Three years ago, billionaire casino magnate Sheldon Adelson predicted iGaming would break the back of the land-based industry. As chief moneybags behind the Coalition to Stop Internet Gambling, Adelson said the emerging industry would scuttle hundreds of thousands of jobs and prey on society’s most vulnerable: the young, the poor and the elderly.
Adelson also was concerned from a business standpoint. Though operators might see an initial bump from social casinos, “unbranded competitors will eat into the market, buy the business and make the profitability much less,” he warned. “Then big social media sites like Facebook, Twitter, Schmitter, Zynga will come in with a billion hits a day … and a Google will say, ‘Play with me.’”
Adelson’s opposition has done little to stem online growth. Though real-money iGaming is still limited to Nevada, New Jersey and Delaware, cashless games have exploded. Last year, Eilers Research analyst Adam Krejcik estimated that social casinos would generate $2.7 billion in revenues for 2015, 10 times more than the real-money market; other estimates exceed $3 billion. According to a September 2015 report from App Annie, of the top 100 iOS game app downloads, 49 were casino slots.
Today, more operators are realizing it’s time to play or pay.
If You Can’t Beat ’Em…
The key word is convergence: aligning two different and, in this case, seemingly competitive business models to create a stronger, congruent and collaborative whole. Social casinos enable land-based properties to keep patrons in the pocket after they leave the property, when the casino-patron relationship typically ends.
“Between one-third and two-thirds of casino patrons are already playing online, consuming slot machines, casino table games or online video poker on their mobile phones, laptops or tablets,” says Dermot Smurfit, CEO of GAN (formerly Game Account Network), which recently opened its North American headquarters in Las Vegas.
While online players as a whole tend to be “promiscuous,” dividing their loyalties among up to 10 social casinos, they can be effectively corralled to a branded gaming experience. “If you offer a similar product online as you do in the retail channel, and it is properly integrated with your rewards program, customers are increasingly loyal to you, and increasingly likely to come back to your bricks-and-mortar facility,” says Smurfit.
At the dawn of the social casino era—which is really only about five years ago—U.S. operators like Adelson worried that online gaming, even on a cashless basis, could cannibalize their land-based businesses. Smurfit believed otherwise; he had seen the dynamic at work in Europe, especially in the U.K., where the industry is more entrenched. There, he says, “the concept of cannibalization by an online proposition doesn’t even exist.”
In 2011, GAN entered the stateside market, launching its first free-to-play offering with Aristocrat at Maryland Live! in the Baltimore-Washington corridor (last December, that early offering was migrated into GAN’s Simulated Gaming platform).
From the jump, there was “an extraordinary demand” for the social option, in part because most Americans can’t access real-money gaming websites like players in Europe, Asia and elsewhere, says Smurfit. The site offers $5,000 in virtual currency for new players, along with hundreds of slot titles and table games including poker and baccarat. Once it went live, patrons started to visit the property more frequently, says Smurfit. (They were verifiable as existing patrons, because they had used their rewards cards to sign up.)
“This was a revelation to our casino partners, who started from the premise that online could be a bit dangerous,” says Smurfit. “They thought surely everyone would just sit home and play and never come back to the property. But the truth is exactly the reverse. We reported a 28 percent uplift in land-based gaming revenues from those casino patrons who went home and started playing online” with their brand of choice.
“In other words, as they spend money online playing these games offered by their local casino, they are effectively preparing to return to the land-based property.”
The Chicken or the Egg
That level of measurable outcome has been a game-changer, says Rory Shanahan, director of B2B products and marketing for Scientific Games’ Interactive Division. “For the first few years it was kind of the chicken or the egg,” he says. “It was hard to get (operators) to take a chance on social casinos, because we had no data to back up the claims.”
Today, he says, statistics confirm that casino patrons who play online tend to increase their on-site spend. In another important metric, the average daily social player will engage with a casino brand four times a day, says Shanahan, for a total of between 80 and 100 minutes.
“Whether it’s a current player in the database or a new player acquired through the social casino, that’s four different times every day that they’re surrounded by the casino’s brand. They’re exposed to the entertainment options. The casino has the ability to email them or send them a push notification (about) the reasons they’d want to come to the casino floor—whether it’s a free concert, a new restaurant or a free-play offer.”
(One caveat: According to a 2015 report from SuperDataResearch.com, ads can be a social casino’s “best friend and worst enemy… While the social casino audience is highly receptive to marketing, 35 percent of social casino players quit games because of excessive ads and pop-ups.”)
Al O’Brien, director of marketing and entertainment for Black Oak Casino Resort in Tuolumne, California, says the property’s Scientific Games-designed Play4Fun Network “has provided us with a wealth of opportunity to connect with our gaming audience and keep us top of mind for their next in-person visit. It also gives us an opportunity to showcase new games and video formats to keep our players informed about trends on the gaming floor.” An interactive app lets customers not only play a slot game but book a room, get up to speed on current promotions, and otherwise keep in touch with the property, operated by the Tuolumne Band of Me-Wuk Indians.
For the most part, concerns about cannibalization have been put to rest, but barriers to online entry remain, says Shanahan. For one thing, most operators just don’t know how to run social casinos. “There’s a certain amount of expertise and investment, up-front and ongoing, that’s required to engage in this space. A lot of people don’t have the time or energy to take on what essentially is an R&D gamble.”
Until recently, he adds, some operators have been waiting for real-money online gaming before leaping into the digital space. They’re still waiting. “Widespread adoption (of iGaming) is going much more slowly than even the most conservative estimates,” he says. “Meanwhile, players are engaging in social casinos, and there’s an opportunity cost for operators who take a wait-and-see approach.
“If you don’t have something out there under your brand,” Shanahan says, “your players will engage in another brand, whether it’s a competitive land-based casino or some company in Silicon Valley.”
Fantasy Springs Resort Casino in Indio, California, owned and operated by the Cabazon Band of Mission Indians, launched its social casino in 2015. The SG Universe system gives new players 50,000 free credits for unlocked games, with content from the Bally, Barcrest, Shuffle Master and Williams studios. “It’s been a huge hit with our customers,” says Don Casper, vice president of marketing for Fantasy Springs. “We’re always looking for more ways to keep our players engaged and interacting with our website and social sites, and this addition has proved to be extremely successful in achieving that goal. Our customers love the idea that they can play real games that are actually on the casino floor from anywhere they have access to a mobile device or computer.”
The social casino “keeps players interacting with our brand on a daily basis,” he says.
TMI?
Not surprisingly, social casinos are a valuable tool for mining customer data, says Smurfit. “You know everything about an online customer—where they played, how long they played, what games appeal to them. I would say it’s almost too much information, because it takes a long time for land-based casino executives to filter the wheat from the chaff and really derive understanding from all that information.”
Because the social casino network is integrated with the land-based management system, operators have an open window to patron activities, on-property and online. And that user information is proprietary, unlike information generated by Facebook games.
“If I’m a player on DoubleDown Casino on Facebook,” says Shanahan, “anybody in the world can pay to advertise directly to me. Also on Facebook, there’s a constant barrage of ads for competing content, so from a player-data security standpoint, it’s one of our top priorities to ensure that each casino’s player database is completely controlled and not visible to any other partners or third parties.” Needless to add, Facebook charges 30 percent of all revenues derived from social casinos on the ubiquitous social network. And why give it away?
Interestingly and perhaps counterintuitively, it’s not the social-maniacal millennials who are most active online, though that may change as more skill-based and interactive games are added. “The core of demand among casino patrons is really about slots and table games. So yes, millennials can be and are engaged online, and the demographic appeal is much, much younger online than on-property,” concedes Smurfit. “But crucially, in order to generate serious amounts of money and really engage with the existing casino base or audience, you need great breadth in land-based casino slots,” which (surprise!) still tends to appeal to older females.
But the audience is not all “blue-haired slot players,” says Shanahan. “It’s a very diverse population, and although there are certainly players over 65 who play our product, about half of all social casino players are under 40, and 70 percent are under 50.”
As Mohegan Sun General Manager Ray Pineault recently told the Associated Press, “You can’t over-emphasize millennials to the detriment of your other customers. They’re still young and have less disposable income than their more established parents.”
Let the Games Begin
Social casinos are currently monetized when players who run through their free credits opt to buy more time or level up to locked content. About 15 percent will make at least one purchase per month, according to Shanahan. “Most just enjoy the entertainment experience and like to play between trips (to the property); it’s an opportunity also to try new games before they try them on the casino floor.” SG Universe’s Cool Jewels, for example, launched online just as the product was going live on-property. “So the casinos could advertise to their players and say, ‘Hey, this just came to our casino floor. Come play it live.’”
But how blurred are the lines between play-for-fun and the intensely regulated real-money environment? An October 2014 post on PokerUpdate.com cited gaming expert Chris Grove’s statement that a “top customer” on PurePlay “risk-free online poker” had spent more than $250,000 on play chips—“chips with no redemption value.” Could that get the attention of regulators?
It’s true that social players do indeed spend money and can earn rewards as well as bragging rights when they “win.” But Smurfit is confident there are no regulatory issues, present or future, around social casinos. “There have been plenty of test cases to prove that because players cannot win anything, it is not gambling. It is simply paying for the entertainment experience.”
Social casinos may be especially meaningful for tribal operations in out-of-the-way locations. At its best, they extend the relationship with customers across the miles and beyond the casino doors. The San Manuel Band of Mission Indians, whose casino is set high in the San Bernardino Mountains of California, launched its mobile app across Google Play and on iOS in December, partly in response to the delay of regulated online poker in the Golden State. The Indians recruited iGaming veteran Matt Cullen to run San Manuel Digital. Cullen, like Smurfit, has seen firsthand the evolution of social games around the world.
“You saw it in Western Europe in the early 2000s, when all the betting shops were going online and feared it would cannibalize their core business, the retail business,” says Cullen. “Well, it didn’t. It lifted everything and grew exponentially across the board. Then they realized, ‘Oh wow, not only can we make money here, but it drives patronage and loyalty on the land-based side.’
“For tribes and for casinos in general, there really isn’t any reason not to get into social if you can afford to do to it,” says Cullen. “It’s just a further distribution of your brand, and gives you the ability to touch players where they are—which is online and on mobile devices.”
Going Social
- Who’s your competition? More than 1,000 social casino apps are currently available for download or on Facebook. And about 200 new social casinos are launched each month.
- Distracted ‘drivers.’ According to SuperDataResearch.com, social casinos compete with other media for players’ attention; for example, 63 percent of players engage while also watching TV.
- Interplay. An estimated 46 percent of social casino players start on a personal computer before shifting to mobile play; 28 percent start on mobile and switch to a PC.
- The smart money. According to research from customer marketing firm Optimove, mobile social casino gamers are “like web players on fast-forward:” they play more often and convert faster to paying customers.
