July 25, 2012

Social Gaming: Gambling on Women?

In late May 2012, the announcement of BWIN.party to create a dedicated social gaming unit, Win, created ripple effects in various gaming entertainment board rooms.

Of course, social networking sites have already been used for over a decade to mobilize customers around a brand (Muniz & O’Guinn, 2001). And Facebook, the latest social network hit with over 900 million active users (March 2012), has found its advertising revenue coming from numerous companies, worldwide, taking this network for granted in their media exposure plans.

Also, networked virtual games like MMORPGs (massively multi-player online role-playing game) have been around for over a decade, and virtual social worlds, with their own currencies and virtual goods, have offered companies and organizations various marketing opportunities (Kaplan & Haenlein, 2009c) for a while already. We might still remember how the Chinese government had to step in halfway 2000 when the virtual QQ coins, massively used to purchase off-line goods, started to affect the Renminbi exchange rate.

Despite we can be aware of such fertile combination of online gaming and social networks, what is different about the BWIN + social gaming combination is the heralding of what seems a natural evolution from entertainment to gaming into gambling as an online lifestyle.

BWIN, namely, is not an incidental isolated case. Zynga, the online gaming company now arguably more famous for its Poker game than its FarmVille hit which took Facebook by storm in 2009, increased its user base to 292 million in April 2012 from just 30 million two years earlier. Also brick and mortar giants like Caesars Entertainment Corp and MGM have already entered the scene through acquisition of mobile gaming businesses or by developing a virtual world/currency ecosystem of their own.

These social gaming ecosystems typically resemble a freemium model, that is, users can play the game in a free plain vanilla version, but have to pay to access premium features or content. These payments in social gambling games are small such that it could be easy for users to associate these expenses with the entertainment of buying a virtual carrot for a virtual horse on FarmVille. Zynga reportedly makes 40% of its revenue from those in-game sales.

Interestingly, according to a study on the state of the social gaming industry by Crowdpark in February 2012, 58% of virtual goods purchased in social games are done by females. And among the top spenders 70% are women. This finding might be an even more compelling reason for gambling entertainment companies to enter this realm. Not on the race courses, nor in betting branches or around casino poker tables, but it is here where the on average 40-year old woman is actively gaming and spending and ready to be transformed into a previously untapped new revenue stream.

Below a ppt dump of bits and pieces about what is going with social gaming in the gambling industry.


December 23, 2011

Why Do People Gamble?

Allow me to digress from the original intent to first sift the literature of business models for clues how to best get my research started. Dr. Jay Bal’s straightforward question when I met him earlier this month, “why do people bet?” first demanded a better answer than I could give him on the spot.

Whereas playing is inherent nature of many species, gambling, although it could be human’s second oldest diversion (Thomson, 1997) is not necessarily biologically wired (Anjoul, 2003). From cultural perspective then, in individualistic cultures (Hofstede, 1984; Hofstede, 1993) people would tend towards fulfilling own needs and interests: a mindset that could be associated with a gambling state of mind. It would then be tempting to conclude, ignoring for the moment analysis that have criticized the individualism-collectivism spectrum (Yeh, 1988), that in the collectivistic labeled Chinese societies gambling would not be on top of the list of leisure activities. Since this could be a heavily disputed conclusion, as observed from my position in Hong Kong, for the moment I would also like to let go of cultural explanations on why people gamble.

Let’s get into the mud. First and foremost reason is that betting has a financial outcome. The punter expects to have a chance (p) that his return (R) will be larger than his investment (I) when he leaves the betting scene: p*R > I. A positive financial outcome becomes more realistic with higher values of both p (winning probabilities, e.g., in skilled Black Jack) and R (large pay-out in case of e.g., national lottery jackpot) and lower values of I (e.g., a couple of bucks in a slot machine, no big deal).

Whether that punter in skilled (e.g., Black Jack, poker, horse racing) or unskilled (e.g., lotteries, bingo, roulette) betting games has a correct perception of the real probabilities remains questionable, but as long as p>0, and he has experienced some near hits, he has an incentive to ‘try his luck’.

Why someone would want to ‘try his luck’ to generate financial positive outcome (instead of working more hours at the office, for example) is a question that could lead us into the study of human psychology. We could look at positive reinforced arousal in the context of sensation seeking theory (Zuckerman, 1979), or from the reversed angle, we could look at conditioned escape from reality into a world of wishes. Such questions become more relevant when the study object is around problem gambling, an inroad I do not intend to take at this moment.

For now, let me share my second largest reason to occasionally dance with Lady Fortune on the race tracks: the pleasure of visibly increasing the p value by studying the necessary materials at hand; very much like increasing your chances to win in a chess game by preparing for a chess opening you know your opponent will be troubled with. The small I needs not generate more than the Reward of a fresh pint! (Alas, alcohol and gambling - did not expect to end there when I started ...)


December 13, 2011

Step 1: Research Question – Completed Already?

Official start date of my PhD journey: 1 December 2011. As part-time PhD student I am given 7 years to complete the mission and what better way to start than with attending Research Methodology (REME). So, flying in from Hong Kong, on 7-8 December I indulged myself in topics like Literature Review, Research Design, Mind-mapping or Case Studies. I vaguely recalled the topics from my previous Masters studies but it was worthwhile the trip to dust off my brains which had been used for over 15 years in a corporate setting only.

Some lecturers officially mentioned it, some students informally confirmed it: it can take a large part of the first year to just come up with a research question or research title. No kidding.

I was glad I had the opportunity to meet Dr. Jay Bal, my supervisor, for the first time and it was worth missing the Arden lunch as we managed to change the draft research question New Online Business Models in the Gaming Industry and the Implications for Organizational Design in Betting Companiesinto the following one:

Social Media Based Online Business Models for the Gaming Industry

That seems quick, just a week to get this research question/title done - too fast? Let's see if it holds in the longer term but for now it gives me enough structure to logically dissect the topic into following componments:

  • Social Media
  • Online - Social Networks
  • Business Models
  • Gaming Industry

As per Jay's suggestion I will first dig into the literature of Business Models and will let you know all about it.


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