IGT looks to spin off poker and bingo to continue DoubleDown’s growth

When IGT announced its acquisition of DoubleDown Casino in January last year, most people baulked at the hefty price tag, yet consistently high revenue figures have vindicated the deal. Now the company is preparing for the next phase of the app’s development as it targets expansion in poker and bingo.With revenue from DoubleDown Casino doubling in IGT’s 2013 financial third-quarter to $61.4m, IGT vice president of interactive Robert Melendres has set his sights on the next phase of growth, which could see it go head-to-head with the likes of Zynga Poker and Bingo Blitz by spinning off branded social poker and bingo offerings. Currently attracting over 5m monthly active users, the DoubleDown app remains one of the most popular casino apps on the market and is ranked among the top three for social poker, but Melendres believes the product is only just beginning to take shape. The target now is to establish DoubleDown as the number one social casino app across all verticals. “We look at poker as a work in progress that needs more investment, though we still have 50,000 daily active users, but that’s not good enough,” says Melendres. “We want millions, and we know that we have to invest to achieve that.” This may lead to possibly the most audacious update to the DoubleDown offering; poker being spun off as a separate app. Melendres admits that IGT is currently considering such a move in order to attract those interested in poker, but looking for a more authentic experience. “Everything we do is about the player, and we know that poker players want sophistication and their own app, as these guys aren’t slots or bingo players,” he explains. “Our strategy was always to have a casino and a community, but what we don’t want to do is soften up the poker offering for the casino.” This approach may lead to a similar change in DoubleDown’s bingo offering in a bid to take on the likes of Buffalo Studios’ Bingo Blitz and Bash Gaming’s Bingo Bash. “We’re not ready to announce anything, but we’re just thinking about what is best for the players, and what the community wants at the end of the day,” Melendres adds. These potential developments will be accompanied by a lot of behind-the-scenes work to improve all aspects of DoubleDown, with Melendres admitting that a lot of “fundamental blocking and tackling” needs to be done, with a totally revamped mobile offering high on the agenda. A fully-featured app is in development that promises to replicate the desktop experience with a focus on screen-optimisation and improving back-end performance to ensure the app is as fast as possible. IGT also has plans to improve DoubleDown’s presence in new markets. The company's games are already built in 17 languages with 32 currency options, but the social offering only features English, French, German, Spanish and Italian. “It’s not just a case of translating into simplified Chinese, but I also need to work out the best networks to get into the market, because I can’t crack it with Facebook,” Melendres adds. “The markets in the English-speaking and European countries are big, but for us it is important to hit these smaller markets, as that’s where future growth is going to come from.”Hefty feeWith IGT preparing to extend the DoubleDown brand and considering its impressive financial results, one could laud the acquisition of DoubleDown as a masterstroke, especially considering the slow progress of other gambling companies in establishing themselves in the social casino market. Yet at the time of acquisition the price tag of up to $500m seemed excessive, especially for a company that prides itself on going it alone, spending around $200m on research and development and filing around 200 patents each year. With such heavy investment in developing proprietary offerings, why go against type and make such a hefty bet on social? Melendres, who was responsible for putting the deal together, admits that while the acquisition was a unique move for the company, it was “exactly what [IGT] needed for growth and exactly right for [its] strategy.” “We are the top content producer for slots in the world, and the competition in social casino was not very good at that time,” he says. “We already had a library of slot content that we had built up over the years to serve the UK and European markets, and I knew that because of the way we had our technology structured with our Remote Gaming Server we could integrate that into DoubleDown, so I took the biggest distribution channel I could find with the best content and combined them.” He describes the decision to target social casino as a “simple content and distribution play” to drive growth and diversify the company’s portfolio and channels, yet while this explains the rationale behind IGT’s foray into social, it does not explain the decision to do this through an acquisition. Melendres attributes the decision to two key factors; time to market and time to scale. With regards to time to market he points out how the social casino ecosystem has formed, with a small number of larger players in seemingly unassailable positions at the top of the market. In short, had IGT looked to build a social casino offering in-house it would have taken a long time to establish itself among the likes of Zynga and Caesars. “So time to market was hugely important, but so was time to scale,” he continues. “This was very important to us, because unless you have big pockets, you want the business to be self-funded for its own growth, so we were able to find a business that was big enough and profitable at the bottom line.” The reason for this requirement is clear; rather than throwing money at an in-house app until it began generating revenues, IGT took take control of a business with proven success. Furthermore, Melendres adds, customer acquisition costs in social casino are rising, and will continue to do so, with the substantial existing customer base helping mitigate the rise in costs. After such a hefty outlay in social, however, Melendres believes that the market is still open to new entrants. While he admits it is “very difficult for the small guys” to penetrate the market today, he says it is still possible for innovative and disruptive start-ups to gatecrash the party. “It just takes one innovative, thoughtful, well-funded, patient developer who can pull off what King.com did. So the barriers to entry are significant at one level, but at another innovation can transcend that – people who have the vision and creativity, but now it’s substantive,” he says. To built on its momentum, IGT has launched a marketing drive which kicked off with the launch of a new brand identity at the Global Gaming Expo in Las Vegas last month. Melendres says the IGT brand remains strong, but believes that DoubleDown has now emerged as a brand in its own right, with “significant growth” to come. “The fact that we were willing to go into social and do it big takes a lot of vision and courage, and it’s been proven out,” he says. “And we’re only just scratching the surface.”