Are Social Casino And Fantasy Sports A "Proxy" For "Real" Online Gambling?

There has been much debate  concerning the relationship  between social casino, freemium,  virtual currency and "real" online gambling games over the last several years. It was thought at one time that social and freemium games that involved playing gambling style games could lead to "conversion" of social casino players to "real" online gambling venues.   In fact, this has proven not to be the case. A number of online gambling businesses; most notably, JackPotJoy, 888, Party Gaming/Bwin and PlayTech either created social casino properties or teamed with social casino business to determine if "conversion" up into "real" money online gambling could be achieved by association with social/freemium online game properties.  Their experiments showed that there was, in fact, little or no meaningful conversion of social casino players to "real" money gambling play. In addition, an   extensive independent research study was  conducted by Australian researchers  to determine if social/freemium gaming content and game play acted as a proxy and or ramp to "real" gambling. This study was prompted by real concern on the part of Australian politicians that social casino was a  threat to the population increasing the risk of "problem" gambling. The research showed that there was no meaningful conversion of social casino players to "real" online gambling.

The results from these experiments and research projects decreased the anxiety and public concern about social casino as a "gambling" threat. Over the years the social casino(Facebook) and mobile/social casino have grown and have developed into an independent industry on its own completely divorced from "real" online gambling.  Estimates for "social" casino  are in the billions of USD world wide establishing this industry as a real contender; and possibly a competitor  to; as opposed to a collaborator with online gambling.

The question now arises is social casino a "proxy" for online gaming? Does social casino keep players away from real gambling venues either physical or virtual?  There is certainly plenty of research on the up-sell for social casino into "real" money gambling. However, there is a noticeable absence of any objective research on either the satisficing of the urge to play "real" gambling style games by playing social casino games. The awareness of social casino as an alternative form of gambling became front and center for me when a distraught parent contacted me asking me to intervene on behalf of her teenage son that was racking-up big bills on her credit cards spending money on Facebook casino games. I attempted to contact Facebook to request them to block this individual from further transactions. However, there was no way for a third party, or a parent for that matter, to engage Facebook on this subject.  Clearly, this was an example of a person that was having a "gambling" problem.

No mater what the answer is to this final question of social casino as a true "gambling" activity it is well documented that social casinos are doing very well on their own with absolutely no association with or up-sell into "real" money gambling. In fact, the rather arcane notion that virtual goods and the virtual experience has no "value" is clearly absurd and being leveraged to grow very successful social casino businesses. In truth, social casino is an established business sector on its own with its own "problem" gambling challenges. This phenomena deserves serious organized attention similar to how "real" gambling" has created a problem gambling initiative.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin, has developed, launched and operated Internet gambling sites in Europe.   Kevin and Gameinlane   develop "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. 

Are Social And Freemium Games Stealing Players From Internet Gambling Operators?

There has been a recent surge of freemium and social  virtual currency based gambling style games in Facebook and on mobile devices. The number of offerings and the amount of players is staggering. It is estimated that  Facebook social games have 49 million active users per month. The mobile freemium and social gaming space is even more impressive with projected revenue growth rates of 3.37 USD by 2014. 38% of the US population has played some form of mobile freemium game. 40% have transacted with virtual currency.  In China, Korea and Japan freemium and social virtual currency games are the primary source of entertainment online.  There is a new announcement everyday indicating that traditional Internet gambling businesses and land based casino operators  are launching social and freemium game properties. Conversely, the Internet gambling market is not growing anywhere near the growth  rates of social and freemium games. Increasingly complex  legal regulations are causing the European gambling market to constrict and at the same time the cost of operating an Internet gambling operation in Europe is increasing.   This begs the question as to what the true motivation is for existing Internet gambling properties to enter the social/freemium gambling space.

Social/ Freemium Lead Generation - The conventional wisdom has been that the Internet gambling companies are most interested in the cross over from social/freemium games to Internet gambling games. The notion is that some percentage of social/freemium players will cross over to traditional gambling if properly incentivized. There has been some history with this approach. Zynga has sold leads to European gambling sites over the years. However, the conversion rates of these leads has been poor. Part of the issue with this approach has been the lack of "profiling"  of social/freemium players  to determine what players would most likely convert to Internet gambling players.

Social/Freemium Standalone Business - Two years ago at the ICE gambling conference in London I had the opportunity to chair a number of sessions on freemium/social  games. During this conference the traditional gambling operators that had purchased social/freemium and mobile gaming sites indicated that they were more interested in this space as a separate business unit and had no intention of trying to move players back and forth between gambling and social/freemium properties. This was the first indication to me that Internet gambling properties were seriously thinking about the freemium/social space as a separate business unit. 

Abandoning Internet Gambling Business Completely - This may appear to be far fetched at this time. However, with the increasing difficulty of making an Internet gambling business work in an environment were regulators are more interested in short term tax revenue then they are in the survival of a once thriving business model, i.e. the death of .com and the emergence of .country, I am sure the Internet gambling operators are going to be looking closely at the numbers of both business models. If freemium/social can break even for the gambling companies the operators may just decide to close the gambling operations all together.

Impact Of Potential US Legalization Of Internet Gambling - Since October of 2006 Internet gambling has been illegal in the US. The law supporting that legislation has proven to be unenforceable and is about to be rewritten on a federal and or state level. This means that one day an Internet gambling operator could wake-up to find that it is once again legal to take wagers from  US Internet gamblers.  The problem is that these operators will have to figure out how to instantly acquire these players. Clearly, some of the gambling operators see social/freemium as a way to pre-acquire players, establish brand awareness and if the operators are smart, profile social/freemium players to determine the likelihood of social/freemium players converting to traditional gambling.

Social/freemium games provide a number of opportunities for existing Internet gambling operators. The Internet  gambling operators know how to acquire players, monetize them, retain them and run very efficient  businesses.  Certainly operating a social/freemium gaming site is different from operating an Internet gambling property. Also, the gambling operators are late to the party (no pun intended). However, I suspect they will adapt to the social/freemium world quickly.

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.