GIGSE 2014 San Francisco Conference Summary

 The 2014 GIGSE   online gambling and social gaming conference lead off debate set an interesting tone to this years  conference in an unexpected way. Three former politicians; Willie Brown former Mayor of San Francisco, Edward Rendall former Governor of Pennsylvania and Robert Miller, former Governor of Nevada dove right into the hotly debated topic of legalized online gambling in the US. The debate reflected some of the on-going political debate  on the subject recently intensified by Sheldon Adleson's flat out attack on the roll-out of online gambling in the US.

Edward Randall and Robert Miller took a very different  stance in regard to online gambling relative to Mr. Adleson and were strong proponents of it. Nevada has already legalized online poker and may very well legalize online casino games in the near future. Edward Rendall  was also an advocate of responsible online gaming legislation based on his state's strong and financially beneficial roll-out of land based casino gambling.  He sees no conflict between the land based and online gambling industry pointing to research that there is no evidence, at this time, that online gambling will impact offline gambling revenue. 

Willie Brown took the contrarian view that "if you can not see it or touch it you can not regulate it". Mr. Brown, being the passionate  public speaker that  he is, was quite animated diving right into the potential dangers of online gambling to land based casino revenue and the prospect of organized crime syndicates laundering online gambling proceeds.  He also wound-up the crowd with the threat that every child under the age of 12 years old would be gambling on their mobile phones. Many of  the conference attendees  were shocked by his position and his passionate defense of land based casino and objection to legalized online gambling.    However, I am sure there are plenty of land based casino business affiliates that harbor the same feelings. Bringing these fears to the surface in an animated way helped to drive home to a sympathetic audience that the "every" day person and voter may not see the world in the same way that the audience does.

 Despite the former mayor's impassioned critique of online legalized online gambling in California it is unclear what position average California voters take on legalized iGambling in California. The debate in California thus far has been primarily in Sacramento. The track record there has not been great given the indictment of a number of state senators that have supported online gambling in the legislature.  This has further muddied the waters in the state capital even though the State has hired Richard Schuetz as Commissioner of the California Gambling Control Commission to sort out the mess and to give credibility  to the effort.  

Social Casino Games - The conference held a complete multi-day track addressing the ever growing strength and growth of the  "social" casino industry. For those not in the business, social casino games are gambling style games where you can place a bet but you can not cash out any of your winnings. In many cases the games are almost identical to slot games and table games found in land based casinos and online gambling sites. This allows social casino games to be unregulated. The sector has actually outgrown the online gambling market in recent years in terms of game play. It's revenue is somewhat muted because of the small transactions involved in the games however the worldwide estimate of revenue from this sector is 4.1 billion USD.   

 I had the pleasure to chair some of the program  and was struck by the growing "maturity" of this sector. It is clearly getting harder to break into this space and the businesses that have been in this sector for some time appear to be getting a solid hold on the market. Ironically, many of the established European online gambling operators,  US land based casino operators and game suppliers to the land based casino industry have become very active and successful in this sector.  However, the maturity of this sector is also leading to stiff competition because the game content that consumers appear to enjoy is very closely related to traditional online slot play and easily copied.   It will be very interesting to see how and if consolidation occurs  in this sectors over the next year.  There are also forces at work internationally that are advocating some form of regulation of this market. However, the reasons for regulation have been hard to substantiate. There is no concrete evidence that social casino play contributes or leads to a propensity to play "real" online gambling games.  In addition, online gambling operators in Europe have tried unsuccessfully to convert social casino players to "real" money gambling venues.  

US Online Gambling(iGaming) - Online gambling has been introduced and is operational in Nevada, New Jersey and in Delaware. However,  the roll-out of online gambling in these states has been less then stellar based on perhaps unrealistic  expectations set prior to legalization. This situation is placing a drag on the further roll-out of online gambling in the US and consolidation within the states that have legalized it.

This debate was carried on in a number of venues at the conference with state compacts being considered to potentially pool players and increase liquidity.  However, it is clear that after the shock,  confusion and in some ways muted response by online gambling consumers in the states where online gambling is legal there is hope that lessons have been learned and the "fix" is on the way.

 Liquidity is the overriding culprit for  the slow start. However, the liquidity issue is really a symptom caused  by poor planning,  credit card transaction oversights, overly zealous IP and location based rules and the misunderstandings between land based casino operations and online gambling operators.  Also, expected numbers of concurrent players were exaggerated going into launch. The experience in the European market should have been taken into consideration when prognosticating  the impact of a country by country or state by state online gambling model in the US.  

 Although the issues with the way the roll out has occurred and the actual content that the consumer has access to is greatly responsible for the lack of robust player numbers most iGaming experts will agree that  the industry can restore consumer confidence in legalized US online gambling allowing it to move forward in a responsible and profitable way.

States like Delaware and Nevada are somewhat challenged because of their relatively small population base. We have seen how the balkanization of  online gambling in Europe from a .com approach to a country by country implementation has resulted in extreme consolidation in the online gambling business in that region. The US is starting out without having gone through that phase. However, the discussion about state "compacts" is being bantered about conceding that US online gambling in its current state by state format could be challenging.

Native American Indian Tribal Representation - GIGSE has had very strong representation from the American Indian tribal groups over the past several years. This group is heavily dependent on their land based casino's supporting and funding many American Indian initiatives. In many  ways their casino's have helped to sustain many tribes and create jobs for their community.  Consequently, they are very interested in the impact and  or opportunity that online gambling poses. The prickly aspect of online gambling for them is "liquidity" given their relative small geographic  focus.  The success of relatively small online casinos launched in Malta, Isle of Man and Alderney may point to an indication of how an Indian casino could flourish in online gambling in the US. In addition, there has been no proof that online gambling negatively impacts land based casino gambling.  

It could be argued  that the US online gambling sector is already over regulated in the US and the  social casino sector under regulated. The interesting dynamic and friction  that this creates could lead to one group being penalized for being successful and the other group being given leeway to relax regulation to increase revenue. For example, are state compacts inevitable?  Will social casino be subject to some form of taxation to offset lowered online gambling revenue? Will social casinos have to conduct age identification, etc. ?  However, after listening to the politicians it could be very challenging to get states to agree to cross state lines on revenue share, regulation and player ownership.  Also, constructing and enforcing regulation is a time consuming and expensive undertaking making it less likely that social casino will be subject to regulation unless the regulation is very simple. Making voters undergo more referendums before the iGaming model has proven its worth is unlikely.

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.

  

  

Wearables Influence On Gaming

At the recent Casual Connect  Conference in San Francisco I spoke about the future importance of “Wearables” like Google glasses and some of the arm, wrist and angle bracelets that detect heart rate, location and perhaps movement. The response to my prognostication was not well received with many traditional gamers dismissing this as just another “gimack”  that would not be adopted by consumers or gamers. This response surprised me a bit and demonstrated the traditional mentality of game developers. Clearly, they believe the console still rules and perhaps traditional RPG/Emergence games as reigning forever.

However, when I attended the wearables  conference in San Francisco a month later there was an entire session on wearables and gaming. I thought for a brief moment that I had been vindicated and in fact there was some development in this area.  A company representative from   Mind Pirate  spoke and appeared to be out in front of the wearable gamer curve with prognostications about using virtual reality/google glasses and entire headset wearables to leverage the new input devices that could bring gaming to a new level.

However, subsequent discussions on the wearable  panel discouraged me a bit indicating that the wearables would simple be used to re-hash old games played on consoles in a new virtual reality setting. This seemed to me a bit deflating because I suspect that the wearables certainly will be used to spice-up traditional console games. However, with the ability to mix reality and virtual reality together with body readings such as heart rate, body temperature , etc, the degree of personalization of ones own body reaction to the game and opposing or collaborating players should set games off into a different direction and result in new games being created for existing and new audiences. The new audience crowd is a very important from a commercial perspective. Overall, the game community has struggled  broadening the reach of games with the exception of the Nintendo Wii.

Let’s hope wearables  will be adopted by a new set of developers that have not been prejudiced by the current game development community. I would really like to see something new and innovate games emerge from the merger of wearable input and connectively to body processing information.

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.

Wearables Influence On Gaming

Converging Social/Free To Play Games And Internet Gambling

 Conferences are spawning all of the place on "CONVERGENCE" and organizations are cashing in on the hype over the concept of converging  gaming models. It is assumed that these conferences are talking about the  movement  of players from a free to play gaming model into a  classic Internet gambling  model.  If this is true, convergence has actually been operational for some time.  So what is the hype about,  what is the history or convergence  and what if anything are we missing at this point in the evolution of online gaming? 

 Traditional Internet Gambling Convergence Experience -  Internet gambling organizations in Europe have been converging and merging free to pay and Internet gambling for some time. Most of them have had free to play sections where players can learn how to play familiar European style gambling table games, bingo  and poker. The free play zone has also been a place to up-sell players into real gambling. With  the exception of Party Poker now Bwin.Party  there has not been a heavy emphasis on these free to play offerings to acquire players because the high cost of acquiring  gamblers  in Europe  has resulted in  the tendency to  drop players directly into the play for play zone directly fromt marketing campaigns.  However, discussions with gambling operators indicate that the free play zone has attracted players, and for low or no cost.  They have had programs to up-sell players into conventional gambling games and their has been conversions from these free to play offerings in the single percentages range.

The  Party Poker free to play  model is a bit of an enigma because of its popularity and its very high numbers of players relative to casino style free play zones.  it is unclear if Party was cultivating this traffic or the popularity of the brand itself drew unsolicited players to the property. It is also speculated that the closure of the US market to legal online real money poker may have driven many of the US players into the free to play model. Irrespective of how or why Party cultivated the free play traffic it is clear that professional and a mature poker player like free play and move between the free to play and pay for play model. Not sure if Party is or was looking at the conversion numbers. However, their recent partnership with Zynga may be an indication that they believe their is an expected "conversion" rate between free to play an play for play poker. 

Tweener Subscription Games -  Before the advent of Facebook, and even today, subscription or "alternative method of entry" gaming models have been launched and operated in Europe and the US.  Subscription games are games that  pay out real money and require a monthly subscription fee to play. In general, they target  a market segment that is willing to pay some amount of money to gamble but not  a particularly large amount relative to traditional  gambling. The subscription gaming model is usually attached to a reasonably robust free to play  model as well,  intentionally moving players back and forth to keep them in the property. The movement of a player up into a subscription is essentially a conversion. The challenge with the subscription  model has been the intentional cap on the amount of money a player can invest in  game play during a single transaction. Because of this  keeping a player within the gaming environment is critical to realize the full value of a player and to keep the subscription model working.  Thus the concept of the  focus on the "lifetime value" of  player as opposed to an exclusive gambling emphasis. Subscription gaming models have paid more attention to convergence of free to play and pay for play then traditional gambling models for good reason. The subscription model is more holistic  realizing that players will move bi-directionally from one model to another.

Monetizing In Social Games - Post launch of applications in Facebook allowing virtual currency transaction and  the eventual Facebook introduction of Facebook credits the world saw the first social casino games begin to make money from gambling transactions.  Despite the fact that Facebook game players can not cash out their credits, the Facebook game providers were and are able to cash out what the players are contributing. This paradox created by an arcane legal notion of what "value" is has been exploited by the social casino community. This  business model has been carried over to mobile as well.  Facebook social games use free to play extensively for the purpose of acquisition, to obtain the connections these players have,  to eventually  convert/up-sell them into a virtual goods transaction and to allow them to drop in and out of free to play and pay for play keeping them in the game ecosystem. Yes, the conversion rates up into a paying model are small, around  4 to 6% in most cases. However,  there would be no conversion at all if free to play did not exist. Also, oddly enough the free to play conversion numbers to paying players is not much different then the subscription or pay for play gambling properties.  Without free to play the player pool would be be very small obviating the social game model all together.

So What Is The Convergence About? -  We can see from the historical record that convergence in one form or another between free to play and pay for play has been around for awhile so what convergence are these new conferences trying to address? My belief is that the convergence being discussed is the convergence of disparate gaming models that are not connected in a holistic gaming environment. An example would be the convergence of a Facebook  social casino model with an  externally hosted Internet gambling model or a Facebook social casino with a Facebook gambling model a la the Gamesys JackPotJoy combination. 

 It is unclear if business models that send players from one gaming business model to another without any overriding context will be successful. However, I suspect they will be sub-optimal.  The lack of a truly  integrated  player experience will be  potentially confusing to players  perhaps making them feel as if they have been forced into an environment that they did not sign-up for.

Ideally, a gaming environment  should not force a player out of the "system" and into an alien environment to either pay or play for free.   Instead their  needs to be a way to move players up and down the monetization ladder and hold them in the overriding gaming economy and environment.

Life Time Values Of A Player - The concept of the life time value of a player is frequently used in free to play, social games and subscription gaming models that have a number of monetization methods such as advertising , virtual currency transactions and branding revenue. Gambling has a tendency not to use this term, instead, focusing on a breakdown of players into categories such as wales or fish.   The problem with the gambling  player profiling in a world were the various gaming models are becoming intertwined is that   the wale/fish dichotomy overlooks the symbiotic relationship between these two classification of players and the the tendency for some wales to become fish for a time and some fish becoming wales for a time.  So the proper way to characterize the true "value" of a player in a multi gaming model environment is to think of players holistically and to use the "life time value" of a player as the true measure of the effectiveness of the gaming platform. It is still unclear if a  free to play player that drops into a play for play environment for the first time  will automatically become a fish. Hopefully not, because this will certainly undermine the attempt to make a convergent gaming model work.  The lifetime value of a player is much more important concept on a business model that has a number of different ways to monetize a player.

Player Profiling -  Player profiling becomes important  in a convergent model  to determine what players are more likely to upgrade and to attract players that will feel equally comfortable in free and play to play gaming model.  Profiling is proving  to be more challenging then first thought with top grossing wales in a free to play or subscription model not necessarily being the most likely to go all in and play in a gambling environment.  I suspect that  data points such as player social game monetization, age and demographics are not going to help  very much in understanding what motivates someone to up the anti and play a higher stakes gambling game. It will most likely take some reasonably sophisticated evaluation of a players historical and more immediate player behavior to determine  at what  point and time a player  is "most" likely to upgrade or downgrade. At that instant and time the game environment has to respond to drive that player into a "crossover" experience to coax them into the higher stakes game or  keep them in the game environment. 

Profiling of players may require the evaluation of information outside of the game environment to fully understand a player's propensity to play one style or game or another, or if they are intending to leave a gaming environment or joining one. Tweets, Facebook intra-friend communication and other publicly obtainable information may be a resource that can be exploited to build a 360 degree view of a player at an instance in time.  

Transaction Sensitivity - It is reasonable to assume that a player that first transitions from a free to play model to a pay for play model will be hyper-sensitive about losing. Especially, if the amount of money lost is significant. Consequently, the gaming system has to  be keenly aware of where a player is in terms of the player life cycle and be able to modulate the amount wagered and potentially the amount lost in a play to pay model.   You still want the player to continue to  play  in the free area to maintain liquidity and to monetize that player with advertising or  virtual currency transactions if the play for play experience is not working for that player. A convergent gaming model needs to  place an  equal important on both free to play and pay for play. We see this in Facebook games and it works really well.  In addition, the current crop of game analytics will most likely not  adequately address the convergent environment in a way that optimizes player retention and the lifetime value of a player requiring an overall of the data points and reports to adequately operate a convergent model. 

In conclusion, conversion and convergence  of players from  free to play to pay for play  has been  around for a long time.  What is new is the current  need to seamlessly  move players  bi-directionally within a holistic gaming environment that makes a player feel comfortable in both environments. Overall, optimizing this form of convergence will be difficult to do without changing the mindset of what a gaming environment is and understanding in a more comprehensive way, at an instance in time, what is the players "state". These requirements will pose challenges for the businesses that are attempting to converge the free to play and play for play players within the context of  of their current business operational models. Essentially, convergence is going to be harder then initially thought for some and more natural for others that already understand the lifetime value of a player concept. 

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane works with companies in the social, Internet gambling and land based casino sectors developing game content and online gaming strategies. Kevin is a frequent speaker at social game, Internet gambling and casino events and conferences in Asia, Europe and the US. Kevin is currently working with organizations to determine their acquisition and merger strategy as it relates to the growing interdependence of the various game content and delivery platforms.

Social Gaming Companies Entering The Online Gambling Space: Think Before You Leap

A number  of social gaming companies are either contemplating or actually starting the process of entering the online gambling space. These companies have been attracted to online gambling for a number of reasons. The primary reason is the higher ARPU's in gambling relative  to social gaming. Gambling ARPU's on average can be in the hundreds or USD's with some wales contributing in the thousands of USD. Another reason is that social casino games look like traditional gambling games and do have game mechanics similar to traditional gambling games.

However, there is a much more to consider beyond the expectation of acquiring high yielding players before a social gaming company commits to engaging in the online gambling business. Launching and running an online gambling business is much more expensive and complicated relative to operating a social gaming business.  Many business processes have to slow down to avoid the risk of errors in the code and product. Financial records have to be kept for audit purposes and a delicate balance maintained between speed to market and adherence to regulatory standards. Marketing costs are considerably higher for online gambling operators.

The following are a number items that a social gaming company should be aware of and be prepared for if they expect to be successful in the online gambling arena.

Licensing Fees -  Operating a "legal"  online gambling business requires licensing from a recognized  gambling authority usually associated with a state, country, district, principality, etc. This fee can be in the vicinity of 200,000 USD and higher with an annual fee to retain the license. In Europe,  country by country regulation is emerging requiring an online gambling operator to pay licences to every country they want to operate in. If the US decides to legalize gambling it could be on a state by state basis mimicking the same regime that is emerging in Europe. An online gambling company could easily spend a 1,000,000 USD on licensing fees with some annual fee to maintain a licence if that company wishes to be licensed in several countries, states or jurisdictions.

Background Checks And Vetting Of Key Staff Members -  Legal online gambling operations are subject to scrutiny by law enforcement to determine if staff members have been charged and or convicted of any crimes that may suggest that they  intend to operate illegal gambling operations. Key personal will have their backgrounds checked to determine if they have an affiliation with people that have a criminal record. Staff members will be subject to a review of their financial records to determine if there is any suspicious transaction history that would imply that their interest in online gambling could be used for the diversion of funds from the online gambling operation.

Regulatory Review And Audits - Regulators are going to want to audit the game platform and perhaps the games themselves. The RNG(Random Number Generator) is the key piece of code that will be scrutinized. However, other portions of the stack could be of interest. Intrusion detection is another area of concern by regulatory authorities. These audits may come randomly or at scheduled times during the lifetime of the operation. This means that your code has to be up to the standards required by the regulators, it should be well commented and the sensitive code can not be changed without permission from the regulatory authority.

Player Age/Location/Identity Check - All players interested in playing on a gambling site have to be screened to make sure they are above the gambling age limit and they are coming from a location where it is legal to gamble. If a player's age, identity and location cannot be verified they must be rejected and cannot play. In some cases players that do fit the criteria  to play will be rejected because their is not enough evidence that they are who they claim to be. Location is becoming more important with many European countries only accepting players from their country. The US state by state model will most likely take this position. In Europe some countries are requiring pre-screening of potential players by the authorities before the player can interact with the gaming property resulting in player drop off prior to ever experiencing game play.

Marketing and Retention Costs - The overall market size of "real" gamblers versus social gamers is significantly different with gambling players representing only a fraction of the number of social game players. Regulation itself restricts the numbers of players with only a small segment of the population having access to "legal" gambling properties.  Age restrictions also constrict the total size of the market. Playing for "real" is also a deterrent curtailing the number of players and the amount of time they gamble.

 It is not uncommon to pay on average  of between $300 and $500 USD's to acquire an online gambling player.  Placing Ads either in electronic or physical mediums are higher as well.  The methods of acquiring gambling players  differs as well. Affiliate marketing is a key component of online gambling with certain affiliates focusing exclusively on online gamblers. 

Competition can be fierce  for  the acquisition of gambling players requiring online gambling business to provide extra incentives for gamblers to play on their properties. Players my be given free chips to start play and to encourage players to return to play if they have been absent for a period of time.

 Many traditional marketing tools are not available to marketers  For instance, paid search in Google is not allowed by Google  and certain e-mail providers will filter gambling related e-mail campaigns.  It is unclear on what restrictions Facebook will place on online gambling within Facebook. 

Gambling Legal Counsel  - An attorney specialized in online gambling will have to be added to the budget. In some cases different legal counsel will have to be added for each jurisdiction that a company seeks to enter. Obviously, this can add a significant expense item to a game operators budget.

Transaction Reporting - The European country by country online gambling model has lead to the requirement for licensees to report on all gambling transactions. It is highly likely that this model will be replicated in the US. This means that a special feed of gaming transaction has to be constructed in a way that the data feed complies with the regulatory specifications and that data is transmitted in real time to a special location external to the game hosting site.  The experience in Europe indicates that the setup of these game transaction systems is time consuming and expensive. 

Game Play - Social games, even if they are social casino games emphasize the "fun" part of gaming.   They encourage other people to join  a player in this fun activity and players often gift other players with free virtual currency and perhaps virtual items.  Gambling is different. Believe it or not "real" gamblers may not be all that interested in letting others know they are gambling or how much they are spending on their gambling wagers. If you are going to extend your social game into the gambling realm think about opt in and opt out features that let players remain anonymous.  If you launch a gambling game in Facebook realize that the social graph may be restricted in Facebook and certain gamblers will not want to make others aware that they are gambling in Facebook. Traditional gamblers may want a more traditional gambling game experience. This means that if you have modified a game like blackjack or roulette  to fit a more play for fun environment it may have to reworked to look more like the original game.  Gamblers want to know what the payouts are for various games and what the different wins in a game will payout. They want to know the odds of winning in a specific games. Player game time may decrease because they only have so much in their wallet requiring a social game company to think of clever ways to keep a gambler engaged.

Regional Game Preferences - I participated in the development and launch of two online gambling platforms targeting UK players and learned  the hard way about regional game preferences.  We developed our game content based on the land based preferences of US casino players and free to play gamers. Needless to say, when we launched our games in the UK we were surprised at how different the UK gambling preferences where relative to  an American  land based audience. The biggest difference was in slot preferences. However, table gable preferences where skewed differently as well. The moral of the story is know your audience before you start building your gambling content.

Game Development - There will be tighter restrictions on how games will be developed and who develops them. Overnight peer programming mash ups to jam a game out as fast as possible may not work. Certain best practices such as code documentation is very important. Code has to be developed with security in mind to avoid intrusion attempts and changes  to the code by internal personal that could result in preferential game play features that could be unlocked during game play. The wallet function is an especially vulnerable  area that could easily be tampered with by a developer or an IT tech for the purpose of redirecting funds to an external account.  The game development process inevitable slows down. Changes to games can not be pushed as quickly as in a social gaming environment. Agile processed can still be used. However, the velocity of releases slow down and change control gets more stringent. 

IT Infrastructure  - Many social game companies are using cloud hosting facilities to host their games. This may not be an option for them when they move into the gambling business. Regulators will want their hardware isolated and in total control of the operator and a certified hosting facility. This will increase the cost of hosting requiring computer and net working equipment purchases with steady  and continuous upgrades as hardware evolves.  Additional IT staff will have to added to monitor and service the equipment making sure that it is operational on a 7/24 hour basis.  Hosting facilities will be limited to the ones specifically sanctioned by regulators to be "certified" hosting facilities.

Game Platform - The underlying mechanisms that determine the out come of a game have to be random and not modifiable. The random generator (RNG) that is required for most gambling games has to be truly random and will be subject to audit. Currently many social game out comes are not random. They are programmable and frequently changed to adjust a game to particular audience or event. This practice will have to stop.

The Odds Of Winning - The odds of winning a game have to be clearly stated and the odds cannot change unless players are made aware of it. No more changing or manipulating the odds at random times to increase or decrease a player winnings.

Gambling Companies Need To Be Profitable - Many social game companies, especially new ones, are not profitable. It is unlikely that an unprofitable social gaming company is going to get a gambling license. Also, a gambling company needs to have the financial reserves to cover a large bet that goes well for the player and not for the gambling business. Running a gambling business is expensive. Overall, the business must be profitable. However, there are times when the players beat the house and the house must cover the bet even if this means a losing quarter for the company.

QA -  The reliability, stability and accuracy of a gambling game has to be at a standard higher then most social games. Social game operators have the notion that if they push a release to Facebook and they find out it is not working properly they can always fix and push another release. This mentality will not work in a gambling environment. Any release pushed to production, especially, ones involving payout, wallet functions, player security, etc, has to have a very low margin of error. The need for speed to market has to be tempered with the need for security and fair play for the player.  

Virtual Currency,Wallet And Payment - A gambling environment requires a "wallet" function were a player deposits  "real" money funds to be wagered in game play and where the player stores "real" money won during game play. Essentially,  a gambling game operator acts as a bank for its players. Social games usually monetize players through the purchase  of virtual currency using Facebook credits, other virtual currency platform providers or they create a virtual currency of their own. The social game operator sets the valuation of the virtual currency by creating a conversion rate from virtual currency to chips. There is no need to have a conversion rate back to "real" currency because  there is no cash out function in social games. Conversion rates can change at the whim of the social game operator and the operator can inflate or deflate the value of the virtual currency at their own whim. This all changes  in a gambling environment. Valuation of currency are established by the public market for that currency and the policies of government banking institutions. Currency inflation and management is impossible in a real gambling environment.

Managing the player's  wallet  is extremely important to make sure their are no errors with the deposit, and withdrawal processes. balances  always have to be accurate with players having access t their funds to cash out when they see fit withdrawing all or a portion of the funds. The wallet is consistently a potential  target for fraud and intrusion threats. Only a handful of employees of a gambling company have access to this wallet, knowledge of players balances and the financial instruments(credit cards, bank transfers, etc) used by a player to deposit and withdraw funds.

Obtaining payment processors for gambling operators can be challenging with many banks and payment processors not willing to work with online gambling operators. One of the first things a social game company should do is seek out a payment processor and bank that will support their gambling operation.

Gamblers will have various  deposit and withdrawal preferences requiring the gambling operator to offer all of the standard transaction methods used by the gambling community.  These payment methods may differ depending on what jurisdiction the gaming company is targeting. Also, the transaction fees form some of these services can be vary. However, they are not as high as the 30% tax that Facebook levels on social games. 

Denial Of Service Attacks Fraud Detection And Collusion - Traditional online gambling operators have large and sophisticated fraud detection organizations within their businesses. The sole purpose of these groups is to detect and stop fraud attempts. Collusion amongst players is a common threat with Poker and sometime Blackjack as the most vulnerable because of their multi-player basis. Sophisticated crime networks work from around the world to conduct fraud and collusion attempts on gambling sites. DOS attacks are common were an individual or group will high jack thousands of computers loading them with programs that send thousands of requests to a gambling site resulting in the site grinding to a halt. They then post a ransom letter to the game operator with a price tag for them to stop.  In some cases to operator has paid up. Preventing these attaches requires network equipment purchases and real people observing players game play to detect and avoid fraud and collusion.

Clearly  the "real" online gambling  business differs significantly from a social gaming environment. There certainly is upside potential in the online gambling space for social game companies. However, all of the special considerations associated with gambling have to be taken into consideration before committing to an online gambling business model. 

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.   

Is It Too Late To Enter The Social Casino/Poker Game Space?

We see and hear about all kinds of social gaming/casino conferences and meet-ups.  Acquisition of social and freemium gaming properties are being scooped-up  for millions of dollars.  Alliances are being formed between conventional online gambling businesses and Facebook social game developers and operators.   There are claims that  companies are committing 10 to 20 million dollar marketing spend to attract social gamers. We also hear about declining revenue per social gaming player in Facebook and increasing cost of acquiring these players. Attention has now been placed on mobile as a way to attract and monetize social gamers outside of Facebook. However, mobile has no underlying social mechanics to assist in acquiring players for free and it it can be a challenge to get through the Google and Apple Application certification process if there is a hint of real gambling to a game. Also, there are dominant social game publishers on Android and in on iOS that are making it difficult for new entries in the market segment to get noticed.

With all of this attention and competition in the social /casino gaming marketplace is it  too late to get into social gaming and be successful at it?

Facebook Social Casino Environment  - Certainly the glory days  are over for the Facebook platform as it relates to low cost of acquisition, retention of players, social K factor and healthy monetization  per player. The social casino games and publishers that have successfully acquired players over the past two years are dominant in this space making it hard for new comers to break in. A publisher can certainly get the volume of play. However, revenue per player is dropping because the wallet size in the social casino space is one of the limiting factors in a social game environment.  The overall population of social gamers is clearly being aggressively pursued by many game publishers.

However, new companies recently entering the social gaming space have been less then creative in their casino game offerings.  In many cases the games and game design are me too offerings with little difference between the offerings of various publishers.  Also,  chip or token reward systems do not differ very much between publishers giving the players little reason to jump ship for another me too slot or bingo game offering or to spend money on more then a few different social gambling games.  

Consequently, there is room in the  social casino space for something that offers differentiation from the other social gambling games.  Ironically, the social game  publisher/developers may have to learn from the land based casino slot machine companies to determine how to add features and functions to slots that cause a newly introduced game to become popular in a crowded marketplace. Monetization in a social gaming world is another story. Social game publishers will have to device more clever ways to entice social gamers to pay for the social game experience. There is a secret sauce to monetizing in the social space that few new comers  understand.

Mobile Social Casino Environment -  Many social casino publishers have decided not to publish in Facebook. Instead they have gone right to  mobile. Over the past two years they have experienced good growth and low cost of acquisition relative to the Facebook environment. That is beginning to change with this space also getting crowded. However, the adoption rate for people generally accessing content from their mobile devices continues to grow. This is helping to extent the opportunity horizon for social casino offerings within mobile even if there is not much differentiation between games. However, it is unclear how long this will last  without significant investment in marketing to outpace existing mobile social casino offerings.

Social Poker - Poker is a much more difficult space to break into because it is naturally a social game leading to large communities forming quickly blocking out most late adopters to this category. Facebook as everyone knows, is primarily owned by Zynga poker with a few distant but successful publishers and operators still actively courting  Facebook poker players. It is hard to unseat Zynga because of the nature of poker and Zynga's long history in Facebook.

 Mobile appears to have a few high profile poker sites already. However, it is unclear as to the  extend of consolidation in mobile poker give the organic growth rate of mobile gamers.  Social mobile poker could be a real opportunity for a couple of high profile mobile social providers. Also, the ability to combine social poker players  on Facebook and on mobile devices is intriguing and perhaps the ultimate holy grail for the social gaming sector. If a publisher/operator can pull this off it would create a truly massive community of poker players.

Social Bingo - Much like poker bingo was originally devised as a social game played in community settings with players aware of the other player's progress and winning. The social games in Facebook and mobile try to mimic this a bit by providing awareness of a players progress through a leader boards, notifications, etc. However, this really falls short of what bingo is all about. Bingo should be played as a community game with everyone in the community aware of the size of the community playing and the activity occurring in the bingo "hall".  The game should have start and end times for games and the size of the community of players should indicate the amount of possible winnings.  I have not seen this to date and therefore assume it is not being done or it is not being promoted in a way that is resulting in the creation of large pools of Bingo players. I am not clear as to why such an obvious approach is not being taken. However, it will take some community building features to get Bingo to a level that it deserves. This is also a good way to leap frog the current crop of allegedly social bingo properties.

Essentially, the same old social casino slot game is not going to cut it in Facebook. You may get visitors to these properties but not much game play and sub par monetization. Mobile social may be different   given the organic growth of mobile game play adopters . However, in both cases more thought has to be given to the design of slot games in these environments if a publishers want to be successful. Poker is owned by Zynga in Facebook however, mobile could still be an opportunity. Bingo is still the sleeper game in Facebook and mobile. Someone will figure that out. The mass adoption of social/freemium virtual currency gaming/gambling does make it very difficult for new entries in this space.

 Also, traditional Internet gambling companies will really struggle in this market because they are not accustomed to the rapid development and iteration cycles required to launch and react to the  social freemium marketplace and there is no regulatory protection stifling competition and innovation in the social gaming world. These companies should look to buy a social gaming company and not interfere with their development and launch processes after they are purchased.

The social  gaming/gambling space is a busy place and in many cases over hyped and filled with me too game content. If someone wants to be successful they have to look ahead and not in the rear view mirror. Creativity and experimentation is absolutely necessary. An iteration mentality will  have to be a big part of any organization's culture getting involved in the social casino space. Be prepared for failure and have a process for reacting to early disappointments and perhaps success. This is a perpetual sprint to the elusive finish line.   

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. 

 

Internet Gambling's Confused Definition Of Social Gaming

The Internet gambling business community has woken up to the fact that they have missed out on perhaps one of the most important Internet wagering business opportunities of a lifetime by not taking social/freemium gaming seriously. They are now in catchup mode  trying to sort out how to engage with gaming that is not of the conventional regulated ilk.

The problem is that in their panic to carve out market share in this space they have somehow lumped all non-conventional wagering Internet gambling in the "social gaming" category. I hear it time and time again that they are investing heavily into "social" when in fact many of the games they are investing in are not social at all?

The worrisome  part about this is that making big bets in a highly competitive space without understanding what social really means could be disastrous for these operators. In point of fact, the term "social" as used by gambling operators really means "freemium" encapsulating all gaming that does not fall into the regulated gambling space.  It should also be noted that even this definition may change as gambling operators invest heavily in the freemium gaming space. Ironically, This will draw the attention of regulators to freemium Internet gambling making regulators  suspicious of virtual currency and goods transaction within games of chance. The operators emphasis in  this space may kill the goose that laid the virtual golden egg.

In point of fact, we need to be conscious of what the gambling operators are really looking for despite the fact that they may not know themselves.  Are they looking to invest in games that are truly social outside of any socially contextual platform such as Facebook and or are they investing in games that are not social and require a boost from a socially contextual platform to become social?

To answer this question we  need to understand what social means and what it does not mean.

What Does "Social" Mean? - It my seem silly to have to ask or answer this question. However, the definition needs to be spelled out to draw focus to what is really important about social gaming.  Social implies an environment that encourages interaction amongst individuals. An extension of this is the tendency for social environments to encourage people in the social environment to connect with other people they know to participate in the environment and for people to become acquainted with people they do not know within this environment. If a social setting is truly interesting to people, a community around that subject will grow quickly, providing that a communication mechanism is either part of the game  or  facilitated by an external communication system that can be leveraged to communicate to people inside and outside the social environment.  

Truly Social Games - There are gambling games today that are social games. Poker and traditional bingo are the two most noteworthy. These games can only function if there are is a critical mass of people playing these games. This is commonly called "liquidity". Yes, there are stand alone video poker games and standalone bingo games. However, historically  poker and bingo started as social games to enhance the dynamics of the game and in bingo's case to actually foster a sense of community. Gambling operators such as Party Poker, Full Tilt, Pokerstars, etc,  are a few of the big gambling names that were able to leverage the inherent social nature of poker  on the Internet. Other non gambling games such as Farmville and Cityville are  freeemium style social games that leverage community social features encouraging players to act in a community way to achieve common goals.

Social Platforms - Platforms such as Facebook and Google+ are social backbones that provide basic social facilitation tools that mimic real world social interaction on a much bigger scale then found in a terrestrial environment. Simple things such as invitation capability, profiles of people, notification systems and meeting places such as forums and  applications that provide meeting places for people to meet and communicate are provided. In the case of Facebook the overall community is very large leading to potentially high levels of interest, virility and liquidity for games.

Anti-Social Games - Slot machine, single player bingo, roulette, etc are not social games. They are played in a solitary way. Because of this they do not have  tendency to create large communities or cannot create large communities without a facilitating" social network.   These games are inherently anti-social because they require that the player concentrate on the game and not other players in the game or how other players are doing. There is no value to the individual player with the exception that Jackpots do require large amounts of players to increase the prize.

Social Games + Social Platforms - The combination of an inherently social game combined with an underlying social platform makes for an extremely powerful combination. Zynga Poker is the obvious example and a  shrewd first application to launch within the popular social network Facebook. Within 3 months they leveraged the open virility components of Facebook resulting in massive adoption of their poker room  blocking out all of the competition for the top application spot in Facebook. Zynga's  Farmville and Cityville where both based on this strategy of first mover virtual world games within Facebook resulting in yet another success story and domination within Facebook of this game category.

Anti-Social Games + Social Platforms - We have recently seen success with anti-social gambling style  games such as slots  combined within social platforms. These games offer an essentially solitary game experience and  combine it with  invites, notification, updates and other community features to enhance the ability and likelihood that even without any real game purpose to engage others in the game the game can leverage the underlying social platform and perhaps its reward systems to encourage others to play the game.

Rapid Growth and Consolidation -An interesting phenomena about the combination of social platforms with games  is that there is usually a quick consolidation of players into only a few popular games. Ironically, the social nature of the game and or the social platform facilitates this process. This is especially true if a game is inherently social leveraging social network features to grow a community.

Can Internet Gambling Operators Compete In The Social Gaming Space? Of course they can. However only if they really understand the social environment and if they  launch new and interesting freemium games or at least hybrids of the traditional casino or social gambling games that are not offered at this time. Sure they can try and buy their way into the social space by spending more marketing funds than anyone else or they can acquire  existing successful social games or game companies. 

They also need to understand the freemium game business from a revenue per play, cost of acquisition, and retention perspective. Making freermium work requires much higher player volumes than they are accustomed to and there is no regulatory protection limiting competition. At least not yet. 

This is not to say that the Internet gambling companies should not attempt to enter this space. However, their current culture of offering the same suite of gambling games as their competitors in the gambling space will most likely not be a successful strategy in the freemium world.  Just putting the same old gambling game  into a crowded social environment is not likely to be a winning combination. They will have a steep learning curve. However, they do understand that the world has changed and a business strategy that does not include a "freemium" component will most likely marginalize them. Freemium is also the faster moving game sector from a technology and delivery perspective. The gambling companies have consistently been behind the technology evolution curve because they have not been building and supporting freermium games. This will change by necessity if they want to compete with the highly funded startups in this space. It should also be noted that the mobile environment may be the best place to offer freemium goes and not Facebook or Google+. This is an entirely different discussion and will be forthcoming.

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. 

  

Facebook Opening Facebook Platform to Support Internet Gambling?

Recently, I returned to San Francisco  from a four week trip abroad(Nepal). Within several hours of my return I was confronted by a colleague telling me that Facebook was going to allow "real" gambling on its platform. I found this interesting but not surprising. Further investigation has revealed that Facebook has been in discussions with legal online gambling companies that have successfully acquired large numbers of social gamers and Facebook gambling enthusiasts in Facebook. 888 and Gamsys are a few of the names explicitly mentioned in the context of the Facebook gambling initiative.

I am not surprised by this because Facebook has been  considering online gambling as a revenue stream for longer then people realize.

In 2005 I returned from the UK after having spent 3 years launching and running online gambling sites for US based casino operators. One of the first people to approach me about European Internet gambling was a representative form Facebook. This meeting was very hush hush with the representative from one of Facebook's VC investors leading the charge on questions about revenue per player, cost of acquisition, age and identity checking, the regulatory process, etc. relative to Internet gambling. 

I never heard from or saw this investor again. However, it was clear then as it is now that Facebook continues to view Internet gambling as a potential source of revenue.

Fast forward to the introduction of applications on the Facebook platform in 2007 with Mark Pincus' poker application being one of the first applications launched in Facebook(this is a story in and of itself) and the eventual domination of Facebook social gaming by Mark and Zynga. Zynga eventually began to sell leads/players to traditional Internet gambling companies to generate revenue. It is no accident that the first really successful application in Facebook was a social gambling application.

Zynga and other social gamers adopted  virtual currency and goods(poker chips) in early 2010 as a means of generating revenue from games in Facebook. By the way they actually copied this model from the Chinese casual game companies that proved this model could work. This step was a big one with the leap from advertising as the primary Facebook application revenue source to a transaction model leveraging game virtual currency as the primary source of revenue.  This move also conditioned players to pay for play in Facebook.

Later in  2010 Facebook's counters the social gamers virtual goods and currency initiative by creating their own virtual currency in the form of Facebook credits and forces all of the social game companies to use this currency and pay Facebook 30% of the proceeds! Virtual currency and goods revenue is now 60% of Facebook's revenue exceeding advertising revenue. Facebook realizes at this point that its fate and success are directly linked to games and social game revenue.

In 2009 I started to talk to the Internet gambling companies about the importance of social games as a means of acquiring potential real gamblers. I was not taken very seriously until late 2010 when traditional gambling companies began to realize that social gaming itself was a market they wanted to explore. In 2011 the entire Internet gambling industry is all in in regards to social games with most of them launching Facebook games and Facebook Fan pages.  The Internet gambling companies are experimenting with up sell from their social games into traditional gambling venues. They are also using social gaming as a holding area for fatigued gamblers. 

The 2011 IPO filing with the SEC has also driven Facebook closer to flirting with allowing Internet gambling because Facebook needs that revenue if it wants to have post IPO(float) revenue to support its stock price. Facebook does not want to be another  Groupon with a falling post IPO stock price due to disappointing earnings. Facebook realizes that its overall growth wil began to taper off after its current growth markets in Asia begin to cool off. In a world of slow or slower growth Facebook needs to get more revenue per Facebook member. Gambling is an additional source of revenue they can exploit.

So will Facebook officially allow sanctioned Euro zone licensed gambling operators to take wagers within the Facebook environement from Facebook members in 2011?

I suspect Facebook will explore this if the SEC, US and EU authorities give them the nod. I would be surprised if it happens before the IPO. Expect this sometime in 2011 after the IPO.

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.

Making Money With Online Games

It is no secret that online games of all kinds are generating a tremendous amount of revenue for businesses. Although hard to confirm, it could be that games are the second highest source of revenue(Facebook credits) behind advertising within the Facebook environment and the highest source of revenue for individual application providers within Facebook. Online gambling has consistently posted  3 to 4 billion dollar revenue numbers per year with the numbers continuing to increase. We also see a big push to "gamify" traditional e-commerce applications to increase e-commerce revenues.

So what is this all about and why are games such an attractive way to make money on the web and in social networks?

There are a number of reasons for this phenomena with no single reason being the most important. A number of game elements come together to create an optimal environment for game revenue generation. It is also a myth that once you launch a social game or a gambling style game the money flows in. This is far from the truth with many social and gambling games missing the mark and being taken off of the market. Also, one size does not fit all. Some game elements work better then others in specific environments. A game launched in a social network has to have a social component to really make it work well. Conversely, I have seen single online slot games with no manufactured social elements generating great revenue while other slots generated very little revenue.

With this said, there are game elements that are common to most successful high revenue generating games. 

Engagement  - Games are differentiated from other Internet applications because they frequently engage the player  in an engagement that lasts more then a few minutes.  Essentially,  the consumer of the experience stays within the application longer then they normally would in other applications.  This engagement is achieved by exposing the player to a number of game mechanics.  The exact mix of game mechanics differs from game to game. However, the mechanics always have to add up to longer engagement within the game.

Community - Even in solitary play style games like slots and casino games a sense of belonging to a community is required to encourage a player to frequently return to a gaming property and to feel comfortable with contributing time and money to an online gaming operation.  This sense of community instills "trust" in the gaming operation, a common activity that can stimulate conversation among like minded players and a competitive element that encourages players to achieve recognizable milestones. Even in social games community must be cultivated to encourage players to connect with  other players in the gaming community thus growing the overall community. In many ways customer support operations play a big role in maintaining and growing communities. Addressing system problems, billing issues and game play disputes quickly and effectively is essential to maintain trust in the game platform and an indirect way to attract other players to the community.

Multiple Monetization Methods - Really profitable games have more then one source of revenue. In social networks the two primary sources of revenue are virtual currency and advertising.  In some cases games have small games included within them or on a side bar that generate revenue. When the player of the primary game becomes fatigued they have the option to play a short easy to play game.  Some game operators use a referral system to refer or up sell their players into other gaming venues. This multiple choice of revenue generating opportunities helps to increase revenue per play, decrease the risk of receiving no revenue per player and helps the game publisher understand which revenue methods work best for classes of players.  This later reason also helps game companies profile players into categories of less to most likely to contribute revenue for certain types of revenue generation offerings

Placement Of Monetization In Game - Where a monetization element is placed in game, when it appears to the player and the method of taking the transactions are critical considerations when designing a game. The opportunity for a player to contribute funds in a game should not distract the player from the game play itself. On the other hand the financial transaction should be presented in places where it is obvious that more fund contribution will enhance game play, allow a player to move to a higher levels in a game  or avoid the termination of the game. Monetization encouragement should be presented at critical places in  a game where more contribution to a game will increase the likelihood for an improved prospect of winning or winning larger prizes.

The Value Of Free Play And Ad Revenue - Many online game companies do not fully understand the value of free play in the context of game monetization. The ultimate goal of a free play option is to upgrade a player to a pay for play level,  to allow players that have pay for play fatigue an option to stay in the game community even if they are out of funds. Free play is used to keep players within the game community and defecting to another game site. Ultimately, this strategy should lead to more players transacting because the overall player pool is always increasing. 

Advertising can and should be a monetization method in free play. However, it needs to be  presented in such a way that the player does not find the advertising annoying. In this case the player will not be monetized to the full extent.  Unfortunately many gaming sites bombard free players with excessive advertising resulting in high drop out rates.  In some cases games sites do this to make the free play option so unpleasant that the player either leaves or upgrades to an advertising free pay to play level. This strategy is flawed because there is a high likelihood that the business will lose the player entirely. 

Reasons to Return To The Game - Inevitably gamers have to leave a game for a number of reasons. A good game will always have a reason for the player to return. The reasons to return to a game are varied and depend on the type of game. In a role playing game(RPG) a player always has the opportunity to reach another level. Games like Cityville or Farmville use this technique to continually draw players back to a game. Essentially  the game becomes addictive. In a gambling game the reason to return is the hope that there may be a big payout or increased play will increase the likelihood of winning. In many cases the game creates a community of players. Many players return to a game to rejoin the game community.

Measuring Progress - Players enjoy comparing (competing) themselves to others and having a means of sharing  a status with others. This is just human nature and needs to be an essential part of any successful game. A game should have leader boards, notification of players achievements, point accumulations, levels of play achieved, etc. visible to all players of the game.

Monetizing Across Multiple Games - In an ideal world a game operator will have multiple game offerings. Many of the big game publishers in Facebook run multiple games. They constantly cross sell players to other games in their portfolio. The added games will help monetization in a number of ways. The obvious one is that once a player is acquired you can generate revenue from a number of games. The less obvious reason is that a player can become bored with a game and needs to be constantly stimulate by new games. If additional games are not added then the player will leave and perhaps not return.

Games Advertising/Branding - I can not think of a better place to advertise or obtain brand awareness for your product or company then in online games. The simple reason is that the players spend so much time in a game environments. Brands will pay a tremendous amount of money  for this exposure. I am surprised that gambling operators do not take more advantage of this form of revenue generation in their games. Some of the larger social game publishers are heavily sought after by big brands because the brands understand that some games give them sustained exposure to large number of players.

Hierarchical Pricing Structures - Having different pricing packages based on a game, type of game, access to games, etc, is a good way to extract a higher revenue per player. You see this often with an entry level fee and a premium offering. Game publishers could easily increase the number of levels in games beyond 2 and increase their revenue because players frequently do not have binary coin in decision points.  

Player Profiling - Player profiling has become a critical part of many gaming operations. Sophisticated business intelligence systems are being used to determine when players are likely  to transact, how often they will transact and how much they will contribute to a gaming operation. Essentially, knowing the customers has been raised to a new level because players are inadvertently giving game platform providers information about their game play behavior and themselves. Combining this information with player profile information volunteered by the player and the players social networking connections results in targeted acquisition  and up-sell programs that increase the spend per player.

Clearly, online games have become a good  source of revenue for game publishers. However, not all game publishers are fully optimizing their games sites to take advantage of the revenue opportunities. E-Commerce sites will continue to be intrigued by the value of game mechanics in their applications for good reasons.  The continued popularity of games will drive companies wishing to brand themselves and their products to spend money on games as a way to get there products and services recognized resulting in additional revenue sources for game publishers. Given the creative nature of games there are still many opportunities to launch successful games. We may see the addition of more ways to monetize games given their popularity opening the door to new game development, new venues and higher revenue.  

Interplay of games on mobile devices, on the web and within social networks still has a long way to go offering creative opportunities  for new entrants in the space and even more opportunity to generate revenue. 

Just having a game in Facebook does not guarantee high revenues.  Games have to be interesting enough to support all of the mentioned features and they have to be engaging enough to attract high numbers of players. In the Facebook environment we are talking about millions of concurrent players if only single monetization methods are employed. If more monetization methods are used fewer players are required.. In gambling style games the total amount of players can be smaller becomes of higher transaction amounts. However, retention features are critical to maintain adequate income to support a game.

In all game environments a steady flow of new games should and will be introduced as businesses and governments realize the value proposition of games.  This means that competition will intensify and player expectations will be higher resulting in the demand for more interesting games, more variety and better ways to entice players to part with funds to play games.

 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.