Last year was an annus mirabilis – or year of wonders – for social gaming. Will 2015 be as wonderful for the sector?
This year the social gaming market will likely develop differently than it did in 2014. A maturing market will see brands trying to increase their share of the market while keeping both competitors and start-ups at bay. Some brands appear to have adopted the motto that it’s best to be ‘too big to fail’, as marketing budgets are swelling to levels not seen before in the social gaming space.
In short, if the social gaming market was still in its infancy in 2014, this year will see it come of age. These are exciting times for social casino operators and affiliates alike.
Mergers & AcquisitionsWith large marketing budgets comes high acquisition costs, and vice versa. Operators will have to be highly strategic to keep their costs down. Several companies have looked at mergers and acquisitions (M&A) as a way to simultaneously lower their costs and increase budgets via a strategy of market synergies.
In 2014, some huge social gaming M&A deals made shockwaves in the industry. Who can forget landmark partnerships like GSN’s purchase of Bash Gaming last March for $165 million, Caesars’ acquisition of Pacific Interactive the month before, or, perhaps most spectacularly, Churchill Downs’ purchase of Big Fish Casino for an incredible $885 million last autumn?
In 2015, we anticipate that a lot of smaller brands or proverbial Davids will try to keep up with these three Goliaths and the other massive operators in the social space. We don’t expect to see partnerships in 2015 of the same scale as we did in 2014.
After all, M&A can be a costly business. Zynga is a case in point. The fallen San Francisco-based social giant has been unprofitable for multiple quarters and has lost 63% of its players, though the firm hasn’t shied away from big deals, spending $527 million on mobile gaming company NaturaMotion. In 2012, Zynga spent $200 million on ‘Draw Something’ creator OMGPOP, and then had to shut their doors in 2013. Zynga is still looking for ways to help stabilise their former industry-leading products.
Engagement and Player QualityWith start-ups, bringing in a large quantity of players is extremely important and frequently their initial focus and main KPI. However, once these operators have matured, they start to look at the one factor that’s extremely important for a brand’s long term success: namely, player quality.
Some major operators thrive on developing an eco-system where players are first acquired, and then monetized by being sent to another game advertised within their own. Others still, like NYX’s Trophy Slots, have abandoned that approach and are focusing their attention on keeping their active players engaged.
Dessi Popova, Community Manager at Trophy Slots, shared, “We received a lot of complaints from players about advertisement being too flashy and interrupting the player experience.” She added, “After calculating the revenue of the advertisements, NYX found that keeping players engaged, especially VIPs, is more important to the long-term success of our business than serving advertisements for other games.”
Popova said, “Player retention in the gaming industry, like in most business environments, is one of the main revenue generators.” She added, “Frederick F. Reichheld and Phil Schefter of the Harvard Business School cite a study analyzing the costs and revenues coming from serving customers over their whole purchasing life cycle: ‘The bottom line: Increasing customer retention rates by 5% increases profits by 25% to 95%.’”
Horseracing & Daily Fantasy SportsIn the US, online horseracing wagering and daily fantasy sports (DFS) brands like FanDuel and DraftKings will play an increasingly important role in the real-money gaming market in 2015. However, these verticals are also likely to diversify more beyond real-money and into the social space this year.
Social casino, poker and bingo brands have generated plenty of buzz over the last couple of years. In 2015, though, we’ll likely see more and more social horseracing and DFS brands being launched, or real-money operators in those two verticals launching social gaming sister brands to support and complement their real-money offering
How will 2015 play out in the social gaming space? Only time will tell. One thing’s for sure: with our Social Gaming Network giving us the sector’s pulse, we’ll be keeping you posted on how the social scene evolves this year – and beyond.