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Hangovers make way for a brighter future

17th July 2012 8:44 am GMT
Delegates would have been excused for lying in bed on day two of the World Gaming Executive Summit in Barcelona. Day one was dominated by rather depressing news of the economy and dastardly regulations and a few beers were sunk in the evening. But they would have been wrong to slumber. Day two was all about opportunity. Reduced to two words, that meant mobile and social. The day kicked off with futurologist Gerd Leonard telling us about, errr, the future. It’s all about convergence; the convergence of online gaming, social networking, television, money and banking. Key buzzword to drop to your CEO is SoLoMo apparently, which means social, localisation, mobile, cloud and video. And if you’re not doing that, you’re nowhere. It’s facebook’s strategy for the next five years, reckons Leonard. Leonard is a great presenter. It’s what he does. There’s lots of use of buzzwords such as “crowdsourcing” and “radical transparency” and Big Capitalized Statements like “Data is the New Oil”. No doubt you’ve seen his like before. It’s all a bit mind-boggling but it all makes sense and it’s kinda inspiring too. It set the stage nicely for a day of intriguing debate. Leonard’s words contained a warning too. Market-leading companies die but industries die too unless they adapt to modern technology and modern culture. Ladbrokes CEO Richard Glynn closed the conference with similar words of warning: “If you look at any other sector there are global brands that dominate the industry, in gambling there are just regional brands. Is that a sustainable model?” I would begin to answer his rhetorical question by talking about regulations and various governments’ desires to balkanize the internet and the business. However, as we are finding out in France and Germany (as the two most obvious examples), that might not be sustainable. That means finding a new model that was only really hinted at by all the CEOs, who gave us the benefit of their wisdom. Everybody agrees that the new model certainly revolves around mobile and for most it involves tapping into the world of social networks but as Playtech CEO Mor Weizer acknowledged: “It doesn’t end there. It starts there.”Going socialAfter Leonard’s introduction, the starting point for Thursday’s proceedings was Nyx CEO and founder Matt Davey. Nyx has been one of the few gambling companies to pile into social in any meaningful way. He noted that there are around 50 gambling apps on facebook and only six of them were created by gambling operators. A delegate from the social gaming world would later tell me this is due to the industry’s inherent lack of entrepreneurialism. He believes the entrepreneurs have moved on and the gambling industry has been left in the hands of professional CEOs and accountants, who are ill-equipped to innovate. Davey admitted to being sceptical about the benefits of the social networking revolution but has been thoroughly converted over the last year as he has watched players battle through 1,000 levels or play for up to 18 hours a day. There is a real demand and there is money to be made from social gaming. But the biggest lesson Nyx has learned is not to focus on conversion.“There is a natural desire to convert people from virtual money to real money but I have not seen that yet,” said Davey. “Land-based casinos look at facebook as a marketing site. It’s not.” Davey made way for a fascinating debate among some of the entrepreneurs driving the social gaming explosion. The founder of social gambling games site Yazino, Hussein Chahine, reckoned the lack of conversion opportunities is because the social demographic is different. “It is different users and it is a different experience,” said Chahine. Hal Bringman, the man who introduced Double Down Interactive to IGT, agreed. Facebook’s head of European gaming partnerships Julien Codorniou seemed to be in attendance purely to market the benefits of the facebook platform for gambling operators. Unfortunately he was unwilling to engage on anything even slightly controversial but was more than happy to reel off the big numbers that seem to dominate discourse on his company. But Chahine insisted social is more of a threat than an opportunity. “In social gaming you have to be a hardcore consumer business,” he said. “It’s not a technology business and I don’t think that mentality exists in the gambling industry.” It does in some corners. Ladbrokes maybe struggling with its digital business but CEO Glynn would later display a firm grasp of this new landscape. “We have to stop looking at the future as something we determine,” he said. “The customer is so empowered that they will decide our future. We have to accept that the future is the customer deciding what they want, when they want it and how they want it.” The words could have come straight out of the mouth of futurologist Leonard.Regulation, regulation...Following the outburst/mission statement/PR exercise performed by William Hill CEO Ralph Topping just days earlier, the thorny question of regulation was bound to arise for the social gaming panel. Facebook’s Codorniou declined to comment - ”obviously”. It was not that clear why this is “obvious”. One would think facebook would have a very strong opinion on this issue. Perhaps it is “obvious” the company would like to avoid regulation at all costs and therefore does not want to comment on the issue for fear of upsetting X or Y government. Perhaps it is “obvious” the company wants to be a market leader but does not care for thought leadership. But facebook’s irritating non-committal aside, the rest of the panel were in firm agreement that regulation would be wrong. Gerard Cunningham of Koolbit thought the idea “very strange”. Bringman said Double Down self-regulates. Chahine said Topping was “very emotional” and called regulation a “dream”. Henning Kosmack of Megazebra said it is just another form of entertainment: “We don’t regulate how many hours people watch TV.” It was left to PKR founder Jez San in the crowd to voice the dissenting view. He said that if you create a highly addictive game then you must regulate it. He said comparing it to an X-box game or any other form of entertainment is fatuous because there is only one payment for an X-box game. “You do not want $1,000 per day players,” said San. “You don’t want people spending their rent money on it.” Cunningham, whose Koolbit casino games are only available on mobile, responded that it is very hard to spend hundreds of dollars a day on mobile: “It bears no relation to the real money world.”No money in mobile?In a business that revolves around money, questions of monetization are never far away. However, the debate has moved on a bit of late. While most accept that you can make money from social games and more or less understand the theory behind how you do it, many (outside the sports betting industry) are now sceptical about making money on mobile phones. Zynga’s lack of success with mobile thus far suggests it is a tough market. That fact coupled with CEO Mark Pincus’s admission that he is not ready to plough huge sums into mobile games has led some to believe that if Zynga can’t do it then what chance does anyone else have. But Bringman says Zynga’s mobile slots are “crap...a terrible user experience”. “We spent a huge amount engineering to build a totally synchronous gaming for FarmVille with different clients,” said Pincus at the Mobile Beat conference in San Francisco recently. “Consumers hated us for it. They wished we would’ve built them a totally separate FarmVille experience.” Facebook has not found the answer on mobile yet either. Its 2011 Project Spartan to develop an HTML5 site failed to provide an adequate platform for gaming. Users love to post updates on their phones but for a combination of reasons the games just don’t work. “Unfortunately for facebook, mobile is an afterthought they are still trying to catch up on,” said Bringman. Codorniou claimed there was no distinction between web-based facebook and facebook mobile - “if you are big on facebook then you need to be big on mobile”. It is not taking Zynga’s wait-and-see approach. The investment is being made. It surely will come up with an answer but it is not there yet. Cunningham, whose focus is mobile games, commented: “If you are going to create a desktop game and then transform it to mobile then you are going to be in the wrong mindset.” He and Chahine were in agreement that the real money gambling industry might just be a little too late to facebook. Cunningham believes it might be better skipping the pain of developing a facebook game and focusing on mobile. Everyone still has some way to go there. Weizer noted that most mobile gambling apps are quite poor. “We get 70 to 80 per cent of our customers from sports betting but the most money from gaming,” he said. “There is no seamless app there yet - even from the leading operators. This is what Playtech realised when it bought Mobenga. We are strong in gaming but not in betting but we bought Geneity to bring it all together. Clearly, the convergence on mobile creates the opportunity to do so.” Whether you are on facebook or not, mobile is the next battleground. As Leonard said at the start of the day: “If you don’t have a mobile strategy, you won’t exist in a couple of years.”
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