Why Is Social Gaming So Important For Online Gambling Companies?

I had the pleasure of participating in a GIGSE panel discussion this year where I was asked to comment on the role of social gaming in the context of the potential legalization of online gambling in the US.

I indicated that social gaming should be a critical strategic consideration for any company interested in taking advantage of the future prospect of legalized online gambling. I also implied that even if US online gambling is not legalized or takes a long time to happen a serious look at  social networks and social games should be a part of any gaming companies strategy.

I pointed to the success of Zynga as an example of how a social gaming strategy has created perhaps the most successful online gaming company to date.

Despite Zynga's  impressive numbers many of the people in the audience dismissed Zynga or any other social gaming company as irrelevant and inconsequential relative to online gambling. The reaction I received from many attendees was a bit shocking to me.

The argument's they used to support their position are as follows.

1.) The majority of social gamers are under the age of 18.

2.) The social gaming experience is different then "real" online gambling.

3.) There is no money in social gaming. Revenue per player is very low.

4.) There are only a  "few" high virtual currency transactors in social gaming.

5.) Zynga's lead generation to online gambling operators has been very poor.

6.) Social gaming companies do not know how to operate real gambling sites.

Although some of these arguments have merit others do not or are taken out of the context of the intricate online gaming ecosystem.

The following are items online gambling companies should take into consideration before they completely dismiss social gaming.

1.) Average Age Of Facebook Players -Just about everyone has a Facebook ID. The average age of Facebook members is now 35 years old and getting older. The 18 to 25 year old age group is a significant portion of Facebook membership. This is the perfect age group profile for online gambling. If you have every played in Zynga poker you will see (their pictures) that many of these players are the traditional age group for online gamblers.

2.) Social Games Are Different For Online Gambling Games - Yes the social game experience is different from an online gambling experience. Of course it is, because online gambling is not allowed in Facebook. Companies like Zynga have shrewdly decided to offer a game experience that matches the social environment. This is one of the reasons why Zynga has 250 million players and online gambling companies are not even close to these numbers.

3.) Social Games Will Change If Online Gambling Is Legalized - If online gambling becomes legal in the US and Facebook embraces it (which they will in a clever way) online gaming content in Facebook will change making it more gambling like. The gaming companies will not change their current casual offering. Instead they will offer a different game experience and upgrade casual gamers into the gambling operations. Even if the conversion rates is in the single digits the numbers are astounding. Also, Goolge, Apple, Yahoo, Amazon, EA, etc. and other major online companies that have large numbers of online profiled transactors will create online gambling games and seek to convert their current visitors to online gambling.

5.) Making Money In Social Gaming -Many online gambling companies that come to me to help them understand the social gaming world are appalled at the relatively small monetary transactions per player. They become discouraged by these numbers not realizing that if a gaming company can create a gaming application that has a viable social component and a good social network marketing strategy the shear numbers of players will make up for the lower transactions per player. No this is not an easy thing to do. However, if successful, social gaming can begin to pay for itself.

In contrast to online gambling companies, social gaming companies use a variety of game "monetizationr" techniques to make money from social gaming. In gaming advertising, virtual currency, virtual goods, lead generation for other social applications, etc. In aggregate these numbers start to add up. Virtual currency and good sales alone are climbing to rates equal to and exceeding online gambling revenue. It is estimated that the virtual world will be generating 5 billion USD per year in the not too distant future.

6.) Player Profiling And The Online Gaming Ecosystem - Treating  online gambling and social gaming players as distinct and separate individuals is not realistic given the large numbers of players engaged in social gaming. Inevitably there is an intersection between these two groups. In the past two years social gaming companies with the help of third party companies specializing in social network profiling have begun to take a look at all of the Twitter, Facebook, Google search, etc data to decipher the likes and dislikes of people on the web. Evaluating and making sense of this data is not easy. However, some progress is being made to provide hints as to the propensity of an individual to buy a certain product, play a certain game, travel to a specific destination, etc. There is still much work to be done to in this area and privacy issues abound. However, with the increasing amount of information we are all contributing freely to the Internet there will be a time when  profiling will get to a point where we can successfully to move players to and from different environments with a high degree of accuracy and increased moneitization.

7.) Marketing And Player Acquisition On The Social Web - An online gambling company has to learn how to market to players within the social web even if they believe that social gamers are not the target audience. Everyone is in a social network of some kind and online gamblers are no exception. Developing a productive and effective social networking marketing program is non-trivial and requires a very different approach then tradition web, affiliate, e-mail, physical, etc. marketing. Ironically, social games are one of the most effective ways to market products and services because they do have the potential to get close to a truly viral application. This is the holy grail of social marketing and and should be a goal for online gaming companies even if they never launch a social game of their own.

8.) Social Games As A Separate Business Unit - At the ICE conference in London this year I had the opportunity to help organize a special session on social game monetization.  It was revealing because it came to light that traditional gambling companies like 888 and BetWin are creating separate social gaming business units not related to their gambling properties. These companies realize that the future of online gaming is within social networks. This is where the growth and innovation will be. They want to be in it and be just as successful as Zynga and other high profile social gaming companies.

It is clear that  many online gambling companies do not fully understand the importance of  social networks and social games in the context of online gambling and distinct social gaming applications. Some of them do and are taking steps to explore how to be successful within social networks and to launch social games that can stand on their own taking advantage of the social graph. This space is certainly evolving quickly making it more difficult to get into the social space and establishing expertise and brand awareness. Despite this a presence in social networks is becoming mandatory for any company wishing to maintain market share and to grow. The sooner an online gambling companies embraces this reality the better off they will be.

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.

California Indian Tribes Going All In For Online Gambling In A Double Dip Recession?

The State of California, like many states in the current economic climate, is strapped for cash and tax revenue. It is no secret that legalized and controlled online gambling could result in meaningful revenue contributions to the states coiffures. Thus the online gambling bill SB 1485, proposed by State Senator Wright to legalize online gambling under state control.

One of the major state lobbying groups opposed to this legislation is the state's Indian tribal community.

While attending the 2010 GIGSE conference in Montreal I received an education on the California Indian nation's position concerning the legalization of online gambling in California. I was surprised that the tribes were actually opposed to the legislation. It really made absolutely no sense to me why this would be the case. The tribes are currently heavily invested in land based casino operations and have built up an economy and expertise in this area. Their sovereign nation status provides them with a unique opportunity to extend their land based success to the Internet. It is no secret that the future growth of online gambling is on the Internet. Why would they kill the goose that laid the golden egg?

It appears there are two issues contributing to the tribes position.

Competing Indian Tribes - There are several Indian factions competing for the online wallets of California consumers. This is a battle within the Indian nation for ownership and dominance of Internet gambling in California. The individual Indian factions do not want online gambling to happen unless their faction gets a part of the action. This debate is healthy and at the same time concerning. Land based casino operations clearly allow each tribe to physically locate gambling facilities within their communities. Internet gaming is a different story requiring a different model to distribute the benefits to all Indian tribes. In a way the benefit distribution for online gaming may be more equitable then the current offline gambling model. If the Indian nation is trying to use their current land based casino wealth distribution model as a proxy for the Internet model we could be in for a long and confusing battle.

The State Of California As Primary Beneficiary - All of the tribes are concerned that the current legislation proposed by State Senator Wright favors the State Of California as the primary arbitrator, operator and beneficiary of online gambling operations. This is a valid concern with only three gambling hubs proposed by the legislation. Who decides who will get them and how? The Indian tribes are rightfully suspicious of the states final legislation given the impetus behind the legislation.

What Is the Solution? The tribes do need to get their act together sooner rather then later. If they do not they may be responsible for the entire state missing the window of opportunity and a potential big source of revenue for all state residents. They should "bury the hatchet" so to speak, within their own ranks. Getting the Indian tribes moving into cyberspace can only help their community and provide their constituents with skills and job training they desperately need. A model for distributing benefit to all Indian tribes is the way to go to resolve a potentially prolonged battle.

The State of California should allocate one of the hubs to be managed by the Indian nation. This has a few interesting consequences. The tribes will have to cooperate to determine how they can all benefit from the legislation. They will also have to propose a plan on how individuals within these tribes will benefit. Can this lead to cyberspace jobs and job training for American Indians? Will it result in a general fund to manage the distribution of online gaming proceeds to the tribes? Should one of the hubs actually be hosted on Indian land helping the tribes develop an Internet infrastructure that can be leveraged in other ways?

In conclusion, the legalization of online Internet gambling in California has the potential to change the Indian nation in a positive way, providing the tribes can bury the hatchet and work together to make it happen. This may be a once in a lifetime for the Indian nation. It would be a shame if tribal squabbling get in the way of legislative enactment.