$500M is what slot machine manufacturer IGT paid for social game studio DoubleDown Interactive last year. More than EA paid for Playfish. For a company with 1 game that is not even in the top 25 of largest Facebook games. Before that, Caesar's had bought Playtika (Slotomania), also for a 9-digit buy-out fee. Why are social casino games are so hot right now? And why are gambling companies buying free-to-play game studios? What can the game industry learn from the world of gambling, and vice versa? In this session, Raf Keustermans, co-founder and CEO of social casino startup Plumbee will share insights and data from both worlds : current markets, similarities and differences, growth & margin softness in online gambling, analytics, 'whales', trends, risks and opportunities.

1. Gambling for matchsticks

2. RAF KEUSTERMANS
Co-Founder, CEO Plumbee
(consultant) VP Marketing Kobojo 2011
Independent Social Gaming Consultant 2010-2011
Global Marketing Director Playfish (EA) 2009-2010
Marketing Director EMEA Pogo.com (EA) 2008-2009
Head of Marketing Western Europe Unibet.com 2005-2008
Strategic Planner at BBDO, Grey and Publicis 1998-2005
raf@plumbee.com
Twitter: @raf_keustermans

3. Plumbee?
VC-funded social casino games startup.
Founded by 3 ex EA Playfish execs in 2011.
Based in Shoreditch, London. 35 staff.
Mirrorball Slots on Facebook (soon on iOS).
270K DAU, 1M MAU.
Average user is 52 year old, US woman.

4. Social Casino
• Fastest growing category in free-to-play gaming
• Together with other high-ARPU verticals: midcore, hardcore, card-
trading
• Low ARPU games getting squeezed – CPI/LTV broken
• Proven game mechanics, proven audience
• Strong monetization and retention
• 3-10x casual games ARPDAU
• It’s about execution and know-how
• ‘Gold rush’ – lots of casual game devs pivoting to casino (and failing)
• M&A, convergence social/real money gambling
• Vertical becoming very crowded, also on mobile
• 40+ slots games on Facebook today!
• Top team & big bucks required to succeed

6. • Facebook:
– Only 1 casino game in Top 25 Audience (DAU)
– 11 casino games in Top 25 Top Grossing
• iOS:
– No casino games in Top 25 Free (US App Store)
– 3 casino games in iPhone Top 25 Grossing apps, 7 in iPad
Top 25 Grossing (US)
• Google Play:
– No casino games in Top 25 Free (US)
– 6 casino games in Top 25 Grossing apps (US)

8. Main Categories
• Slots: Slotomania, Lucky Slots, Mirrorball Slots
• Bingo: Bingo Blitz, Bingo Dash, Zynga Bingo
• Poker: Zynga Poker, Pokerist, Fresh Deck Poker
• Not all gambling games work as social, free-to-play games.
• Only games with an intrinsic ‘fun’ or social element work: poker,
bingo, slots are strong enough to work as games without the
monetary element.
• Sports betting, most casino table games, ... are too ‘mechanical’ and
don’t work as free-to-play social games.

9. M&A
• Primarily driven by gambling companies:
• 2009: Gamesys (JackpotJoy) ‘acq-hired’ Iwi (undisc)
• 2010: 888.com buys Mytopia for $48M
• 2011: Caesars buys Playtika (Slotomania) for $100M+
• 2012: IGT buys Double Down Interactive for $500M
• 2012: RockYou buys Ryzing (bingo, undisc)
• 2012: Aristocrat buys Product Madness (undisc)
• Ongoing consolidation, convergence, …

10. Gambling M&A - Why?
• Find new growth
– Margin squeeze (tax, regulation), fragmented market, stale
products
• Find new customers
– No evidence so far that cross/up-selling to real money
gambling works
• Build audience, brand, revenues in locked markets: US,
Asia, ...
• CRM strategy
• ‘Skip a step’: land based casinos looking to get into digitial
skipping ‘traditional’ online gambling and moving directly
into social & mobile
• Gambling becoming part of broader mainstream
entertainment industry

11. Some Data Points
• Monetization:
• ARPDAU on Facebook for casino games $0.12-$0.25 (casual games
$0.06)
• Double Down (IGT): ARPDAU $0.25 (1.5M DAU -> $10M+/month)
• Zynga Poker estimated $200M+/year (Fb + mobile)
• Audience Size (Facebook):
• Poker: 40-45M
• Slots: 20-25M
• Bingo: 10-15M
• Bubble-shooting: 80M+

12. Opportunities?
• Poker
• Only 1 dominant player (Zynga), stale product
• But: high switching cost for user
• Liquidity is key to success (big upfront bet)
• Sports betting
• Very, very hard to translate in a fun game/experience
• Scary long list of failed social betting startups
• Potential $1B opportunity in the market
• Invent new casino/gambling games
• Last major ‘innovation’ in gambling was Rush Poker (fast fold poker)
• This is what game guys are good at!

13. Gambling? Or Entertainment?
3 key elements of gambling:
1. Consideration: user ust pay ‘something of
value’ to participate (stake)
2. Prize: by participating, user can win
‘something of value’
3. Chance: outcome is not determined by
skill

14. Consideration (stake)?
• In social, free-to-play games, most users (95-
99%) never spend any money.
• Users get free currency in the game, via the
Facebook Page, promotions or via their friends
– E.g. in Mirrorball Slots user can get easily 2,000 coins
per day for free, while the minimum stake per spin is
0.1 coin...
• Most paying users spend to play more (buy
more time).

15. Prize?
• No cash-out.
• Users can’t get ‘real world’ prizes, they can
only win more game currency (coins, chips,
gems, medals, ...).
• Users ‘win’ 15-20 mins of fun, entertainment.

16. Chance?
• Guilty (for social casino games).
• Same for rock-paper-scissors. Or Yahtzee.

17. But what if...
‘something of value’ would also include...
Time?

18. Sure. Let’s call all board
games gambling.

19. Are the lines becoming blurred?
Financial Times, 7 August 2012

21. Nope.
• Big difference between real-money gambling
games and free-to-play games on Facebook
(and iOS): payments, compliance, licensing.
• Facebook and iOS gambling apps follow
existing gambling regulation.
• Gambling and ‘real games’ also co-exist on
the ‘open web’.

22. What can non-casino game studios learn?
• Laser focus on execution to win/survive in hyper-
competitive market
– Most social casino leaders are new startups: Zynga
failed in bingo, mobile slots; Plumbee is bigger than
EA in social casino
• Bring external talent to the games industry
– Slots mathematician, gambling analytics, VIP
managers
– Gambling was big on analytics before it was cool
• Innovation in existing formats
– Meta-game, features

24. Raf Keustermans
@raf_keustermans
www.plumbee.com