Social Casino Games

The New Way to Win

Basically, social casino games are virtually indistinguishable from demo games "for chips" that are offered by all online casinos. But the players at online casinos treat games "for chips" as a teaching step before the game for real money. The players of social casinos perceive the game "for chips" just like a game to play and have fun.

What is necessary for a good game? Of course, it is a good gameplay. Perhaps most readers have played Farm Frenzy or something like that. Such social games draw players' attention by:

• daily bonuses,
• the opportunity to pass through the levels,
• the opportunity to become better in the game,
• the opportunity to show off their success to friends,
• the opportunity to play with friends
• bonuses for invitation of friends.

And if you take this social gameplay and add it to demo games of online casinos, social casino games can be formed in the resulting mixture. Moreover, the high level of social gameplay often affects the fact that players make such games a great part of their real lives. After all, the developers of social games add more and more bells and whistles for the players: daily tournaments and weekly races of leaders, promotions, more prizes and awards. New and new goals appear constantly and they are catchy enough to force gamers to keep playing.

The well-known cultural anthropologist Natasha Dow Schull describes how some players enter the "pleasure zone". They are somewhat similar to D'Artagnan, who said: "I'm fighting because I'm fighting." So these gamers play the game just because they like to do it. Players who are in the "zone" do not care whether they win or not as long as they enjoy playing. Neuroimaging of players at that moment showed that the losses, which had been programmed and had been part of any casino game, stimulated the same brain regions as winnings. The pleasure centers of the brain do not really care whether you win or lose real money or just virtual chips.

Social casino games are pure entertainment, but the players are still deeply motivated to keep playing. Researches have shown that novice gamers rapidly become very motivated, try to accumulate virtual currency and tend to return to the game every day. Many players visit chats and forums where they discuss in detail the strategy of a game or purchase virtual chips and coins. Players of social casinos have different motives to play, but they are associated with gambling rather than with gaming. They want to have a progress in the game and win it. And they are willing to pay money for this. 

The Difference between Gambling and Social Games

A few people understand the difference between gambling and social gaming. In fact, there are direct differences between them, which are based on the fact that different forms of games create various risks.

Nowadays the term "gambling" has the following economic definition: betting money or any material value on events with an uncertain outcome with the primary intention of making a profit or getting a material value. In other words, a game of chance is a game in which three elements are present:

• Winning . The goal of the participation is to win.
• Chance . Both wins and losses depend on the fortune rather than on the skills of participants.
• Bet . The opportunity to participate in the game is provided by making the bet, which is lost in case of the loss, in any possible way.

Let's imagine the definition of a gambling game in the form of a scheme:

If at least one element is absent, the game does not belong to the category of gambling. Thus, social casino games will not be considered as gambling games if they lose at least one of these three elements.

Social casino games, which are spread through social networks and mobile platforms, have elements of gambling, but they lack cash payouts. Players of social casinos buy virtual goods or pay money for virtual chips, but it is just impossible to win real money. In addition, the business model of free social casino games allows operators to make profits via banners with advertisement, which can be seen on the screen during the gameplay.

Unlike companies of online casinos, which are very hierarchical due to their corporate structure, social casino operators can rapidly change their offers and easily be adapted to the changing needs of users. Their methods of data analysis differ significantly: whereas gambling is mostly focused on returning investments and generating income, social casino operators invest in complicated analytical tools to understand and predict the behavior of gamers in order to improve the playability and uniqueness of their games, and improve the profitability of advertisement.

Thus, social casinos react quickly and implement changes according to consumers' needs. So, now they are focusing on mobile gamers, who prefer playing on smartphones and tablets rather than in the social networks.

Social casino games are not always social. There is a big difference between games in which players interact with each other and play against each other and games in which the gamer competes for the victory with a casino. The legislation has already admitted that the banked games are more dangerous than non-banked games. Therefore, blackjack, baccarat and roulette are regulated more strictly than poker. A free slot machine on your iPad is closer to the real slot than Angry Birds.

The Market of Social Casinos

At the moment, the market of social casinos is flourishing. After the rapid development of social games in 2013 in social networks, their explosive growth on mobile platforms began in 2014. The total revenue in 2013 was $2 billion and last year it comprised 3 billion. According to the financial forecasts, revenues of social casinos in 2015 will reach $4.4 billion on various platforms.

Casino social games are considered to be one of the most profitable segments on the mobile gaming market in particular and mobile applications in general. They entered the "super league" of gambling. The industry of social casinos has reached billions of dollars for the last two years. This can be explained by the rapid growth of Facebook and other social networks, as well as by the widespread mobile technologies. This has led to numerous mergers and acquisitions and the establishment of dozens of startups. But as you can see from the chart, large companies are dominating on the market. 

Distribution of Revenues of Social Casinos in 2014:

Licensed companies that own offline and online casinos are spending hundreds of millions of dollars to enter this business. For example, Caesars Interactive Entertainment Corp bought half a dozen social gaming companies in the last couple of years. By the middle of the February, it was purchased by the Israeli company called Pacific Interactive, whose main feature was a great set of games in the style of slot machines. A little earlier Caesars acquired House of Fun, which reached the result of 700,000 users daily in less than three years. And the very first purchase of Caesars Entertainment was Playtika. It was a company based in Israel. It was estimated in 2010 that it would cost approximately $1 million.

Playtika was independent for 11 months and during that time it could not succeed in making money. However Caesars Entertainment paid between $80 and $90 million for 51% of its shares. Why did it happen? It happened because Playtika created Slotomania, which was the number one of all social casino games on Facebook. Slotomania is still one of the most popular social games and now has 13 million "likes" on Facebook. Why did Caesar need to purchase companies owing social casino games? This happened because they contributed to promotion of the brand and help to make lists of potential customers. But even more important thing is the fact that they bring profits to their owners.

Top Five Industry Leaders

1. Caesars Interactive Entertainment is still occupying the leading place with 21.2 percent of the market share thanks to its assets, such as Playtika, Buffalo Studios and Pacific Interactive. Their share is more than two times higher compared to the share of its nearest competitor, namely IGT, which the world's largest manufacturer of shot machines. This company owns DoubleDown Casino.
2. IGT entered the market of social casinos after purchasing DoubleDown in 2012 for $600 million and currently it has the 11 percent share of the market.
3. Zynga is occupying the third place with the market share of 8.8 percent. The main application of the company is Texas Hold'Em Poker. It brings the company 74 per cent of gaming revenues on Facebook.
4. GSN/Bash Gaming is the fourth-largest social casino with an estimated market share of 7.4 percent.
5. Big Fish Games, which is owned by Big Fish Casino, closes the top five social casinos with the 6 percent market share. Maybe it's not too much, but the company received about $36 million of income from social casino games in the last quarter.

Where Does Money Come from?

So how do social casinos earn money if they don't have gambling games? Most social casinos provide players with the opportunity to play for free using chips. Their certain number is provided for the first visit and then users get them each hour, or each day, or after reaching the next level, or for invitation of friends. Operators also sell extra chips for real money, but nobody forces users to buy them. Thus, social casinos get their profits from players who have lost everything and who do not have enough patience to wait for next free chips. In the photo you can see how many chips are available at Caesar Casino. Their number is similar at other social casinos.

The most common way for social casinos to avoid the ban of gambling is to refuse offering valuable prizes. But who will play in this case?! Well, here's a simple case where the winner can win chips, which can be sold for cash. If the rules allow transferring gaming chips to other players, it leads to the formation of the secondary market on which the virtual currency can be converted into real money.

Social casinos have found that some players will spend real money on buying special avatars or virtual gifts, which can not be sold, but can be used to stand out. In this regard, critics of social games state that these games actually have all three elements of gambling, because these prizes are valuable for players. However the legislation neither supports them nor agrees with the fact that the intangible element can be considered as a "valuable prize" if it can not be sold for money.

The common monetization model is a model according to which gamers can play for free anytime and anywhere. They need to pay only when they want to get extra little things, such as exclusive avatars. But the most common scheme of monetization of social games is selling time. As soon as the players loses free chips given at the beginning of each hour (or day), he or she can wait for to receive the next free chips or pay and get them right now. For example, the poker player who has lost all his chips faces a choice: he can sit a few dozen hands waiting for free chips or buy additional chips for real money. Researches have shown that the temptation to save time is so great that people often pay, even if they understand that they can not return their money.

Millions of gamers play social casino games and many of then spend as much money as players who gamble for real money at online casinos. At the recent meeting of the International Masters of Gaming Law in Oslo, an Internet gaming expert Melissa Blau created a stir when she told that "whales" (gamers who spend a lot of time on playing social casino games) spent on average $550 monthly. The news that people might spend up to $7,000 per year to play with no hope to win was amazing. But when Blau reported that those who play for real money at online casinos spent on average the same $550 each month, the experts who were present at the meeting sank into a reverie. It was very surprising.Players say that the best thing in the world is the winning. But it turns out that the loss of money can bring the same pleasure... 

The profit is generated despite the fact that the majority of people who play social casino games never buy chips. The Caesars Interactive spokeswoman Seth Palansky said that about 96 percent of players of Caesars Interactive Casino, which dominated the market, did not pay a cent. But millions of people play at casinos! And even if only 4 percent of the players spend money, it means that this 4 percent includes hundreds of thousands of people.

Revenue of Social Casinos

Social casino games are occupying a unique segment of the gambling market, have unique audience and diverse game mechanics. Of course, this growing segment of the market is facing its own set of problems, opportunities and challenges.

The Lack of Transparency

Social games do not belong to the category of gambling games and, until recently, the authorities have not been interested in them, but now they are starting to attract the attention of regulators. The fact is that the real casino games always have elements of a random number generator. And the legislation establishes the minimum and maximum payout percentage. For example, the payout percentage of a slot machine in Las Vegas should be at least 85%. At online casinos, this percentage is 95-98%. Social casino games may look like slot machines, but their mechanics is completely different. These games are never completely random.

The payout percentage may vary even in the middle of the game session, i.e. you can start having 125% and finish with 75%. For these purposes there is dynamic game balancing, which is used in social games.

Social casino games can deceive players. Since these games are basically not regulated, they can easily choose any payout percentage. Indeed, events in social games almost never occur randomly. Social casinos do not want players to get bored and stop playing, so that developers make games easier, if the player is stuck at the same level or more complicated if the player wins too much. This is called dynamic game balancing. It is done automatically and aims at "hooking" players. It is obviously that chances can not be changed in the middle of the game at real online casinos, but this happens very often in the social games.

Of course, developers of popular social gaming casinos understand the importance of keeping the gameplay that is similar to real casinos with the same mathematical dynamics of odds in order to avoid distorting the perception of people. However the interests of owners of social casinos are slightly different, because they need playability. So, one of the problems of social games is the "efflux" of players from social casinos to online casinos. Imagine how players "for chips" are playing game at social casinos, which looks like a slot machine, but pays 125% out. It is clear that they win, they like it and finally they decide to try games for real money? What do you think? How much money do they lose until they realize that the chances of real slot machines are lower? People have the impression that everything they have to do to win money is to visit real casinos and just feed a slot machine with money.

Therefore, this is a problem of a transparency lack. Nowadays social casinos do not inform their players that games at their casinos are arranged not very randomly. And now the European Union is going to demand operators of social casinos to tell players that their games are not quite what they seem to be.

The Gamers' Age

Another problem is the inability to verify the age of those who play at social casinos. So, Facebook set the minimum age of 13 years for those who wanted to register, but it was not checked: people just needed to indicate how old they were. Some reputable social casinos indicate the minimum age of 18 years despite the fact that most online casinos for real money require that the players should be at least 21 years old. But this is almost not verified. Technically, social casino games are not gambling.

Addiction

The nature of the game can lure unscrupulous operators to get an extra advantage over players, since operators of social casinos have an excellent knowledge of psychology of their players. As soon as a player pays money once to continue playing after losing all his chips, it is very easy to create the same situation again. And they make the game extremely attractive exactly to this particular player, so that he is always close to victory, but he will have to pay more and more to keep playing.

Demography and Other Interesting Statistics

The potential of social casinos for growth is fantastic. About a quarter of all Internet users regularly play social games nowadays and nobody laughs when experts predict that within three years the number of such users will be one billion.

- IGT has studied the demography of six million users who play social games at DoubleDown Casino on Facebook or on mobile devices.

"Being the world's largest online casino, we pay attention to the trends and inform the public that poker is becoming more attractive to a wider audience,"- said John Clelland, a global marketing vice president of Interactive Group. -" Poker is traditionally considered to be male game, but our data suggest that the number of female players is increasing at social casinos".

- Poker is still one of the most popular games among forty casino games offered by DoubleDown Casino. Researches have shown that the number of female poker players increased by 22 percent previous year compared to a year earlier and females spent about as much time playing free online poker as males. In addition, females made larger bets than males and their average size for the game session is 25% higher compared to males.

- Raf Keustermans , a CEO of Plumbee that is a manufacturer of social casino games, said that the average cost of developing a social casino game was about two million dollars, and the $10 million marketing budget is necessary to launch it.

- Researches of social games distribution in the United States have shown that about six million Americans or approximately 2% of the population play at social casinos.

- The breakdown of visitors into group depending on age is very interesting :

• Users from 50 to 59 years old.
• Users from 60 to 69 years old.
• Users from 40 to 49 years old.

For comparison, the average age of customers of brick and mortar casinos is 44 years.

- The most popular gambling time is from 4 p.m. to 6 p.m., immediately after returning from work.

Social Casino Games in Russia

The volume of the Russian market in the segment of social gaming casinos is relatively small. So, the income of the industry was 45 million dollars in 2013. This amount increased by one third and reached $60 million in 2014. And if the number of those who play social games was 25% of all the players in 2013, it decreased to 13% within two years. Nevertheless, the revenues of operators are not reduced due to the fact that many players prefer mobile platforms to social networks. And since the average smartphone owner is richer than the PC player, so the choice of mobile devices allows the market to grow faster by increasing the average fees in the game.

Some details about the income of casino games in Russian social networks are revealed by Igor Klyukin, an analyst of the leading gaming company Pixonic:

For example, the top apps of Odnoklassniki have a social poker apart from casual games. According to our estimates, these applications earn about 20 million rubles per month and 10 million belongs to the social network. The daily audience of casino applications in social networks has about 300 thousand individuals and at least 80% of them are males.

And Maxim Samorukov, a project director of Crazy Panda, stated in the media that a casino from the top of social networks could earn from 1 to 3 million rubles per day depending on the season and held promotions.

The most famous Russian company in the field of social casino games is KamaGames Studio with a series of applications called Pokerist. Also there are developers of the social poker called Crazy Panda (World Poker Club, Vegas and other games) and Myrka with the application S&H Casino. According to the analytical service AppData, the application PokeristClub from KamaGames on Facebook has 200 million active users, and the application Texas Poker, which also belongs to KamaGames in the Google Play Store, has up to 50 million downloads.