracted a smaller audience relative to social casino.  Also, social casino was heavily influenced by the social network that hosted the games with the network itself being as important, if not more important then the game play itself.  The  poor "conversion" of social casino players to "real" money gambling players also had an influence on the regulators decision.  Some players prefer social casino  over real money gambling and others prefer freemium or virtual currency games. The social casino businesses have also been careful to make a clear differentiation between their models and online gambling business models. 

Number 4 - The Merger Of Social Casino, Online Gambling And Land Based Casino Models. - Similar to number 3 in terms of content and interest blog number 4 also received a lot of attention as a number of businesses began to develop, acquire and launch a number of  gaming models. However, merging of these models has been difficult as the audience, risk and governance of these models is  very different.  Operating the  gaming models as separate and distinct businesses has proven to be the most rational and successful way to operate  these discrete models.

Number 5 - Zynga Under Investigation  By The US Justice Department -   The popularity of Zynga poker in the Facebook  social network did catch the attention of the US Justice Department as it was one of the first really large social casino businesses using Facebook virtual currency credits as a way to monetize players. The sheer size of the Zynga poker community averaging thousands of players interacting at  peak time did draw the attention of US authorities.  However, with no cash out possible the JD had little to stand on without changing the "definition" of what "prize" meant in a gambling  context. Prize is something of "tangible value" that can be exchanged and used to purchase other items of tangible value outside the origin of the currency generated. Facebook made sure that this could not happen, therefore, obviating the need to either shutdown Zynga or forces the company to change its revenue model.

Kevin's Corner continues to cover global gambling topics of all, types and  varieties. Reflecting on what has been the most sought after gaming content subject  over the past 5 years certainly reinforces what is "popular". However, the popularity of a blog does not necessarily indicate its "value" to all audiences. Thus, making it an important goal of Kevin's Corner to continue to cover many different topics.  Kevin's Corner subjects are often recommended by members of the gaming community as the community seeks to decipher what is really going on in the space and to engage others in a open dialogue about the future of gaming. If you would like a subject covered lets us know. Please send your suggestions to kflood@gameinlane.com.

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane  has developed, launched and operated Internet gambling sites in Europe,  social casino,   freemium and subscription gaming in the US.   The company engages with land based casino  operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation  of game content in an online context.   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 in addition to launching online gambling operations in Europe. Gameinlane is also startup "friendly" understanding the unique value new gaming companies bring to the marketplace.  Kevin frequently speaks at gaming conferences around the world providing him with a unique perspective on this very interesting business sector. Kevin can be reached at kflood@gameinlane.com  and or twitter  at @kflow1776.

 

National Council Of Legislators From Gaming States Winter 2016 Meeting Summary(NCLGS)

I had the pleasure of attending NCLGS in Orlando Florida this year(2016). I have attended a number of "Gaming/Gambling" related conferences over the years  but had never attended NCLGS. I was pleasantly surprised by the agenda, participants and the dialogue that ensued during the conference.

NCLGS is an extremely important and influential group  composed of legislators, lobbyists and gaming regulators form around the country(USA). In addition to regulators the conference had representation from   gaming content providers,  land based casino operators,  native american casino operators, iGaming operators and game content providers. 

The 2016 conference's focus can be broken down into a number of broad categories.

Commercial Land Based Casino Health And Welfare - This group excludes the Native American casino's which will be addressed later. It is composed of the Classic Atlantic City and Vegas land based operators. These are the entities that helped to define what gambling regulation is today and are still the primary focus for land based regulation in the USA. It is clear from regulators and casino operators that these entities show  great promise as demonstrated by Atlantic City's recent gaming table revenue growth and challenged as demonstrated by Las Vegas flagging gaming table revenue.  

Vegas - The gaming table revenue in Vegas is falling and so are the numbers of people engaging in gambling in Vegas. Two factors play a role in this decline.  

 Alternate Entertainment - Vegas has done a  good job in creating a "destination" resort      environment  for tourists form around the world. The strip is filled  with throngs of people walking the strip. The shows are packed and in some cases the trendy restaurants and clubs. However the casino floor for the most part is only partially occupied. So what are these people doing in Vegas if they are not gambling? It appears that the alternate entertainment in the form of shows, restaurant, rides, etc. is drawing the crowds and not the casino floor.

 Changing Demographics And The Millennials  - The conference spend a significant amount of time pondering the impact of the millennials on and off  the gaming floor. There was clearly a consensus amongst the conference presenters that   the gaming "content" currently offered by land based casino's is clearly off the mark when it comes to the millennial demographic.  This consensus generated a number of ideas on what the gaming content should be to improve the likelihood that millennials will be encouraged to play gambling content oriented games.

Socially/Interactive Games - It is clear based on the success of console  and "social casino" games that social or at least interactive games are what this demographic group prefers to engage in. Of course, poker is the ultimate and traditional form of social gambling. However, there are many more games that could be based on current console gaming platforms that could be adapted to a gambling content.

Skill Gaming And Fantasy Sports - Much time was spent on the subject of  fantasy sports and its alleged  categorization as a skill game. One can argue both sides of this debate. However, these debates are almost irrelevant because it is clear that the combination of social and skill gaming is clearly a winner when it comes to attracting millennials to Las Vegas and other land based operations.

Online/Internet Gaming And the Poker Conundrum -   The online poker juggernaut continues to plaque and perplex the regulated gambling authorities and industry. How can you possibly outlaw the all american past time and online gambling in general. There was direct reference to New Jerseys' growing success in these online domains. Undeniably these sectors have to be addressed by US gambling regulators  if there is to be any future for "gambling" in America. You can not hide your head in the preverbal ground and ignore this. The  most paradoxical aspect of ignoring the online domain from a regulatory perspective is that this approach  provides  opportunity for illegal online gambling operators.  

Native American Indian Land Based  and Regional Casinos - The most interesting, amazing, uplifting and in some cases heart breaking subjects at the conference was the advent and growth  of the native american indian land based casino initiative. The native american representatives made a compelling case for how important these casino's are for their constituents. They provide funding for schools, housing, jobs and healthcare that would otherwise never happen without gambling revenues. Essentially, a very real positive use of funds generated by their land based casino initiatives.

Overall, NCLGS was an honest and informative get together to discuss legal gambling in the USA. I commend the professionalism of the participants and the honest dialogue that accompanied the conference.  The conference also highlighted serious issues that regulators and existing land based operator face. The world is changing in terms of gaming and gambling content and the existing operators, although aware of these challenges, appear to be either slow to address them or in a bit of denial about the future of both land based gambling trends and iGaming.

  Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane  has developed, launched and operated Internet gambling sites in Europe.   The company engages with land based casino  operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation  of game content.  Gameinlane   develops "social and real money" 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.

  

Sorting Out Investing In The Online Gambling/ Gaming Industry In 2016

The continuing consolidation in the online gambling  and social casino   sectors begs the questions as to the future of the overall online gambling sector as a growth or consolidation play.  Essentially, is the sector still offering new and engaging games to players that  result in  the growth of players and revenue?   Growth rate predictions for the online gambling sector are only in the single digit category,  Social casino  is also slowing and entering the single digit growth category. However, acquisitions such as the Candy Crush acquisition by Activison in the social casino category  make for interesting opportunities for truly knowledgeable investors.

The surprising 2015  launch of Fantasy Sports as a semi-regulated "skill game" presents new and  interesting opportunity for gaming operators going forward. The "skill" category as a gaming category that can garner a large following of players has been a pleasant surprise to gaming operators. 2016 may see some interesting "regulatory" challenges to this business model requiring existing or potential fantasy sports operators to   factor in regulatory compliance fees into their business models.

The online gambling market is estimated at 40 billion USD .  The size of the online gambling market is significant. However, The  online gambling space is far from homogeneous making it difficult to fully comprehend it as a single sector. It is also highly fractured from  a regulatory perspective making a proper assessment of its potential growth rate challenging. Some jurisdictions are regulated and some are not.   In addition, there are many different forms of online gambling; casino, sports book, etc.  From an activity/regulatory perspective gambling has traditionally included three elements; chance, consideration and prize.  However, that is beginning to change with "skill" gaming/fantasy sports entering the mix of legalized gambling.  In the US the skill  sector is  regulated and limited to certain states . Nevada's recent move to regulate  fantasy sports  as a gambling activity adds more complication to the notion of what is and is not gambling. 

In the social casino  sector  the virtual currency payout format has been used to avoid standard gambling regulation. However, from a pure experience perspective the virtual currency payout does not change the fact that players are still wagering.  Many of the traditional  online gambling and in some cases land based casino  operators realize this and  are engaged in both the  'real money" and  social/virtual currency casino  space. 

Other factors making it hard to fully understand the sector is the existence  of regulation in some markets and no regulation in others.  Regulated markets usually keep track of player activity and unregulated ones do not or have questionable numbers. Even  in regulated markets such as the United States  many Americans regularly play games hosted in territories that are not regulated such as Costa Rica and Panama.  

Given all of the moving parts in the gaming/gambling sector  it will take a very savvy investor and or organization to make the proper  decisions on how to enter  the online gaming space, stay in the sector or  make acquisitions in 2016. With this said the complicated nature of the sector favors knowledgeable investors and existing businesses in the online gaming space. There are certainly  new opportunities in the "skill" game arena and in the consolidation of gaming models such as skill, chance and social gaming. Fantasy sports and its "skill" category will also draw the attention of traditional  sports book operators as they have access to sports activity content and feeds that can be leveraged in fantasy sports.

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane  has developed, launched and operated Internet gambling sites in Europe.   The company engages with land based casino  operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation  of game content.  Gameinlane   develops "social and real money" 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.

  

Lessons To Be Learned From The Illinois Online Lottery Project

At the EiG conference in Barcelona this year I had the pleasure of sitting in on a presentation describing the history and approach Illinois took  launching an interactive online version of their state lottery. It was an education on the success, misconceptions, mistakes made, and  reactions of a traditional land based gambling operation going interactive/online with their business.

The importance of this presentation went far beyond a focus on the Illinois lottery organization's challenges and education in launching and operating an online gambling operation. Many land based US casino operators are now seriously contemplating launching online gambling or social gambling operations in the US.    Some have already indirectly launched social gambling properties through acquisitions of existing online gaming properties.  The Illinois interactive experience should be studied by all of them if the land based operators actually want to launch and run successful online gambling operations of their own.

Will Internet Gambling Negatively Land Based Gambling? - Probably the most controversially debated subject in the board rooms and management meetings of land based gambling operators is the threat posed to their land based revenues and customers by online gambling operations.  The general consensus has been that if you encourage people to play online they will not go to the casino or buy lottery tickets at the local casino or grocery store.

The Illinois lottery experiment proved that this fear was entirely unfounded. In fact,  the launch and operation of the Illinois lottery proved that there was very little overlap of online and offline players. The online players were actually new customers for the lottery. In many cases they had never played the lottery or bought a ticket at a land based location.

Creation Of The Web Site - The first attempt in creating and launching the Illinois state lottery web site was deemed a failure by the management team. The usage was low, it was hard to understand and the communication on the site was poor. The primary reason for this is that the web site was created to mimic a land based operation model and to attract a typical "land based customer".  Neither if these approaches worked because the online customer is different from the offline customer and the process of marketing, selling and engaging online lottery players is completely different then attracting terrestrial  players.

Marketing Online For Online Consumers - The initial marketing effort by the Illinois online lottery version did not work very well. The Illinois lottery primarily used its traditional in-house marketing organization to create and execute the campaign. The result was underwhelming causing the marketing program to reconsider their land based marketing approach for online players.

 Relaunch of a Successful Online Lottery Business - In all due respect to the management of the Illinois lottery they learned from their early experience launching an online business  and were  adamant that online was an absolutely necessary channel for them.  Eessentially, they took the iteration approach practiced by most online businesses. The rule is simple; do not expect to come out of the gate with a winner, iterate, change, test and relaunch. This is in contrast to land based operations that require a large capital expenditure commitment and relatively long time frames to construct, move or change physical assets. Online lets you fail, fail often and quickly giving an organization valuable information about what works and what does not.

The Illinois lottery regrouped, discussed what worked and did not work in the first round, hired experts form outside the organization in web site designed and online marketing and gave it a go again. This second attempted proved to be very successful with a dramatic increase in visitors, online sales of lottery tickets and no downside to their land based operations. 

In Conclusion  - There are several good lessons to be learned from the Illinois lottery online project.

1.) Interactive businesses do not negatively impact land based operations.

2.) Interactive business attract a new and different audience compared to land based operations.

3.) Marketing to online consumers is different from marketing to land based consumers.

4.) Building, launching and operating an online business requires a completely different kind of expertise and skill sets relative to land based gambling businesses.

5.) Failure is OK and perhaps necessary as long as you iterative to a positive outcome.

  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. 

Convergence Of Social, Freemium And Gambling Games Requires A New Set Of Analytics And Game Platform Design

Freemium, social and gambling style games are beginning to converge making it hard to recognize what is a free game, virtual currency transaction related game, real gambling game, etc. The games in many cases are exactly the same in terms of content and game play characteristics with possible slight differentiation in  monetization strategies and perhaps legal status. In many cases the consumers of these games may not even recognize the differences being oblivious to what is legal or not and no longer seeing the difference between virtual currencies and traditional currencies and virtual goods and physical goods.

This blurring of game distinctions and boundaries  makes for a very interesting  game analytic system or platform. Traditional game analytics are silo-ed.   They are traditionally crafted for each of the game and game platform and audiences. We talk about ARPU in certain areas, life time value of a player in another and coin in or deposits in another. 

A number of game developers, platform providers and game publishers are now involved in all of these business models and are trying to figure out how, or should be trying to figure out how and if players are moving across the various game boundaries. For instance, if a business acquires a player in a freemium game how do they encourage the player to cross over into playing a real gambling game. How do you convert a player acquired in a  gambling game  into a freemium game? Should you? Under what circumstances should an attempt be made to convert a player? How do cross over players monetize in both environments? Is it cheaper to acquire them in a freemium game and up sell them into a gambling game? What does ARPU mean in this new world? What is the lifetime value of a customer? What is the cost of acquisition? What game features are working to keep players in the larger game eco-system? 

With the current state of game analytics and game platforms I suspect that optimizing a player across platforms is very difficult and unfortunately absolutely necessary to optimize everything from marketing spend, product feature sets and optimization of revenue per player. The games themselves may not encourage awareness of the other game types and  single sign-in or ID's not cross referenced across platforms.

Overall, game convergence requires us to view a player in a completely different light. We need to view them holistically presuming that any player could cross over, certain players will be most likely do so. Certain players will monetize better in one environment and not so well in another. Can we extend the lifetime value of player much longer then we can in a single game silo? Can we leverage the social context of a Facebook game in a gambling environment without ever launching a Facebook gambling game?

Clearly, we are at a point where the notion of a game or gaming environment has drastically changed. The analytics for this environment clearly lag behind the evolution of player behavior and game content offerings. However, the game platforms themselves may not be properly taking advantage of the new game play normal. Organizations think in silo's and build systems and games around these silo's. In a very real way the consumers or players are ahead of the game platform providers leveraging  game content as they see fit.

I am sure analytics system's will catch-up and savvy product managers will realize the opportunity. In the meantime revenue is being left on the table, cost of player acquisition  is higher then it should be and overall lifetime value of a player is unclear. 

 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.