The Social Casino Phenomenon: Real Money and Databases for Bookmakers

In the gambling industry, the Free to Play model is not dependent on turning players into gamblers for profitability, according to a columnist for the specialised publication IGB. Mohammed Cohen examines the effectiveness and profitability of social casinos globally, exploring why online platforms offering free games can fetch higher sale prices compared to traditional online casinos. He also highlights how games involving ludo and puzzles, along with casinos that utilise free tokens, generate actual revenue and contribute valuable resources for major players in the gambling sector.

Social casinos represent a significant global market and a substantial opportunity, particularly in Asia, where regulated real-money online gaming is largely restricted. The social or free casino model serves as an effective channel for gaming companies to engage customers in casual play. Moreover, it functions as a profitable independent business that does not depend on converting free players into real-money users.

These social casinos provide access to slots and table games on online platforms with minimal hassle and verification. Users can simply visit a website or download a mobile app to start playing with free tokens supplied by the operator. The term "social gaming" emerged as Facebook became a leading platform for popularising free online games from the late 2000s to the mid-2010s.

Sean McCamley, a veteran in the land-based casino industry, recalls being intrigued by social casino games six years ago. What particularly piqued his interest was Caesars Entertainment’s acquisition of the social casino platform Playtika for $92 million in 2011. In 2016, the business was sold to a Chinese consortium for an astonishing $4.4 billion, a deal that so impressed McCamley that he founded the social gaming platform GameWorkz. He notes, “The key to profitability in today’s market lies in offering a diverse range of games on social platforms, including not only slots but also puzzles, ludo, role-playing games, and other similar genres.”

Strengthening the social aspect of games

McCamley advocates for enhancing player engagement through various means, including sharing leadership insights and providing opportunities for virtual meet-ups over coffee or pizza. He emphasises that the social element, along with effective loyalty programs, holds significant importance in Asian markets, especially in Japan and South Korea. Joe Pisano, CEO of Jade Entertainment & Technologies, highlights Asia's pivotal role in the gaming industry, noting that it accounted for a substantial portion of both revenue and player demographics. The Asian social gaming sector was valued at $6.5 billion in 2022 and is projected to continue growing, thanks to the integration of mobile technology and social media. Executives agree that localisation is crucial for stimulating growth and demonstrating an operator's commitment to the region. Players in Asia are often familiar with English-language online platforms, so effectively managing local currency is the key aspect of successful localisation.

Trend of buying social casinos: real income

Major global gaming companies have actively adopted social gaming, utilising their extensive content libraries and broadening their offerings through strategic acquisitions. Aristocrat's free-to-play segment, Pixel United, reported a remarkable $1.76 billion in revenue last year, constituting 42% of the company's overall earnings. In the first half of 2024, Aristocrat generated $877 million in revenue from Pixel United, representing 41% of the total company revenue, driven by 4.3 million daily users.

Within Pixel United, Aristocrat's social casino games—such as Cashman Casino, Jackpot Magic Slots, and Big Fish Casinos—generated 57% of the segment's total revenue. Role-playing games (RPGs), strategy, and action games accounted for 32%, while casual games, including puzzles and similar genres, made up the remainder.

In October of last year, Light and Wonder acquired a 17% stake in SciPlay for $496 million, valuing the social gaming firm at $2.9 billion. With its portfolio of social casino and various other games, SciPlay, now a private subsidiary, earned $777 million in revenue last year, contributing over a quarter to LNW's total revenue. In the first half of this year, SciPlay's revenue reached $411 million, accounting for 27% of LNW's total revenue of $1.57 billion. Notably, the company has consistently outperformed the social casino market for the past ten quarters, as highlighted by Truist Securities analyst Barry Jonas.

According to Monica Shevgan, a senior management consultant at Coherent Market Insights, global social gaming revenue is projected to reach $29 billion by 2026, with a compound annual growth rate (CAGR) of 16% from 2020. This projection encompasses a varied array of social games, including non-casino titles like Candy Crush, Bejeweled, and Farmville.

Problems with the free to pay model

Social casino growth has not kept pace with other social sectors. In the year leading up to the first quarter of this year, global revenue for social casinos reached $7.3 billion, reflecting a 1.7 percent decline compared to the previous year, as reported by Eilers and Krejcik’s Social Gaming Tracker. 

A veteran executive from a publicly traded social gaming company, who preferred to remain anonymous, noted, “Social casino has become a highly saturated market. There are now tens of thousands of social casino apps available in app stores. Additionally, the viral marketing avenues on Facebook have significantly decreased, and the impact of app stores has diminished as well.” 

According to Eilers and Krejcik, the three leading social casino operators—Playtika, Pixel United, and SciPlay—together dominate nearly half of the global market. The executive points out that new entrants struggle to achieve the rapid growth that enabled early players to secure lasting dominance in the industry. Nevertheless, even the leading companies are encountering difficulties. For instance, Playtika's shares, listed on NASDAQ, have plummeted 78% since reaching their peak in March 2021, and the company's current market capitalization of $2.8 billion is 36% lower than its valuation at the time of its 2016 sale. "Nonetheless," the CEO asserts, "the fundamental dynamics of mobile free-to-play and social casino remain highly profitable."

Secret to Success: Social Casinos Operate Without a Licence

One of the main advantages of social casinos is that they are not subject to government licensing, as they generally do not meet the criteria for “gambling” in many areas. According to GameWorkz CEO McCamley, "This opens up access to numerous tier-one jurisdictions and significantly shortens the time to market."

The Philippine regulatory body, Pagcor, has confirmed to iGaming Business that free-to-play operators do not need licences. Additionally, its recent ban on Philippine Overseas Gaming Operators (POGOs) does not extend to social casino operators.

The absence of licensing requirements allows the same platform to operate across different jurisdictions, enabling even smaller operators to establish a global footprint. While the costs of developing content are similar for both free and real-money games, operators report that expenses related to attracting players to social casinos are considerably lower. “The key advantage is that there’s no need for a bankroll that can deplete capital since there are no player payouts,” McCamley, who is also a managing partner at EuroPacificAsia Consulting, explains. “Furthermore, payment processing fees tend to be lower because the social sector is regarded as low risk.”

Monetisation

Social casinos predominantly generate revenue through in-app purchases, as they do not benefit from player losses. Users receive a limited number of free tokens at regular intervals, typically every hour or day. A former senior executive, who preferred to remain anonymous, noted, “A small percentage of users feel that the free bonus coins provided to them are insufficient to maintain their engagement, leading them to purchase additional coins.” In contrast, players of other social games often have the option to buy extra playtime or games.

Research from Aristocrat and Light and Wonder indicates that slightly more than 10% of social game users opt to purchase additional services, with the average expenditure per daily active user exceeding $1. Additionally, advertising has emerged as a significant revenue stream in social gaming platforms. A former social gaming executive explained, “In the past five years, there has been an aggressive push to incorporate advertising and monetize games through ads.”

Random involvement and associations with your favourite casino

Social gaming provides land-based casinos with the opportunity to connect with their customers anytime and anywhere. An anonymous expert highlights the stark difference compared to the limited engagement from traditional advertising methods, like receiving "one or two impressions a month" through passing a billboard or opening a newsletter email. The executive notes that social gaming encourages players to engage multiple times a day for durations of 45 minutes to an hour. Users appreciate the familiar core gameplay tied to their favourite casinos, along with the option to play in a free mode. The simplicity of accessing the game on their smartphones enhances this convenience, underscoring the strength of social casinos.

Social Casinos with Benefits from PlayStudios

MGM and PlayStudios have elevated their collaboration to new heights. Established in 2011 by MGM in partnership with game developer Activision Blizzard, PlayStudios was a pioneer in creating a social casino experience with tangible rewards. Users of the myVegas platform earn loyalty points while engaging with MGM properties along the Las Vegas Strip, which can be redeemed for dining and hotel accommodations at those locations.

The partnership rapidly expanded to encompass online gaming environments inspired by specific MGM properties. Over time, the rewards program grew to include MGM locations beyond just the Strip, now featuring more than 100 partners from the hospitality, travel, and leisure sectors across six continents, representing 236 brands, such as cruise lines, restaurants, movie theatres, and other casino operators. In June 2021, PlayStudios went public on NASDAQ  through a merger with the special purpose acquisition company (SPAC) Acies, a transaction that valued the company at $1.1 billion and maintained strong ties to MGM. Former MGM Chairman and CEO James Murren took over leadership of Acies and subsequently joined the board of PlayStudios.

MGM also invested in Acies, and initially, Murren's successor, Bill Hornbuckle, represented MGM on PlayStudios' board; his position is now occupied by MGM Resorts Operations President Steve Zanella.

Social Grooming and the Risks of Gambling Addiction

In Asia, gambling operators face the challenge of adhering to China's prohibition on gambling promotion. A former executive, who preferred to remain anonymous, noted, "In mainland China, online app stores maintain stringent restrictions against casino-style games, even if they are offered for free. They specifically disallow slots and baccarat games."

Even beyond China's borders, there is ongoing discussion regarding whether social games might be acclimatising players, particularly minors, to gambling behaviours. McCamley acknowledges the concerns but believes the argument against social gaming is fundamentally flawed. "Most platforms mandate that players be at least 18 years old and support responsible gambling advertisements."

Many platforms, such as those under the GameWorkz brand, provide a diverse array of games including role-playing, puzzle, and crash games, deliberately avoiding the term "casino" to present themselves as social gaming providers. Pisano emphasises that "games featuring loot boxes, casino-style mechanics, or other gambling-like elements can pose risks if they are accessible to minors. It is vital for game developers and operators to stay vigilant about these potential dangers." She further adds, "Tackling the issue of underage gambling demands transparency, a dedication to responsible gaming practices, and continuous educational initiatives for both players and parents regarding the realities of social gaming."

Free to pay - entrance to sports betting

Social gaming has proven to be an effective route to real money gambling in the sports betting space. US online sports betting leaders FanDuel and DraftKings started out as social fantasy sports sites.

“By the time the US Supreme Court overturned PAPSA (Professional and Amateur Sports Protection Act) in 2018, the companies had been in business for many years, had huge databases and were natural platforms for converting social players into real money players,” explains FootballBet.com CEO David Leppo.

“In jurisdictions where sports gambling and casinos are legal, we have been offering social betting since our days in the Dominican Republic in the 1990s and in Asia since the early 2000s,” he says.

“Social casinos are a great way to grow our customer database, which we all know is the most valuable asset in our business. It is also a way to introduce customers to the platform, not to mention the invaluable word of mouth. In any case, social sites build trust with players and regulators,” Leppo concluded.

Social Fantasy Cricket - Database Creation

In May, Jade introduced social fantasy cricket in Sri Lanka, inspired by FanDuel/DraftKings. "Cricket boasts the largest audience in South Asia, and we aimed to create a database by engaging with cricket fans primarily through our social platform," says Pisano. 

Although Jade received approval for sports betting in Sri Lanka in early January, they have postponed the launch to focus on database growth prior to debuting their online sports platform and SapphirePlay casino. 

Additionally, Jade intends to roll out social fantasy sports this year in the Philippines, where they possess a Philippine Inland Gaming Operator (PIGO) real-money betting licence. "Our goal with fantasy eSports is to draw in a new customer demographic and subsequently promote our sports betting offerings to them," Pisano explains. 

However, McCamley cautions that the overlap between social casinos and real-money casinos is minimal. "Social casinos follow a fundamentally different business model, with only the games being similar. Every other aspect of player expectations varies significantly. Attempting to operate a social gaming platform in the same manner as an online casino is destined for failure."