The Colliding Worlds of Virtual and Real Currency Gambling

[Originally posted on http://www.socialgamesobserver.com/guest-post-virtual-and-real-currency-gambling-12660]

[Editor's note: Real money gambling could turn into a main revenue driver for social games – if it is going to happen. In the first few weeks of 2012 this seems to have become increasingly likely; both Facebook and Zynga have been reported to be in talks with potential partners, and slot machine company IGT bought social casino game publisher DoubleDown Interactive for $500M in January. We are covering this topic from different perspectives (see the first articleon gambling law).
This is a guest post by Andrew Hughes, fourth-time mobile entrepreneur and Co-Founder & CEO of AbZorba Games (founded in summer 2011) whose Games Social Casino recreate the live casino game experience for Android. Currently AbZorba is expanding to multiple platforms and channels, including online and IPTV.
In this guest post, Andrew shares his views on opportunities and risks of real money social gambling.]

My father once said “Everything in life is a gamble son, just know the odds”.

Sound advice and timely for those of us who thrive off casino app games as decisions will soon have to be made to align or decline real money gambling alliances.

Social gamers’ growing appetite for casino apps

Whilst Virtual Casino app games may not be the next ‘throw a cabbage at a pig’ blockbuster – and how many try that tough route? – but they are trending, and will continue to trend, for the very fact they are perennial ‘evergreen’ fun that gamers come back to time and time again. Games such as Blackjack, Poker, Bingo to name a few.

The mobile format in particular offers the ‘perfect storm’ of smartphone penetration, network reliability and app popularity. Throw in live multi-players, like we did with AbZorba’s Live Blackjack21, and it’s seriously a compelling format.

Its proper, grown-up gaming with proper in-app spending power; AMRPU in double digits and lifespan that only cartoon characters can dream of. But take a look more closely and what can we see going on?

Online gambling is a $30B market, but what are the risks?

Casino apps sit right in the cross-hairs of the moral and legal debate between just-for-fun and real gambling – virtual chip play or real dollar risks. The outcome could be the biggest opportunity yet or the biggest threat. By offering links to gamble real money runs a considerable risk the high rollers, or ‘whales’, could turn away in droves.

Even without the chance to win real money some players spend up to $3000 for virtual chips.

So, why should a perfectly good app generating revenues from virtual goods take risks to court controversy and potential gamer backlash by offering real money gambling? And, in the online world, why should Facebook and Zynga for example, the most successful social games partnership yet, separate their strategies to contemplate launching disparate real gaming?

Simple: money. Serious money. Some say Facebook could be worth as much as $100 billion revenue when, and not if, online gambling in the US opens up again.
Even so, data shows a total global value of online gambling in 2011 approaching $30 billion of which casinos, including poker and blackjack, contributed 46%. Bingo wasn’t too bad at $1.6 billion though and marks a strong increase and presence. Let’s understand that’s a 12% increase on 2010 and in recessionary times.

Serious questions arise though. How will gamers themselves take to being invited to move from entertainment to gambling for real? Where is their risk tolerance line drawn and do we dare entice them over? Or, if we don’t, will they just go elsewhere to play? And anyway, is it even up to us to police them? Hard choices indeed.

At AbZorba, we believe most gamers have made a conscious decision not to gamble, or can’t, whilst still loving our casino game format. We know our gamers specifically enjoy the live multiplayer element we provide, where their skills are tested against others not their wallets, moreover it’s key to their loyalty. That’s not to say they don’t spend real money, some spent as much as $3000. But that whole social element of chatting up the person on the same table and buying them a ‘cocktail’ is pure fun, not risk.

However, we have noticed a fascinating change. There is a sharp rise of interest for real money gambling. Perhaps there is an untapped appetite for social gamers to morph in to real gamblers after all, empirical evidence suggests so.

Real and virtual casino gaming industry – a clash of titans

As the games industry debates the real battleground will not be between the likes of Facebook and Zynga but between the real and virtual gaming industry. Each titan is eying each other’s territory. To the real casinos social sites and apps provide a massively untapped opportunity but why should Facebook, arguably the best gatekeeper, leave ‘chips’ on the table? Why not just enter the game itself?

We too have been inundated with request from real gambling companies to reach our gamers. Why? Our gamers play live in an authentic casino environment and it’s that competitive element that encourages greater spend compared with say a single player format and they get that.

The question remains for us all though. Should we rush to bridge the divide between virtual and real money? Can the two worlds co-exist, indeed should they? Its undecided but one thing is for sure, the risks if we do or don’t are real, the stakes are high and my father’s advice has never rung truer.