How do the worlds of social gaming and gambling converge? Can they co-exist, co-operate, or do they perhaps compete? How does convergence between the two sectors impact on your business, whether you’re a social game developer or a gambling company? The survey launched by Kontagent and EiG to find out the views on these questions from both sectors revealed very contrasting opinions on the goals for launching social-casino games, on regulation and Facebook’s move into real-money gaming. Find out the first results of that survey during the pre-EiG webinar when experts from the social gaming and gambling sectors will present the key factors and questions to be taken into consideration to decide the extent and success of the social gaming and gambling convergence. Find out more about the social gaming research study launched by EiG and Kontagent here.

1. Social Gaming and
Gambling Convergence:
Threat, Opportunity or
Just a Hype?
19 September 2012

2. AGENDA WHO’S WHO
Intro Moderator
Background and landscape Ewa Bakun
Head of Content, Gaming, Clarion Events
Research findings Ewa.Bakun@clarionevents.com
Online gambling
o Survey results Speakers
o Expert perspective
David Gutierrez, PhD
Social gaming Data Scientist, Kontagent
o Survey results David.Gutierrez@kontagent.com
o Expert perspective
James Hollins
Summary Industry Analyst, Investec Securities
James.Hollins@investec.co.uk
o Conflicting opinions
o Convergence Kevin Flood
CEO, GameInLane
Q&A Kevin_Floodz@yahoo.com
@Clarion_Gaming | @Kontagent

3. WHAT ARE “SOCIAL” CASINO GAMES?
Casino-style games on social networks, mostly Facebook
Players cannot “cash-out”; no real-money wagering
„Freemium‟ model: most players play for free, but can buy virtual
chips/goods for enhanced experience
„Freemium‟ games are also popular on mobile platforms
(iOS, Android)
@Clarion_Gaming | @Kontagent

4. SOCIAL CASINO-STYLE GAMES LANDSCAPE
Land-Based
Casinos
iGaming Social
Operators Games
Mobile
Games
@Clarion_Gaming | @Kontagent

5. EXCITING MARKET OPPORTUNITY
Social casino games share has
doubled on Facebook since 2010
(from 6% to 13%)
Social casino games have surpassed
farming games
40% higher ARPU than RPG games;
7x higher than casual games
Of the Top 10 grossing iPhone apps,
three are casino games
Social and mobile casino
worldwide market size could
be up to 100B USD by 2017
Sources: Kontagent Data Science, Juniper Research, AppData, App Annie.
@Clarion_Gaming | @Kontagent

6. ?
WHAT THE ONLINE GAMBLING INDUSTRY THINKS
More than half of online gambling sites respondents have already
launched a social casino game or are seriously considering it
Those who have launched a social casino game:
• Have done it for a separate revenue stream and in anticipation of US regulation
• Expect this revenue to be up to 25% of their total revenue
Most respondents believe there is still room for new entrants
25% think Facebook is not going to allow gambling on its platform
Sources: Kontagent survey
@Clarion_Gaming | @Kontagent

7. ONLINE GAMBLING INDUSTRY AND
INVESTORS’ PERSPECTIVE
Q: In light of that, what have you found in your research as an investor
in this space?
A: Research shows you need to be looking at social gaming
• Social has become a major talking point for companies, shareholders
and investors
• Deals and investments are taking place to drive early-mover advantage
• A number of operators are staying away from the area
@Clarion_Gaming | @Kontagent

8. ONLINE GAMBLING INDUSTRY AND
INVESTORS’ PERSPECTIVE
Q: How are online gambling operators viewing social?
A: A new revenue driver & most operators targeting social
Q: What are some other opportunities?
A: It goes beyond revenue.
• New recruitment platform
• Facebook move towards real-money gaming
• International expansion with limited cost or regulatory threat
• High returns from well-invested games platforms available
• Cross-fertilisation of marketing and affiliate skills
• Attractive online and mobile crossover–always on
• However, regulation may change and competition is intensifying
@Clarion_Gaming | @Kontagent

9. ONLINE GAMBLING INDUSTRY AND
INVESTORS’ PERSPECTIVE
Q: The recent M&As are an indication. What have we seen?
A: M&As have been extensive
• IGT purchase of Double Down ($420-585m)
• Caesars acquisition of Playtika (c$90m)
• Bwin.Party $23m acquisition of Velasco and Orneon
• 888 purchase of Mytopia ($18m)
Q: Besides M&As, are there other indicators?
A: Organic growth also aggressive
• Facebook launch of Bingo/Slots Friendzy with Gamesys
• Big Fish real money games launch with Betable
• Bwin.Party c$30m games studio investment (2-year)
@Clarion_Gaming | @Kontagent

10. ONLINE GAMBLING INDUSTRY AND
INVESTORS’ PERSPECTIVE
Q: What are some other things to consider?
A: Not for everyone–skepticism remains
• Social gaming in name, gambling in nature
• Long-term legal viability
• Cashing in chips blurs the boundaries
• Gambling Commission in UK likely to review
• Zynga Poker launched in China
• More wary of US domestic market
• If not prohibition, then at least a tax impact
@Clarion_Gaming | @Kontagent

11. ?
WHAT THE SOCIAL GAMES INDUSTRY THINKS
40% of respondents have already launched a social
casino game
• Of those who haven‟t, about half will consider launching one.
• Those who have launched it have done it mostly encouraged by the
success of these games and looking to be acquired.
Most respondents believe there is still room for new entrants
10% think Facebook is not going to allow gambling on
its platform
Sources: Kontagent Survey.
@Clarion_Gaming | @Kontagent

12. SOCIAL GAMING INDUSTRY PERSPECTIVE
Q: Can you give us your market perspective?
A: Growing adoption of „freemium‟ and social casinos
• High level of competition
Q: What did you think of the initial research findings?
A: Social casinos outside of Facebook
• Using engagement hooks/mechanics outside of Facebook
Q: In your opinion, what is the relevance of the online gambling
industry to social casino games?
A: Relationship between iGaming platforms and „freemium‟ and social
platforms still distant
• However, more thought needed on linking the two environments
@Clarion_Gaming | @Kontagent

13. SOCIAL GAMING INDUSTRY PERSPECTIVE
Q: How are social casino games different from other social games?
A: Social mechanics provided by underlying social networking platform
Q: Is regulation needed for „freemium‟ social games?
A: Complicated; could be a threat to standard iGaming businesses
Q: Can you speak about how the social games industry has been
impacted lately?
A: More competition means it‟s more difficult to make money
Interesting trend: Publishers are avoiding 30% Facebook tax
Industry changes:
• Facebook - Gamesys Jackpot Joy in the UK
• Big Fish Casino in the UK
@Clarion_Gaming | @Kontagent

14. SOCIAL GAMING INDUSTRY PERSPECTIVE
Q: Given your industry knowledge, what are some of the biggest
opportunities for social game developers?
A: There are many opportunities, but also threats.
Opportunities Threats
Increased competition;
Higher-revenue games
lots of entrants
Big gambling houses
Partnerships and acquisitions
entering the space
With regulation, opportunity for even High licensing
higher revenues after licensing/approval acquisition costs
@Clarion_Gaming | @Kontagent

15. THE TWO INDUSTRIES DISAGREE ON:
Rationale to get into this space:
• Online gambling industry
o Revenue and regulation
• Social and mobile game industry
o Success and acquisition
Real-money wagering on Facebook is perceived
more as an opportunity by the social gaming industry
Online gambling industry prefers to keep real-money
wagering off Facebook
Sources: Kontagent Survey.
@Clarion_Gaming | @Kontagent

16. THE TWO INDUSTRIES AGREE ON:
Still room for more entrants
Long-term business opportunity and are planning to enter it
if they haven‟t already
Prefer slots games over any other games
Optimistic about mobile platforms
Most see real-money gambling on Facebook coming
Analytics and game mechanics are very important in
developing successful social casino game
Sources: Kontagent Survey.
@Clarion_Gaming | @Kontagent

17. Q&A
Thank you for attending
ktgt.co/social-casino-survey
@Clarion_Gaming | @Kontagent