Born free: The role of social casino in 2020

Even though players can’t exchange or sell acquired and purchased in-game digital chips, coins and credits for actual cash, this didn’t stop social casino from mushrooming into a colossal casual gaming vertical in its own right.

Eilers & Krejcik Gaming estimates that for the trailing 12 months to the end of June, social casino – slots, table games, bingo and poker – was worth north of $6.2bn globally, up from $5.2bn in 2018 and $4.5bn the year prior.

Although the market’s explosive growth seen at the start of the previous decade has flattened to a certain degree, the boutique analyst firm still expects it to swell to $7.6bn by the close of 2023 based on a compound annual growth rate (CAGR) of 7.9%.

Unsurprisingly, the coronavirus pandemic and enforced lockdowns, resulting in the shuttering of US casinos, gave casual games, including social casino, a boost. Adam Krejcik, principal at Eilers & Krejcik Gaming, says social casino “increased dramatically” due to the pandemic.

The firm estimated bookings (revenue) at Zynga – the studio behind Wizard of Oz Slots, Hit it Rich! and Zynga Poker – jumped 58.7% year on year in the second quarter, with average revenue per daily active users (ARPDAUs) on slots hitting new highs.

“Q2 was a record period for just about every company and for the industry,” Krejcik says. “We saw a huge acceleration of growth, especially in the months of May and June when there was the lockdowns and restrictions. All mobile gaming, and specifically social casino, were major beneficiaries.”
Social circles
The powerhouse at the top of the market continues to be 10-year-old Playtika, which was previously owned by Caesars Entertainment’s interactive division, with a 27% market share and an estimated 15 million-plus monthly active users (MAUs), contributing to projected revenue of $1.7bn in Q2.

In fact, the Israeli casual gaming giant’s flagship social casino product, Slotomania, remains the biggest and most popular slot game in the world despite being one of the oldest.

Below Playtika, you have casino gaming equipment suppliers Aristocrat (an estimated 11.7% market share) and Scientific Games’ standalone social games division, SciPlay (8.2%), as well as established mobile games publishers like Zynga, Huuuge Games and DoubleU Games.

Although a small percentage of social casino players make in-app purchases, which drives the revenue, it’s a tiny slice of what is still a very large number. Recent data on monetisation rates are scarce but a study by the UK Gambling Commission back in 2015 found that 90% of players on gambling-style social games didn’t spend any money on in-game items.

Of the 10% that did back then, 90% spent less than $500 in the preceding 12 months. The regulator also found that for one leading social casino game fewer than 120 people in the UK spent more than $1,000 in the 12 months prior.

Moreover, top social casino products tend to have a stickiness quality and longevity which are unlike many mainstream ephemeral mobile games.

SuperData Research published in 2016 suggested the average lifetime value (LTV) of a social casino player was $324, yet two interesting trends have developed in recent years, as Krejcik explains: “The number of monthly active users in social casino over the last five years has declined, but the number of monthly active paying users has increased.

“Conversion has been one of the big growth drivers of this industry. So, you have a greater percentage of paying players and they are generally spending more per month than they did a number of years ago,” he added.

Another trend has been the decline of Facebook – the birthplace of social gaming. Facebook now accounts for around 14% of industry-wide social casino revenue, says Eilers & Krejcik Gaming, although the social network is still used for user acquisition (UA) and targeted advertising.
A bit on the side
Practically all the major brick-and-mortar casino chains have a free-to-play (F2P) mobile social casino these days. Yet, rather than it being a massive standalone revenue generator and global hits like a Slotomania or a Double Down Casino (DoubleU Games), these apps are mainly about brand awareness, customer engagement and acting as one cog in the omni-channel wheel.

Krejcik says: “Of course they would like to generate revenue and profits, but even if it’s breakeven or a small loss they view it as part of a broader strategic digital plan to acquire users online and build customer awareness, as well as the cross-sell between land-based or a real-money online site at some point.”

In July, Boyd Gaming debuted its Stardust Social Casino app leveraging the iconic Stardust brand, one of the most famous casinos in Las Vegas history and the inspiration behind the critically acclaimed 1995 movie Casino.

As well as featuring a panoply of slot titles, including games found on its casino floors, the F2P product allows players to earn B Connected loyalty points and tier credits to redeem for in-venue benefits at most of its 29 properties situated in 10 states.

Two months after its release, Stardust has achieved a rating of 4.6 in Apple’s App Store based on almost 300 reviews, while feedback at the Google Play app store is slightly lower but still an average of four stars from more than 330 reviews.

“We’re very happy with the responses and our ratings,” says Boyd Gaming SVP and CIO Blake Rampmeier. “We view social casino as an additive to our offering for our customers but, first and foremost, it’s about our customer database.

We’re going after people that are outside of our current ecosystem, although right now it’s about giving our customers another option.”

He adds: “Also, the content that you see is some of the top games that customers play on the casino floor – no one else has that content in social casino and no one has access to it even on the real money gaming side. That’s a real differentiator for us.”

Rampmeier says Boyd has “a whole laundry list” of items on the product roadmap for the app over the next 12 months, with one priority being the introduction of player leaderboards following user feedback. “We didn’t want to roll something out that was perfected,” he explains.

“We wanted to roll out a very good, strong product and continue to build on it. Stardust is really the first nationwide customer-facing brand that we’ve had. Much of Stardust’s growth thus far has been organic, too. This is a marathon, not a sprint.

“The last thing we want to do is just flood the market and then have nowhere to go. We’re just scratching the surface here and have a lot of runway, so we’re going to use it.”

Another casino operator making moves on the social casino front is Penn National Gaming’s (PNG) online arm Penn Interactive. The Pennsylvania- based company unveiled a new app from GAN in August called mychoice Casino, which takes its name from PNG’s mychoice player loyalty program and replaces the F2P Hollywood Casino app that was powered by Scientific Games.

“Brand-wise, it was linked to one of our casino brands and we really wanted to have a product that could touch all of the properties,” says Rich Criado, VP of online casino at Penn Interactive.

PNG boasts 41 properties in 19 states, while more than 20 million members are signed up to mychoice. “Our players can link their mychoice accounts to it, they can earn tier points and redeem comps for credits, so it’s a way to link the physical and digital worlds.”

Criado expands on this point: “Our CEO has talked often about this omni-channel ecosystem. It’s not just about getting people into the digital realm; it’s about how you complete the circle and drive them back to the property.

“You create that ecosystem like an Amazon or an Apple which do very well where they have the physical and digital pieces. One of the reasons we chose GAN was because they believed in the same vision as us – this isn’t going to be a stagnant product that we ship and forget about. We are going to continually iterate and make it better.”

The new mychoice casino game lobby (Source: Penn National Gaming)
Pen to paper
What has been noticeable of late is that the pace of merger and acquisition in social casino has slowed, which was kind of inevitable. It’s nearing a decade since Caesars Entertainment surprised the industry by snapping up Playtika when it was a 10-person operation for around $100m and kickstarting a wave of M&A and bolt-on acquisitions.

In 2012, slots supplier IGT shelled out $500m for social casino studio DoubleDown Interactive – at the time a jaw-dropping sum but what ultimately turned out to be a shrewd purchase (IGT sold DoubleDown to South Korea’s DoubleU Games for $825m in 2017).

Meanwhile, Churchill Downs paid $885m for Big Fish Games in 2014 and, four years later, sold the social games publisher to Aristocrat for almost $1bn.

Finally, and most significantly, Caesars offloaded Playtika in 2016 to a Chinese consortium backed by Alibaba founder Jack Ma for an eye-watering $4.4bn. Of course, this short rundown doesn’t include the whole host of small and medium-sized acquisitions.

For instance, PNG acquired its own social games studio, Rocket Games, four years ago in a deal involving $60m in upfront cash and earnouts of up to $110m.

Part of all the M&A was driven by FOMO (fear of missing out), but also because the barriers to entry continued to rise as UA costs soared. And now Playtika, behind games such as World Series of Poker, Bingo Blitz and House of Fun, besides Slotomania, is thought to be plotting a $10bn US IPO.

That would value the social casino giant at close to the market cap of PNG and Boyd Gaming combined. Whether or not that does come to fruition, Criado says he can see social casino apps adopting some of the “video game mechanics” deployed by Playtika and co. in their slot titles as opposed to the status quo of mirroring the games found on the casino floor.

“I think, in the longer term, real-money gaming and social casino gaming will borrow more elements from video games. Video games are very immersive and have a lot of interesting game mechanics that keep you engaged, so I think the industry in general will move in that direction.”

He adds: “Playtika is a very different product to maybe what mychoice Casino is, but I could see us inching in that direction over time.”

Like Criado, Boyd’s Rampmeier anticipates a bright outlook for social casino generally, while highlighting that the pandemic has helped introduce a younger cohort (social slots players tend to be female and aged 45+) to Stardust.

“Now is a great time for social casino and I don’t think it is dead. There is a resurgence and certainly the pandemic has helped with that but, in general, more people are focused on the digital component.”

Meanwhile, Krejcik, an analyst who has been covering the space for the best part of a decade now, neatly sums up his position on social casino’s future: “It’s its own sustainable, growing industry. The growth is slowing but with the pandemic you saw a real acceleration of growth and we revised our estimates higher… Overall, we’re pretty bullish still on the market.”

$6.19bn

How much the global social casino industry is estimated to be worth

2/3

Approximate proportion of social casino players that are female

27%

Global market share of social casino heavyweight Playtika, previously owned by Caesars

13

Years since Zynga Poker first launched, initially on Facebook

$821.6m

Estimated revenue the top 10 titles generated in Q2, or 44% of the market

Various sources