Land-based casino operators describe their evolving social casino strategies
By any measure you care to mention, the casino social gaming marketing continues to impress.
The social casino games marketplace—which is perhaps best defined as social and mobile networks offering free-to-play casino-style games in which no actual real-money wagering takes place but profit can be produced by players purchasing game add-ons and advantages—has grown to become a worldwide industry that currently generates annual revenue in the $2.5 billion to $3 billion range, according to statistics supplied by various research firms. One of these companies, SuperData Research, estimates that consumer spend on casino-style social games will reach the $4.2 billion mark by the end of 2016. Reportedly, 800 million individual users currently participate in some form of social casino gaming each month, with the lion’s share of play coming from the 21-34 and 34-54 year old age groups.
Sporting these types of numbers, it would seem natural for land-based casino operators of all shapes and sizes to want in on the action; after all, what property couldn’t use a boost in revenue and patronage from a growing pool of younger players? Yet despite this potential, a large number of U.S.-based casino operations remain mostly on the sideline when it comes to creating a social presence to exploit social games play. Some dip their toes into the marketplace by offering their websites up to third-party social casino providers such as DoubleDown Casino, a highly successful social games platform offered by International Game Technology (IGT). Other operators—citing concerns over cost, limited returns, potential cannibalization of the land-based player base, lack of buy-in from the brick-and-mortar operations team and so on—have decided the best approach is no approach at all and steer clear of the social gaming scene, at least for now.
However, there is a growing group of land-based casino operators that have decided the best approach is to establish their own social casino brand and platform. Among the companies that have taken this step are Foxwoods Resort Casino in Connecticut, Empire City Casino in New York, Thunder Valley Casino Resort in California, and Dover Downs Hotel & Casino in Delaware, just to name a few. For brick-and-mortar operators looking to follow in these properties’ footsteps, there is an early and vital strategic decision that must be made—will the new social gaming entity be primarily used as a marketing and loyalty tool with the ultimate goal of bringing more patronage to land-based facilities, or as a standalone enterprise designed to generate real-money revenue from the highly-competitive social games space?
Indeed, this was the question faced by two companies that jumped early into the social gaming marketplace—American Casino & Entertainment Properties, the operator of The Stratosphere Casino, Hotel & Tower, Aquarius Casino Resort and two Arizona Charlie’s properties, all based in Nevada; and Caesars Interactive Entertainment, a publically-owned and independently operated affiliate of Caesars Entertainment Corporation, the $7.5 billion bricks-and-mortar casino company. Executives from both these companies discussed the paths they took and shared the lessons they learned along the way at a social casino session held at the Casino Marketing & Technology Conference, which took place this past July at the Rio All-Suite Hotel & Casino in Las Vegas.
American Casino & Entertainment Properties (ACEP) opted for the marketing and loyalty approach to social casino gaming, but it was not a decision they came to lightly or easily, according to Alec Driscoll, director of gaming development for ACEP.
“When we decided to launch a social gaming site back in 2011…we quickly realized we needed to become better educated,” Driscoll said. “So over the next 18 months we met with a lot of external companies. We talked to IGT, Bally, the various European online gaming providers…we kind of kicked a lot of tires. We also visited a lot of social gaming sites, there is really no better way to get educated than to go to any of the sites and just beat them up; download the apps and see what everyone is offering.”
ACEP also held a series of internal discussions and meetings with teams from each of the brick-and-mortar properties to get their views on what they wanted from a social gaming perspective. “We met with them to establish some parameters and goals,” Driscoll said. “We have three different patron models with our land-based properties—locals with Arizona Charlie’s, tourist with The Stratosphere and a combination of both with Aquarius—and each had a different goal with social gaming. One of the GMs just wanted higher head count in the building and thought [social gaming] was a good vehicle for that. Some were looking for higher yield patrons; others for more diverse types of patrons. All were looking for us to provide insight on how to convert social players to websites or buildings.”
What became quickly apparent to Driscoll and other ACEP executives was that there was no appetite to become a big player in the for-money social games or online casino space. “One of the things we really decided to steer clear of was chasing the for-money online business as it became legal state to state,” Driscoll said. “We did not want to chase it and end up putting shops in each of these jurisdictions. In the end we decided to go for a more channel approach to social—to appeal to our existing and known players and to prospect for new local players to go to our properties.”
That decision made, ACEP decided it was not economically worthwhile to build their own social casino platform and games from scratch, so they went the white label route. “From a tech standpoint, I think it is smart to own whatever aspects of the social casino platform you can,” Driscoll said. “But the reality is that probably not everyone in this industry is going to build a robust online gaming platform and do it to specs and regulatory approval. For us speed to market was everything, so we thought it was much easier to just white label some existing technology.”
To that end, ACEP contracted with then-Amaya Poker and unveiled its acePLAYpoker.com social poker site in 2013. When the company decided to expand its online game offerings to become a full social casino site, it did so with technology and products from Bally, which is now part of Scientific Games.
Thus far, ACEP has been very pleased with its social gaming results. The acePLAYpoker.com site attracts players from all 50 states and 70 countries around the world, but 48 percent of users are within driving distance of ACEP properties. This player base has a 30/70 split between carded, known players and the much larger group of untracked visitors. There is also a 30/70 split between male and female users. “We started out as a poker site that was very much dominated by male users in the 25-35 year range,” Driscoll said. “I can tell you that has shifted significantly for us as we added slot and table games, to really bring more of what you would see in your traditional casinos. We still skew a little younger, but the female audience is what is absolutely driving our volume of play.”
Visitors to the site play in excess of one million hands of poker each year, with the site taking in $30 million in annual rake, although no real money is involved since this is a free-play site. The more traditional casino games bring in $200 million in wagers. “People are playing on the site and they are playing significantly,” Driscoll said. “Although we currently only offer free-play for prizes such as entertainment and F&B options, it indicates people are willing to spend money online if we decide to monetize the site.”
And it appears the social gaming website is driving play to ACEP brick-and-mortar properties. Campaigns run through the social games channel have driven 100,000-120,000 visits to land-based properties each year, according to company statistics. “We average double the conversion rate of direct marketing e-mail and other traditional mediums,” Driscoll said. “So using games and awards as enhancements seems to be a very smart play. We average about 8 percent conversion while our traditional direct marketing does half that.”
What’s more, these social gaming visitors to brick-and-mortar facilities appear to be bigger spenders. “The average daily theoretical of a social casino gamer to a casino is 40 percent higher than a typical new visitor,” Driscoll said. “To put that in perspective, for the 120,000 trips we helped to generate, the land-based properties are looking at $8 million in theoretical.”
As for lessons to impart to those looking to walk in ACEP social casino shoes, Driscoll offered the following:
Pay attention to crossover marketing opportunities. The key to a successful social casino gaming program is to get those players to come to a land-based property and vice-versa. ACEP essentially piggybacked a social casino message on existing marketing infrastructure for land-based properties—the company’s social games site got mentioned on the company’s various casino websites and in in consumer e-mails, signage, marquees, in-room tents, room keys, even placemats at the buffet. ACEP also advertised its acePlaypoker offering on gamer websites such as Bluff and All-in. The primary vehicle for marketing brick-and-mortar options to social site players has been day-to-day tournaments where winners get prizes and special privileges when they visit terrestrial property.
Listen to your players. ACEP surveys its social game players every six months on topics ranging from real-money social gaming opportunities to their brick-and-mortar wagering preferences. “We asked our users if they want a greater variety of social games on the site and 77 percent said yes,” Driscoll said. “To me that is a clear indication where we should take the site and also gives us a chance to monetize games to offer them more fun experiences. We asked users if they were regulars to a land-based property and 82 percent said no, that tells us we’re reaching a new audience. We asked how many hours a week they spent on social virtual gaming and 93 percent spend more than one hour a week and 50 percent up to five hours. That is a lot of time and probably more time than they will spend in our buildings. To get access to this customer is very important to us.”
Unlike ACEP, Caesars Interactive Entertainment (CIE) took a more commercial bent when it was formed in 2009.
“We are first and foremost a standalone, for-profit social and mobile games business,” said Pierre Cadena, vice president corporate development for CIE, which also operates a nascent real-money online gaming/poker business in Nevada and New Jersey and the World Series of Poker franchise for its parent, Caesars Entertainment. “CIE was formed with a very simple goal which was to create a vessel that would effectively monetize Caesars Entertainment’s world class portfolio of brands and bring them into the digital space. I and a lot of my colleagues at that time thought that that would materialize first in the form of regulated, real-money U.S. online gaming. Clearly, that was not the case.”
According to Cadena, Caesars stumbled into the social casino gaming world when it acquired Tel Aviv-based Playtika in 2010, which happened to be a case of purchasing the right company at the right time. “Driven by smart phone technology and apps and the proliferation of mobile devices worldwide, social gaming just took off,” Cadena said. “It offered an immense opportunity for [social casino] monetization and growth.”
CIE’s plan was to grow both organically and through an aggressive merger and acquisition strategy. To that end, CIE purchased Buffalo Studios, a California-based company, in 2012, in order to obtain and market its leading social bingo application. In 2013, CIE ended a white label agreement and acquired social poker assets and a development studio from Canada-based Electronic Arts. That allowed CIE to enter into a very lucrative social poker business by leveraging its World Series of Poker brand. The company’s most recent buy was the February 2014 acquisition of Pacific Interactive and its top grossing House of Fun online social slots franchise.
CIE has since consolidated all these purchases under its Playtika umbrella, which according to company literature is the world’s leading social casino publisher, with a 21 percent market share.
“Our [social casino] strategy has been quite unique and not necessarily in line with that of a traditional land-based casino operators; where the goal is to effectively leverage social and mobile gaming opportunities to engage users remotely and drive foot traffic to the land-based property,” Cadena said. “Our number one objective in social and mobile games is to acquire as many users as we can on key platforms like Facebook Canvas and IOS Android… and effectively get those users to convert and be paying customers of ours.”
And that is just was CIE and its Playtika subsidiary have accomplished. Although it is playing in the same space as monetized social casino offerings from giant game companies such as Zynga and Big Fish, online real-money providers such as 888 and bwin, even various game vendors such as IGT and Bally, Playtika has held its own and then some—owner of four of the 15 top grossing games on Facebook Canvas, five of the top 75 games in the iTunes store, and four of the top 50 grossing games on Android. As of mid-July 2015, Playtika’s Slotomania game was the 8th highest grossing game on Google Play and 13th grossing game on IOS, in the same ballpark as non-casino oriented social game blockbusters as Clash of Clans and Game of War.
“We are fortunate enough now, four years into our strategy, to really have a very significant user base where we can get tremendous amount of economies of scale,” Cadena said. “We also have the benefit of being able to cross promote very high LTV (life-time value) users across a number of our different game genres of slots, bingo and poker. We now have 19 million unique users that come and play our games monthly and six million unique users that play our games daily.”
CIE has reaped the rewards of this growing consumer popularity. According to Cadena, CIE’s social and mobile games revenue has skyrocketed from $54 million in 2011 to $586.8 million in 2014, which is a compound annual growth rate of over 100 percent.
“Playtika’s secret sauce and competitive advantage is less about product and more about our ability to market, monetize and convert,” Cadena said. “We monetize 31 cents per daily active user; which is two to three times greater than that average of general social games. In terms of conversion—the percentage of unique users that actually deposit money and pay to play your games—we achieved 4.3 percent conversion rate last quarter, up from a 1.8 percent conversion rate in 2013. Meanwhile king.com, the makers of Candy Crush, convert at a 2.5 percent rate; and Zynga at a 1.7 percent rate.”
Other companies wishing to emulate CIE’s path to social casino success are in for a very stiff challenge. “It is not necessarily a strategy that can be replicated easily by other land-based casinos,” Cadena admitted. “We spent hundreds of millions of dollars over the course of four years to effectively get where we are today. We have effectively chosen to drive our social casino business for profit rather than to drive foot traffic to the property. Our social casino strategy may not necessarily fit the needs of most casinos.”