Social Casino 2.0 How to Survive and Grow in a Hyper-competitive Market

RAF KEUSTERMANS

Co-Founder, CEO Plumbee

Board Director ISGA

Board Director Bonza Gaming(Interim) VP Marketing Kobojo 2011

Independent Social Gaming Consultant 2010-2011

Global Marketing Director Playfish (EA) 2009-2010

Marketing Director EMEA Pogo.com (EA) 2008-2009

Head of Marketing Western Europe Unibet.com 2005-2008

Strategic Planner at BBDO, Grey and Publicis 1998-2005

www.plumbee.comraf@plumbee.com@raf_keustermans

The Great Social Casino Gold Rush,

2010-2013

What happened?

• M&A deals (Playtika, DoubleDown) and stories of high LTV created a ‘gold rush’ in the social casino vertical between 2010-2013.

• Many small (casual) game studios pivoting to casino genre, usually without fully understanding specific skills required (mathematician, slots producer)

• Today: 350+ slots/bingo/poker games on Fb, 1000+ on iOS and Android... – Mostly low quality, low production value – opportunistic products from

small studios without huge cash reserves.

• Top 10 social casino companies account for 70% of revenue.

• Large companies dominate Top 5 (Caesars, Zynga, IGT, WMS/Scientific Games)

Source: Superdata

• CPI rates keep increasing, while ARPU/LTV is flat, resulting in longer pay back period on ad spend.

• Which results in cash drain, squeezing companies with smaller cash reserves...

Some solutions:• Regional focus• Product• Distribution • Real-Money Gaming

Regional Focus

• Problem: everyone, including market leaders is focused on US, Australia, key European markets.

• Solution: focus on specific, underserved markets, with local content (e.g. local card games).

• Peak Games (Turkey, MENA) and Akamon (Spanish-speaking markets, LatAm) are successful examples.

Product Focus

• Slots, Bingo are very mature/saturated verticals with high entry cost.• Poker: Zynga Poker still doing $120M/year, despite ‘stale’ product –

opportunity for new entrants with right product.– Liquidity is key for success!

• Other casino games: table games (Black Jack, Roulette, Baccarat…) or Videopoker: – Need a strong meta-game to offset ‘shallow’ gameplay.

• Social Betting.– Hard to find the right mechanic but potential $1B+ market.

• ‘New Games’.– An opportunity for ‘real’ game devs.

Distribution Focus

• Find a Publisher/Distribution partner.

• Brands: IP licensing can be expensive, but there are creative solutions.– Use equity, rev share, ... Instead of upfront cash payments.– Structure brand licensing deal as JV or partnership.

• B2B/partnership: opportunities to work with large companies who don’t have f2p expertise.– Land-based casinos, lottery operators... looking to enter social casino vertical.– Media companies trying to leverage their audience.

What About Real-Money Gaming?

Real-Money Gaming is Hard

• Regulation: licenses are expensive, time-consuming process.• Compliance, Fraud Prevention, KYC, …• Payments! • Mature industry: several multi-billion dollar companies.• $200+ CPAs – big market budgets required to get market

share.• No proven overlap between social/free-to-play and RMG

casino games – no easy way to up-sell social players.

Five Options in RMG for game devs

Three easy options:• IP licensing: e.g. Monopoly Slots.

– No Risk, no investment.– Only relevant/possible if you already have strong, recognisable IP, characters.

• Affiliate: send traffic to RMG operator, get paid CPA/rev share for converting users– No Risk, no investment.– Low conversion rates (<1%), not a great user experience, hard to scale.

• White Label/B2B Platform: re-skin existing gambling product or use B2B platform like Betable– Low risk, low investment.– Hard to convert f2p players, most social casino companies struggled so far to make this work.

Two harder ones:

• Joint-Venture: do a deal with existing RMG operator, leverage skill sets for both partners, e.g. Bonza Gaming, JV between Plumbee and Unibet, or the Nordeus/bwin.party JV.– Takes time, money ($500K+)– Could be great win-win deal for both parties, but execution, talent is key for success.

• Become a gambling operator– Very expensive to build competitive new RMG operator from scratch ($10M+)– Not a lot of overlap (culture, skills, business model) with game studios.

Key learnings from Plumbee/Bonza:• Timing is key: we got to 150K DAU (mostly US, AUS) with

$300K ad spend in early 2012.• Similar growth would cost $2M+ today...

• Making quality casino games is not easy, and not cheap.• At Plumbee: 1 slot = team of 7 for 3 months, including

mathematician and experienced slots producer• RMG is hard. Me-too products are not good enough,

unless you have a strong brand and millions to spend on marketing.

@raf_keustermanswww.plumbee.com