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Raf Keustermans, CEO and co-founder of social casino start-up Plumbee, discusses whether B2B suppliers have a future in the social gaming market
In online real-money gaming, the majority of operators are using B2B suppliers for content and technology; casino games, poker networks, CRM and marketing technology. With a little exaggeration you could say that many operators have ‘out-sourced’ product and technology and are mostly focused on marketing, payments, compliance, legal and finance.
There are two risks attached to this approach:
• Owning the wrong end of the value chain – the actual value for an entertainment company is in the product and technology; the other parts (payments, compliance, finance and even marketing) are really a commodity these days.
• Product commoditisation – especially in mature markets like the UK, where some B2B suppliers have built a very dominant position, there is a genuine risk that operators can’t really differentiate themselves. If every operator has the same slots or poker network,
for example, the only impactful way to differentiate you from your competitor is by offering more aggressive promotions, bonuses, higher CPAs or revenue share to affi liates and marketing partners which could potentially lead to margin erosion.
Despite this, it is hard to deny that right now, B2B suppliers are ‘winning’. They are becoming the new industry giants, in many cases showing superior profitability and higher market caps than their clients. Many industry observers are pondering if the same could happen in social, free-to-play (casino) games. Can the B2B giants use their financial muscle, content and technology to create a similar, dominant position in the fast-growing social gaming segment?
I personally don’t believe this will happen, at least not with a B2B approach. Social (casino) games are still much more similar to the videogames industry than they are to gambling – it is all about product and content.
In the same way that it is impossible that there will ever be the same first-person shooter packaged under both a Call of Duty and a Battlefield brand, I think it is hard to see a case where the same slots content or the same bingo game will be distributed under different names on social and mobile networks. Players expect fresh, unique content, ideally mixed with innovative meta-features and social elements, for example, to complete the entertainment experience. They won’t accept me-too content that they can play in every other app or game.
I also believe social gaming operators are more aware of where the real value lies than some of their real-money counterparts, and won’t make the same ‘mistake’ in giving up the most valuable part of their business to a third party supplier. Contrary to real-money gaming, most of the leading social gaming companies are in the first place game studios, with ‘product people’ in key positions.
However, this doesn’t mean that B2B companies can’t be successful in social gaming. IGT, Aristocrat and others are examples of companies that use their strengths to build a leading position in this industry – great content, talent, a deep understanding of game design and a leadership team that understands that different rules apply in social than real-money gaming.
While IGT has done some DoubleDown integrations with casino clients, by and large the DoubleDown business is a B2C business that generates 90%+ of its revenues directly from its own consumer-facing operations. The reason they became the $240m-a-year social gaming giant is that IGT didn’t try to make it into a B2B business. They made an already great team stronger, with great product and technology by adding its top-notch content and using its deep pockets to accelerate their growth as a consumer business.