The huge opportunity has stirred a lot of mergers and acquisitions between social gaming companies and online gambling companies, as both parties think about invading the other’s territory. Earlier this year, gambling company IGT acquired Double Down Interactive, a 70-person casino game developer, for $500 million.
Jim Ryan (pictured top right), co-chief executive of Bwin.party Digital Entertainment, said of the online gambling companies, “As an industry we have missed the ball. Bingo is easy. That is the one and only social game that our industry has gotten right.” He noted that social game companies such as Zynga have amassed huge audiences in the meantime.
Malcolm Graham (pictured top left), chief executive of online gambling firm PKR, agreed. He said, “We have all missed the opportunity to build tournament-style gambling games (for no real-money betting) on Facebook. But in the next 12 months to 18 months, our gambling industry will move onto Facebook.”
The complexities of dealing with the regulations are massive. Ryan said that getting a license to operate an online gambling site in just one location can be huge. He expects that a license to operate online gambling in California, once the state legalizes it, will be about $30 million.
But the rewards can be equally sizable, given the numbers of users who play online casual non-betting casino games on social networks. Those people are potential clients who could be converted to real-money online gambling for the casinos. Land-based casinos have licenses that permit them to offer real-money gambling, but they often lack the precise data that online casual non-betting casino game companies have. By getting together, these companies could engage in some pretty serious cross-marketing.
When you think about it, Zynga’s customers typically generate a few dollars a month in revenue, and only about 2 percent to 3 percent of its users pay for items in the company’s free-to-play games. Real-money gambling sites, on the other hand, are heavily regulated, but their users will often spend $100 in a month.