US Land Based Casino's Taking Very Different Views On Online Gambling And Social Casino Gaming

We have seen a flurry of announcements and proclamations recently related to the US online gaming and gambling positioning of the large Vegas based casinos.  The Sands, Wynn, Caesars and MGM have all publicly announced their views or interest in the online game space. The evidence unfolding is that there is very little online strategic gaming consensus amongst the top tier US land based operators.   What is this all all about, how does the discord impact US focused Internet gambling and is there any common ground amongst the US land based casino operators?

The Sands And Sheldon Adelson - There has been much press about Mr. Adelson's public proclamation that legalized online gambling in the US is "bad" for the land based casino business. He is opposing it and is going to lobby US states and  the federal government to stop the expansion of legalization. Why is Mr. Adelson so worried about online gaming in the US? 

Contrary to most other US land based operators the Sands has not taken the  online gaming space seriously or initiated any online initiatives. The assumption is that they have not because their primary focus has been in  land based casino development. Based on the public details of Mr Adleson's business he is indeed doing very well around the world with his land based operations. However, does he  believe that online gaming is now going to be a threat to his core business? If he does this a very controversial position because it is unclear that  online gambling  will take business away from  land based casino operations. In fact, some would argue that it drives traffic to the land based operation. Is the Sands just too late to the market and not prepared for online gaming? Conversely, is there something fundamentally anti competitive about US online gambling law or is the law too competitive not allowing US casino monopolies to own the space? Essentially, the reason or reasons  for Mr. Adelson's public opposition are difficult to quantify or qualify without knowing  the cause for his concerns.

Caesars and Gary Loveman - Caesars has taken a very proactive approach to online gaming in the US,  assuming  "real" money online gambling will be slow to roll out in the US the company has invested in social gaming/social casino properties. This preemptive, and perhaps an adjunct strategy to "real" money online gambling,  has resulted in the purchase of Playtika and Pacific Interactive. These  acquisitions are well documented. 

However, most people are unaware that Mr Loveman, as CEO of Harrahs,  launched a UK based casual/social gambling site called Luckyme about 10 years ago offering a number of casual games such as bingo, Yahtzee, etc. in a subscription service model similar to EA's Pogo property in the US.  Clearly, Mr. Loveman believes that social/freemium games have a place in the pantheon of gaming options offered by land based operators. The cost of acquiring gambling players in the UK made this model unworkable. However, lessons were learned about the popularity of this style of online gaming.  It also indicates that Caesars may be a believer in the convergence argument that espouses a close relationship between social/freemium games and "real" money gaming. However, their strategy could also indicate that  Caesars  is investing in social casino because it is unrestricted, legal, ubiquitous, has a lower operating cost relative to "real" money online gambling  and it  monetizes at an impressive rate.

Wynn And Steve Wynn - The Wynn's online gaming strategy has never been fully developed although Mr. Wynn has indicated that given the right "conditions" he would enter the space. He was rumored to want to buy  Zynga at one time. However, for some reason that deal was not consummated.  Perhaps this was a good thing given Zynga's fall from grace.  He has recently been quoted as being interested in operating an online casino in the US. However, he feels that at this time he does not believe that either the market and or the US regulatory online gambling regime will lead to a positive business "entrepreneurial" environment for online gambling in the US.   Much can be read into this assessment. However, it appears that the combination of the cost of licensing, restricted state populations and game content does not add up for Wynn. Unlike Caesars, Wynn has not commented on their current social casino strategy. This could mean that they may take another look at this sector given their earlier interest in Zynga. 

MGM and Jim Murren - MGM has been in and out of the online gambling space having launched an online gambling operation in the UK tens years ago. They closed the site due to the highly competitive UK market and the lack of brand awareness for MGM in the UK. They have also been in the social casino space with the funding of MyVegas and integration of the social game into their land based property. Essentially, they have the most well integrated online/offline game strategy  driving players to their land based operations. They are also busy exploring "real" money online gambling licenses in various states. We do not hear a lot about them in the press as it relates to online gambling, however, they may in fact be one of the biggest winners in the space if they have a combined offline, real money and social casino gaming implementation strategy.

Other Casinos - Stations Casino purchased the poker platform provider  Cyberarts  which runs the Nevada Ultimate Poker property. A number of other regional US casinos have been actively exploring the online gaming space and we will see what they implement in terms of social or  "real" money gaming. The smaller regional properties  will probably wait until online gambling legislation opens in the  states they are operating in  before they make a serious entry into the online gaming space.

It is clear that the some of the US Vegas land based casino's have been actively involved in the online gaming space for some time. The roll out of legal online gambling  in the US is now occurring and the early signs are indicating that the nature of the introduction  is causing some land based operators to think twice about entering the legal US online gambling market while others are steaming ahead.  

 Freemium/social casino continues to interest the land based casino operators as an alternative to or complement to their land based and perhaps real money online gambling  businesses. It is very interesting to see IGT become an "operator" of social casino as opposed to being exclusively focused on  a supplier of services to land based operators. Although their  earlier purchase of the Wagerworks online gambling platform and operation of that service in Europe did  indicate that they may have more  "operational" ambitions.  Will the other land based casino platform and game content suppliers follow the lead of IGT?

   The states may have to rethink their online gambling strategy and licensing structure having relied too heavily on the European online gambling model where large casinos are not present and social casino has not necessarily been exploited as a proxy for real money gambling. The US land based casinos need to have a stake in US online gambling for political and economic reasons. Without land based casino buy-in US online gambling could find itself facing some serious headwinds.  Freemium/Social gaming could be the big winner in all of this if legal US online gambling falters.

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.

         

Internet Games Driving "Big Data" Requirements

Venture capitalists are all over the "Big Data(BD)" category investing heavily in a sector they feel is the next big tech sector that will grow quickly and consolidate into few big winners over the next two years.

The Internet gaming space is one of the verticals that ran up against the deficiencies of the traditional DB and BI(data analytics) providers early on requiring them to look for alternatives and to create their own solutions and to take risks with newly minted BD solution providers.  Given the early adopter status of Internet gaming as it relates to BD we can speculate about products and services that BD vendors will have to provide based on the Internet gaming experience.

The challenges that BD will have to solve boils down to solving the standard challenges that have faced computing and especially data solution providers from the beginning of computing.  Latency and storage are the two areas that all data solution providers  must have an answer for. 

Latency - Latency comes down to response for a game. In gaming it is very important for a game to keep up with a player's expected pace of a game. If it does not, players will become frustrated and in some cases the game will become inoperable because the game requires a certain cadence to be considered functional. In mulitplayer games high volumes of players trying to play or compete in a game can put a heavy strain on infrastructure if all parts of the infrastructure are not capable of handling high concurrent usage volumes. This means that "latency" caused by an portion of the game stack or the  infrastructure supporting the game could be disastrous for a game. In social games that depend on their success in the first 48 hours of game launch, any issue that causes the game to be unappealing could sink the game. 

Data Storage- Games that have high volumes of players or associated players can generate extremely large amounts of data in short periods of time because there are many transaction events that occur within a game. We use the term terabytes as a measure of data storage. However, we are getting to a point where terabytes  squared or to the power of x could be a reality if games and especially social games, continue to grow in sophistication and popularity.

The latency and storage challenges associated with games set the gaming sector apart from other verticals such as banking operations, web applications and mobile apps that are not gaming related. This is not to say that applications in these categories are not also driving  BD  requirements. The "gamification" of conventional applications are beginning to transform applications into games. With this transformation comes consumer game play expectations and potentially bigger data storage requirements for other verticals..

BD is not a new challenge. Social game providers experienced the DB storage and retrieval issue very early  after they began to launch games in Facebook. With the domination of Facebook as the leading social game platform the issue has become exacerbated because of the K  or virality effect that can result in a very quick ramp of game usage and in short period of time. This means that a game publisher/developer has to have an out of the box answer to large data requirements.   

NoSQL Data Depositories - The social game companies were  early adopters of NoSQL data storage  providers such as Cassandra, Membase, Hadoop, etc. because they experienced the "how do I handle all of this data problem" in the early days of game deployment in Facebook.  NoSQL DB's as the name implies do not use a table structure to organize and store data.  Instead the NoSQL data depositories use a key value combination to store and identify data. Because there is no "sophisticated" organization of the data and no immediate need to retrieve it or even report on it (we will get back to this point later) these DB's can handle transaction rates with less overhead and more efficient data storage relative to conventional data base products. 

Analysis - Gaming companies and especially Internet gambling companies have historically conducted sophisticated data analysis on game play, player acquisition, player retention, etc. to maintain a competitive advantage and to keep their businesses  growing. Cost of acquisition is extremely high for gambling companies requiring them to be especially careful about retaining existing players. In many cases the success of an online gambling site rests with only a few players that contribute high amounts of revenue. Finding and keeping those players is a very high priority which requires just in time data analysis mining a relatively large data, slicing and dicing the data in a number of different dimensions.

Social gaming companies have a different challenge. Social game companies have a  low revenue per player number relative to Internet gambling or even e-commerce companies. This requires them to drive high numbers of players, which causes the data storage issues previously mentioned, and the need to fully understand how and if players are inviting and associating with other social gamers that are or could drive revenue. Social gamers do have their "wales" just like gambling companies. However, the ratio of total social game players to "high rollers" is significantly different then gambling companies. Social game publishers need data analysis to keep this all in balance.

Both Internet gambling companies and social game companies need almost instantaneous data analysis to react quickly to changing traffic patterns, take advantage of successful marketing programs, retain "high rollers" and to control player drop off.

Unfortunately the current crop of NoSQL data storage solutions does not easily allow someone to analyze that data leaving an entire depository of data off limits to BI.  In a perfect work you would like to be able to combine NoSQL and SQL depositories in a BI roll up to give you the complete picture your business. There are BI vendors attempting to do this as this blog is being written. 

The opportunity and the challenge for BD investors, infrastructure providers, DB vendors, DB analytic engines is to address data capacity and latency issues created by larger data storage requirements and data formats that do not fit conventional SQL structured data . More importantly, creating an analytic feedback loop that farms NoSQL and SQL data,  satisfies standard marketing funnel analysis, game mechanics optimization and social interaction optimization needs to be in place to get real value out of BD. Getting this right will create the wealth effect investors, stockholders and entrepreneurs are looking for. If the BD vendors can solve the Internet gaming companies challenge they will most likely be successful in other verticals.

 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.