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Huuuge Games came late to social casino games, launching its Huuuge Casino in late 2015. But the company has carved out a niche in the $4 billion global market.

Anton Gauffin, CEO of the Palo Alto, California-based company, said in an interview that the company will hit about $150 million revenues in 2017. That puts it at about No. 9 in the market, behind leaders such as Playtika, Scientific Games, Zynga, IGT, and Aristocrat. The latter just acquired Big Fish Games for $990 million from Churchill Downs, combining the No. 5 and No. 6 companies in the space.

That could put pressure on Huuuge, but Gauffin isn’t deterred. His company has grown to 300 employees, and it recently raised $50 million in funding. Huuuge has grown because it has tried to make the “most social” casino game, and it has targeted younger players with its advertising.

“Playtika and Scientific Games have been active on the M&A front,” Gauffin said. “But we were not interested in selling Huuuge. We felt that it was too early and we had a massive opportunity in front of us. We were far from done with our vision.”

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Here’s an edited transcript of our conversation.

Above: Anton Gauffin, CEO of Huuuge Games, at Casual Connect Europe.

Image Credit: Dean Takahashi

GamesBeat: You had your news about the $50 million raise. Could you explain that first, and talk about where you are as a company?

Anton Gauffin: We started working on the deal around the last GDC. We realized we had a good thing going on. Our plan was working, and it still is. We started thinking, “What next?” We felt it was early, and we had so much gas left in the tank that we would have plenty of opportunities to sell the company. Playtika and Scientific Games have been active on the M&A front. But we were not interested in selling Huuuge. We felt that it was too early and we had a massive opportunity in front of us. We were far from done with our vision. We ended up raising almost $50 million.

GamesBeat: Why does the company need that much money? Why do you need such a large team? You’re more than 300 people now.

Gauffin: The scale at which we operate has grown a lot. You can see that from AppAnnie. We’re doing more than $150 million in revenue this year, and we’re investing a lot in marketing. We did early stage/seed funding, and then we had A and B rounds. Before this round, though, we only raised $10 million all in all or so. We had all sorts of challenges because of that. We had to work with Facebook to get the credit lines up and deal with all those practical issues in scaling, because we didn’t have enough money in the bank. We needed more cash to increase our marketing scale. That’s a big part of the reason.

Second, we believe that in the long run, it’s all about bringing more product innovation to the market. Instead of being all in on Huuuge Casino, we’ve been actively building new games and doing our best to bring more innovation to the market. Part of the investment is going into new products that we were already working on. We wouldn’t have had sufficient marketing bandwidth to release those games when they become ready if we hadn’t raised the additional funding.

Above: Social casino games were a $1.16 billion market in the third quarter alone.

Image Credit: Eilers & Krejcik Gaming

As far as team size, there are different approaches that different companies use to succeed in mobile gaming today. But in our case, at least—there’s the production team that builds the products and features for our games. We have a fairly large team powering that, doing business intelligence and all sorts of analysis regarding different experiments, from A/B tests to other things we do to continuously test. We’re very data-driven as a company. We’ve started to build our own BI and analytics platform. That’s grown into quite a large operation.

When you do this business globally, it adds up. For us, the 300 people have — if we only did Huuuge Casino, we wouldn’t need 300 people. But as we’re actively building new games and doing our best to bring more innovation to the market — even though we’ve hired a lot this year already, we still have several open positions we’re looking to fill.

As part of our strategy, when it comes to scaling our operational bandwidth to build games, we’ve opened several new studios this year. We’ve opened a studio in Krakow. We’ve opened another one in Wroclaw, another place in Poland. We’ve also opened an office in Berlin. The most recent office we opened is in Hong Kong. Hong Kong is still fairly fresh news. We don’t have many people there. But in all of these other locations, the teams have already grown quite a bit. We have [15] people in Berlin, 11 people in Krakow, and more than 10 people in Wroclaw.

We felt that in order to build more games, we had to open new studios, because otherwise there would have been a competition for resources on a local level. We believe that when you build games, the team needs to have ownership of the product. They need to be passionate about what they’re building. You can’t try to do too much in the same studio, or you begin to dilute their focus on the product. That’s not the only way to build games, but that’s our way. It adds up people-wise. You need to take good care of your people, regardless of your locations. You need more admin people, HR people.

From my side, a big part of why we raised the funding—we already talked about increasing marketing scale and allowing us to invest into new products. I also mentioned that I think distribution is the biggest headache for free-to-play companies. In practice that means that Huuuge has been actively investing in expanding our business into broader, mass-market casual games. There will be mass-market casual games coming from us fairly soon.

We’re not exclusively a social casino company. Many people in the industry have this perception of Huuuge as just a slots company, and I’ve always said we’re more than that. We do social games. When the new casual games hit the market, I think that will change the perception people have of Huuge. That’s exciting for us.

GamesBeat: Are your live operations also pretty demanding?

Gauffin: Yes, they are. We try to do live ops in multiple countries. Not all of them, but we have specific campaigns going on in specific parts of Asia-Pacific, like Hong Kong, that have been growing well for us. You need specific attention to do that. It helps if you have local cultural know-how. That’s why we expect the Asian part of our operation is going to grow significantly next year.

GamesBeat: How often do you do updates?

Anton: This year we’ve done less binary updates, but we’re doing daily events. When it comes to Huuuge Casino, our main app, every day there’s some sort of event or campaign going on. That takes a lot of effort from the team, to be able to run that type of 24/7 service. Also, the player base has grown. There’s been growth with our player services, VIP services, all the community stuff. We have some specific things going on in the game on a daily basis, and then binary updates bring in bigger feature updates. We try to keep up as high a pace as we can, keep the updates going to the market.

Our app has grown quite a bit size-wise. The product is more complex. Nowadays, developing features — we need to be sure a feature is going to help us improve our KPIs. If you add a new slot machine to Huuuge Casino, say, it’s not easy to figure out, “Okay, this feature is going to move the needle,” unless you do specific A/B tests. You have different groups that see a feature or don’t see it. That way you can figure out if what you’ve done improves the product matrix. It’s harder than you think to make that type of conclusion, because there’s so much going on in the game.

Above: Huuuge is No. 9 in social casino games.

Image Credit: Eilers & Krejcik Gaming

GamesBeat: If you look at the Eilers and Krejcik market share, I think in the last quarter they had you guys at number nine in the world in social casino games. $150 million in revenue seems like a lot, but when you consider how many companies in the space are bigger than you, it must feel a little daunting.

Gauffin: Eilers also upgraded their market size forecast recently. They’re more optimistic about the growth of social casino for the next year. They’ve done the analysis and conclusion that even the DAUs playing social casino are no longer growing that much. The companies have become better at monetization. Many companies, like Playtika, haven’t been growing their DAUs, but they’re improving their conversions, how much people spend.

You’re right that we’ve grown a lot. $150 million is a significant amount of revenue. But we still have eight more companies ahead of us. It’s a pretty big niche category that we’re working to make more mass market. We’ve grown because we’ve approached the market from a new angle, offering a real time social experience, offering more cooperative gameplay, offering more active gameplay. We believe that if you look at the market a few years ahead — for us it feels obvious that the number one game in a few years’ time has to be this type of connected online game, rather than a single-player online experience, which many of the competing social casino products still are today.

GamesBeat: What’s your view of the Aristocrat acquisition?

Gauffin: Aristocrat bought one of the leaders in real-money gambling sites. In recent years they’ve had some of the best-performing, if not the very best in the land-based casino side. They’ve had great slots content. They bought Product Madness, which has been very successful, and they bought Plarium, expanding their digital gaming offering and adding new genres to their portfolio. And now Big Fish Games.

I obviously can’t comment too much on their motives, why they did that, but it’s my understanding that it’s been very clear for them to turn Aristocrat from an old-school land-based slot machine provider into a significant player in the digital gaming market. They’ve made some aggressive moves on the M&A side. Product Madness, the offerings there are beginning to attract hardcore slots players, because they have the Aristocrat content. It seems that when it comes to social casino, there’s a group of players who want to play the same machines you see in the land-based casinos. That’s what Product Madness has been doing.

Aristocrat was missing a social experience, which to some extent I think Big Fish Casino is looking to fill. I believe they see that complementing both their digital gaming offerings and their social casino offering. The Big Fish Casino experience is a lot closer to what we’ve been doing than what the Product Madness guys have done.

For some of these companies, there’s been plenty of capital available. They’ve been very aggressive in looking to create M&A opportunities. In the case of Big Fish—social casino companies have usually been highly profitable. After you reach a certain scale, it’s a profitable business for most of these companies. But that may be more generally how free-to-play works. If you can accumulate a good paying player base, then it’s a sustainable business with nice profit margins. Social casino companies have been profitable, and that’s fueled an active M&A space.

It’s been widely reported that in Playtika’s case—Playtika was pretty exceptional. It grew so big that there were multiple companies bidding for it. Netmarble was one of them, publicly, as well as the giant that eventually bought them. That left many companies hungry, and that’s why social casino continues to be an active M&A space. Besides Huuuge and a few other companies, there haven’t been many new startups coming up.

Above: Huuuge is targeting younger gamers.

Image Credit: Huuuge

GamesBeat: Were you guys just about the last one that got in the door?

Gauffin: Yeah, I think so. The cost of making a product of high enough quality and everything else you need to do, the bar is higher than when we started. Marketing and distribution aren’t any easier at all. It would require more funding and more work. But it’s always with the right amount of innovation and ambition. I don’t want to say that it’s impossible to build new startups. But it’s been challenging to raise for new gaming startups that want to do social casino before you’re profitable.

GamesBeat: As far as why you were able to succeed, do you have a good explanation for that looking back? I understand that you guys were more social than other games.

Gauffin: I believe you can boil it down — the team, me included, we’ve been doing mobile games ever since mobile games got started. That’s the biggest reason. We didn’t start from scratch. We were able to reunite the team, and we were able to leverage some big assets that we’d developed in the past. I had the chance to buy my own company back. That’s the main reason behind our success. Second is finding a new angle, a new way to approach the social casino experience. Coming up with this real time social approach. It’s those two things.

Of course, there are other elements that have helped us. We’ve had great advisors. We were able to get funding early on from other gaming entrepreneurs, including the founder of Big Fish Casino, guys like that. It gave us a lot of confidence that we were on the right track. Their advice was golden for us when we started.

It’s also helped that we had good thing going on in Poland. I’ve been doing mobile games in Poland for many years. The fact that we were building games in Poland initially helped us to do the game with a reasonable budget. It took quite some time to build Huuuge Casino, and if we tried to do it in a more expensive location, we wouldn’t have had proper funding or backing. It required me moving from the U.S. and Europe and going all in on this thing. I wouldn’t have been able to do it any other way.

GamesBeat: The excitement about the whole sector at one point was that social casino games were viewed as a funnel for the gambling companies. I don’t know how true that ever proved to be. Was that a driver of M&A that never panned out, or did it pan out? What’s your view on that?

Gauffin: Yeah, I think initially people thought, “Okay, the whole theme here is to funnel people from social casino to real money gambling, where you have even higher player LTVs.” But it’s a sensitive thing. There’s regulation. You can advertise real money gambling apps in certain parts of the world, like the U.K., but even in the U.K. there hasn’t been significant success stories as far as using social casino to create real money gambling players. I’ve seen it go the other way around. Some of the gambling companies have used their existing CRM databases and advertised social casino for the real money gambling players, to keep them in touch with the brand, and seen better success rates.

From those early days of social casino, everyone has realized that this is a real business. It’s not about trying to convert a free-to-play social casino player into a real money gambler. The business opportunity is much more about giving value and entertainment to these free-to-play players as long as possible. When we do that, we’ve made good revenue as a company.

Of course, the industry continues to think about these things and experiment with the best way to succeed. In Aristocrat’s case, they went to buy Product Madness, bought a social casino company, and then allowed Product Madness to leverage their land-based slot machine portfolio. Ever since Product Madness brought in the actual slot machines from Aristocrat’s portfolio, the metrics went crazy. Some of the casinos have realized that there may be better opportunities—instead of converting social players to real money, you can use real money content in a social casino context, and that way you can succeed in this market.

Above: Huuuge has more than 300 employees.

Image Credit: Huuuge

GamesBeat: If these big companies keep on combining, they build some market power. Does it become tougher to compete with that, given how much marketing money they can throw at consumers?

Gauffin: We all compete on the same discovery and distribution channels. Facebook, [App Store] and Google are the biggest ones. There are certainly plenty of companies that have the will and the budget to target the same players. Distribution remains the biggest headache for social casino companies. It’s not easy to find significant scale.

That’s why we’ve been going out and trying to target new demographics. For Huuuge Casino the largest demographic is younger men, 25 to 35. That’s the biggest demographic. To some extent these demographics differ from country to country, but in absolute numbers, globally, it’s younger men, and that’s quite different from our competitors. Were we to only compete in those real time bidding environments for the exact same users, the exact same demographics, it would be very hard to grow.

We continue to think of new ways to bring new people in. That includes some new product developments. We’re building new games that will hopefully succeed as much, if not more, than what we’ve done with Huuuge Casino.

GamesBeat: What’s your view of mobile gaming overall now? It’s a $50 billion industry now, according to Newzoo. There are broader challenges in things like ad fraud. Some of the market researchers have pointed that out.

Gauffin: I’m a big believer. I don’t think I would be doing what I do if I didn’t believe in the future of mobile games. It’s much more mature than it was. The app stores, they may change their discovery algorithms and things like that, but in many ways it’s much more mature compared to a few years ago. The real players in the market are much more business-savvy about KPIs, how to do paid user acquisition, how to do marketing. There’s so much competition out in the market.

When you look at it from a consumer point of view, the technology is getting better. Whether you look at emerging areas like AR, what Apple is pushing heavily now—the cycle of how fast technology develops on mobile is pretty fast. That enables new types of opportunities for companies.

In the early days of mobile gaming we suffered a lot from bad connectivity. The speed of connections wasn’t good enough. That remains one of the challenges when you do real time online gaming. You can’t guarantee the type of connection the player uses, but you still need to manage that as a developer or a publisher. That connectivity is only getting better with LTE and 5G and that type of thing. I can already imagine the type of mobile gaming we’ll be able to do in the future.

You’ve probably noticed what Supercell did in London last week with the Clash Royale world championships. Bringing esports on mobile to a mass market, we’ll be seeing more of that in the future. I’ve been totally fascinated with the HQ Trivia type of concept, too. Why watch Who Wants to Be a Millionaire on TV if you can play that and take part yourself?

I don’t have a crystal ball to tell you what will be the top game in five years, but I think we already know that games will be more social. They’ll be more connected. It only helps publishers succeed if you’re able to partner up with big companies like Apple and Google, who also want to find marketing drivers to sell their tech. Apple is very much looking to do that with games and apps they promote. The business is only going to get bigger because of that. We see more competition coming in. Tech development platforms like Unity are helping smaller teams to make games.

It’s hard to put free-to-play gaming into one basket. $50 billion is too big. You have different types of business setups. You have some of these ultra-casual games that only monetize with ads. Maybe some of them are done by one man and a dog. On the other hand you have operations like what we have, or Machine Zone. Look at how big Supercell’s operation has become nowadays. There are different opportunities to succeed in a mass global market.

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