Betting on Social

Published in: Latest Intelligence  

Facebook plus gambling is a formula that makes investors salivate. This week, Virtual Gaming Worlds, an Australian startup, raised $2.6 million just a month after crowdsourcing website Kickstarter pulled the plug on the company’s $50,000 fundraising campaign. Slot machine makers Aristocrat Leisure Ltd, International Game Technology and WMS Industries Inc. combined spent more than $500 million on social gambling acquisitions over the past year. And Morgan Stanley estimates the global social gambling market will expand from $1.7 billion to $7 billion by 2015.

According to the bank, half of social gamblers are between the ages of 18 and 40, with Asia and Latin America the most promising growth markets though the US currently represents 40 percent of the market. Social gamblers already number 160 million worldwide, with the genre the fastest growing and highest grossing among social games. Spending on social gambling games averages double that of social games generally, with the games also taking less time to develop since most are based on traditional gambling games. Some 2 percent of those who try free versions of social gambling games become paying players, matching the rate for other social games.

Virtual Gaming Worlds plans to use the funds it raised to develop and market Chumba World, a so-called massively multiplayer online game played on Facebook. Users can set up their own casinos through the game then equip them with slot machines and gaming tables while keeping a cut of profits when other players come to bet at the virtual casinos. The company is to seek a gambling license, develop a mobile version of the game and create more games for the Chumba Casino. Triple C Consulting, a Perth-based boutique investment brokerage firm, led the fundraising.

Social platforms

While Facebook remains the focus on much social gambling attention, with users increasingly accessing social networks via mobile phones instead of computers, social gambling companies are shifting their attentions as user counts for Apple’s iOS platform, Google’s Android and Tencent, the Chinese company, catch up to Facebook’s 1 billion users and its growth slows.

Developers though still like Facebook. Casino games are the top grossing game genre on the platform and the site’s App Centre helps new games seeking visibility.

Developers have racked up their highest average revenue per user (ARPU) on Apple’s iOS platform, but find it hard to get visibility for their games on the platform or that of rival Google Play.

Japanese users have proved especially willing to pay for games, to the benefit of Yabage, a platform run by Yahoo Japan, as well as local developers like Gree and Bandai Namco, but many foreign developers consider entry to the national market too troublesome given the need to localize their games and provide local marketing and support.

Chinese users are also increasingly willing to spend on games, but developers too have been wary of market entry costs. Yet the market’s attraction is growing as users of Tencent’s WeChat platform reach 300 million and company prepares a gaming area.

Game design for Asia

Chinese social gamers are more cutthroat and competitive than their western counterparts. Most gambling games in China are not for money but have some aspect of player versus player as opposed to playing against the house, a similar dynamic to the Chinese preference for baccarat among casino games. This has played out in the popularity of online mahjong and the game Dou Di Zhu (Fight the Landlord).  In China, users like to be able to show off their “achievements”, with many willing to pay to move up game levels or acquire virtual currency, especially in rural areas. Chinese users tend to like mystical, fantastical storylines.

Japanese users show a preference for games with cartoon or female characters as opposed to shooting or casino games. Some developers have adapted by integrating cartoon characters into casino games, such as Gree’s new Poker Creature app for iOS. Such apps can selll for up to $15 a download, as the rights to use popular cartoon characters are expensive. Other games bring in role-playing elements, with a lucky slot combination resulting in a hard blow to a dungeon-dwelling monster, for example.