Social Gaming, Online Gambling Heats Up in London

Exclusive interviews with GEObet, Yazino, and Velo Partners ahead of the Social Gaming & Gambling Summit on November 15th and the Social Gambling Conference on November 16th in London

By Robin Rowe

Extreme Bingo and Texas Holdem from Yazino

Extreme Bingo and Texas Holdem from Yazino

HOLLYWOOD, CA (Gosh!TV) 2012/11/11 – “When I founded Yazino in 2009, 100% of people that I spoke to laughed about the opportunity I predicted,” says Yazino founder and CEO Hussein Chahine. “And. now there are whole conferences dedicated to social casino and social gambling. I’m speaking in two just next week.” Chahine says his company’s aim has always been to be a massively multi-player social casino.

“Social gambling and online gambling are two separate but healthy industries,” says GEObet founder Gerry Gionet. “Social gaming may sometimes offer casino games, but they are generally free and don’t offer prizes. Online gambling on the other hand is real gambling. We think that the best way to provide real gambling online is the same way they do it in casinos, in a controlled and regulated environment so that the players are protected.”

“We are involved is some fabulous businesses,” says partner Evan Hoff of the venture capital firm Velo Partners Limited. “For example, Dragonplay is the leading poker app on the Android platform, offering free or ‘freemium’ entertainment to millions of poker enthusiasts. Others, like NYX Gaming are managing to offer their product to both online and land-based operators and are benefiting nicely from the convergence story.”

“Casino-style social gaming is the hottest thing in the social space at the moment,” says iGaming Business magazine Editor-in-Chief Michael Caselli, who is the organizer of the Social Gambling Conference. “Revenues for casino-themed social games are around three times higher than the average social game, and that’s got everyone’s attention.”

The online gambling business has not been without risks. In 2006, U.S. senators Bill Frist, R-Tenn. and John Kyl, R-Ariz. banned online gambling by tacking the Unlawful Internet Gambling Enforcement Act onto a port security bill. The law didn’t attack gamblers directly, rather made it illegal for banks to deal in online gambling proceeds. Party Poker, the world’s largest online site paid a $105 million fine and left the U.S. market to avoid prosecution. PokerStars, based on the Isle of Man, and another online operator Full Tilt in the UK’s Channel Islands, believed themselves beyond the reach of U.S. law. The Justice Department seized their U.S. assets on April 15th, 2011, an event known in the poker world as Black Friday.

“Online gambling is a market that is growing with regulation,” says Caselli. “As more countries around the World and States within the U.S. license online gaming, more and more people get access to an online gaming site, view their advertising and have payment restrictions lifted from their credit cards. The market is currently a 40 billion dollar market and will one day be as important to bricks-and mortar casinos as their land-based businesses.”

“There are between 500 and 600 tribal casinos in America and each and everyone of these casinos is interested in taking their businesses online,” says Gionet, who aims to have GEObet bring together American Indian casinos under a single operational concept. “Licensing and integration costs can reach into the $600K and higher to build it not including executive staffing. There are IGT, Microgaming, Playtech, NetEnt, PlayNGo to name a few who all have an array of casino games.” GEObet offers an integrated solution to bring casinos online.

“Building a regulated platform from the ground up requires huge amount of infrastructure,” says Chahine. “Audit, KYC [Know Your Customer, a set of banking regulations] and various other considerations, in order to fully comply with gambling rules. The recent partnership of Zynga and Bwin-party shows that even the biggest social gaming developer with a successful suite of casino-style games is incapable of building its own gambling platform. At Yazino our multi-player platform, although we’ve focused purely on using it for social gaming so far, was wired for gambling from the beginning because we saw the future of the industry going this way some time ago.”

“For traditional online gambling operators, the main challenge is navigating the transition from what we call dot-com grey markets to regulated, more highly taxed markets,” says Hoff. “On the social side, the primary challenge is scale. Many of those operators who are sub-scale are struggling, say 100k DAUs [Daily Active Users], even with good revenues per customer.”

Mobile is bringing new players to online and casinos are looking to online to expand their business. The most popular base for online gambling are locations that can services widely across Europe, such as Malta, and other “white-list” jurisdictions such as Isle of Man.

Because many investors will not look at gambling due to regulatory issues or other concerns, valuations are not at the same level as the tech sector. “Amazingly, we are still seeing new entrants, not from land-based or online casinos, entering the market, often with a mobile focus, and succeeding off a zero base,” says Hoff who will be at the conference looking for investments for Velo Partners. “We will be looking at some new start-ups and business plans and it’s always exciting to see who is doing what, and what sort of innovation the sector can expect.”

Velo Partners looks at the whole gaming vertical from land-based to mobile to social, and from seed stage to mature businesses. They typically take a 10% to 25% stake in companies they invest.

“Convergence is happening right now on many levels,” says Hoff. “Operators such as land-based iconic brand the Hippodrome Casino are launching integrated online offerings, while large suppliers like IGT have meaningful investments into both online technology and social gaming. It is difficult to categorize the convergence story as purely a competitive threat or a partnerships opportunity. It is both. The social gambling industry is somewhat different…new demographics, new product and new distribution channels are still driving sector-wide growth.”

The Social Gaming and Gambling Summit kicks off at 9am on Thursday, November 15th in London, with a presentation by Facebook Gaming Marketing Solutions specialist Owen O’Donoghue. The conference will come to Los Angeles on December 14th and 15th.

The Social Gambling Conference kicks off at Friday November 16th in London with a panel of experts on the legality of social gaming and gambling in different jurisdictions. A notable session is Noel Hayden of Gamesys talking about Bingo Friendly, the social gambling game on Facebook.

Directory of gambling trade events:

— Robin Rowe is a partner in Gosh!Entertainment, a company that provides game software development

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