Playstudios is launching a new social casino game, MyVegas Mirage Secret Gardens, that taps into MGM Resort International’s well-known Mirage hotel brand. The Facebook game is the latest that blends the fun of social gaming with the attraction of some of the most alluring casino properties in Las Vegas.

The new game is the latest result from the partnership between Burlingame, Calif.-based PlayStudios and the MGM Resorts International, which owns casinos on the world-famous Las Vegas Strip.

MyVegas is a free-to-play slot machine game festooned with themes from the Mirage Hotel and Casino, from its lush tropical oasis to the Siegfried & Roy animal show.

MyVegas joins 10 other social casino games developed by Playstudios for its popular app on Facebook. That app already has more than 3 million active players, including 250,000 that play every day and 900,000 that play every month, said Paul Mathews, the chief operating officer at Playstudios, in an interview with GamesBeat.

Mathews acknowledged that the company doesn’t have huge numbers of gamers in the tens of millions, like Zynga, but he said that its monetization is good. And while  Mathews acknowledged that mobile games are attractive now, he said that social games on Facebook are also a good business.

“The key here is the play rate and how much they spend,” Mathews. “We’re comfortable with those numbers, though we don’t disclose them. We are launching new games as rapidly as we can and people love it.”

More than a hundred social casino game rivals are facing off on Facebook. Many of these companies are waiting for the legalization of online gambling in the U.S. But Playstudios has no interest in that. While Playstudios and MGM are aligned, you can’t actually win a stay in an MGM hotel in Las Vegas by playing and winning a social slot machine game. Rather, you can win rewards in Vegas simply by playing, such as coming back every day to play. You are rewarded for your loyalty, but not for gambling per se. That keeps it all legal.

While many other game startups have unknown brands in the social casino space, Mathews said Playstudios is sticking to its dual approach of high-quality games and branded, authentic experiences in the MyVegas suite of games.

“Economically, social casino games have turned out to be a good place to be,” Mathews said.

Playstudios has created a meta-game where you can build out your own version of the Las Vegas Strip inside the virtual casino.

“Siegfried & Roy’s Secret Garden and Dolphin Habitat at The Mirage is dedicated to awareness and conservation of rare species. By bringing this destination to life in MyVegas, we’re able to further engage millions of players online with our property in a way that’s both entertaining and rewarding,” said Tom Mikulich, the senior vice president of business development at MGM Resorts International.

Mirage Secret Gardens is a 30-line slot game with 3-by-5 reels. It has a case of cute animals and their trainers set in a tropical oasis. Players can accumulate bonus symbols that activate free spins and a Dolphin Jump Hi/Low Bonus.

While playing Mirage Secret Gardens, players can also accrue status and MyVegas collectibles. MyVegas is also holding a contest in which 100 players will be chosen at random every day to receive 10,000 free chips. Each day, players will have a chance to enter the giveaway. MyVegas players can earn loyalty points by playing Mirage Secret Gardens and win valuable real-world rewards. The comps in Vegas (which you get for being loyal, but not for winning at gambling) include rewards such as special dining offers from Wolfgang Puck, and free Las Vegas rooms, meals, show tickets, and more from Aria, Bellagio, MGM Grand, Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor, Excalibur, and Circus Circus.

MGM Resorts International hopes to drive its tens of millions of customers to the social casino games. In turn, those games will feed customers to Las Vegas hotels. At least that is the theory.

“It’s early to know the full impact of that,” Mathews said.

Playstudios was founded in 2011 by Andrew Pascal, a Silicon Valley entrepreneur who also had a wealth of experience in the casino business. Playstudios raised $12 million in two rounds. Mathews said his company believes that virtual goods casino games — where you can purchase chips for real money but cannot cash your winnings out — will be a good business and that Playstudios has no plans to offer real-money online gambling.

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Big Fish Games is announcing today that its casino game, Big Fish Casino, has become the top-grossing app in the casino game genre on Apple’s iOS platform worldwide.

AppAnnie, a market researcher, said that Big Fish Games has taken the No. 1 spot. Big Fish itself said that its casino game’s revenue has tripled over the past year.

The Seattle-based company also launched a real-money gambling version of the app in the United Kingdom as part of a partnership with Betable. Betable does all of the regulatory compliance and security checks to verify whether players can legally play a gambling game in the place where they are located. In effect, Betable is able to reskin a social casino game, where players pay real money for virtual goods but cannot cash out, and turn it into a real-money gambling casino game.

Big Fish did not break out the financial performance of the gambling version, but it did say that the overall property has a loyal and engaged player base with more than 10 million friendships established in its social network. Many players have been active for more than three years.

Last month, Big Fish introduced Big Fish Bingo, which leverages the same casino mobile-social game platform. Next month, the company plans to add a real-money multiplayer roulette game to Big Fish Casino in the U.K. Carey DiJulio, the vice president and general manager of Big Fish Casino Products, said that the goal is to be the closest thing to the buzz and excitement of playing casino games in real world.

Big Fish Games was founded in 2002, and it has become the largest producer of casual games, with more than 600 external game developers and a catalog of 3,000 PC games and 250 mobile games. The company has distributed more than 2 billion games in its history.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Creating fast-action multiplayer games on mobile is one of the Holy Grails of gaming, given the slow data transfer speeds of mobile networks in the U.S. But Jawfish Games, a mobile gaming startup, has figured out how to do it. This is one of those secret sauce technologies that could distinguish Jawfish from hundreds of thousands of other game makers in the app stores.

Seattle-based Jawfish has launched the technology into the market in a couple of ways. It created an iOS game, Match-Up! by Big Fish, in conjunction with major casual game publisher Big Fish Games. That game launched in the Apple iTunes App Store and was recently featured by Apple. In creating the game and its technology, Jawfish has done something that big game publishers would love to do but haven’t.

In the game, you can play live tournaments with up to 16 friends within the app’s Word, Match-3, or Mahjong mini-games. Hundreds of thousands of players have played 6 million tournaments since the launch. The average play time for returning users is 35 minutes. That’s more like the amount of time that someone spends playing a game like Call of Duty: Black Ops II.

“The simplest games are more fun with real-time multiplayer tournaments,” said Phil Gordon, chief executive of Jawfish. “It’s great to see people having fun in multiplayer tournaments like they thought they would.”

Jawfish is also moving to publish its own games. It has quietly beta-tested Jawfish Poker and Jawfish Words, and it will launch those titles shortly on the Amazon Kindle Fire tablet. It plans to bring those titles out under its own brand name on iOS soon.

Gordon is known worldwide as one of the best professional poker players. His team includes the engineers who built the hit title Full Tilt Poker, which was a hugely popular online poker game until it got shut down by the federal government in a regulatory battle in April 2011. A big legal battle ensued, and eventually the government changed its attitude about real-money online gambling. The app finally reopened last November, after rival PokerStars bought Full Tilt Poker. The team, however, moved on.

“This team had built scalable, lightweight messaging systems before with Full Tilt Poker and they set out to do it again, optimized for mobile game play,” Gordon said.

The company started in January 2012 with eight co-founders, including Gordon, who is famous as a poker player. He finished fourth in a worldwide tournament, the World Series Main Event, in 2001. He was also the lead commentator in Bravo’s TV show, Celebrity Poker Showdown. And he was the poker analyst for ESPN.com for five years. Gordon has written four books on poker, and they’ve sold more than 500,000 copies. His earliest accomplishment: he entered college at age 15.

But mobile games are his next big thing. Gordon believes that real-time, multiplayer tournaments are far more compelling than other kinds of titles. Its platform works on both iOS and Facebook. Jawfish has figured out the complexities around bracket-style competition.

“We thought we were going to be a platform company, but we quickly realized we really loved to market games,” Gordon said.

Gordon said the technology wasn’t possible 18 months ago, but with faster 4G data networking speeds on smartphones, it is quite doable now. The platform sits upon Amazon Web Services. With more than a million tournaments, the entire bandwidth cost has been less than $20, Gordon said.

Some years ago, the technology would have cost $5 million to configure the racks. Cloud computing has made it a lot easier.

“The turn-by-turn model for games is flawed, and it has played itself out,” Gordon said. “Sitting around and waiting for your opponent to make a move is not fun. Real-time is an obvious idea, but no one has done it. We’re the only ones doing it.”

The company cut the deal with Big Fish Games, but Jawfish then decided to embark on its own as a publisher. Big Fish Games is happy with Match-Up! by Big Fish.

“Match-Up by Big Fish off to a very strong start, having hit No. 1 Free Casino game in the US iPad charts when it launched,” said Chris Williams, vice president at Big Fish Games. “Engagement is outstanding with players averaging over 30 minutes of real-time tournament play per day. We have seen over 5 million tournament entries in a just a few weeks and have high expectations for this new synchronous way of playing casual competitive games.”

Jawfish has $3.59 million in funding from Right Side Capital and Founders Fund. The company has 25 employees and is in the midst of hiring 25 more engineers. Jon Mittelhauser, one of the founders of Netscape (creator of the commercial web browser) and a member of the board, said, “ This is a technology company which already knows how to build a scalable real-time platform and is using that knowledge to enable social gaming…. With thousands of mobile games, it is extreme difficult to come up with something unique. Jawfish didn’t only come up with something unique, they came up with a platform which enables a whole new category of real-time multiplayer gaming on mobile.”

Interestingly, Zynga announced last year that it would release real-time multiplayer game tournaments. But it hasn’t actually launched those games just yet.

“It’s been a really interesting 15 months so far,” Gordon said. “We’re on a trajectory for something special in games.”

Check out the trailer for Match-Up! by Big Fish below.

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In a partnership with Betable, mobile gaming firm Digital Chocolate is launching a social casino game that gives you the option of turning it into a real-money gambling game in the United Kingdom.

The move is Digital Chocolate’s first step to transform ultracompetitive casual social casino games into the potentially lucrative real-money gambling market. Real-money gambling promises to revolutionize social games as the barriers between gambling and social casino games collapse around the world. The U.K. is one of the first markets where this has happened.

San Francisco-based Betable’s aim is to disrupt traditional online gambling by making it extremely easy for companies to convert their non-real-money gambling games into gambling titles. Betable is trying to become a one-stop shop where game companies go to enter the real-money gambling market on mobile devices in the U.K. It has ambitions to move to other territories too.

“We are charging real fast into social mobile gaming, and part of our strategy is real-money gaming,” said Jason Loia, the chief operating officer at Digital Chocolate in San Mateo, Calif., said in an interview with GamesBeat. “Real-money gambling is a real part of our strategy in 2013.”

The new Slots! Pocket U.K. game — the first combination virtual goods and real-money gambling title for Digital Chocolate — is launching today on the iPad and iPhone. Another title coming soon from Digital Chocolate is a real-money Blackjack game on iOS. As you can see from the image at the top, Slots! gives players based in the U.K. the option to bet real money or virtual currency and chips on pulls of the slot machine. There are seven different types of slot machines in the title.

Loia said that Digital Chocolate considered the consequence of having another company in between it and its customers. That always carries risks, such as a potential loss of privacy or  But Betable has expertise in complying with the law by checking to see if the person who is making the request can legally gamble from the location where he or she is. It has to be crystal clear that someone is playing for real money, and Betable knows how to do that. Loia said his own company doesn’t have the same kind of ability.

“After talking with our lawyers, it was pretty clear we couldn’t do real-money gambling ourselves,” Loia said. “So we formed the partnership with Betable.”

The companies have been working on the project since they announced a deal in December. Digital Chocolate took an existing social slots game and modified it. The real-money gambling game had to be random and comply with strict laws governing slot machines. But the social casino game can be different in that it can reward players with a lot more winnings or gifts in the early part of the game to entice them to keep playing. Loia said his team did not have to spend a lot of time recreating the foundation of the game in order to meet those different goals and to meet regulations.

“We could plug in real-money gaming as a separate game that sits alongside the social casino game,” Loia said. “Players can participate in virtual goods gaming or real-money gaming. We like the idea of attracting a large audience for social casino gaming and then finding the smaller number of people who want to play with real money.”

Betable provides the backend processing to enable a person to bet real money in what would otherwise be a non-real-money casino game. It detects where the player is and then checks to see if that person can legally gamble where they are. If the player can, it asks if the player wants to play for real money. Then the game executes the random gambling round and pays out coins that can be converted into real money.

Betable handles compliance, fraud prevention, identity checks, wagering and gambling results.

Earlier this year, Beatable chief executive Chris Griffin said that it was getting great results from its first customers in the United Kingdom. At the time, he said that the company was seeing “incredible performance” in converting social gamers to gamblers.

About 80 percent of the gamblers had never spent money in a social casino game before. And the engagement is about 10 times better for real-money gambling games than normal social casino games. The daily average revenue per paying player is 10 times higher with real-money gambling games compared to the same games without it.

Regulatory barriers have fallen in the U.K., and the gambling and game industries are hoping the same will happen in the U.S. States such as Nevada, New Jersey, and Delaware have authorized real-money online gambling, but change is happening more slowly here. So the U.K. market has become an experimental market of great significance.

If the walls come down, then both sides could benefit. Real-money gambling companies could find new recruits among the larger audience for the social casino games, and social casino game companies could enjoy much higher average revenues per paying player associated with real-money online gambling metrics. Griffin says the lifetime value of a user in social casino games may be $2, but the lifetime value of a gambler could be $1,800.

Digital Chocolate will compete against other customers of Betable, such as Big Fish Games. Betable has 10 announced customers so far, including some that launched in December.

Loia said his company has more real-money gambling games in the works. He won’t say what those games are, but he looks forward to the possibility of creating betting games that have nothing to do with casino titles.

Matt Hulett, the president of GameHouse, is going all in. His company has shifted its development firepower into the social casino game business. Today, it is launching GameHouse Casino on Facebook and debuting GameHouse Slots on the iPhone.

The Seattle division of RealNetworks has deployed half of its 200 employees to create a suite of social casino games. Hulett (pictured right) said in an interview with GamesBeat that he hopes to differentiate his free-to-play games with a high-class style reminiscent of the elegant Bellagio Hotel in Las Vegas. More releases are on the way.

“This is not an off-strip lobby,” Hulett said. “Our big bet is to build a high-class casino experience where you feel like you are at the big hotel. We feel we can bring a lot of innovation to these games.”

GameHouse is one of many mobile and social game companies seeking salvation in social casino games, where players can bet virtual chips in games like video poker but can’t cash out. The category drew huge players and investments last year, and it remains hot, as we witnessed the Casual Connect Europe conference in Hamburg, Germany.

Social casino games have raised considerable funding. And slot machine maker IGT bought Double Down Interactive for $500 million in early 2012. Double Down had just 70 employees at the time. Aristocrat bought Product Madness in November for an estimated $40 million. And earlier this month, Scientific Games bought WMS for $1.4 billion. Morgan Stanley Research estimates that annual revenues for social casino games will hit $2.5 billion by 2015.

Hulett is late to that party, but he believes the market is just getting started. The team has been building the games over the past 13 months.

“We think there is a lot of room in the market,” he said. “We wanted to nail the core game experience and create the right core behaviors. We want to make a good first impression.”

And GameHouse has more than a dozen games inside its Casino app on Facebook. The titles include slots, video poker, roulette, blackjack, and others. They’re tied together with graphics, animations, and social gameplay. The video poker game has six different machines and can play up to 25 hands at a time. You can make side bets, double-or-nothing jackpots, and high-low plays. In the slots game, there are already 17 machines, and GameHouse will add more.

“The joy of winning money with your friends around a table is there,” Hulett said.

The monetization of casino games is already 50 percent higher than other casual games. And retention rates on mobile are twice as good as they are on Facebook. Players are loyal, but only 2 percent or so pay for virtual chips.

On the right-hand side, a player can see all of the actions that friends are taking. The dynamic lobby (pictured at top) is a kind of home base that changes as players come back and discover new games or slot machines played recently by friends. The Party Play feature shows what friends are playing, and you can jump into a game with them. You can also send virtual gifts to friends and help them increase their winnings.

“The social element is what is more fun to players, and it explains why these games are becoming popular again,” Hulett said.

Players can compete to win more than friends do during a fixed time frame based on an allotment of free chips. If they want to play for a longer duration, they have to pay real money for more chips to extend their session. That’s how GameHouse monetizes the free-to-play game, Hulett said.

So far, GameHouse has no plans to go into real-money gambling, a market where rivals such as online gambling companies and Zynga are staking claims. Hulett doesn’t want to hitch his fate to the actions of lawmakers and regulators.

The move into social casino games is a pivot for GameHouse, which has launched more than 3,000 casual games over the past decade. That audience is shifting from the web to social games on Facebook and on mobile devices. GameHouse is following them, but it is doing so at a deliberate pace. The company is using a team in Victoria, British Colombia, which is becoming a hub for studios. GameHouse has more than 10 Facebook games and twice that number on iOS and Android. It also has 14 million unique monthly users on the web still.

The company tested its ideas with the launch of GameHouse Slots on Facebook, where it garnered more than a million fans. The title, which launched quietly, is one of the top casino and card games in the U.S. on iTunes.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Gov. Brian Sandoval (R) signed legislation that legalized online gambling inside the state of Nevada — a move that could signal a potential goldmine for developers of social casino games.

Both houses of the Nevada legislature passed the bill as an emergency measure so the could lay claim to being the first in the nation to sign such a bill into law — ahead of New Jersey. Online gambling firms pray that the Nevada law could be the start of an avalanche of legislation by tax-hungry states to legalize the industry across the country. And the video game industry’s social casino game makers hope the legalization will happen and bring a windfall to them as well.

New Jersey governor Chris Christie (R) vetoed an online gambling bill Feb. 7, but he said he was planning on signing an amended bill next week.

Social game companies like Zynga are hoping for legalization of online gambling to help their own businesses. Social casino games — where you can buy virtual chips to make bets but you can’t cash out — are considered the “top of the funnel,” or the industry that could recruit new gamblers at very low marketing costs for the gambling companies. Indeed, while online gambling may draw about 40 million players, the number of social casino players is about 170 million.

While social casino games are generating around $1.7 billion in revenue, online gambling is a $35 billion worldwide business, according to Morgan Stanley. It is part of a larger $390.5 billion real-money gambling casino business, with the turnover of dollars reaching into trillions of dollars.

The Associated Press reported that Sandoval said it was a historic day and that the law would “usher in the next frontier of gambling in Nevada.”

Sandoval is the former head of the Nevada Gaming Commission, and he said the law was critical to the state economy. A.G. Burnett, the current chairman of the Nevada Gaming Control Board, said the state has 20 applications from various potential online gambling operators looking for licenses.

The new law permits Nevada to authorize cross-state gambling with other states that offer Internet poker. Previously, lawmakers passed a bill that positioned Nevada to legalize online gambling if the federal government allowed it. That federal bill failed, leading Nevada to try negotiating agreements with other states.

The potential for online gambling brightened at the close of 2011, when the U.S. Department of Justice issued a letter saying that the federal Wire Act of 1961, which had previously been used to crack down on gambling on the Internet, only applies to sports betting.

Other states could benefit from partnering with Nevada because it has the most mature regulatory infrastructure, the Nevadans argued.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Casino companies and investors poured more than $2.2 billion into acquisitions of social casino games companies in the past year or so. And while investment values have sunk, the acquisitions have turned out to be good ones.

In fact, those deals have turned out so well that the social casino game boom is likely to continue as the online gambling, land-based casinos, and social casino games converge into a single industry, said Brock Pierce (pictured), the chief executive of casino game maker Playsino, at the Casual Connect Europe event.

Social casino games monetize at about twice the rate of other casual games. The only segment that generates more revenue per user is midcore games, but the numbers of social casino game players is far higher.

“The casino businesses have come to recognize that and want to know how to get in on that business,” Pierce said.

Melissa Blau (pictured right), a gambling consultant at iGaming Capital, advises land-based casinos on how to move into online gambling and social casino games. She represents around eight different casino groups. She confirmed Pierce’s assessment.

“My clients are trying to figure out their social casino gaming strategy,” she said in her own talk at Casual Connect Europe. “Social casino virtual currency games are smaller, but they are so important, the gambling industry is always looking for where they will find the next players.”

Revenues justify high-value deals

The deal values have raised eyebrows. Caesars Entertainment Casino Group bought Playtika for $180 million in 2011 and Caesars International Entertainment bought Bingo Blitz maker Buffalo Studios for an estimated $100 million in December.

Slot machine maker IGT bought Double Down Interactive for $500 million in early 2012. Double Down had just 70 employees at the time. Aristocrat bought Product Madness in November for an estimated $40 million. And last week, Scientific Games bought WMS for $1.4 billion.

Many viewed those prices as inflated. But Pierce believes they were bargains, since the revenues generated from them are impressive.

“How often do you find a market where every acquirer has done phenomenally well and is making out like a bandit,” he said. “It’s very uncommon in an M&A market where every buyer does well.”

Double Down is generated an estimated $80 million in earnings before income tax, depreciation, and amortization. That comes from about $129 million a year from revenues for Double Down Casino on Facebook. Caesars is generating about $350 million in revenue a year from the Playtika deal.

It makes sense that the deals continue to generate revenue, since games like poker are evergreen. They were popular a year ago, five years ago, or even 100 years ago.

“Most games see growth, and then you have to move on to the next hot title,” he said.

The sector could stay hot in terms of acquisitions. Potential acquirers include Electronic Arts, Gree, DeNA, Harrahs, Tencent, Universal, Zynga, MGM, Nexon, bwin.party, and Bally. That’s a diverse group of companies. Casino companies are used to paying low prices for the acquisitions, but the presence of all of the other acquirers from different industries will keep the prices higher.

Land-based casinos are “desperate for product” in the form of social casino games, Blau said.

Pierce thinks that the creativity of game developers will introduce new innovations to the somewhat staid online gambling business. Chris Griffin, chief executive of Betable, also believes that game makers will disrupt the land-based casinos and online gambling.

Categories include sports betting games, poker, slots, bingo, lottery and others. Caesars Casino is generated about $56 million in revenue a year. Best Casino is generating $34 million. Slotomania is generating $152 million a year. Lucky Slots is generating $62 million a year. And Zynga’s Texas HoldEm Poker is generating about $267 million as the No. 1 poker game on Facebook and iOS. 

Innovation is happening

Zynga’s market looked to be the most mature, where new entrants are unlikely to do well. But new entrants are already doing well, such as Fresh Deck Poker from Idle Games. Pierce credited Idle with creating an interesting new design, with a 2.5-dimensional point of view from a seat, rather than overhead. 
“It’s still early, but you’re seeing meaningful success there,” Pierce said.

Pierce said he is excited about rewards-based gaming as enabled by RockYou’s Ryzing bingo game, which incorporates sweepstakes prizes as legal rewards in its games. And Virgin Gaming is allowing players to wager on games in tournaments for core game players. King.com, Worldwinner, and GameDuell are doing similar things with betting in casual games, but you can’t cash out in territories where it is not legal.

Bingo is popular and is attracting a lot of new entrants. Sports betting apps are plentiful, but not generating much money yet on social and mobile networks. Pierce said the average lifetime value of a social casino player is $78, but the average LTV of a gambler is $1,600. Only about 2 percent of social casino players actually purchase chips.

But social is the “top of the funnel,” or the industry that could recruit the new players at very low marketing costs for the gambling companies. Indeed, while online gambling may current draw about 40 million players, the number of social casino players is about 170 million, Blau said.

While social casino games are generating around $1.7 billion in revenue, online gambling is a $35 billion worldwide business, according to Morgan Stanley. It is part of a larger $390.5 billion real-money gambling casino business, with the turnover of dollars reaching into trillions of dollars. Japan’s Pachinko game business, for instance, is a $2.2 trillion turnover business, meaning that’s how many dollars go through the system. Overall video games, meanwhile, are about $68 billion.

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Betable, which enables companies to convert their casino games into mobile-online gambling titles, says that the results it is getting from its first customers in the United Kingdom are well beyond expectations.

Real-money gambling promises to revolutionize social games as the barriers between gambling and social casino games collapse. Betable’s aim is to disrupt traditional land-based casinos and online gambling by making it extremely easy for companies to convert their non-real-money gambling games into gambling titles.

“The opportunity for disruption is enormous, with social casino games taking money from the core incumbents,” said Chris Griffin, the chief executive of San Francisco-based Betable, speaking at the Casual Connect Europe event in Hamburg. “Across the board, we are seeing incredible performance.”

The best news is that 80 percent of the players have never spent money in the social casino games before.

“It’s complementary,” Griffin said. “That’s what we’re excited about.”

Betable provides the back-end processing to enable a person to bet real money in what would otherwise be a non-real-money casino game. It detects where the player is and then checks to see if that person can legally gamble where they are. If the player can, it asks if the player wants to play for real money. Then the game executes the random gambling round and pays out coins that can be converted into real money. Betable makes the process seamless so the social casino gamemaker can convert a title to real-money gambling in 48 hours, said Griffin.

The walls between real-money gambling and social casino games (where you play for fun and can’t cash out) is collapsing as regulatory barriers fall and countries around the world eye the possible windfall in tax revenues. In the U.S., the Justice Department ruled in 2011 that online gambling is permissible so long as states pass laws to allow it. Nevada and Delaware have passed such laws, and more are on the way.

If the walls come down, then both sides could benefit. Real-money gambling companies could find new recruits among the larger audience for the social casino games, and social casino game companies could enjoy much higher average revenues per paying player associated with real-money online gambling metrics. Griffin says the lifetime value of a user in social casino games may be $2, but the lifetime value of a gambler could be $1,800.

Betable’s customers in the United Kingdom include Big Fish Games, which has launched a popular casino game suite on mobile using the Betable technology.

“We are seeing 10 times engagement,” Griffin said. On top of that, about 2 percent of the social casino game players are converting to real-money gambling. The daily average revenue per paying player is 10 times higher with real-money gambling compared to the same games without real-money gambling.

Griffin said the company is in the process of getting licenses to operate in other territories where online gambling is legal.

Disclosure: The event organizers paid my way to Hamburg, where I moderated a panel. Our coverage remains objective.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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In a new twist for real-money gambling, Betable is announcing a partnership with 3Oak, a new studio funded by Canada’s Frima Studio. Under the deal, 3Oak will make gambling games out of titles that are not typically real-money gambling games.

The move is part of Betable’s campaign to break down barriers between real-money online gambling and social-mobile games. It is a disruptive strategy that could yield riches and change the status quo in two industries if Betable pulls it off as planned.

3Oak will create original titles that will incorporate gambling mechanics into the social gameplay experience. Theoretically, 3Oak could create a fantasy role-playing mobile game that has a minigame. With Betable’s technology, players could bet real money against each other to see who plays it the best. The winner could walk away with actual winnings, not just a virtual prize.

3Oak isn’t yet talking about what kinds it will make, said Mikael Lefebvre of 3Oak, which is a 15-person real-money gambling division within Quebec-based Frima, which has 300 employees. In an interview with GamesBeat, Lefebvre said, “We are not doing social casino games.”

“We are real excited about this,” said Chris Griffin, the chief executive of San Francisco-based Betable. “That has been the thesis of Betable. We make it easy for companies to go into the real-money space, leveraging creativity and know-how from nongambling games. We want to reach a much larger market with real-money gambling, and to do that, you have to do it with games that have broader appeal than casino games. We are particularly excited about Frima. They are redefining what it means to play games with real money.”

As we’ve noted in past stories on Betable, the company has a license in the United Kingdom to operate online gambling on a worldwide basis. In some territories, it will still require a separate license, and in places like the U.S., it has to wait for real-money online gambling laws to be passed by states.

Betable has created a technology to verify where a user is, and it has antifraud measures that can overcome someone who “spoofs” his Internet protocol address to fake his location. It does so by checking into a variety of records, such as credit reports, bank accounts with real addresses, and voting records. If the location is spoofed, it rejects the user for real-money gambling. But if that person passes and it is legal to gamble in his actual location, Betable permits the gambling to take place.

Here’s one of the clever tricks in dividing the gambling process: The developer creates and builds the front end of the game. Betable’s servers handle the back-end processing. Users see the front end, such as a slot machine. They bet money and play the slot machine. The game turns this information over to Betable, which then calculates the result. If the player wins, Betable credits the account. If he loses, Betable deducts money. Betable handles the payment processing by itself, said Griffin.

This makes Betable’s platform universal. Any game can be plugged into its applications programming interface and be converted into a real-money gambling game. Betable can handle all sorts, including bingo, cards, and slots. The developer simply tells Betable what type it has built, and then Betable spits out the right result. As in the partnership with Frima, Betable can also create new kinds of gambling games through custom mechanics. An example: In a horse-racing game, you could pay real money for virtual goods to raise a proper horse. Then you could enter that horse in competitions and bet real money it would win. If it does, you collect real gambling winnings.

The significance of Betable’s system is huge. As of now, no other company has both a license and the technology to help the entire social casino industry convert its titles from virtual currency games into real-money gambling games. The conversion process is painless, and companies can use Betable to stay within the constraints of territorial gambling laws. If a user with a mobile phone moves into a place where it’s legal to gamble, and then the user fires up a game, ot will ask, “Do you want to play for real money?” If the user answers “yes,” Betable executes the gambling part.

Here’s where the economics matter: Typical social-game companies make 10 cents to 20 cents on average per paying user in a month. For Zynga, about 2 percent of its users pay real money for virtual goods, and those paying users spend around a couple of bucks a month. That is why Zynga needs a massive number of players to make decent profits. But real-money gambling players spend $99 to $200 a month on poker games, according to market researcher Playtech. The lifetime value of one of these poker players is about $1,800. That’s a huge difference.

If the social casino companies can convert some of their players to real-money gambling — in the areas where it is legal — then they could make a huge windfall. Zynga is already a billion-dollar company with virtual goods revenue. If it converted to real-money gambling, its revenues could shoot upward.

Betable also has partnerships with Digital Chocolate, SGN, Slingo, Mandala Games, and Murka. Betable’s newly appointed employees include Ya-Bing Chu, Betable’s chief product officer and former vice president at Zynga; and Jonathan Flesher, the executive vice president of business development and former vice president of business development at Zynga.

3Oak is working on its own titles and partnering with third-party developers as well. Frima has worked for other publishers, including Electronic Arts, Microsoft, and Activision. but it has decided to make a shift into social-gambling games under its own name through the 3Oak Studio, said LeFebvre. 3Oak’s titles will run on the web, iOS, and Android. [Update: 3Oak clarified that it is not doing social casino games now, but it may do so in the future with third-party game developers].

Griffin said that the next six months to nine months, there will be a very big movement toward real-money gambling.

“The tipping point will come when we open our platform up broadly and allow a larger pipeline of game developers,” said Griffin. “We are not saying exactly when that will happen yet. We think the effect will be like what happened when Facebook opened up its platform.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Koolbit has flipped the switch on its mobile casino games, and they are now available as real-money online and mobile-gambling titles in the United Kingdom.

The company released its first social mobile casino games — where players can purchase virtual chips but can’t cash them out — last year and grew an audience. But it sees more disruption and financial gain in adding the ability for players to bet real money and cash out their winnings. As such, it is a part of a growing number of game startups that are breaking down the walls between social-networking games and online gambling.

Gerard Cunningham (pictured right), chief executive of San Francisco-based Koolbit, said in an interview with GamesBeat that his company has launched a full suite of gambling casino games at a new website, iGoSlots.com, accessible via the Web or mobile devices. The offerings feature an HTML5 foundation, the lingua franca of the Web. Koolbit made the site in partnership with Cozy Games, and it has a license for gambling on the Isle of Man.

“We’ve taken a mobile first approach with the design, but you can play it in a Web browser anywhere,” Cunningham said. “We’ve had virtual goods casino games running for nine months now, and we’re now going to have the biggest real-money mobile casino network with 25 games.”

Koolbit will continue to operate City Slots, its flagship suite of casino games, as a separate virtual-currency mobile and Web experience. City Slots is regularly ranked in the top 20 on Google Play’s Cards and Casino Games page. That is part of a $3 billion social casino games market. But with iGoSlots, Cunningham said his company will move into the $44 billion real-money online-gambling market.

The iGoSlots.com site is open for registration in the U.K. today. It has 25 titles, including slot machines, scratchers, roulette, blackjack, video poker, and bingo.

Cunningham, a former executive at online horse-race betting firm Betfair, founded Koolbit in 2011 to focus on mobile casino games. He will give a talk at the ICE real-money online gambling conference this week.

Koolbit has 12 employees. Rivals in online gambling include William Hill, Bwin.party, Betfair, and Paddy Power. In social casino games, Koolbit has lots of competitors, such as Big Fish Games and Zynga.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The game industry is still living in compressed time. It went through more gyrations and disruptions in a year than it usually does in a generation. The revolution in games is on our doorstep, but several of the big companies trying to start it have failed to execute. They proved that ambition alone isn’t enough to take on the status quo.

But traditional game makers can’t be too smug. We saw the bankruptcy of THQ and the weakening of many of the strongest video game franchises. Social, mobile, and online forces will continue to reshape the business in the coming year, but nobody was free of trouble.

The good news is that the number of gamers continues to soar (past a billion), and, sometime soon, somebody is going to hit a phenomenal home run. That is why that, in spite of some phenomenal crash landings, entrepreneurs and investors are still going big with new game startups. Those startups aren’t raising as much money as they once did, but the entrepreneurs running them still have fire in their bellies.

We’ve gone back through the archives of GamesBeat for the past year and dug up the stories that made the biggest impact. Here’s our list of the biggest game stories of 2012.

1. Zynga goes into a free fall

In tandem with Facebook’s disappointing initial public offering, Zynga missed its second quarter earnings targets. Demand for its games weakened, and the company’s stock price tanked 40 percent in a day. It never recovered during the year, and the toll was felt by every gaming company. In the third quarter, the results were disappointing again.

The problem for game startups is that Zynga’s value fell by 75 percent, crushing down the values of similar companies in both the public stock and private markets. Game company valuations plummeted, and it is no surprise that the pace of investments slowed in the latter part of 2012. Zynga tried to claw its way back up to recapture the glory days of its IPO. It launched a spate of new titles like FarmVille 2 and moved into mid-core games via acquisition. But the payoff isn’t clear just yet.

2. Mobile goes big

Zynga tried to move into mobile in a big way, but so did everybody else. The migration was huge, since many believed that smartphones and tablets would replace consoles. Rovio’s Angry Birds soared past a billion downloads, and the franchise took off in new directions with Angry Birds Space and Angry Birds Star Wars, not to mention a whole line of new Hasbro toys. Social game companies like Kabam successfully diversified beyond Facebook and invaded mobile — its Kingdoms of Camelot: Battle for the North turned out to be the No. 1 grossing app on the Apple App Store. About 86 percent of Flash game developers expanded into mobile. Like King.com, most of them tested their titles on the web and Facebook and then moved the successful games over to mobile.

By the third quarter, mobile-game startups accounted for 42 percent of all investments in the industry and 22 percent of the transaction value, according to Digi-Capital. That meant that mobile game investments were popular, but they were also smaller since mobile-game studios are still relatively small.

But the mobile market wasn’t easy. Indie game makers could make it big, but they often needed help. Mobile marketers tried everything the could to get their products noticed, but Apple had to crack down on the methods that weren’t good for consumers. Still, mobile promised to be huge. In the U.S., 44 percent of people were playing mobile games. And mobile became the fastest growing segment in games.

3. Kickstarter launches a crowdfunding revolution

While Zynga’s crash hurt funding, developers found a new fountain of money in their own fans. Tim Schafer’s Double Fine Productions tapped the crowdfunding site Kickstarter to fund a new adventure game. It raised more than $1 million on its first day and wound up raking in $3.3 million in 30 days by March 13. Brian Fargo’s inXile Entertainment jumped on the opportunity and raised nearly $3 million for Wasteland 2, a sequel that no traditional game publishers would touch. Jordan Weisman’s Harebrained Schemes raised $1.8 million for Shadowrun Returns. Kickstarters for a variety of other games such as Obsidian, Leisure Suit Larry, Pitfall, and others also took off, creating a revival for mid-sized game development studios.

Soon enough, crowdfunding wasn’t just a way to run around the gatekeeper publishers. It was an agent of disruption, giving more creators control over their destinies at a time when larger game companies had become risk averse. Ouya proved that as it raised $8.3 million for its Android-based video game console.

And Kickstarter wasn’t the only show in town. Gamesplanet Lab launched its own crowdfunding effort for games. Gambitious focused on raising crowdfunding and seed investment for game studios. And Chris Roberts’ Star Citizen took off in part through web-based donation system.

4. Nintendo’s kicks off the new generation

Nintendo’s run with the motion-sensing Wii was phenomenal, with more than 98 million units sold to date. But for the past couple of years, sales have lagged and Nintendo finally got a replacement console on the market with the launch of the Wii U on Nov. 18. Nintendo aimed to disrupt gaming again by incorporating tablets and asymmetrical gameplay into its new console. It initially sold out, with more than 400,000 units sold in its first week. But that doesn’t look so good in the context of some serious new competition. Apple’s new iPhones and iPad tablets routinely sell more than 2 million or 3 million units on opening weekend. Nintendo executives put on brave faces, but critics have been bearish on the Wii U throughout the past year. Those critics, such as our own GamesBeat editor-in-chief Dan “Shoe” Hsu, point out a number of weaknesses in the console, such as the lack of a killer app. Analysts expect it to sell out for the holidays, but the questions is how long it will keep selling for. So far, the Wii U hasn’t set the world on fire.

5. OnLive’s collapse

No company held more promise than OnLive, which came on the scene in 2009 with a plan that astonished everyone. OnLive’s “cloud gaming” solution would allow people with low-end computers to play high-end games that were processed in a remote data center and then streamed as videos to the players’ screens. The cloud would allow players to log into their games from anywhere and play as long as they had a good Internet connection. OnLive beat its milestones and surprised the skeptics, launching its service in 2010. It came up with a lot of improvements, but it lost a number of big game publishers such as Electronic Arts as rivals such as Gaikai came on the scene. OnLive’s membership base grew slowly, and it had a tough time competing against free-to-play online games.

So the company kept raising money at a high valuation to keep the lights on. By 2012, the company had burned through more than $200 million in funding. It had more than 200 employees but failed to break even. It hit the wall in August, running out of money. An investor bought the company and ousted founder Steve Perlman. The company went through a bankruptcy alternative and lost many of its employees. It is trying for a comeback but in a much reduced state.

Perlman has moved on to his wireless broadband startup, but his failure to warn people about the collapse was unpopular with employees. This fall sent a shock wave through the cloud-gaming industry, and it was a case of a solid company racing too far ahead of its own revenues until it shattered its own dream.

6. Curt Schilling’s 38 Studios falls apart, forcing him to auction off his bloody sock

Curt Schilling was a baseball hero who pitched his team to a 2004 World Series victory with a wounded foot. After he retired, he started 38 Studios, a game startup with the audacious goal of creating a massively multiplayer online fantasy role-playing world that could challenge Blizzard Entertainment’s World of Warcraft. He poured more than $50 million of his own money into Project Copernicus, and he hired comic artist star Todd McFarlane and fantasy novelist R.A. Salvatore. It was the ultimate bet on the MMO business. But it wasn’t meant to be.

Schilling took $75 million in loans from Rhode Island in exchange for moving his company there from Massachusetts. But the company’s first game, Kingdoms of Amalur, was a mediocre success, and it ran out of money in June. It laid off more than 300 people abruptly and then filed for bankruptcy. Schilling had to auction off most of his property, including his bloody sock. Instead of killing off WoW, 38 Studios became a cautionary tale for states that provided rich incentives to risky startups.

7. Social casino games take off

Everybody loves a bubble. Speculation that online gambling might be legalized led to a feeding frenzy in the adjacent market of non-real-money social casino games, where people spent money on virtual goods but couldn’t cash their winnings out. Games such as Zynga Poker had taken off over the past five years. But when the Justice Department ruled in December that online gambling could be legal, the floodgates opened. IGT paid $500 million in January for Double Down Interactive, a social gaming company with only 70 employees. After that jackpot, the speculators moved in. Dozens of new startups received funding for their social casino and sports betting games. Analysts report that social casino games will generate $1.6 billion in revenue this year, and that will steadily grow over the next several years. Betable has cut deals with five social casino game companies to convert their titles into real-money gambling games. Zynga’s crash took some of the air out of this bubble, but many are still betting that online gambling will give a big boost to the social casino game companies and visa versa. Zynga itself is betting big on online gambling, and so is Facebook. Will the bubble pop in 2013, or will the marriage of social casino games and online gambling pay off?

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The big initials at Zynga these days are RMG. That stands for real-money online gambling, and the company just filed for the right to publish such games in the state of Nevada.

Formally, the company filed its “application for a preliminary finding of suitability” with the Nevada Gaming Control Board. The move positions Zynga to offer real-money online games (and, quite possibly, real-money gambling) in the state of Nevada, where it is already legal to play such online games as long as players are inside the state. The prospect of real-money gambling is the only piece of news that lifts Zynga’s stock price these days (up 0.43 percent in after-hours trading), and social casino games have been hot all year.

That’s because Zynga makes the world’s most popular social casino game: Zynga Poker. It makes perhaps a couple of bucks a month per paying user, and a small percentage of players pay money. But with real-money gambling, the stakes are bigger. Players who pay real money to gamble online will spend several hundred dollars a month, according to market surveys. If Zynga can use its poker brand power to tap into the real-money gambling market, it will have a chance to disrupt the online gaming market and lift its sagging profits.

“This filing continues our strategic effort to enter regulated RMG markets in a prudent way,” said Barry Cottle, the chief revenue officer at Zynga, in a statement. “We anticipate that the process will take approximately 12 to 18 months to complete.  As we’ve said previously, the broader U.S. market is an opportunity that’s further out on the horizon based on legislative developments, but we are preparing for a regulated market. We’ve also recently partnered with bwin.party to bring the highest quality real-money gaming experiences to our U.K. players in the first half of 2013.”

Zynga has cut a deal to publish real-money casino games in the United Kingdom in a partnership with real-money online gambling firm bwin.party. In the U.S., online gambling is still illegal in most states, but the federal government is stepping back from enforcing a ban since the Justice Department reevaluated its stance on the matter in Dec. 2011. In the wake of that ruling, Delaware and Nevada approved online gambling laws in their states.

If all states approve online gambling, Zynga could have a bigger market. But the chances of that happening quickly are low. And in Nevada, the Gaming Control Board has a lot of power. It can decide whether or not to grant a gambling license to companies requesting permission. And for years, it has developed the know-how to determine whether companies applying for such permissions are shady or not. If Nevada grants a company a license, it is likely that other states could do so as well. Or so the theory goes.

Approval in Nevada takes an estimated 12 to 18 months.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Real-money gambling could generate considerable revenue for Facebook and other social gaming companies as regulations loosen around the world. So Gamesys hopes to have the jump on big companies from Zynga to PKR (makers of online poker) as it conducts its first real experiment with gambling with Facebook’s audience in the U.K.

Gamesys launched its real-money gambling app, Bingo Friendzy, on Facebook in August. The result so far is very positive, said chief executive Noel Hayden (pictured above) in his talk last week at the Social Gambling Conference in London. Gamesys will get more competition over time, as Facebook authorizes more real-money gambling games on its platform in places where it is legal, such as the U.K. At some point in the future, U.S. online real-money gambling could be legalized, according to bullish investors.

“The players that we have converted [from free to play to real-money paid gambling] are high-value players,” he said. “The social players are more valuable than our standard real-money players.” Real-money gambling games can be very lucrative, generating $500 a month from a paying player, and word about such games can spread very rapidly among friends on Facebook.

“We’ve been thinking about these things for a long time,” Hayden said. “We’re excited because Facebook has so many rich viral features, amazing targeting — it’s unbelievable the targeting you can do. We’ve all had refer-a-friend features in our games, but Facebook enables refer-a-friend on steroids.”

The key advantage on Facebook is that members don’t normally trust ads but look favorably on referrals. So if your friend recommends that you play a real-money gambling bingo game on Facebook, you’re more likely to do it.

Hayden started the company in 2001 with Robin Tombs, Andrew Dixon, and several developers. In 2003, they launched the Jackpotjoy web-based casino game, which had both free-to-play title and pay-to-play versions. On its first day, the game generated £35 in revenue.

“I was absolutely delighted,” Hayden said. “Back in those days, I was doing all the support calls. I was doing chat hosting in bingo. I printed the games of the winners and was writing checks to them manually.”

The company launched a real-money online gambling version of bingo. It has provided its version of bingo under license to a variety of brands, such as Lycos, Ryanair, News International, Orange, and Harrah’s Entertainment.

Eleven years later, Gamesys has more than 700 employees. In 2011, the company took more than 3.2 billion real-money gambling bets from players, and it generated £125 million — $198 million in U.S. currency — in revenue.

“I’ve got some seriously great people in the business and things are going well,” he said. “In 2008, we started to notice a lot more of our players spending time on Facebook. So in 2009, we decided to start our social gaming division,” which made non-gambling freemium games (where users play for free but may pay real money for virtual currency).

Gamesys tried out Facebook by launching a social city-building game, but it didn’t do so well because Facebook had scaled back on the viral messages that games could send out to people on the network, largely because of too much game spam going to those not interested in games. The city-builder failed, but Gamesys learned a lot about the need to continuously update a game.

“You have to be constantly adding features and that creates a huge added cost for a team,” Hayden said.

Hayden said that non-gambling social gaming companies had the advantage of speed and agility over the traditional online gambling companies. They can, for instance, make use of analytics and act upon them in short order to change games to better suit users.

“I thought cash gaming moved quickly, but social gaming was moving at light speed,” Hayden said. “You can move really fast with the right team. … It’s about the science and the creativity coming together. You have to do all this stuff really fast to compete with the San Francisco dudes.”

He visited San Francisco to visit the social gaming ecosystem and understand the business better. That opened his eyes to the competitive landscape. Social casino gaming had its attractions because of no regulation, in contrast to online gambling, which has regulations such as putting limits on how much people can lose in a month of gambling.

With the new game, Gamesys “gets a single view of the customer, both on the freemium side and the real [money gambling] side,” Hayden said.

One difference between the games is that a freemium game can pay a lot more chips out to winners and reward them more frequently, while developers face limitations to how much cash you can give out in a real-money gambling game. So the games actually have to have different designs.

In designing social bingo games, Gamesys included features such as signing in again after an interrupted session and start back where the game left off. It also added pictures of Facebook friends on the game board so a player can immediately see who wants to play a round. Such features are typical in social games, but they’re relatively new for real-money online gambling games.

The Bingo Friendzy game had to be designed to fit in the Facebook Canvas, or the user interface that fits around a Facebook app.  When someone wins a round, it’s treated as a huge deal, with all of the appropriate fanfare. That’s a big part of the fun factor that social gaming companies have executed better than real-money gambling firms, Hayden said.

The Facebook gambling game works well in a social context because it gives you bigger payouts if you play with multiple friends. That encourages people to play together. Friends can take videos of game sessions and put them on YouTube. And that leads to more notifications going out about how your friends are playing a particular game on Facebook.

“You get tons of impressions going out in all kinds of ways,” he said.

Gamesys also created Slot Friendzy, a slot machine game as another addition to the bingo game. One of the unique things about Facebook is that it uses real names. When you’re gambling, you don’t necessarily want everyone in the world to know it. So the app has to get your permission before it posts that you won ten pounds in a bingo gambling game.

“You have to really think carefully about the type of content you are sharing and promoting,” Hayden said.

As far as what is coming next for Gamesys, it is soon launching a free-to-play social gaming title called Here Be Monsters, a mashup of a social farming simulation and a Pokémon-like monster collection game. It has worked on the game for the past 18 months and plans to launch it in 2013.

The company will continue to make web-based games, move into mobile, and continue to make Facebook games as well. Watch out Zynga.

The conference organizers paid my way to London, where I gave a speech. Our coverage of the event remains objective.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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That was one of the topics debated at the Social Gambling Conference in London on Friday. The discussion put the real-money online-gambling companies at odds with the makers of non-gambling social casino titles, where users pay for virtual goods (such as poker chips) but are not allowed to cash out their winnings.

The panel, moderated by Stuart Tilly, director of a new group dubbed the Social Gaming Association, produced some fireworks at the first-time summit in London on Friday. Tilly’s group is a new association representing the non-gambling social-casino-game companies.

Jez San, president and founder of real-money gambling firm PKR, said he does not believe that gambling regulators should force social-casino-game enterprises to comply with responsible-gaming regulations.

But San (pictured above in blue on the far left), who spent two decades in the non-gambling video-game business and participated in the real-money gambling industry for the last six years, said that the social-casino-game industry should voluntarily submit itself to its own self-regulation.

“I don’t believe social games should be regulated. But I do believe the providers of the social games should take a more responsible attitude than they are currently taking,” San said.

He said the most important thing is that the social-gaming outfits should allow individuals to impose their own limitations on how much money they can spend in a month. The people behind real-money online gambling experiences must currently do so in order to show they are taking responsibility for the possibility that addicted players might overspend.

San said that he doesn’t want to see a newspaper like the (tabloid) Daily Mail write a profile of a single mother who lost all of her money playing casino-like social pastimes on Facebook. If the industry doesn’t impose its own regulations, it will inevitably face more strict government regulation in the future. If social-game companies (such as Zynga) do not self-regulate, they could make the whole industry look bad when the inevitable addiction problems surface.

“We don’t want to be profiled as having ruined someone’s life or bankrupted a single mother who can’t pay the bills,” San said. “We act in a very responsible manner. We don’t allow minors to play, and we don’t allow the vulnerable to play. The social gaming world doesn’t acknowledge such problems and would like to put its head in the sand and pretend that it’s a free world and people can spend whatever they want.”

Andrew Hughes (pictured left), chief executive of social-casino-title firm AbZorba Games, was on the other side of the discourse.

“There is a lot of debate still to be had,” he said. “I don’t think regulation should happen now. It’s too confusing … First, it is entertainment. You do not have to play. About 98 percent of my gamers never pay a single cent. They can earn chips looking at advertisements. Nobody can take the monetary value out of our game.”

Consumers can self-regulate now, and Hughes said voluntary self-regulation is fine. So in that sense, he agreed with San. But he would not grant that the social-game companies try to get people addicted. He noted that, among paying players of social casino titles, only 7 percent of them ever buy anything.

San said that average revenue per paying person is misleading, given that a small amount of gamers account for a large amount of sales. Hughes returned to the fact that it is clear in his releases that the play is just for fun.

San added, many of the social-game firms will not impose limits because “their job is to find whales” (people who spend a lot of money on social casino efforts, sort of like high rollers in Las Vegas) and then get them addicted.

“Can we keep it to social gaming,” Hughes asked. “We are not talking about social gambling. Social gaming is about a free experience.”

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How do you operate when you’re inside a speculative bubble?

That’s an important question to consider when you look at all of the companies in the social casino gaming and online gambling business. Those companies are aware that both disruption and some irrational exuberance are happening, but they have to find the right strategy to either ride the bubble out as in inflates or be ready to land on their feet when it pops.

I’m contemplating this question while flying over the Atlantic Ocean as I make my way to the Social Gambling Conference in London. I’ll be giving a talk there about who is being clever in this emerging gaming market, and this is an amended and abbreviated version of that talk.

Social casino games have been hot, and they’re poised to disrupt both gaming and gambling. There are more than 100 such games on Facebook now. The biggest of them is Zynga Poker, a 5-year-old game that is still a cash cow for the company. In this game, you can buy virtual poker chips and play poker with your friends, but you can’t cash your winnings out. If you could cash out, that would amount to online gambling, and that’s illegal in most U.S. states. But that could change, and that possibility has fueled the bubble.

A year ago, the U.S. Justice Department ruled that online gambling wasn’t illegal after all, provided that states approved laws that expressly permitted it. By January, slot machine maker IGT bought DoubleDown Interactive, a 70-employee social casino gaming firm on Facebook, for $500 million. That seemed crazy, but IGT and other gambling companies see social casino games as the “top of the funnel,” according to Playsino chief executive Brock Pierce.

In the spring, more than 700 people attended in the iGaming Summit in San Francisco, and we saw a big crowd at the GamesBeat 2012 conference’s social casino gaming panel.

Facebook games are free to play, allowing users to play for free and pay real money for virtual goods. That model draws a lot of people into social casino games at a very low cost, at least compared to the high cost of acquiring new real-money online gamblers. If social casino games draw in new players at a very low cost, some of those players will become online gamblers. And some of those players may visit land-based casinos. And some may become high rollers.

That’s the benefit to the casino companies, and it’s why companies such as MGM have teamed up with social casino gaming startup Playstudios. According to a survey by analytics firm Kontagent, about 82 percent of online gambling executives believe there is still room for them to play in social casino games.

But those casino companies and online gaming firms have been slow to create good social games. Zynga has disrupted them, with 33 million monthly active users for Zynga Poker on Facebook. DoubleDown Casino, by contrast, has just 4.8 million monthly active users on Facebook. On its own, without real-money online gambling, social casino games are already a $1.6 billion worldwide business, according to market analyst SuperData. And the percentage of people playing social casino games is on the rise.

Zynga is expanding in the other direction, launching social casino games that have given it a very large percentage of the social casino gaming market. It hired a seasoned real-money gambling chief, and it is preparing for the day when online gambling will be legalized again. In the spring, it will launch real-money gambling games in a partnership with real-money online gambling firm Bwin.party, which has a license for legal gambling in the United Kingdom.

The only drawback is that, to get to the market quickly and avoid lengthy regulatory reviews of its own games, Zynga may have to relabel Bwin.party games with its own Zynga brand.

Why is Zynga in such a rush? The company’s stock price is hurting, and it needs do something ambitious — because it makes a few dollars per user per month with social casino games, with a lifetime value for a paying customer of just a few dollars. By comparison, online gambling companies can make $300 per user per month. If Zynga can knock down the barriers between online gambling and social casino games and then wait for legalization to happen in the U.S., it can start collecting pennies in the Gold Rush.

But making games is not the only way to make money in the Gold Rush. Betable is selling picks and shovels to the gold miners. It is doing so by enabling social casino game companies to offer a real-money betting option when they play a casino game on their mobile phones. Betable has built all of the infrastructure and obtained the necessary licenses (currently in the United Kingdom) to authenticate players and check whether it’s legal for them to play a real-money gambling game on their phone based on their actual location. If the user passes all of the tests, then Betable will allow that player to play a real-money version of the social casino game. In contrast to many social casino gaming startups, Betable has a business-to-business platform that could very well succeed regardless of the pace of legalization.

Luckity, a division of Churchill Downs, wants to accelerate the Gold Rush, but it is betting that legalization could happen slowly. In the meantime, it is offering a suite of social casino games where you can bet real money in the U.S. It has done so by capitalizing on the federal laws governing horse racing. Because of a separate federal law, betting real money online in horse races is legal in the U.S. So Luckity has created a random number generator based on the outcomes of horse races that occur around the clock throughout the world. It then uses that random number generator to determine whether a player wins or loses a bet in a social casino game.

That helps Luckity skirt the restrictions of the online gambling laws. The drawback is that when you play a slot machine game and bet real money, you might have to wait minutes for the outcome since there isn’t always a horse race happening every minute of the day. That will introduce delays that may frustrate players. The player thinks he is playing a real-money social casino game, such as a slot game. But in reality, he is betting on a horse race.

Other companies see the risks of the overcrowded casino game market, and they’re moving into the social sports-betting market, hoping to capitalize on the “second screen” trend, where users watch sports games and make bets with their friends on smartphones or tablets. Each of these tactics is a clever way to deal with the fact that there is a solid but melting barrier between gaming and gambling.

There are plenty of hurdles that could pop the bubble. Legalization may not happen in the U.S., given the concern that many people have about how addictive games are. Game developers may not want to design games that promote the “sinful” entertainment such as online gambling. And users might very well decide that playing social casino games for fun is more attractive than playing for real money.

Those factors could put practical limits on the business that social casino game companies can undertake. Whatever happens, whether the bubble pops or not, the companies with the right strategy and flexibility will win.

Disclosure: The Social Gambling Conference paid my way to London in exchange for a speech. Our coverage of the issue remains objective.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The French don’t want to be left out of the real-money online gambling opportunity. French social casino game startup Mandala Games said today it has teamed up with gambling startup Betable to offer real-money gambling versions of Mandala’s social casino games.

The San Francisco-based Betable previously announced it has signed partnerships with Slingo, Digital Chocolate, and Murka Games. The news comes two days after Big Fish Games announced that it had launched a real-money gambling version of its Big Fish Casino game in the United Kingdom.

Betable makes it easy for companies to offer real-money gambling, helping them get around years of complicated legal and technical challenges. It offers a license so that they can offer real-money gambling to players on mobile devices or the web, provided the players are in territories where real-money gambling is legal.

“We believe that real-money gaming will help us grow to become one of Europe’s largest social gambling game developers,” said Nadya Jahan (pictured below), founder of Mandala.“Thanks to our partnership with Betable we will be able to tap into this opportunity quickly, allowing our team to stay focused on what we are dedicated to: designing cutting-edge games.”

Mandala will launch its Slots by Mandala social game with Betable integrated into it in the coming weeks. That will enable players to play Mandala’s slot game for real money in the United Kingdom.

“Our partners can be based anywhere in the world, and we’re happy to welcome Mandala Games as the first European developer on the Betable platform,” said Christopher Griffin, the founder and CEO of Betable. “The quality of Slots by La Riviera is impressive and appeals to a demographic that we believe will make their game a huge
success.”

Founded in 2011, Betable’s investors include Bullpen Capital, CrunchFund, FF Angel LLC, Greylock Discovery Fund, Morado Ventures, Start Fund/DST, Tekton Ventures, True Ventures, Venture51 and a bunch of individual investors.

Here’s how we described Betable in a previous story:

In the U.K., Betable has a license to operate online gambling on a worldwide basis. It has the technology to verify where a user is, and it has antifraud technology that can overcome someone who “spoofs” their Internet protocol address to fake their location. It does so by checking into a variety of records, such as credit reports, bank accounts with real addresses, and voting records. If the location is spoofed, it rejects the user for real-money gambling. But if the user passes and it is legal to gamble in their actual location, Betable permits the gambling to take place.

Here’s one of the clever tricks in dividing the gambling process: The developer creates and builds the front end of the game. Betable’s servers handle the back-end processing. The user sees the front end, such as a slot machine. They bet money and play the slot machine. The game turns over this information to Betable, which then calculates the result of the slot machine play. If the user wins, Betable informs the game and credits their account. If the user loses, Betable deducts money from the their account. Betable handles the payment processing by itself, Griffin said.

This makes Betable’s platform universal. Any game can be plugged into its API and converted into a real-money gambling game. Betable can handle all sorts of games, including bingo, card games, and slots. The game developer simply tells Betable what type of game it has built, and then Betable spits out the right result. Betable can also create new kinds of gambling games through custom mechanics. An example: In a horse-racing game, you could pay real money for virtual goods to raise a proper horse. Then you could enter that horse in competitions and bet real money it would win. If it does, you collect real gambling winnings.

Mandala recently launched its La Riviera slot machine game on Facebook. Jahan has become something of a celebrity in France, where she was in the first season of the reality web Les Influencers (The Influencers). The show will air on a weekly basis and follow seven online entrepreneurs.

Jahan founded the self-funded company in 2010 with a goal of bringing the “French touch” to social games with high-quality visuals. The company has around 12 employees.

Rivals include Playtika-Caesars, Double Down Interactive-IGT, Zynga, and others. This genre market is hot in part because of expectations that the legal barriers between online gambling and social casino games will come down in the U.S. in the future. On top of that, such titles with a free-to-play business model are proving to be very popular on Facebook.

As an fyi, I’m going to give a talk at the Social Gambling Conference in London on Nov. 16.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Moving fast in the hot social-casino game market, Playsino has acquired rivals Popover Games and Foghorn Games. With those moves, Los Angeles-based Playsino is positioning itself to be a survivor as consolidation inevitably hits a market where more than 100 competing games exist on Facebook alone.

The acquisitions give Playsino access to the cross-platform game Popover Poker, other casino games, and Popover’s employees. It also gives the company control of Foghorn Games, maker of Popover’s social-casino game Bingo Around the World. The move comes after Playsino announced this summer that it would publish casino games created by third-party developers.

“We’re happy to have found two like-minded companies that we can bring to market and further accelerate Playsino’s growth in this exciting space,” said Brock Pierce, the chief executive of Playsino.

Pierce previously started, bought, or invested in more than 30 game companies and secured more than $200 million on behalf of his companies. His nickname is the “Godfather of Virtual Goods” for his work in the early virtual goods market. But he’ll face competition from huge rivals such as Zynga, Electronic Arts, WMS, and IGT.

Popover was founded in October, 2010, as a maker of multiplayer social-casino games for Facebook, iOS, Android, and Windows mobile. It has technology to allow players to compete with each other despite language barriers.

“Our unique value proposition is a perfect match with Playsino,” said Nick Eliovits, CEO of Popover Games, Inc. “Brock’s experience in the industry is second to none, and I’m excited to be working with him and the Playsino team.”

Foghorn, meanwhile, created Bingo Around the World as a free-to-play game on the iPhone and iPad. Users can play bingo in eight cities around the globe and play against their friends.

“We are enthusiastic about the future under the Playsino umbrella,” said Chris Smutny, the president of Foghorn Games. Tamer Hassanein, Foghorn’s cofounder, added, “We are very confident that our games will greatly benefit from Playsino’s global audience of casino players and experience unparalleled success.”

According to a report by SuperData, social-casino games are expected to hit $1.6 billion in worldwide revenue this year and grow to $2.4 billion by 2015. Social-casino game players currently account for 13 percent of total players on Facebook, compared to just 8 percent in 2011 and 6 percent in 2010, according to Kontagent. The analytics firm says that social-casino games have higher-than-average revenue per user: at least 40 percent higher than a typical casual social game.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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More than 100 companies are competing in social casino games, both on Facebook and on mobile devices. That includes huge companies like Zynga, Electronic Arts, WMS, and IGT. But that doesn’t mean it’s impossible for startups to enter the market and grab traction. Consider the case of Koolbit, which launched recently and has more than a million users for its City Slots Casino game on Android mobile devices.

Koolbit has some of the highest rankings on the Google Play market, even though it is competing against bigger public companies that have big operations in Facebook games. The San Francisco-based company will launch multiple apps over the next three months leading into the holiday season, said Gerard Cunningham (pictured right), the chief executive of the company.

“We’ve done well by focusing on casino games on mobile,” said Cunningham in an interview with GamesBeat. “We’ve watched as everyone got excited about the casino genre on Facebook. We’ve got several new games in the pipeline.”

Social casino games have come on strong in the past couple of years, with SuperData predicting that the market will grow from $1.6 billion in 2012 to $2.4 billion by 2015. Cunningham believes it is because the broader market of casual players on smartphones and tablets enjoys simple games like slot machine games or poker titles. They’re an amusing way to pass the time.

Investors are stoked about the market because they believe it will grow dramatically as casinos start marketing to social players and as online gambling becomes legal in more territories.

Cunningham, who used to run the U.S. arm of online horse-racing gambling firm Betfair, has experience in real-money gambling and is personally licensed to operate gambling games in seven states. But he thinks the social casino game will grow fast whether or not real-money bets come into the picture.

“It’s easier to break into social gaming,” said Cunningham. “I know how painful it is to run a real-money gambling business.”

Cunningham said he believes his company has a fighting chance because other rivals are “trying to jam a desktop experience into mobile,” while his developers are targeting mobile first. He also tapped Tapjoy, which has the biggest installed base of games on Android. Tapjoy operates a distribution, publishing, and monetization business that makes it easy for Koolbit to reach new users every day.

“Distribution is one of the No. 1 issues that we face,” said Cunningham. “We get that through Tapjoy.”

Koolbit is also pouring a lot into consumer-oriented design, moving beyond the “childish graphics” of early casino games.

Cunningham said he believes in the long-term future of the Android platform, even though more casino game companies are operating on Facebook and iOS (Apple’s iPad, iPod Touch, and iPhone). He expects to make games for iOS and the Kindle Fire tablets, as well.

“Distribution is critical in the mobile game business, and we want players in every market and demographic,” he said. “By 2013, I think it will be a crazy successful year for Android. There are issues with payments and a huge amount of fragmentation on Android. But we decided this would be worth it.”

The company has 12 employees, and it has backing from Canaan Ventures, led by partner Maha Ibrahim, who was a seed investor in social gaming firm Kabam. Other real-money gaming investors have put money into the startup, and so has WTI. Cunningham is bullish on the future of social mobile casino games. Altogether, the company has raised $2 million.

“People around the world like playing casino games,” he said. “They are willing to search for them and find the best ones. And they’re willing to pay for them. But it’s hard work to get them.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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What happens when you search for a popular genre of games on the App Store? You might expect the most popular game to show up first. But that’s not always the case, especially with the hot category of mobile social casino games, according to new search tracking tool startup SearchMan.com.

Search rankings are important because they are the No. 1 way users find apps, according to Nielsen. Optimizing your app for search is a more affordable way for indie developers to get their apps noticed than buying mobile advertising at relatively high prices, says Niren Hiro, co-founder of SearchMan.com, which specializes in optimizing mobile apps for discoverability. You can think of search as the “shelf space” of the digital age. And on Apple’s new iOS 6 (the new version of the operating system for the iPhone, iPad, and iPod Touch), Apple has removed the categories button from the main screen of the iPhone 5 and left search intact.

SearchMan.com found that lesser-known game studios including Avanlix, Aristocrat, Arawella, and Pokie Magic have an extraordinarily large number of apps ranking inside the top 250 search results for gambling-related search keywords in the App Store. Hiro said that results inside the top 250 are visible to users. Zynga is known to be interested in the social casino games genre, but it also has aggressive competition from Backflip Studios, TinyCo, Big Fish Games, and others. The search results are based on the number of appearances of apps published by a specific game company in the top 250 search results for four gambling-related keywords: casino, gambling, slot and poker. The keywords were chosen based on the highest query volume in the U.S. App Store, as estimated by Google Keyword Tool.

As you can see in the chart below, Aristocrat has far better search results than Zynga in the top 250.

SearchMan.com has delivered its search tracking tool and analysis to more than 2,000 developers since launching three months ago.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Analysts expect social casino games to hit $1.6 billion in worldwide revenue this year and grow to $2.4 billion by 2015, according to a new report.

Social casino games are coming out of the woodwork and gamers are turning to them avidly on Facebook. SuperData, an online games research firm, has backed up those impressions with data that confirms that the market is hot.

The average social casino gamer spent $78 in July; this was about 1.8 times more than the average social gamer, who spent $43. Those numbers refer to the average revenue per paying user, not all users, as most users don’t pay anything in a free-to-play game.

SuperData says the U.S. is the largest market with $660 million in annual spending, followed by Europe ($446 million) and Asia ($311 million). Latin America spends $180.7 million on social games, while Australia spends $59.8 million. The number of monthly social casino players in the U.S. is 35.4 million.

The report breaks down the categories within the social casino genre as Slots, Poker, and Table Games. The number of players has doubled since 2010.

“Both small social game developers and large land-based casino operators are looking at this new space,” said Janelle Benjamin, SuperData’s vice president of research, “With declining margins in the overall social games segment, casino-style games offer a healthy growth potential.” SuperData bases its findings on its unique panel of over one million paying online gamers.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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San Francisco-based RocketPlay has launched Sports Casino, a social game where you cannot win real money but can still live the fantasy of betting in a casino sportsbook.

The title fits with Zynga’s suite of other casino games, such as Slingo, Zynga Poker, and more. Therefore, it is a good game to cross-promote to Zynga’s 306 million monthly active users on Facebook and Zynga.com, said Matt Cullen, the president of RocketPlay, in an interview with GamesBeat.

“Sports Casino delivers an authentic virtual sports-betting experience to social gaming and sports fans,” said Mani Honigstein, the chief executive officer of RocketPlay. “We’re thrilled to launch with Zynga’s support, a company that has set the social gaming benchmark and will help us bring a great game to a wide range of players.”

Sports Casino gives players a feeling that they’re in a Las Vegas-style sportsbook, placing bets on global sports events with real-time odds. But the betting is pretend. You can buy virtual currency with real money, but you cannot cash out your winnings as you can in real-money online gambling. Besides sports, you can also play casino games such as video poker, slots, and blackjack during sports downtime. The experience is social since you can play with friends in a kind of second-screen experience as you watch live sports on television. You can bet, for instance, whether a team will score a touchdown on its next drive across the football gridiron.

The Sports Casino game is launching just in time for betting on professional and college football, baseball, and international soccer. The game targets male gamers on Facebook. If real-money gambling is approved in the U.S. or is allowed in other territories, then Cullen says RocketPlay can adapt the game for real-money wagering as legal restrictions are lifted.

After the game launches, RocketPlay will keep updating the game with new features and news ports, including hockey and basketball.

RocketPlay’s team includes online gambling veterans from Betfair, Kabam, 888.com, and bwin.party. The firm is funded by Pitango Venture Capital and has offices in San Francisco, London, and Tel Aviv, Israel.

RocketPlay has gone through a few pivots in its history. It was founded in 2008 as a social network for soccer fans. It launched cash-based weekly fantasy sports games and licensed them to newspapers. Last summer, it began adapting its strategy to make social casino games.

“Everybody in this space was making a lot of money,” said Cullen, who previously worked at horse-racing online betting firm Betfair. “Everyone was killing it, but nobody was touching sports. We married the Las Vegas sportsbook experience with the United Kingdom’s online sports experience.”

So RocketPlay built its free-to-play platform for sports betting and teamed up with Zynga, which is publishing titles from third-party developers.

Currently, online sports betting is not legal in the U.S., with the exception of horse racing. It is also legal inside the state of Nevada, but it’s not clear what will happen in terms of broader legalization. The company has five employees in the U.S. and 16 in Tel Aviv. Pitango Venture Capital has invested less than $10 million in two rounds. RocketPlay is not currently looking for a new round.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Zynga has recruited a former online gambling executive as its chief of its real-money gambling initiative.

Maytal Ginsburg Olsha, the former senior vice president of corporate and regulated markets at online gambling firm 888, will become the chief operating officer of new markets for the social gaming company, according to Social Casino Intelligence. This kind of executive is necessary to help bridge Zynga’s social casino business with the complex, heavily regulated world of real-money gambling.

Zynga confirmed in July that it would enter the overseas real-money gambling market in early 2013. Zynga has the world’s largest online poker game in Zynga Poker, and it has launched social casino slots and bingo games recently. But the prospect of converting its games into real-money gambling titles represents a big opportunity.

Ginsburg Olsha left 888 in June. Zynga has not yet confirmed the move. The addition is coming at a time when other executives are departing the firm. Zynga has lost its chief operating officer, chief creative officer, a couple of vice presidents, and a couple of general managers since it reported weak earnings in July.

Ginsburg Olsha joined 888 as vice president of customer acquisition in 2007. She was was promoted to VP of poker and corporate customer acquisition in 2009 and was appointed senior vice president of corporate and regulated markets earlier this year. Real-money gambling could help boost Zynga, which has seen its stock price drop more than 70 percent this year on the weakness of social and the poor earnings report.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Betable has landed a big fish in its quest to offer real-money gambling as an option for social casino games. Today, the London-based company announced that Big Fish Games is working with Betable, enabling Big Fish consumers in the United Kingdom to play social casino games where they can bet and win (or lose) real money.

Big Fish Casino, which is a rebranded version of a mobile game (Card Ace: Casino) that Big Fish acquired, will have the option for real-money gambling, which could potentially generate a lot more revenue than a standard casino game.

Big Fish Casino players in the U.K. can choose an option to play with real money in the next few weeks. When they do so, Betable takes over and handles the gameplay on its servers.

Big Fish Casino is the first high-profile mobile casino game to add real-money gambling in a social game. Real-money bets will be available in casino games such as slots, blackjack, roulette, and video poker.

“We have a strong conviction that mobile apps that combine social and real-money gambling are a powerful way to engage more users and increase overall monetization,” said Paul Thelen, the founder and CEO of Big Fish.  “With its real-time social interaction features and the thrill of real-money gambling, Big Fish Casino is the closest mobile users can get to the buzz and excitement of playing these games in a real-world casino.”

“We believe that the first social gaming companies to offer real-money play will enjoy a substantial competitive advantage over those who wait, and we couldn’t be happier that Big Fish is getting a head start with Big Fish Casino,” said Christopher Griffin (pictured at top), the CEO and founder of Betable. “We have long admired Big Fish’s success and high-quality products and look forward to a long and healthy partnership.”

Big Fish Casino is available on iOS (Apple’s iPhone, iPod Touch, and iPad) and on Android.

As we noted before, Betable believes it can break down the barriers between legal online gambling and social casino games.

Betable’s “bet” is to create all of the infrastructure, payment system, licenses, antifraud procedures, and verification needed to prove whether a given consumer can legally play an online gambling game in given location. Then it will make that platform available to developers through an applications programming interface (API) so they can embed it in their new or existing social casino games. And presto, Betable’s online gaming system will automatically be integrated into a game.

If you play an online social casino game, for instance, you’re not allowed to win real money in the game if you live in the U.S. You can pay real money for virtual currency, but you can’t win real money because you are physically in a location that does not allow it. The problem for most online casino game companies is that it is hard to verify someone’s location. As a result, most of those companies don’t try to skirt the law and simply avoid real-money online gambling altogether.

But Betable has figured out how to solve this problem. Its chief technology officer is a location expert. So the company can verify a person’s exact location. When that person plays a social casino game on the web or on a mobile phone, Betable asks them if they want to play with real money. If the person says yes, then Betable takes over and moves the game session to its servers, which are in territories where gambling is legal, such as the United Kingdom.

In the U.K., Betable has a license to operate online gambling on a worldwide basis. That’s an important detail that we’ll explain in a bit.

Betable has the technology to verify where a user is. It has antifraud technology that it can use to overcome someone who “spoofs” their Internet protocol address, or fakes their location. It does so by checking into a variety of records such as credit reports, bank accounts with real addresses, voting records, and other information. If the location is spoofed, it rejects the user for real-money gambling. But if the user passes and it is legal to gamble in their actual location, then Betable allows the gambling to take place.

Here’s one of the clever tricks in dividing the gambling process: The developer creates and builds the front end of the game. Betable’s servers handle the back-end processing. The user sees the front end, such as a slot machine. They bet money and play the slot machine. The game turns over this information to Betable, which then calculates the result of the slot machine play. If the user wins, Betable informs the game and credits their account. If the user loses, Betable deducts money from the their account. Betable handles the payment processing by itself, Griffin said.

This makes Betable’s platform universal. Any game can be plugged into its API and converted into a real-money gambling game. Betable can handle all sorts of games, including bingo, card games, and slots. The game developer simply tells Betable what type of game it has built, and then Betable spits out the right result. Betable also makes it possible to create new kinds of gambling games through custom mechanics. An example: In a horse-racing game, you could pay real money for virtual goods to raise a proper horse. Then you could enter that horse in competitions and bet real money it would win. If it does, you collect real gambling winnings.

The significance of Betable’s system is huge. As of now, no other company has both a license and the technology to help the entire social casino game industry convert its titles from virtual currency games into real-money gambling games. The conversion process is painless, and the game companies can use Betable to stay within the constraints of territorial gambling laws.

Here’s where the economics matter: Typical social game companies make 10 cents to 20 cents on average per paying user in a month. For Zynga, about 2 percent of its users pay real money for virtual goods, and those paying users spend around a couple of bucks a month. That is why Zynga needs a massive number of users to make decent profits. But real-money gambling players spend $99 to $200 a month on poker games, according to market researcher Playtech. The lifetime value of one of these poker players is about $1,800. That’s a huge difference.

If the social casino game companies can convert some of their players to real-money gambling — in the territories where it is legal — then they could make a huge windfall. Zynga is already a billion-dollar company with virtual goods revenue. If it converted to real money gambling, its revenues could shoot upward.

Social games generate around $7.3 billion in annual revenue, Playtech says, while online gambling companies generate $32 billion worldwide, and the casino industry generates $426 billion. By poking holes in the barriers between those industries, Betable enables social game companies to get access to the revenues in the much larger markets.

That’s why Zynga’s stock price rose earlier this year. That’s because there’s a chance the U.S. will legalize real-money online gambling, which has been banned here since 2006. In December, the Justice Department reinterpreted a law to allow skill-based online games, so long as states specifically allowed it. Nevada has passed a law to that effect, and Delaware is on the verge of doing the same. The promise of tax revenues from online gambling will likely spur other states to act. That means that U.S. consumers, who have a lot more money to spend than other consumers around the world, may one day be able to play real-money online gambling.

Even if online gambling is not legalized in the U.S., Betable has a big overseas market since 30 percent to 60 percent of social game players are outside of the United States.

This chance has spurred an investment frenzy in social casino game startups. IGT acquired social casino game maker Double Down Interactive, a firm with just 100 employees, in January for $500 million. Many companies are in a race to create vertically integrated gambling companies, with social casino games, real-money online gambling, and land-based casinos.

Betable itself has raised its own seed round. To date, the company has received an undisclosed amount of money from 25 investors including Greylock Discovery Fund, FF Angel LLC, True Ventures, Dave Morin (ex-Facebook employee and current founder of Path) and Yuri Milner, the Russian investor who took big stakes in Facebook and Zynga. Those are big-name supporters who believe that Betable has a shot at raising the average revenue per user and average customer lifetime value for social games.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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IGT made a few jaws drop wide open when it bought DoubleDown Interactive, a social casino game publisher, for $500 million in cash in January.

Following short on the heels of a U.S. Department of Justice decision in December that legalized online gambling with certain restrictions, the acquisition of DoubleDown was a triggering event for the investment craze in social casino games this year. As legal barriers between land-based casinos, online gambling firms, and social casino games melt away, investors are pouring money into startups like Playsino, Blitzoo, and Betable on the assumption that legalization will lead to huge profits.

But Glenn Walcott, president of DoubleDown, says that social casino games are a good business in their own right. They now account for about 13 percent of game playing on Facebook, which has 955 million monthly active users (MAU), about half of them game players.

But the market could turn out to be a bloody one. Big players like Zynga and rival Playtika-Caesars are out to steal audiences interested in social casino games. The card sharks are everywhere. But DoubleDown has a full suite of games within a single app, and it has 5.4 million monthly active users who are highly engaged. Three percent of them spend real money on virtual casino chips, and that’s enough to make a good business for DoubleDown.

We caught up with Walcott at the recent Casual Connect game conference in Seattle, where social casino games were a hot topic. Here’s an edited transcript of our interview.

GamesBeat: You guys are an interesting new player on the scene here. You have some history in this social casino game market that other people don’t.

Glenn Walcott: Yeah. It’s funny. People look at us and think — relative to the world of gaming, the Facebook world — it seems like we’re dinosaurs.

GamesBeat: How did you get started on Facebook?

Walcott: The three founders of the company had another game company before this. It was generally in the sweepstakes category. It was very successful. It printed money.

But they said, this is not what we want to do with the rest of our lives. They were spending time playing games on Facebook, especially Zynga Poker. They thought that it would be awesome to build a great casino-style game. They liked that style of game. But the problem with those games is: How do you monetize that style of game? It’s not like the download world, where there’s a great product that you can download for $5 to $20 dollars.

But Zynga was the first company to come out with a virtual currency for a casino-style game. It became so obvious. You just spend money to buy more chips. So they said, let’s go out there and do it.

We didn’t want to go right after Zynga Poker. That was the 800-pound gorilla. Zynga had a great product. Our founders said, let’s come out with a product that nobody else has come out with. Let’s do blackjack.

They came out with blackjack with a multiplayer engine because multiplayer is very difficult to build. That provides a major barrier to entry.

So we came out with blackjack, which launched in March of 2010. After that was successful, we moved on to another game that we liked, which was roulette. We launched a roulette game in the summer. Later that summer, we launched three slot games as well. So now we were on our way to really building a casino. We started ramping up the marketing of it on Facebook. We realized that our marketing dollars paid for themselves in about a month, which is a great return-on-investment (ROI) on a marketing investment. At that point in time, around October of 2010, we became a break-even company. We had eight people at the time.

Then we decided, hey, let’s go on a tear. Let’s think big. Let’s make this a really big company. We went on a hiring spree and spent tons of money on marketing. We had a product that monetized well. The casino-style genre monetizes well on Facebook. And we understand, anecdotally anyway, that we monetize very well within the casino genre. Because of that, our marketing dollars have been able to go further than many companies’ have.

Fortunately we’ve done a great job at continuing to launch innovative new products, all within the casino suite, and we’ve done a great job with the marketing to understand who our demo is and how to go after them. It’s not just acquisition marketing, but…how can we make sure that we get in front of people from a retention perspective? How do we continue to provide unique and incredible content to our customers? That’s the way we believe we’re going to retain them.

One of the things that’s unique about the DoubleDown Casino app versus many other apps that are out on Facebook is that we have one application, the Casino. It’s the only one. Whereas all these other companies — Zynga, Electronic Arts, other big companies — have multiple apps.

Every game, as you know, has a life cycle to it. It’s very successful for maybe up to three months of that life cycle, then it starts to go down, and you have to try to convert those users to another one of your applications. When you’re doing that, you hit another barrier to entry. You have to get someone to click an “allow” button to get access to that game. They have to give out more information. That’s just another reason for people to say no.

We’re just accumulating all these games into one spot, and we’ve found it to be very successful. It’s funny to us that we’re unique and that most people don’t like building the full casino. They’re just building blackjack or poker or slots, and if they do have other games, they’re putting them out as a different application. That’s one of the things we think has differentiated us.

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Blitzoo Games, a social-casino-game maker that has succeeded on Facebook, is expanding to the mobile space today with the launch of its SlotSpot casino-game suite on the iPhone.

The Vancouver, Canada-based company is entering a crowded mobile casino game market with big rivals like Zynga and Electronic Arts. But David Bezahler, chief executive of Blitzoo, said in an interview with GamesBeat that his company is putting a new spin on slot-machine titles for smartphones. This type of game has generated an investment boomlet in social-casino experiences, and Blitzoo is banking on the possibility that the phenomenon will spread from Facebook to mobile.

“Mobile is where the growth is,” said Bezahler, who spoke at our recent GamesBeat 2012 conference. “It is where the opportunity and monetization are.”

On Facebook, Blitzoo’s SlotSpot is one of the highest rated and most popular slot games with 1.5 million active monthly players. The game features high-end graphics, fast gameplay, and customized themes. Now the company wants to keep its fans engaged wherever they go. SlotSpot includes 12 slot-inspired minigames with names like Swashbuckler, Reel Romance, Showgirls Classic, and Ragin Cajun. Each has its own characters and distinctive storylines.

“Today you would need a casino four times the size of the MGM Grand to house all of the people playing our slots at any given moment,” said Bezahler. “We put tremendous effort into nurturing the community around our game, and they’ve been asking us to launch a mobile version of the app, so we are proud to be able to give them a game that we believe will exceed their expectations. This is not simply a reskinned game but a brand new experience built specifically for the iPhone.”

SlotSpot has more than 40 levels. As you accumulate winnings, you can access the new levels and unlock premium rewards such as new minigames, unique bonus modes, additional pay lines, and other added benefits. SlotSpot Adventures are woven through the title where you can go on quests to advance a storyline and witness new plot twists. The social part of the game includes sending coins to friends or competing against them.

Blitzoo was started in 2010 by veteran game executives. It has 26 employees.

“We started with people who had console-game development experience,” Bezahler said.

The company created a Facebook game with a space theme: Planetoid Inc. It took a year to make, but the title didn’t get traction. It also wasn’t designed for monetization. Bezahler said the team left the game on Facebook but stopped supporting it. The developer moved on to create a mass-market offering dubbed Party On. That backyard-party game again didn’t catch on, so Blitzoo scrapped it.

“We decided to find mechanics that were addictive and build a Facebook game around it,” Bezahler said. “We focused on getting an emotional investment by the player in the first 30 seconds of use.” From that came SlotSpot with its addictive casino theme. It took about six weeks to make, and it launched with just a few features.

Bezahler said the evolution of the company is based on a “realistic understanding of the evolution of Facebook.” When the SlotSpot game took off on Facebook, the team breathed its collective sigh of relief. Bezahler said everyone was happy that lots of people were playing the company’s game, and they were offering constructive feedback on a daily basis.

“The reality is that you can still make money in Facebook games, but at its core, Facebook is a better marketing platform than it is a monetization platform,” he said. It’s not exactly what the team set out to do, but Bezahler said, “Success brings its own form of excitement. It’s a truly interesting technical challenge, and we have people competing against each other 24 hours a day.”

Bezahler thinks the social-casino genre has taken off because it fits the demographic of older women on Facebook, and it addresses a “pent-up demand for this kind of easy to play and fun game.”

Rivals in the space include Playtika, Double Down Interactive, and others. Bezahler expects consolidation in the market, and he notes that ads to draw players are getting more expensive.

Blitzoo has raised $5 million in funding, and it plans to raise $5 million to $10 million more.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Social casino games are hot. Santa Monica, Calif.-based Playsino is taking advantage of that by launching its Playsino Publishing Network which it will aim at helping social casino game developers get new users and monetize them on Facebook and mobile platforms.

Playsino will publish casino games built by other developers and spend a minimum of $100,000 per title to market them. Playsino uses a dedicated media buying team and offers game production support as well.

“Playsino is the only publisher focused exclusively on the hot social casino space.  Our focus will give our partners access to gamers who are specifically interested in casino style games and monetize better than all other social gamers,” says John Maffei, head of Playsino Publishing.

In 2012, social casino game players now account for 13 percent of all of the players on Facebook, compared to just 8 percent in 2011 and 6 percent in 2010, according to Kontagent. The analytics firm says that social casino games have higher-than-average revenue per user: at least 40 percent higher than a typical casual social game.

Playsino is headed by chief executive Brock Pierce, who is also a managing director of the Clearstone Global Gaming Fund. He has started, bought or invested in more than 30 game companies and secured more than $200 million on behalf of his companies. He has helped startups pioneer business models built around virtual goods and microtransactions.

Playsino is creating its own free-to-play casino games for mobile and social platforms. Playsino was founded in 2012. The company’s first game is Solitaire and Prizes. Maffei said in an interview with GamesBeat that the company plans to build out a suite of internally produced games, but it will also publish a number of titles from outside developers who create social casino games.

Pierce is also CEO of Titan Gaming. He also founded ZAM Network, a gaming media property with 15 million hardcore PC gamers. He sold that to Tencent in January. And he founded GamesTV, a joint venture with Shanghai Media Group.

Although he has a lot of experience, Pierce has a small company among a lot of big ones. Rivals include Double Down Interactive, owned by slot machine giant WGT, social game giant Zynga, and a number of other social casino game startups.

“The difference is we are 100 percent focused on the social casino game market,” Maffei said.

Maffei said that the company has a good understanding of the ins and outs of user acquisition, and it also has good experience with game production in the social casino genre. The team has 15 employees, most of them developers. Playsino has raised $1.5 million in funding from  IDM Venture Capital, a Singapore-based venture capital firm, Pacific Capital Group, Siemer Ventures, and a number of angel investors.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Whip Jon Kyl (R-Ariz.) are in talks about getting support for the agreement, according to a report in the National Journal.

“Here’s the issue. Sen. Kyl and I’ve worked very hard. What we need to do is get some Republican support. That hasn’t been forthcoming yet,” Reid told the Journal’s Tech Daily Dose on Tuesday.

Reid did not say where the deal stands. But a Democratic aide said Reid wants fellow Nevada senator, Republican Dean Heller, and Kyl to sell the GOP on the deal. Kyl was an author of a 2006 law the curbed online gambling by stopping banks, credit card companies, and others from processing payments for online bets.

But the Justice Department reversed itself in December and decided that the Interstate Wire Act of 1961 did not bar all Internet gambling, but rather just sports gambling. States have since been considering legislation to make online gambling legal on a local basis. Delaware and Nevada  have moved to legalize online gambling within state borders. Reid reportedly wants Nevada casinos to host online gambling operations.

All of this activity has caught the attention of investors, who are putting money into social casino game companies in the hopes that the barriers between online gambling and social casino games will melt away. But this law as proposed seems like it would narrowly allow online poker and not much else. Since poker is a game of skill and players play against each other, it is reportedly less prone to fraud.

“Notwithstanding the efforts of Harry Reid and Jon Kyl, given the general acrimony in Congress and the upcoming election, it is clear that the legalization of online gambling will move forward on a state-by-state level first with Nevada and Delaware likely to be followed by New Jersey, California and Iowa,” said Jon Richmon, CEO of U.S. Digital Gaming.

[Photo credit: Vegas chatter]

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Social casino games are hot this year. Mandala, a startup based in Nantes, France, hopes to add the French touch to them. The company just partnered with Hong Kong-based social gaming firm 6waves to publish Mandala’s upcoming La Riviera on Facebook.

6waves, which merged with Lolapps last year, has closed a lot of its internal development efforts and is relying on outside programmers for many of its social games. Mandala has made its mark in France and now wants to become a player in the international market.

Nadya Jahan (pictured right), chief executive of Mandala, said her aim is to stay focused on the creation of games and to rely on 6waves to publish the titles before a larger audience. 6waves will handle the international promotion of Mandala’s new title, enabling the company to spread what it calls its “made in France” values throughout the social gaming universe.

La Riviera is a slot machine game, and it’s Mandala’s second title on Facebook. The game has a tutorial room for new players, and it has mechanics such as missions, achievements, and crafting. The company previously self-published Divinitiz on the social network in 2011, and it attracted more than 350,000 players in two months.

Jahan has become something of a celebrity in France, where she will be in the reality web Les Influencers (The Influencers). The show will air on a weekly basis and follow seven online entrepreneurs.

Jim Ying, the senior vice president of publishing at 6waves, said, “What drew our attention to Mandala was their compelling gameplay and quality graphics. La Riviera captures the core of what people worldwide love about playing slots: excitement, competition, eye-pleasing visuals, and a festive atmosphere.”

Jahan founded the self-funded company in 2010 with a goal of bringing the “French touch” to social games with high-quality visuals. The company has around 12 employees.

Rivals include Playtika-Caesars, Double Down Interactive-IGT, Zynga, and others. This genre market is hot in part because of expectations that the legal barriers between online gambling and social casino games will come down in the U.S. in the future. On top of that, such titles with a free-to-play business model are proving to be very popular on Facebook.

Jahan said the company’s games have had high average revenues per user so far.

“I was raised with a joystick in my hands,” Jahan said. “My father was video games passionate, and my mother used to work in the computer industry, so it’s in my genes. I created my first business at 17 and graduated in IT development completed by business training. I left my last position as a business developer manager in the serious game industry to create my own company.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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It’s about time somebody fused the worlds of games and casinos.

Betable hopes to disrupt a hot segment of the game business by breaking down the walls that currently separate real-money online gambling and social casino games. If it works, the San Francisco startup could resuscitate the slumping social game industry and fuse it with real-money online gambling, which has a much larger market.

London-based Betable’s “bet” is to create all of the infrastructure, payment system, licenses, anti-fraud procedures, and verification needed to prove whether a given consumer can legally play an online gambling game in given location. Then it will make that platform available to developers through an applications programming interface (API) so they can embed it in their new or existing social casino games. And presto, Betable’s online gaming system will automatically be integrated into a game.

“We’ve found a way to get the social game companies into the gambling market in a way that is disruptive,” said Christopher Griff (pictured above), the chief executive and founder of Betable, in an interview with GamesBeat. “This is a tectonic shift.”

If you play an online social casino game, for instance, you’re not allowed to win real money in the game if you live in the U.S. You can pay real money for virtual currency, but you can’t win real money because you are physically in a location that does not allow it. The problem for most online casino game companies is that it is hard to verify someone’s location. As a result, most of those companies don’t try to skirt the law and simply avoid real-money online gambling altogether.

But Betable has figured out how to solve this problem. Its chief technology officer is a location expert. So the company can verify a person’s exact location. When that person plays a social casino game on the web or on a mobile phone, Betable asks them if they want to play with real money. If the person says yes, then the company takes over and moves the game session to its servers, which are in territories where gambling is legal, such as the United Kingdom.

In the U.K., Betable has a license to operate online gambling on a worldwide basis. That’s an important detail that we’ll explain in a bit.

Betable has the technology to verify where a user is. It has anti-fraud technology that it can use to overcome someone who “spoofs” their Internet protocol address, or fakes their location. It does so by checking into a variety of records such as credit reports, bank accounts with real addresses, voting records, and other information. If the location is spoofed, it rejects the user for real-money gambling. But if the user passes and it is legal to gamble in their actual location, then Betable allows the gambling to take place.

Here’s one of the clever tricks in dividing the gambling process: The developer creates and builds the front end of the game. Betable’s servers handle the back-end processing. The user sees the front end, such as a slot machine. They bet money and play the slot machine. The game turns over this information to Betable which then calculates the result of the slot machine play. If the user wins, Betable informs the game of that and credits their account. If the user loses, Betable deducts money from the their account. Betable handles the payment processing by itself, Griffin said.

This makes Betable’s platform universal. Any game can be plugged into its applications programming interface (API) and converted into a real-money gambling game. Betable can handle all sorts of games including Bingo, card games, and slots. The game developer simply tells Betable what type of game it has built, and then Betable spits out the right result. Betable also makes it possible to create new kinds of gambling games through custom mechanics. An example: In a horse-racing game, you could pay real money for virtual goods to raise a proper horse. Then you could enter that horse in competitions and bet real money it would win. If it does, you collect real gambling winnings.

The significance of Betable’s system is huge. As of now, no other company has both a license and the technology to help the entire social casino game industry convert its titles from virtual currency games into real-money gambling games. The conversion process is painless, and the game companies can use Betable to stay within the constraints of territorial gambling laws.

Here’s where the economics matter: Typical social game companies make 10 cents to 20 cents on average per paying user in a month. For Zynga, about 2 percent of its users pay real money for virtual goods, and those paying users spend around a couple of bucks a month. That is why Zynga needs a massive number of users to make decent profits. But real-money gambling players spend $99 to $200 a month on poker games, according to market researcher Playtech. The lifetime value of one of these poker players is about $1,800. That’s a huge difference.

If the social casino game companies can convert some of their players to real-money gambling — in the territories where it is legal — then they could make a huge windfall. Zynga is already a billion-dollar company with virtual goods revenue. If it converted to real money gambling, its revenues could shoot upward.

Social games generate around $7.3 billion in annual revenue, Playtech says, while online gambling companies generate $32 billion worldwide, and the casino industry generates $426 billion. By poking holes in the barriers between those industries, Betable enables social game companies to get access to the revenues in the much larger markets.

That’s why Zynga’s stock price rose earlier this year. That’s because there’s a chance the U.S. will legalize real-money online gambling, which has been banned here since 2006. In December, the Justice Department reinterpreted a law to allow skill-based online games, so long as states specifically allowed it. Nevada has passed a law to that effect, and Delaware is on the verge of doing the same. The promise of tax revenues from online gambling will likely spur other states to act. That means that U.S. consumers, who have a lot more money to spend than other consumers around the world, may one day be able to play real-money online gambling.

Even if online gambling is not legalized in the U.S., Betable has a big overseas market since 30 percent to 60 percent of social game players are outside of the United States.

“You could flip a switch and monetize this user base,” Griffin said.

This chance has spurred an investment frenzy in social casino game startups. IGT acquired social casino game maker Double Down Interactive, a firm with just 70 employees, in January for $500 million. Many companies are in a race to create vertically integrated gambling companies, with social casino games, real-money online gambling, and land-based casinos.

Betable itself has raised its own seed round. Today, the company has received an undisclosed amount of money from 25 investors including Greylock Discovery Fund, FF Angel LLC, True Ventures, Dave Morin (ex-Facebook employee and current founder of Path) and Yuri Milner, the Russian investor who took big stakes in Facebook and Zynga. Those are big-name supporters who believe that Betable has a shot at raising the average revenue per user and average customer lifetime value for social games.

Among the other investors are CrunchFund (Michael Arrington’s fund), Marc Abramowitz (first investor in Palantir), Scott Belsky (founder of Behance), Auren Hoffman (founder of Rapleaf), Sean Knapp (founder of Ooyala), Howard Lindzon (founder of Stocktwits), Matt Ocko (angel investor in Zynga), Joshua Schacter (founder of delicious), and Arjun Sethi (former CEO of Lolapps).

Betable is now recruiting developers to use its licensed gambling operation platform. Griffin believes that his company is bringing true innovation to the space and knocking down the barriers between social casino games and real-money online gambling. Griffin believes that the casino industry, while enormously profitable, has been stagnant and is ripe for disruption.

“This gambling industry has not had innovation for a long time,” Griffin said. “They use somebody else’s technology and they regurgitate games that have been around for 200 years. But the industry has multibillion-dollar companies.”

Part of the reason the gambling oligopoly exists is that it is hard to get gambling licenses. Betable has secured a license from the U.K. that is valid on a worldwide basis for online gambling. It took Betable two years to secure that license.

“FF Angel invested in Betable because it substantially reduces friction between businesses and gamers in a poorly structured market while maintaining high levels of compliance and accountability,” said Brian Singerman, a partner at Founders Fund, the firm that manages the FF Angel fund.

“We believe real-money gaming will make the social games industry more successful and has the potential to catapult games that offer it to the top of every app store on the planet,” said Tony Conrad, Partner at True Ventures. “While awaiting the US’ legalization of online gambling, which could take years, the overseas markets represent billions of dollars in opportunity for developers located anywhere in the world. Betable is in a great spot to help those developers participate in this emerging market.”

Betable has partnered with 30 developers in its alpha testing program, and now it will accept a number of new partners in its private beta program. Griffin will participate in a panel on the hot social casino game market at 2:30 p.m. on Tuesday at the GamesBeat 2012 conference. Betable will also hold a hackathon in San Francisco on the weekend of July 27-29. Betable has 15 employees, including a development team in San Francisco.

If Griffin has his way, soon, hundreds of game developers could be offering real-money online gambling on web or mobile platforms to their users in a matter of months.

“We have the opportunity to shake things up,” Griffin said.

GamesBeat 2012 is VentureBeat’s fourth annual conference on disruption in the video game market. This year we’re calling on speakers from the hottest mobile, social, PC, and console companies to debate new ways to stay on pace with changing consumer tastes and platforms. Join 500+ execs, investors, analysts, entrepreneurs, and press as we explore the gaming industry’s latest trends and newest monetization opportunities. The event takes place July 10-11 in San Francisco, and you can get your tickets here.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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So now it has become a financial imperative for traditional game companies to make the leap to digital — before the all-digital companies gain too much of an upper hand in the emerging markets of social, mobile, and online games. Crossing over from an existing market to an emerging one is what our GameBeat 2012 conference is all about.

Looking back and forward

A year ago, we wrote about The Road Ahead in Mobile Games and a follow-up piece after our conference. The conference was all about the wide-open battle for control of the emerging mobile gaming market. A year later, this trend is still strong. Mobile gaming companies are still raising the most money, according to game investment bank Digi-Capital. But the battle has really spilled beyond all borders within the game market. This is, as our theme indicates, the Crossover Era. Companies are crossing over into other markets in a kind of giant street brawl. At our conference, we have more than 80 of the industry’s top minds focused on the evolution of games.

Zynga’s presence is from social to mobile. Electronic Arts is expanding to numerous digital platforms, including social and mobile. Activision Publishing is moving into mobile. Microsoft has expanded into free-to-play online games. Sony enters cloud gaming with the purchase of Gaikai. China’s Tencent is moving into the West with investments in Riot Games (makers of popular multiplayer online battle arena game League of Legends) and Epic Games (crafters of top-rated third-person shooter Gears of War and groundbreaking iPhone series Infinity Blade). Headlines from recent months explain why game acquisitions are up: Game industry acquisitions grew dramatically in the second quarter, putting 2012 on track to break records for game M&A deals, according to investment bank Digi-Capital.

In many ways, this is one of the best times for the game business. More than 72 percent of people in the U.S. play games now, according to Zynga. That means it’s not so crazy for Mark Pincus, the chief executive of Zynga and our opening fireside chat speaker at MobileBeat/GamesBeat, to dream of a billion people playing games. The opportunity for play is enormous. The worldwide game industry is expected to grow from $52 billion in 2011 to $70 billion in 2017, DFC Intelligence reports.

Transaction mania

Just six months into the year, games M&A is already at 88 percent of the transaction value for all of 2011, which was the previous record year. In the first six months of the year, Digi-Capital has tracked 51 transactions worth $3 billion in value. The average value of each transaction was $59 million. The firm tracked 113 transactions in 2011 worth $3.4 billion, with an average value of $30 million. That means we’re seeing fewer transactions, but the values are higher.

The state of the game market remains mixed and difficult to read. Longtime publisher THQ has seen its stock price wither as it closed studios and exited a number of game categories due to slow sales. Year-to-date physical retail game sales are down 25 percent, according to NPD. But digital content sales are up 10 percent.

Likewise, investment in game startups has cooled off from 2011′s pace. In the first six months of 2012, there were 73 investments in game companies that generated $481 million in transaction value at an average of $7 million, according to Digi-Capital.

In 2011, there were 152 game investment transactions worth $2 billion at an average investment of $13 million. The transaction volume is down by 4 percent, and the transaction value is down 51 percent. If this trend persists, then the game investment level for 2012 might return to the respectable level of 2010, the second-highest year on record.

Investment into mobile games is still strong, but money going into social games is tapering off. That suggests that many may believe that Zynga has locked up the casual games market on social network Facebook. And Facebook itself has seen slowing of its growth, enough so that its own IPO turned out to be mixed.

Social casino games

Despite the downturn in social game investments, there is a category of social that is on fire. Social casino games have rocketed this year in a couple of ways. In 2012, social casino game players now account for 13 percent of all of the players on Facebook, compared to just 8 percent in 2011 and 6 percent in 2010, according to analytics firm Kontagent. That’s a significant switch in consumer tastes, away from casual simulations such as FarmVille.

And social casino game startups have become a hot market for investors. In December, the Justice Department kicked off this frenzy when it announced that online gambling could become legal in the U.S., so long as each state passed laws allowing it. Nevada has done so, and Delaware will likely do it soon. More states will likely pass bills doing the same, since it means more tax revenues.

That in turn could bring down the barrier between social casino games and real-money online gambling. This might be a shifting of the bubble, from one market segment to another. But it certainly seems like a bubble, since the old guard casino gambling companies are moving into the market. IGT to acquire social casino game maker Double Down Interactive, a firm with just 70 employees, in January for $500 million. Many companies are in a race to create vertically integrated gambling companies, with social casino games, real-money online gambling, and land-based casinos.

They all want to create a big funnel, according to Brock Pierce (the managing director of the Clearstone Global Gaming Fund and moderator of our panel on social casino games at GamesBeat 2012), with social games feeding players into online gambling and the casinos. But they might very well run into fierce competition from Zynga. I can imagine one day seeing a real Zynga casino on the Las Vegas Strip. If social casino game companies can get access to real gamblers, they could see their average revenue per paying user go from $2 a month to hundreds of dollars a month, according to an entrepreneur who will unveil a new startup at GamesBeat 2012.

These companies are all positioning against big companies like Zynga, but they clearly believe that innovation and entrepreneurship will pay off.

Mobile game race

Money is also flowing into mobile games. The mobile game market seemed “frothy” last year to Tim Chang, who is now a partner at the venture-capital fund Mayfield Fund. But it continued to gather steam in part because of the growth of mobile devices, with more than 550 million iOS and Android users now. That amounts to just 8 percent of the world population, so there is plenty of room to grow. And in the U.S., games account for 88 percent of the top grossing app rankings on the Apple App Store.

There are also big international mobile app markets, new devices such as Apple’s latest iPad, and the entry of new players such as Japan’s DeNA (which bought Ngmoco) and Gree (which bought both OpenFeint and Funzio).

Gree grew rapidly in Japan as its mobile social network took off. Naoki Aoyagi (pictured above), the chief executive of Gree International and a speaker at GamesBeat 2012, told us recently that he thinks that the mobile gaming market will play out in the next 18 months. Just as you saw Zynga move to dominance in social games, somebody will move to dominance in mobile games.

As with casino games, it’s another race. It’s not just mobile-focused companies that are running this race. It’s big companies like Activision Publishing, whose mobile leader Greg Canessa will speak at GamesBeat, and Electronic Arts, whose digital chief Kristian Segerstrale is talking at GamesBeat.

The tough thing about the mobile market is that it makes sense to invest a lot in it now, but mostly on the basis of future revenues, not current revenues. If you poured $10 million into a mobile game company now, it might be tough to get a $50 million return.

At some point, it could be doable. But that’s a risky proposition now. Has the market hit its stride yet? There are still tough issues such as fragmentation, discovery, and distribution.

Tablets über alles

The ultimate game market may prove to be tablets, which are at the center of the convergence of multiple trends. At the Electronic Entertainment Expo (E3) this year, the tablet meme was out in force. Sony pitched its dedicated touchscreen PlayStation Vita handhelds as living room companions for the console. Nintendo integrated its own tablet controller into the Wii U, and Microsoft launched its SmartGlass tablet companion technology for the Xbox 360. And Microsoft is also launching its very own Surface tablet (pictured above).

The aim is to fend off the threat of the iPad, which has sold more than 60 million units, or likely more than all of the Xbox 360 game consoles that have been sold to date. GameStop is getting into the act by preparing to sell Google’s Nexus 7 tablet in its retail stores, in recognition of the “hybrid gamer” trend where players spend as much time and money with digital games as they do with traditional games.

By 2016, the tablet market is expected to surpass the notebook market in size, according to NPD. It’s no surprise then that seasoned game developers such as Jason Citron, the founder of OpenFeint and a speaker at MobileBeat 2012, now want to go back to game development and target tablet games as their primary platforms.

The mammals still thrive

Yet as much as some market leaders would love to lock up the market, there are always a lot of startups that live in the shadow of giants and find ways to coexist, cut a new path, and even disrupt the big guys.

Indie game developers accounted for 68 percent of the game sessions on iOS and Android in the first quarter, according to Flurry. A year earlier, indies accounted for only 56 percent of game sessions, versus established companies.

King.com and Wooga moved ahead of EA into the top positions in Facebook games, below only market leader Zynga. They were late entrants, but they still managed to tap interest in tournament and short, arcade-like games.

And Kixeye, a maker of hardcore games on social networks, is thriving even though it has only 4.8 million monthly active users on Facebook. Will Harbin (pictured left), the chief executive of Kixeye and a speaker in a fireside chat at GamesBeat 2012, insists that the competition “is totally not a race.”

Rather, it is all about the creation of high-quality games. Kixeye’s users spend 20 times as much as the typical social gamer, meaning it can be highly profitable on a lot fewer users than its rivals. Harbin believes that cool games with great 3D graphics are totally doable on the web browser, with no download necessary, and we’ll see proof of that in a matter of weeks or months. When that happens, the browser-based, free-to-play online game business will hit the consoles like a ton of bricks. Disruption is just getting started in that sense, Harbin said.

Platform wars

Platform owners can still make life easy or difficult for everyone. Apple has created a wonderful platform with the iPhone and paid out more than $5 billion to developers. But it can also be a tough platform owner that sets the rules for developers. If they stray from what Apple says, they can face a pretty fierce banhammer. And developers must always pay 30 percent of their proceeds to somebody, it seems.

Trip Hawkins (pictured above), speaking at last year’s GamesBeat, wanted nothing more to do with platform owners. He complained that the industry was caught in the “dark age” where it is enslaved by platform owners. But out on the open web, he promised that the “browser will make you free.” Hawkins is out of a job this year, as he recently resigned from Digital Chocolate.

But the appeal of making royalty-free games hasn’t been lost on everyone. Zynga has created its own Zynga.com website to host games for social networking fans who are really interested in games. It has also created its own platform, with networking infrastructure and analytics, so that it can be its own platform and publish games for other developers. Faced with its own challenges, Zynga is crossing over barriers and doing what many have done before it: creating its own platform. And if Facebook and Apple get too aggressive with their platform policies, there’s always someone like Google offering an alternative platform as relief.

The existing platform owners are aware of this, and they’re changing with the times. Sony demonstrated this when it acquired Gaikai, a cloud-gaming startup, for $380 million. Sony’s Jack Buser, the head of digital platforms for Sony PlayStation, will talk about Sony’s own crossover strategy at our event.

New business models

The free-to-play game business is sweeping through the game industry. Sony Online Entertainment is converting its massively multiplayer online games into free-to-play titles.

But there are more business models awaiting. What if, rather than having gamers pay for games, you could turn that upside down and pay gamers to play games?

Brian Wong, the chief executive of Kiip, and Dennis Fong (pictured above), the CEO of Raptr, talk about this in a fireside chat at GamesBeat 2012 with Wired Game Life editor Chris Kohler. Both companies have reward programs where brands enthusiastically reward gamers for hitting achievements in certain kinds of games. In those cases, the rewards pile up high enough so that you could really interpret them as being paid to play.

That sounds crazy. But what if the customers come back and become loyal high rollers, spending a lot of money on a company’s brands? Rewards companies could be laughing all the way to the bank.

Red ocean or blue ocean?

Zynga recently showed off a bunch of new games at its Unleashed event, only to see its stock price fall. Evidently, investors weren’t that impressed with its lineup, which seemed targeted at the “red ocean” to me.

From what I saw at the event, Zynga is charging head-on at its rivals, fighting for market share with the sharks as they go after the meat (in this case, Facebook players) in the bloody red ocean. The concept here was chronicled in 2005 in the book “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne. In a red ocean battle, the market share is fixed, and competitors fight each other for it in a zero-sum game. But in the blue ocean, where there are no competitors, a company can be successful by expanding the size of the market. Zynga’s battle with EA is a case in point. EA creates The Sims Social; Zynga counters with The Ville. Zynga launches CityVille, and EA counters that with SimCity Social.

Mark Pincus (pictured above), the chief executive of Zynga, believes very much in the blue ocean strategy. We’ll see if his company can continue to expand the games market. We’ll ask him about it at our opening fireside chat on Tuesday morning.

The golden age of gaming

Bing Gordon (pictured left), a partner at the venture capital firm Kleiner Perkins Caufield & Byers, made headlines in early 2011 when he declared — in a poem — that we were in a “golden age of gaming.” Gordon was an early pioneer in games and spent more than 25 years at Electronic Arts. Now, in his second career, he has scored big with investments in Ngmoco and Zynga. His own personal reinvention is something that everyone is going through. And so our theme isn’t just about the Crossover Era as it relates to companies. It’s about the personal journeys that people in the game business are making every day as they move from one part of their careers to another.

Gordon is back for a fireside chat. Gaming’s success is “more than we imagined, as much as we hoped,” he said. Gordon remains an inveterate optimist about the industry that he has been in for more than 30 years. We hope you join us to figure out where it’s going next.

[Photo credits: Dean Takahashi, Matthew Lynley]

GamesBeat 2012 is VentureBeat’s fourth annual conference on disruption in the video game market. This year we’re calling on speakers from the hottest mobile, social, PC, and console companies to debate new ways to stay on pace with changing consumer tastes and platforms. Join 500+ execs, investors, analysts, entrepreneurs, and press as we explore the gaming industry’s latest trends and newest monetization opportunities. The event takes place July 10-11 in San Francisco, and you can get your tickets here.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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