Authors' Note: In the fifth of a 12 article series themed on where the money is now for “smart” casinos, VizExplorer executives examine the confluence of social and mobile technologies, and offer five steps to find success in this new world. Please note these articles are meant to stimulate thought and that we are using some deliberately provocative metaphors which should be taken with a grain of salt.
Time past is problematically comprehended history, and time future is a world of contingency and chance—and at the core of a capitalized economy are investment decisions that incorporate that uncertain future.
—William Janeway, Capitalism in the Innovation Economy
In the quote above, American Venture Capitalist and Economist William Janeway posits that we are faced with an uncertain future and the investments that we make will define our success or failure. He goes on to describe the process of creative destruction and how capital is reallocated following this economic process.
The challenge of the mobile and social business strategy is that it needs to be taken in a context of a highly dynamic and difficult to predict future. For example, look at recent Facebook usage statistics… there are now over 1.7 billion global Facebook users, and this number is projected to hit 3 billion by 2020. These forecasts are saying that nearly half the planet will be active on social media by 2020. The growth numbers in the U.S. are quite different but equally fascinating, as they show stickiness in social media usage, that is, a user’s tendency to “stick around” a site or an app longer.
There is little doubt that mobile and social media is a world of contingencies and chance. This world leads to investment decisions that are uncertain, yet necessary for growth and prosperity. To give gaming operators the best chance of success, we will examine the nature of mobile and social media change and offer five critical success points to making it work in your business.
Success Point One: Understand Product Adoption levels—When thinking about any new technology, we need to consider the adoption patterns of these new technologies. Simply put, new technology is now adopted by a wider portion of the population in less time than ever before.
It has taken less than five years for tablet computing devices to reach a 10 percent adoption rate among U.S. households. By way of comparison, it took electricity 30 years and the telephone 25 years to attain the same 10 percent adoption rate. What this means is that when we contemplate any new tools, we need to look carefully at adoption curves to understand when these evolving technologies are likely to impact our gaming world.
It’s safe to say that the most impactful technology development over the past decade has been the smartphone, which has allowed people to easily connect and remain in constant touch with the world. The next consumer adoption curve is the ability to control the things smartphones allow us to interact with; everything from smoke detectors and air conditioners to hotel check-in and valet services. As we start thinking about this step, challenges arise in the form of new vendors, new systems and environments changing so fast that just keeping up with the change is a full time job.
Success Point Two: Horizontal Innovation—Horizontal innovation involves groundbreaking technologies that apply broadly across wide areas of the business. So a horizontal innovation within the casino space would have to be an application that impacts the whole gaming floor at one time. However, in gaming it is important to note that the end customer experience is, in many cases, a mixture of influences from many suppliers. Consider customers today; they can play on a game made by one game designer on a gaming machine made by one supplier, using a customer management experience and secondary gaming device from a second supplier, a bonusing system from a third supplier and a ticket printer from a fourth supplier. The customer experiences the gaming device as a whole, and simply has no idea that the gaming experience is provided by an amalgam of suppliers.
In the world of social and mobile, we need to think about horizontal innovation that will apply across large portions of the business. This horizontal approach has the potential to have massive impacts on the business.
Success Point Three: Understand What Drives Product Usage Levels—As we examine the potential for innovation in social and mobile, we need to be able to predict the long-term usage rates. These long-term rates are a combination of churn and adoption. To understand the importance of churn let’s examine a quadrant diagram with two dimensions. The first dimension is the adoption rate and the second dimension is the churn.
Looking at each of the four categories in the quadrant diagram gives four scenarios:
Volatile: These products are likely to grow very fast initially and then stabilize at a moderate level of total adoption as the new customers balance the churn behavior.
Persistent: These products, like the telephone, are here to stay for many years; however, like the telephone, they can change in nature. When we see these products we can anticipate that they will be with us for generations to come.
Grinder: These products slowly grow in market share and can strangely be seen as rapid adoption when they are in the high growth part of their curve. When looking at product adoption, we should always look carefully at these grinders as they can catch us by surprise in the long run. Historically air conditioning is a great example of a grinder. According to an article in the New York Times, the air conditioner took almost 60 years to gain 90 percent adoption. However, it is fair to say that once people got accustomed to the air conditioner, they find it hard to drop the product.
Dead: These are products that customers fail to embrace and are often killed shortly after they are released. It’s important to note that users of these products soon drop them.
To further explore this product adoption rate matrix we will examine two products; consumer apps and social media apps. In the August 2016 issue of Casino Journal, we explored a phenomenon called app fatigue, where apps are examples of high churn with an 80 percent abandon rate after a single use. To counterpoint the app fatigue example, we will look at the number of social media users and how there seems to be almost no churn.
Commercial apps are facing huge app fatigue, even the hottest games rise to only about 30 percent usage rates and nearly 80 percent of mobile apps are abandoned after their first use. This is massive churn and places the apps squarely in either the volatile or the dead categories. Characteristics of a dead app are that extremely small numbers of users are downloading the app, let’s be optimistic and say 10 percent, but that 80 percent of these users will abandon the app after the first use.
Volatile apps are a little more interesting; these apps are constantly picked up by consumers and they have the potential to spark high usage levels. With a volatile app, it can at least be said that users are trying the app so the door is open to possible success if churn can be improved.
But at the end of the day, the best that can be said for most commercial apps is that they are, at best, volatile. Most, unfortunately, are dead. Executives who find themselves with the responsibility of managing a commercial app need to focus heavily on churn rates and driving long term value, rather than just adoption.
Social media is quite a different story, but the actual numbers are harder to find. To dig out the churn rate, we need to look for clues based on the published numbers. To gain an analysis of the churn rates, let’s examine the growth rates in America. Here are some facts:
• Over the last 5 years, the monthly active users (MAU) for social media have grown approximately three million per year. In the prior five years, the MAU grew approximately two million per year;
• The U.S. social media market is considered saturated, with more than 226 million users in the total market; and
• The churn formula is a function of the total MAU size (think of it as a percentage).
In short, we can see that despite the growth in the total number of active users, the usage levels are constantly increasing. If there was a percentage of users who were churning as the MAU approaches the total population of users capable of accessing Facebook, then this overall increase rate would be impacted. Without seeing the actual churn numbers, we are on mathematically dangerous ground, as there could be other factors deeper in the numbers. Having said that, it seems reasonable to say that the growth appears to be independent of the total MAU size and it is highly likely that there is very low churn. This hypothesis is reinforced when looking at mobile and daily usage numbers; it is unlikely for a user to churn if they are in the habit of using social media on a daily basis. This hypothesis places the social media in the persistent category.
When we bring all this together, we can see that commercial apps are a volatile effort at best, while social media continues to drive increased usage and is a persistent force that cannot be ignored.
Success Point Four: Collect the Data—
The process of change involves making a bet on the future then carefully watching that bet. In the process of building our mobile to social strategy, there is little doubt that the usage patterns and impacts on the business are highly likely to have unintended consequences.
Consider the example of the latest social explosion, a game called Pokemon GO. In a period of one month, Pokemon GO attracted 20 million active users, according to company statistics. This game encourages people to move around, interact and explore the world and collect virtual pets. The game manufacturers claim it will be possible for a business to load up on Pokemon GO attraction points, called PokeStops or gyms; this would result in scores of people turning up at a property wanting to spend time in specific areas. Of course, this begs the question, “What are Pokemon players doing in my property today and can I benefit from this activity?”
Well, we have watched players turn up at the Mermaid Bar in the Silverton Casino, buy a drink then play Pokemon GO. So from a casino operator perspective, we believe Pokemon GO or other such augmented reality games could be used to boost foot traffic, market to customers and even foster wagering activities.
As we think about the desired results of our mobile app and our social strategy, we need to understand what is happening, adapt to this world of extremely rapid change and shape our innovation plans accordingly. The key to making this work is data… data that can give insight into invisible threads that form the mobile social media world.
As you embark on your social and mobile strategy, remember that data from across the entire enterprise is needed to monitor for unintended consequences.
Success Point Five: Real Time and Automation—In our social/mobile world, customers are moving around and interacting in real time. They are responding to social events and to each other; to make use of this, our smart casino needs to be able to communicate and react to the users in real time. To achieve this real time interactivity, make sure social tools conduct dialogs in real time using text, messaging and e-mail. Once a real time interactivity flow is created, combine it with tools that are adaptable and flexible enough to seize the opportunities presented by innovations across the social and mobile worlds.
The world we face is an exciting one full of unpredictable events that shape the opportunity for innovation. The social and mobile world is there and it is very much changing everything around us. The challenge is how can we make the right bets and execute on these bets with the best chance of success.