The big debate about the blurring of social casino games and online gambling

Takahashi: It’s interesting when you bring the regulators into it. That can change the market itself. Maybe a regulator might take two years to figure out whether your game is an entertainment product or if it’s truly a gambling game. How long does that actually take them?

Grant: Anecdotally, we can look at Zynga as an example, with their real-money product launch in the U.K. You look at the Zynga casino products, compared the game mechanics and game types that are available on Facebook in the free-to-play market offered by Zynga, [and] they really bear very little resemblance. In addition, we can see that Zynga has not used the traditional social tools and the framework that led to its success in building up the audience it has, with its viral channels and loot drops and rewards and generous pay tables. They haven’t brought any of that into the real-money experience thus far. Clearly, from a very large and well-established and successful company, they have drawn a clear delineation between those products and those experiences. It doesn’t appear, in any way — at least from what you can see in the market — that they’re trying to take one set of users and educate or drive them into another.

Keustermans: We’ve done the same. We have a real-money slots app on Facebook in the U.K. as well. It’s called Boulder Slots. Our free-to-play game is called Mirrorball Slots. One is pink, and the other is blue. They have different reels and different games. It’s a different registration process. There’s no overlap. They’re different products for different people with different expectations.

Gupta: Between those two games, are you doing any cross-promotion?

Keustermans: There’s no cross-promotion.

Takahashi: There’s an interesting question there, though. Why shouldn’t there be any cross-promotion between those two?

Keustermans: First of all, our audience in free-to-play is relatively small, so there are practical reasons why. But also, I personally don’t believe that there is a lot of upside. We’re probably going to run a test at some point to see what extent there is overlap, but from what I hear from companies that have tried it, it’s below 1 percent conversion. There are quite a few companies that probably don’t want to go public on this, but it’s very hard. It’s so much hassle to cross-promote and annoy your free-to-play users with real-money messaging. For me it’s not worth it to pay for. It’s more efficient from a time and cost perspective to acquire real-money users rather than trying to find the five guys among your million free-to-play users who might be interested. I don’t have any hard data either way, but I’m not really a believer.

Harper: We do something that goes the other way around. In DoubleDown Casino, since the acquisition by IGT, we have access to IGT’s online games through the RGS, the remote game server. Actual online for-wager slot games, to use an example, that you can play for real money in the U.K. — we can bring those in the U.S. for virtual currency. They’re the same game. So we have the reverse of that model running. I don’t know if there are any useful data there, and I probably wouldn’t share if there were, but if you want to look at the reverse process, it seems to be working very well.

Takahashi: So in this case, when a player walks out of a casino, the casino loses track of them. But if you get them to play an online game, then you can get more analytics on that person. You can find out a lot more useful information.

Harper: You’re getting analytics, but you’re also getting to keep in touch with them. It serves both purposes.

Grant: You can sustain engagement in those periods when they’re not in a particular experience.

Gupta: I think if you can get a user to play your brand of games, if you then run away from that, it doesn’t make any sense. The whole point is to have your brand be there to tell the user where they are. That’s the power of a brand. That’s why cross-platform works. Our cross-platform users are the best users we have.

Keustermans: But cross-platform is a different thing. If we launch Mirrorball Slots on mobile, we’re not going to give it a different name, but it is obviously something different. It’s a different business model. It’s not cross-platform, it’s cross-business-model.

Gupta: Are you going to try expanding that way?

Keustermans: I think it’s a bit too early. I want to make sure that the product is optimal before we start testing anything, because I don’t want to waste too much time and energy. But I’m not personally a believer in that kind of conversion.

Ben Dale: As Ladbrokes makes its move into the social gaming space, it’s not wedded to the brand. We would use whatever brand works best for us. Our viewers are not saying, “We need to have a Ladbrokes-branded social game.” Our view on conversion, though it’s very early days, is that it’s unproven. But we’ve seen the power of social in its own right. At this stage, based on the data that we have access to and that we’ve asked others for, we don’t see social as an obvious conversion tool for the Ladbrokes brand.

Schneiderman: We see the same thing. We see that social really does have potential. I know there’s not a ton of data for us to firmly state what the funnel will be, but from our perspective, one thing that we don’t talk about much is the intimidation factor of real-money gambling — going in person to places where you may feel like you don’t know the games, you aren’t familiar with the games. Social, in lots of ways, is making people who have never attempted this world feel comfortable with these types of games. We’re not going to be able to measure conclusive proof of that for quite some time, but I think it’s making a big difference.

Takahashi: That makes an argument that the companies across the borders here are actually your friends. You’re doing them a favor by teaching them how to play.

Schneiderman: Absolutely. I think it’s advantageous for companies to partner up in this space, for real-money gambling people to find social partners so that they can understand this type of user. They may not pay up front, but if you monetize them at just the right points, you can make as much as from your whales, or even more. But there are different compulsions that drive those desires to become spenders in a non-gambling, non-up-front-payment type of game. We’re friends, not foes.

Grant: Also, for the land-based operators, what do you think the average age is of the slot-machine player in a land-based casino? Look at that and compare to the average age for slots players in social channels or on mobile. At some point, if they don’t find a way to engage those people where they’re choosing to spend their time, as their already-aging population continues to age and mature, there’s going to be a very large gap there.

Takahashi: Getting back to some of the blurriness, we have some interesting companies out there. The MyVegas folks have a partnership with MGM, and MGM gives comps in Vegas as rewards or prizes in the MyVegas social casino games on Facebook. Or Gamesys is a real-money gambling company on top of Facebook, which hasn’t been perceived as a real-money gambling house in the past. We have some blurriness there. What do you guys think about that?

Dale: I think blurriness can work very well. You see PokerStars develop a strategy now of investing now in retail spaces, buying land-based casinos or taking stakes in them. That’s very interesting. I believe PKR previously had land-based tournaments. It works very well as a concept. It’s very neat. I think that blurriness has been around for quite some time. I can’t say that it’s particularly new.

Takahashi: There’s another area where this can spill into, and that’s the rest of video games. One of the hottest things right now in video games is e-sports, competitive gaming in real locations. People want to be the best at League of Legends. But what if you put some money down on it? What if you can win money?

San: I think that will happen, and there are obviously companies that will facilitate that, but I think it’s fraught with problems. There’s collusion problems. There’s fairness problems. There’s all sorts of things like that. Games that have not been designed to be played for real money being played for real money — you’re really asking for trouble.

I should say, live tournaments being played for money aren’t a big problem. The big problem is people playing at home. You don’t know who’s colluding with whom. Someone could throw a match to allow someone else to win. It’s a real problem.

Takahashi: This does exist already, though, with Virgin Gaming on top of Xbox Live as an app now. For the past few weeks, it’s been very popular. You can enter tournaments for real money, playing games that you’re very good at.

Gupta: We’ve seen some of this in fantasy sports. It’s still illegal in the U.S. to run a real-money fantasy sports site.

Harper: But what we’re talking about here is entirely different. This is skill-based gaming. That’s something entirely different from what we’re talking about, which is gambling. There are lots of sites that have been around for a long time doing that kind of thing. And horse betting is legal online in the United States. Most people forget that. There’s a lot of that going on right now. It’s a very different marketplace, and it has extremely different characteristics.

Keustermans: Going back to the point about blurriness, you can call it that, but you can also say that gambling is going back to its roots. For a long time, gambling — and specifically online gambling — has been separate from the entertainment industry. It’s been sidelined in its own little world. Right now I think it’s very exciting to see that gambling companies and startups are saying that gambling is not a separate notion that exists completely in its own world. Gambling is part of the entertainment experience. Putting real money on the line can make all kinds of things much more fun.

How you do it, obviously, needs to be very careful. There are a lot of risks. But for gambling to go back and become more embedded in entertainment again, that’s great. One of the biggest mistakes the gambling industry made when they started making online or digital experiences is that they forgot that land-based casinos, for example, aren’t just about gambling. They’re nice resorts with swimming pools and clubs and bars and restaurants. People like the package because it’s a very entertaining package. Gambling plays a key role in that.