Insiders explain the billion-dollar social casino market

The social casino business seems crazy to many die-hard slot fans: you gamble, you can't win anything and yet it must be worthwhile for the operators somehow. It does indeed - and to a considerable extent, as insiders recently revealed to the international trade press. As part of a comprehensive report by a major industry portal, several people involved provided astonishing insights into turnover, values and player motivations.

Social casinos, also known as free-to-play casinos, have developed strongly in recent years and, according to industry experts, are now more than just a niche in the gambling market. Those responsible and insiders report that these platforms are gaining in popularity, especially in jurisdictions with strict gambling laws, such as China, Japan or South Korea, because they fill a significant gap in the entertainment offering.

There, social casinos offer a legal alternative by selling users virtual chips or tokens to play casino games - without offering the opportunity to win real money. We took a closer look at the social casino trend in 2021.

Those involved rate the potential as exorbitant. Joe Pisano, CEO of the social casino group Jade Entertainment & Technologies, estimates the market in Asia alone at around 6.5 billion US dollars, with further growth forecasts. Shaun McCamley, long-time managing director in large land-based casinos, reports on a real key experience: in 2011, Caesars Entertainment acquired the Playtika social casino platform for USD 92 million. Without making any significant changes, the company then sold it to a Chinese consortium for a whopping USD 4.4 billion in 2016. McCamley then decided to invest as well.

More and more big players in the industry are entering what is clearly a very lucrative business

More and more of the big names in the gaming industry are recognising the immense potential of the social casino market and entering this lucrative business. Global gambling giants are utilising their extensive game libraries and strategically expanding their portfolios through acquisitions or innovations.

• Aristocrat: One example of this is the Aristocrat subsidiary Pixel United, which generated an impressive 1.76 billion US dollars in revenue last year alone - equivalent to 42 percent of the company's total revenue. In the first half of this year, Pixel United recorded a turnover of 877 million US dollars with an average daily user base of 4.3 million, which in turn accounted for 41 percent of the company's total turnover. Remarkably, 57 percent of Pixel United's revenue comes from its social casino offerings such as Cashman Casino, Jackpot Magic Slots and Big Fish Casinos, underlining the importance of this segment in the overall portfolio.
• Light & Wonder: Other industry giants such as Light & Wonder have also put out feelers into the social gaming market. In October last year, the company acquired the remaining 17% of shares in SciPlay for USD 496 million, valuing the social gaming specialist at USD 2.9 billion. SciPlay, which is now a wholly-owned subsidiary, achieved a turnover of 777 million US dollars last year, which corresponds to more than a quarter of Light & Wonder's total turnover. Analysts such as Barry Jonas from Truist Securities emphasize that SciPlay has now recorded continuous growth for ten quarters and generated sales of 411 million US dollars in the first half of this year alone.

However, this development includes not only casino games, but also the broad spectrum of social games such as Candy Crush, Bejeweled and Farmville, which are increasingly becoming the focus of investors and developers.

How can the platforms make so much money or achieve such a value?

The immense economic success of social casino platforms can be explained by the interplay of various factors that go beyond simple user numbers.

Industry experts emphasize that it is precisely the enormous reach of these offers that ensures that even small amounts - multiplied by millions of players - can lead to considerable income. Social casinos are primarily reliant on in-app purchases in order to make a profit, as they do not incur losses through real money.

Two key factors:

1. In contrast to real money casinos, social casino players engage far more frequently and intensively. ‘Users enjoy the core game, which they may associate with their favourite casino, and can play it for free,’ explains a social gaming manager. They don't have to worry about actually losing credit, which increases their willingness to gamble.
2. Added to this is the ubiquitous availability of smartphones, which makes the gaming experience even more convenient and accessible. Users can immerse themselves in their favourite casino anytime, anywhere by simply opening the app on their phone - a convenience that pushes the platforms enormously. More interesting details on user behaviour can be found in our article ‘SOFTSWISS provides insider insights into the use of social casinos’.

Another crucial aspect for financial success is advertising integration, which has gained immense importance in the recent past. ‘In the last five years, people have become more aggressive about advertising and integrating advertising revenue into games.’ Advertising has thus emerged as a stable and growing source of revenue for the platforms, in addition to player purchases.

For example, Aristocrat and Light & Wonder report that more than 10 per cent of their social gaming users regularly purchase additional services or game time and include advertising, with the average spend per daily active user being just over $1. Combined with the long playing time - often between 45 minutes and an hour per day - this results in a highly profitable model that is very different from traditional casinos.

There are now even links to casinos in the real world

The integration of social casino platforms with real casinos has taken the business to a whole new level.

PlayStudios, one of the best-known examples in this area, is setting standards with its innovative loyalty programme. Since it was founded in 2011 by MGM and game developer Activision Blizzard, PlayStudios has not only offered the usual social casino gameplay on its myVegas platform, but also combined this with real rewards.

1. By collecting loyalty points, players can receive exclusive benefits at real MGM properties along the famous Las Vegas Strip.
2. These points can be redeemed for amenities such as hotel rooms, restaurant visits or entertainment, linking the social casino experience to the physical casino world in a unique way.
3. The success of this model eventually led to a massive expansion of the rewards programme, which is now not limited to the MGM Strip. The PlayStudios network now spans over 100 partners worldwide, representing 236 different brands in the hospitality, travel, leisure and even cruise sectors.

The global expansion brings players a variety of benefits that go far beyond slot games and the like and shows how social casino providers are integrating not only interactive but increasingly real experiences into their digital worlds. A remarkable step that increases user engagement and diversifies the business model at the same time.

myVegas and the concept are now estimated to be worth an incredible 1.1 billion US dollars.

Conclusion

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